Measuring and Building Institutional Capacity for Investor-State Dispute Settlement in Latin America and the Caribbean
Drawing on generous support from the Georgetown Americas Institute, CAROLA and Georgetown University’s States and Institutions of Governance in Latin America (SIGLA) project are partnering to launch the “Measuring and Building Institutional Capacity (MBIC) for Investor-State Dispute Settlement in Latin America and the Caribbean” Initiative.
Measuring and Building Institutional Capacity (MBIC) for Investor-State Dispute Settlement in Latin America and the Caribbean
A central challenge to democratic governance and the rule of law in Latin America is the growing use of “investor-state dispute settlement” (ISDS) by multinational corporations (MNCs). Using this mechanism, MNCs can bypass domestic judicial systems to challenge regulations, including those enacted in the public interest. A CAROLA study of all regional disputes over 25 years revealed that Latin American and Caribbean (LAC) States have together faced claims for US $1.5 trillion and been ordered to pay a staggering US $32.2 billion in awards and settlements. Internal governance and institutional challenges, such as weak coordination among relevant government ministries and the inclusion of different branches and levels of government, stymie States’ ability to prevent claims and successfully manage disputes. In addition, new office holders are often unaware of the scope of their liability exposure stemming from previously-signed international agreements.
The MBIC Initiative seeks to identify and map LAC countries’ institutional capacity to prevent and manage claims from foreign investors. Current research focuses on identifying countries’ institutional framework, characterizing their leading agency/institution defending the State against these claims, and assessing their capacity to anticipate and prevent an internal grievance from escalating into an international dispute. The project currently involves the analysis of four countries, namely Argentina, Colombia, Peru, and Mexico, and will eventually expand to focus on 15 LAC countries.
Following data collection we will compare and contrast institutional capacity across the 15 LAC countries of focus, and begin to develop ideas for how LAC countries can build their institutional capacity in this critical area.