Government Actors and Acts of Expropriation Nathan M. Jensen Washington University in St. Louis Jeremy Caddel Washington University in St. Louis

Research Question Which government actors lead to contract disputes between countries and MNCs? Which government actors lead to contract disputes between countries and MNCs? How do political institutions affect these risks? How do political institutions affect these risks?

Rule of Law Rule of Law and Development Rule of Law and Development (North and Weingast 1989; North 1990; Olson 1993, 2000). Rule of Law and International Investment Rule of Law and International Investment (Vernon 1971; Friden 1994)

Political Risk and FDI Institutions Institutions Democratic Regimes Democratic Regimes Veto Players/Political Constraints Veto Players/Political Constraints Courts Courts Bilateral Investment Treaties Bilateral Investment Treaties Preferences Preferences Partisanship Partisanship Time horizons Time horizons Learning Learning

Empirical Work Flows of FDI Flows of FDI (Li and Resnick 2003; Jensen 2003; Busse 2004; Ahlquist 2006; Büthe and Milner 2008) MNC entry strategy MNC entry strategy (Henisz 2002; Desai et al 2008) Political risk insurance premiums Political risk insurance premiums (Jensen 2008) Country/regime expropriation Country/regime expropriation (Jodice 1980; Kobrin 1984; Minor 1994; Li 2009) Investment Climate Surveys Investment Climate Surveys (Weymouth and Broz 2009; Biglaiser and Staats 2010)

International Centre for Investment Disputes (ICSID) ICSID clauses in bilateral investment treaties ICSID clauses in bilateral investment treaties (Yackee 2007, 2008, Kerner 2009, Allee and Peinhardt 2009) 156 Country Member 156 Country Member Role of Private Parties Role of Private Parties Firms can initiate disputes Firms can initiate disputes Do not have to exhaust domestic remedies Do not have to exhaust domestic remedies

Data Sources: Sources: Completed ICSID cases (180): case facts Completed ICSID cases (180): case facts Media sources, company information, case studies Media sources, company information, case studies Coding Coding Government actor initiating dispute Government actor initiating dispute Secondary actors involved in the dispute Secondary actors involved in the dispute

ICSID Disputes ActorDisputes Executive10 Ministry34 Executive Branch Executive Branch Legislature Legislature 5 Subnational12 State-Owned Firm 12 Other Agency 24 Total: Other Total: Other 48 48

Empirical Analysis Dependent Variable ( ) Dependent Variable ( ) Country-year dispute (1= dispute, 0 = otherwise) Country-year dispute (1= dispute, 0 = otherwise) Separating executive from other disputes Separating executive from other disputes Key Independent variables Key Independent variables Political regime and political constraints Political regime and political constraints Methods Methods Logit model with cubic splines Logit model with cubic splines Robustness (rate event logit, etc) Robustness (rate event logit, etc)

Preliminary Empirical Analysis ExDisputeNon-ExDisputeExDisputeNon-ExDispute Regime-0.036*(0.019)-0.009(0.018) Political Constraints 0.638(0.436)-1.001**(0.459) Observations1,997(111)1,997(111)2,038(113)2,038(113) Main Controls: log GDPPC, dispute counter, splines Robustness: FDI flows, regional dummies, etc

Conclusions Political institutions affect non-executive disputes but not executive disputes Political institutions affect non-executive disputes but not executive disputes Legislative initiated disputes are very rare Legislative initiated disputes are very rare

Future Work Data Collection Data Collection Expropriations from 1990-Present Expropriations from 1990-Present OPIC Political Risk Insurance Claims OPIC Political Risk Insurance Claims Past Expropriations Past Expropriations Data coding Data coding Government actors Government actors Types of actions Types of actions Active dispute vs. failing to act Active dispute vs. failing to act Relationship between actors Relationship between actors Independence of ministries Independence of ministries