1. Carolina Moehlecke The University of Texas at Austin IPES – Fall 2017
Uncertainty, Information and Risk: How Investor-State Disputes affect global policy diffusion
Carolina Moehlecke
The University of Texas at Austin
IPES – Fall 2017

2. Question & Context
Do Investor-State Disputes delay global policy diffusion? Under what conditions?
Investor-State Dispute Settlement (ISDS): multinational corporations can sue governments.
Lawsuits that dispute governments’ regulations: chilling effect.
This study: the presence, the scope and the depth of the chilling effect.
Carolina Moehlecke (UT Austin)

3. Argument
Disputes: realms of uncertainty and risk (Nelson and Katzenstein, 2014)
- Uncertainty: unstable parameters (before information).
- Risk: known parameters (after information).
Uncertainty delays policy adoption until information is revealed.
Regulation happens under risk, if countries estimate they can sustain costs.
MNCs generate uncertainty, and benefit from delayed policy adoption (Pfeffer and Salancik, 1978).
Carolina Moehlecke (UT Austin)

4. Hypotheses
H1: Disputed policies should diffuse at relative slower speeds than comparable undisputed policies.
H2: Under uncertainty, the less experienced a government is with Investor-State disputes, the more likely it is to delay policy adoption.
H3: Under risk, developed countries should be more likely to promptly
adopt the disputed policy.
Carolina Moehlecke (UT Austin)

5. Multi-Methods Approach
Focus: anti-smoking regulations.
- Philip Morris vs Uruguay (Feb-2010 – Jul-2016) – ICSID.
- Philip Morris vs Australia (Jun-2011 – Dec-2015) – UNCITRAL.
Presence of the chilling effect: models of diffusion with observational data.
Scope of the chilling effect: case studies (95 countries analyzed).
Depth of the chilling effect: interviews (Uruguay).
Carolina Moehlecke (UT Austin)

6. Data 95 countries 10 anti-smoking policies (Mar 1973 – Dec 2016)
Sources: Tobacco Control Laws and Canadian Cancer Society (NGOs).
Parliamentary records, ministerial declarations, news sources,(....)
Three disputed regulations and seven undisputed.
Carolina Moehlecke (UT Austin)

7. Graphic health warnings≥ 80%
Anti-smoking policies
Bans on Smoking
In Restaurants & Pubs
In Public Transport
Bans on Marketing
On TV & Radio
On branding on Physical Structures
Packaging
Pictures required
Misleading labels prohibited
Graphic health warnings ≥ 50%
Graphic health warnings≥ 80%
(Uruguay)
Single-Presentation
Plain Packaging
(Australia)
Comparable policies in terms of:
countries’ interest
(2) implementation complexity
Carolina Moehlecke (UT Austin)

8. Results – Presence of the chilling effect
One intercept-only survival model for each policy (Mallinson, 2016).
Weibull distribution: hazard function behaves monotonically.
Response variable: time until adoption relative to first-mover.
Coefficients are average times until adoption (rescaled, so 0 = slowest).
Intercept-only models allow comparisons: disputed (orange) and undisputed (gray) policies.
Carolina Moehlecke (UT Austin)

9. Carolina Moehlecke (UT Austin)

10. Carolina Moehlecke (UT Austin)

11. Results – Scope of the chilling effect
Risk-takers:
regulation under risk (plain packaging)
Risk-averse:
no regulation under risk (plain packaging)
England
France
Ireland
N. Zealand
N. Ireland
Norway
Scotland
Wales
Burkina Faso
Canada
Chile
Hong Kong
Mexico
Panama
Singapore
Thailand
Togo
Uruguay
Lawsuits: 0.4
GDP per capita: U$ 55,590
Lawsuits: 6.4
GDP per capita: U$ 19,508
Carolina Moehlecke (UT Austin)

12. Results – Depth of the chilling effect
Interviews in Uruguay, July 2017
Uncertainty: Uruguay hesitated about policies and adoption was delayed.
Countries in the region consulted Uruguay.
Uruguay has become more cautious in regulating public health.
Uruguay has become more cautious in negotiating BITs.
Carolina Moehlecke (UT Austin)

13. Conclusions Investor-State Disputes can delay global policy diffusion.
Inexperienced, developed countries adopt policies under risk.
Experienced, developing countries keep delaying policy under risk.
MNCs benefit from delayed diffusion: time to adapt.
Disputes affect countries’ policy-making processes more generally.
Not only countries can be chilled: IGOs too?
Carolina Moehlecke (UT Austin)