Beyond Credible Commitments: (Investment) Treaties as Focal Points

Abstract Why do states enter into treaties? In literature on the investment treaty regime, the dominant answer is that investment treaties provide credible commitments to foreign investors. This narrative provides valuable insights but cannot account for the historical origins of the treaties, where drafters explicitly decided to exclude “strong” dispute settlement provisions. Unlike modern-day investment treaties, the early investment treaty regime did not allow investors to file claims against host states through investor-state dispute settlement (ISDS). Using historical evidence from three major capital-exporting states—the United States, the United Kingdom, and Germany—the article shows that this was a conscious design choice. Rather than providing formal dispute settlement, sanctions, and penalties to make credible commitments, Western states intended investment treaties to serve as salient focal points for the informal resolution of investment disputes. The substantive obligations were expected to fulfil their coordinating role without the shadow of judicialized dispute settlement. The argument is not just of historical interest but has broader implications for literature on international economic law dominated by the credible commitment narrative, as well as the current political backlash against ISDS.