Why is Exit So Hard? Positive Feedback and Institutional Persistence
Chapter eight analyzes why institutions persist, even when they generate unintended consequences for the states that created them. The chapter sets out a typology of possible actions that governments can take to exit from investor–state arbitration. To date, governments have engaged in remarkably little exit. The second section explores how positive feedback has created a new constituency of law firms and investors with an interest in arbitration and therefore has led to a new politics of ISDS. The third section discusses other types of feedback that have stabilized and developed a dense web of commitments enshrining investor–state arbitration. The fourth section observes that over time, competitive dynamics emerged and define investor–state arbitration today: competition between law firms, arbitration organizations, and even jurisdictions hoping to host arbitrations makes exit and reform more difficult. The barriers to exit may be highest for capacity-constrained states.