Investment Treaties and Transition from Authoritarian Rule

Following recent events in Egypt, Libya, Myanmar (Burma) and Tunisia, foreign investors have lodged international claims under investment treaties. Several of these cases follow a common fact pattern. They concern foreign investments acquired from authoritarian governments substantially below market value through transactions that were not arms' length. Subsequently, new governments sought to renegotiate these contracts and concessions, or to change the regulatory arrangements that govern them. The investors then invoked the protections of an investment treaty. This article draws on political science scholarship on transition. It argues that investment treaties risk constraining the ability of incoming democratic regimes to consolidate their position, and questions the normative justifications for applying the principle of full market value compensation to situations in which investments were not acquired on a full market value basis. These conclusions are relevant to wider debates about the tension between legal stability and political change in international law.