Global Value Chains as a Constraint on Sovereignty: Evidence from Investor–State Dispute Settlement.

The article examines how global value chain (GVC) integration and Investor–State Dispute Settlement (ISDS) influence host states' regulatory sovereignty. It finds that host states have abandoned nearly 24 percent of regulations disputed by multinational corporations (MNCs) in ISDS cases between 1987 and 2017, even though ISDS legally requires only monetary compensation, not regulatory change. Empirical analysis shows that ISDS arbitrations cause significant reductions in intermediate goods trade within the claimant's industry, indicating disruption to GVCs, which in turn increases the likelihood that host states abandon disputed regulations to avoid economic harm. A detailed case study of Mesa Power v. Canada illustrates how threats to GVC integration can motivate regulatory changes beyond legal obligations, suggesting that economic globalization via GVCs can constrain state sovereignty by amplifying MNC leverage over domestic policy.