The system of international investment arbitration suffers from serious flaws. In South America, more than other regions, these failings are apparent from direct experience. Perhaps because so many countries in the region have faced multiple international investment arbitrations based on multi-million dollar claims for compensations, a number of alternatives to the current system of investment dispute resolution have been proposed by governments, multilateral institutions and academics.
State Liability for Regulatory Change: How International Investment Rules are Overriding Domestic Law
With governments around the world pushing efforts to negotiate and approve mega-investment treaties, it is important to be clear on just what these investment treaties do and do not mean. This article compares U.S. domestic law and international treaty rules on state liability for regulatory changes. It shows that arbitral tribunals have interpreted investment treaty rules in a manner far more favorable to the interests of investors than the approaches adopted in U.S. courts.
National investment boards or agencies operate in several countries with a view to attract foreign investment. Towards this objective, they often maintain websites highlighting the advantages of investing in their country. This article surveys some common categories of representations and promises made on the websites of national investment boards and discusses their potential legal implications.
Arbitrations by ConocoPhillips and ExxonMobil against Venezuela feature some of the largest claims ever to have been brought against a state by international investors. However, a careful reading of dispute’s factual background suggests that these claims bear little connection with the deals that these oil firms actually agreed to in Venezuela.
Threat of Pharmaceutical-Related IP Investment Rights in the Trans-Pacific Partnership Agreement: An Eli Lilly v. Canada Case Study
There are many reasons to strike the draft TPP Investment Chapter, a chapter that restricts government sovereignty to regulate business activities while simultaneously ceding de facto regulatory power to foreign investors and private arbitrators. The Eli Lilly claim against clarifies the risks of including IP rights in investment chapters and the boundary-pushing claims that can be brought on behalf of foreign pharmaceutical companies.
In July 2013, the United Nations Commission on International Trade Law () adopted a package of rules aiming to ensure transparency in investor-State arbitration, ratifying the work done by delegations to UNCITRAL—comprised of 55 Member States, additional observer States and observer organizations—over the course of nearly three years of negotiations. With the adoption of the new rules, there is now a carefully negotiated and widely approved template that can serve as a model for how to conduct investor-State arbitrations transparently.
The Draft Investment Chapter of the Canada-EU Comprehensive Economic and Trade Agreement: A Step Backwards for the EU and Canada?
This brief article describes some important aspects of the draft investment chapter of the Canada-, as well as commentary on the potential implications should Canada and EU sign on to these provisions.
While the revision that gave birth to the United States’ Model bilateral investment treaty in April 2012 has been closely observed and commented upon, much less attention has been paid to changes made to the Canadian Model.
The inclusion of market access commitments in investment agreements has proven divisive. This article looks at where China stannds on this issue.
China is often singled out as one of the big ‘land grabbers’, although it strongly refutes these claims. We set out to verify whether reports about Chinese investments were accurate or not.
A major challenge for investment treaty designers and adjudicators is to separate opportunistic behavior by host states that should be sanctioned under international law from bona fide public policy measures that should not. This article suggests that International Investment Agreements need to be both ‘smarter’ and more ‘flexible’ to better make that distinction. It draws on economic contract theory as a basic framework, and political economy theory for fine-tuning.
Enabling Risky Business: Human Rights and the Role of Officially Supported Trade Finance and Investment Guarantees
The expanded role played by Export Credit Agencies (ECAs) since the global financial crisis has not been matched with stronger rules that address the human rights-related impacts of ECA financed projects. Given narrow set of regulations that currently apply to ECAs, this brief article argues that more needs to be done to ensure that ECA financed projects do not cause harm to home states.
Very few BITs refer directly to human rights issues. However, when they do, they clearly do not impose any binding obligations on foreign corporations. The following paragraphs will provide a concrete analysis of how BITs could be drafted (or redrafted) to incorporate non-investment obligations.
While an extensive body of literature maps the tensions between regulatory sovereignty and investor protection in international investment law and analyses the balancing of private and public interests in arbitral practice, only a small sub-set of this literature makes reference to public interest considerations at the remedies stage of the investor-state arbitration process.
