Below is the abstract for “Defrosting Regulatory Chill,” available for download on SSRN.

In Homer’s Odyssey, King Ulysses asked his men to tie him to the mast of his ship with the hope that he would not jump into the sea after listening to the Sirens. The Odyssey’s hero made a pact to bind himself in the future. He knew that the temptation would be impossible to resist without restraints. Similarly, the creators and advocates of international investment agreements believe that providing rights to foreign investors through international treaties will chill state policies that would harm the interests of investors in the future. The “rope” to tie the state is the threat of facing multimillion-dollar claims brought by investors to international arbitration tribunals. But this widely accepted model assumes that the state, like Ulysses, is a single, static unit that can be tied to the mast.

Analyzing 25 years of international investment dispute data, this Article’s findings challenge the conventional wisdom that the “ropes” are effective in chilling energy government policies. The Article analyzes two variables: 1) the time elapsed between the initial filing of an arbitral claim and the final award and 2) changes in the administration of particular countries during the pendency of the arbitration proceedings. My objective is to identify how often the government that was in power at the time of the enacted regulation is the same actor that has to compensate the investor.

The Article concludes that the chilling effects assumption does not apply evenly across all sectors and actors. Paradoxically, those countries with more democratic transitions tend to drag out the arbitration proceedings for a longer period, and investors there face more challenges in recovering compensation. In contrast, in those countries where the same party or officer remained in power for more than a decade, the government dropped out of the system by denouncing the treaties, tended to settle earlier in the process, or otherwise avoided dragging out the compensation stage. Rather than tying the hands of the state, the investment arbitration system tends to generate disparate incentives depending on who is likely to be left with the bill. Ultimately, the state, as a subject of international responsibility, has to pay, but the government actors’ self-interests predominate. Those government actors do not necessarily contemplate the country’s long-term interests but rather the short-term benefits of policies affecting foreign investments. Rather than being the ropes that tie countries to the mast, we see that international arbitration proceedings result in individual government actors abandoning the ship and leaving someone else to pay the bill.