ABSTRACT
This chapter explores important limitations to the capacity of private transnational governance by contract in the investor-state regime to broker conflicting interests between private investors, host states, and their populations. It traces the history of international investment agreements (IIAs) as a form of contractual governance in the colonial era and highlights their recent transformation towards a delocalized, denationalized, and privatized regime, erupting tensions in public and private understandings of international law. The chapter then focuses on incomplete contract theory for insights into why IIAs have become dominant mechanisms of foreign investment protections and how they have been designed to shift the balance of power within investment relations. It argues that it is insufficient in drawing attention to the distributional consequences of the investor-state regime. The chapter describes recent movements of resistance and reform to demonstrate how insights from critical political economy can help supplement our knowledge for envisioning the future of this regime.
