Information and risk : how investor-state disputes affect global policy diffusion

I propose an informational mechanism to explain how multinational corporations (MNCs) use Investor-State disputes to slow down the global spread of costly regulations to their businesses. I rely on a multi-methods strategy to analyze my proposition in the context of the limited diffusion of certain anti-smoking policies around the world. First, the statistical analysis of novel, monthly-data for a sample of 95 countries from 1973 to 2016 reveals that anti-smoking policies challenged by international lawsuits diffused at slower speeds relative to comparable undisputed policies, while cases were ongoing. Second, primary and secondary qualitative sources and in-depth interviews demonstrate that scarce information around these lawsuits induced both sued and third governments to delay the adoption of the challenged policies. Specifically, I show that governments inexperienced with international arbitration decided to wait for more information on the cases before deciding whether to adopt the disputed regulations. After information was revealed, developed countries estimated they could bear the risk of a potential costly lawsuit and promptly adopted the disputed policies, while developing countries did not. My findings indicate that MNCs can use Investor-State disputes to place countries in a world of scarce information, and hence affect their sovereign powers by slowing down their policy-making processes.