STATES AND FOREIGN INVESTORS: IS IT POSSIBLE TO FIND SOME COOPERATION?

Abstract

A significant number of countries facing difficulties in financing their own economies are trying to attract foreign investments to develop productive activities in their territories. However, these relations between States and foreign investors are historically characterized by conflicts. States and investors, as rational agents, are always trying to maximize their payoffs. In this context, there are conflicts between expectations of future payoffs that will result from investments and immediate gains obtained with an expropriation. As this relation perpetuates in time, some cooperation can be achieved. Law is one of the elements in this incentive’s structure, which can help to achieve bigger cooperation between States and foreign investors. This article brings considerations of the foreign literature in the Economic Analysis of Law that uses the rational choice theory and the game theory to explain the role of the International Investment Agreements and the investment arbitration in the relations between States and foreign investors.

Foreign investment; payoffs; game theory; rational choice; incentives