East Asia, Investment, and International Law: Distinctive or Convergent?

International investment agreements (IIAs) are the primary legal instruments designed to protect and encourage foreign direct investment world-wide. This article argues that Asia has used IIAs just as much as have other regions of the world to attract foreign direct investment, but that Asia’s pattern of agreement provisions is somewhat distinctive. States in East and Southeast Asia have tended to enter into agreements that strike a balance somewhat more favorable to host states than to foreign firms, at least when compared to the rest of the world. This may be due to high growth in the region, which tends to strengthen host states’ bargaining power. I provide evidence that Asian states have signed bilateral investment treaties (BITs) when their growth rates have been robust, while the rest of the developing world has historically tended to sign BITs when their growth rates are weak. A better bargaining position leads to less constraining IIAs, which may in turn help to account for the relative dearth of investment disputes involving East and Southeast Asian states, since weaker protections give foreign investors slimmer grounds to dispute their treatment. This distinctive pattern may also be related to the wider range of macroeconomic tools available to many governments in the region to stimulate growth, which may decouple IIAs from business cycle pressures. There is some evidence, however, that the terms of Asian IIAs are beginning to converge with investment agreements elsewhere in the world