Economic Interest versus Social Conscience Signing Bilateral Investment Treaties – Does Human Rights Matter?

Both theoretical and empirical literatures have identified several channels through which bilateral investment treaties encourage FDI in developing economies like providing investment protection guarantees and so on. Economic and political interests are said to be the driving forces behind signing the investment treaties. However, there is virtually no systematic evidence on whether countries consider human rights performance of the host country while signing bilateral investment treaties. We make an attempt to examine this question by considering 87 developing countries over a period 1980-2006. Different estimation techniques like: negative binomial and poisson models are used. The results demonstrate that economic interests drive bilateral investment treaties to human rights performance. Economic interests measured by economic development, long-term investments, return on investments and macroeconomic risk are significant while human rights performance namely, political terror scale and physical integrity rights remain consistently insignificant. The results are robust to the use of alternative estimation techniques and sensitivity analysis. These results highlight that economic interests preside over social conscience while countries signing investment treaties.