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Abstract

In their 1959 proposal to build a new international legal order founded upon principles of human dignity, Professors Myres McDougal and Harold Lasswell admonished international legal scholars to continuously reappraise the suitability and necessity of existing international legal institutions, taking due notice of the "myths" on which current arrangements are based and justified.' The aim of this Article is to take McDougal and Lasswell's admonition seriously in analyzing one of the persistent myths that serves to explain and to justify bilateral investment treaties ("BIT"s) that form the backbone of the modern system of international investment law. The author’s aim is simply to establish that developing countries enjoy significant flexibility to exit the BIT system-if they come to the conclusion that BITs are, on net, undesirable-without harming their ability to make binding commitments to investors on a case-by-case basis through investment contracts, supported by international arbitration. In Part I, the author first briefly describes the modern BIT regime. The author then summarize and discuss the most important extant theoretical study of BITs and the source of the myth challenged here. Part II presents the mythic account of BITs. Part III analyzes the extensive jurisprudence of international arbitral tribunals in the pre-BIT era, which the author defines as the period prior to the 1990s. This jurisprudence demonstrates that international tribunals reliably expressed support in the abstract for the principle of pacta sunt servanda, and that they reliably awarded investors meaningful compensation for violations of the principle. Part IV discusses why the permanent sovereignty movement failed to make state promises unenforceable. Part V summarizes the Article's main points and responds to four potential objections. Part VI concludes.

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