Investor state dispute settlement (ISDS) and the social licence to operate of international business: An analysis of controversial cases

Abstract

This paper analyses how the challenging of regulation by multinational enterprises through the investor state dispute settlement (ISDS) process impacts the social licence to operate (SLO) of international business (IB). Drawing on the analyses of controversial ISDS cases, it makes four key contributions. First, it proposes a framework for better understanding SLO and presents strong evidence that the use of ISDS has undermined SLO, not only of the involved companies, but also of IB more widely. Second, it extends the literature on corporate political activity (CPA) by drawing attention to the importance of litigation strategies, largely ignored in prior research. Third, it contributes to the literature on the externalities of CPA by exploring how certain tactics can undermine public trust and SLO. Last, it expands our understanding of the ‘dark side’ of CPA beyond illegal activities and government capture, to ethically questionable strategies.