Agro-is a two-edge sword: only when managed properly will it bring food security benefits. However, the current global governance structure for agro-FDI unevenly distributes rights and obligations between the host state, the investor and the investor’s home state.
A Distinction Without a Difference? The Interpretation of Fair and Equitable Treatment Under Customary International Law by Investment Tribunals
Broad interpretations of the standard for fair and equitable treatment () by investment tribunals have become a source of increasing controversy. In theory, linking FET to customary international law (CIL), which is formed through the “general and consistent practice of states” that they follow out of a sense of legal obligation (opinio juris), results in a standard of protection that is more deferential to the regulatory authority of governments than the “autonomous” standard. In practice, however, investment tribunals continue to construe even CIL-based FET provisions to impose broad limits on government authority by accepting, without any evidence of state practice or opinio juris, the pronouncements of previous tribunals as definitive evidence of the standard under CIL.
It is quite common in investment arbitration for the respondent State to include in its defense to treaty claims one or more criticisms of the investor’s underlying conduct. Yet while such arguments feature prominently in State defenses, they are rarely framed as counterclaims seeking affirmative relief. The reason may lie in an instinctive preference by States to pursue any affirmative claims in their own courts. But it may also lie in perceived limits to the jurisdiction of international tribunals to hear State counterclaims.
Two recentdecisions have reached entirely different conclusions on the issue of jurisdiction over State counterclaims. This essay touches briefly on certain jurisprudential and policy factors that may explain the divergent results and frame future cases for further analysis.
In late 2012, the International Monetary Fund (IMF) officially endorsed an “institutional view” on the management of capital flows. This short note provides an overview of the new IMF view, pinpoints how it may conflict with country obligations under trade and investment treaties, and discusses remedies for reform.
The United Nations Conference on Trade and Development () has released its Investment Policy Framework for Sustainable Development (IPFSD). This article engages in an independent assessment of the IPFSD.
The Sixth Annual Forum of Developing Country Investment Negotiators: Understanding and Harnessing the New Models for Investment and Sustainable Development
The Sixth Annual Forum of Developing Country Investment Negotiators was held on October 29-31, 2012, in Port of Spain, Trinidad and Tobago. The forum encourages participants to develop their own critical perspectives on issues which are germane to the negotiation of international investment treaties.
Integrating Sustainable Development into International Investment Agreements: A Commonwealth Guide for Developing Country Negotiators
In November 2012 the Commonwealth Secretariat completed a practical guide, titled “Integrating Sustainable Development into International Investment Agreements: A Guide for Developing Countries,” to help enable developing countries to design international investment agreements that support their development needs.
Just as Peru has joined the global trend of concluding investment protection agreements, the country has also been no stranger to the considerable increase in international investment disputes observed in recent years. To address this growth in international investment arbitration in line with its investment attraction policy, Peru has created a system for efficiently and effectively resolving potential disputes.
The South African Development Community () Model Bilateral Investment Treaty Template and Commentary was completed in June 2012 by Member States of the Community. Its completion marks the end of an 18 month process of consultations and drafting among government representatives and is intended as a guide for member states in future investment treaty negotiations.
Towards a New Generation of Investment Policies: UNCTAD’s Investment Policy Framework for Sustainable Development
On 12 June 2012, the United Nations Conference on Trade and Development launched its Investment Policy Framework for Sustainable Development. IPFSD comes at a time when the international investment regime is in a state of “transition” and when an increasing number of governments are reviewing their investment-related regulatory frameworks, both at the national and international levels.
Dealing With the Increasing Complexity of Investment-Related Treaties: A Framework and Some Policy Guidelines
Bilateral investment treaties used to be boilerplate: taken out of a drawer before official visits; signed with pomp and circumstance but not much attention to precise wording. Today, the diversity and ramifications of investment-related treaties are staggering.
From October 1-5, 2012, a working group of the United Nations Commission on International Trade Law met in Vienna to continue work on how to ensure transparency in treaty-based investor-state arbitration. It was the working group’s fifth week-long meeting on the topic, but will not be the last.
National investment codes may function as potential sources of international investment law. In other words, states may make unilateral undertakings within the framework of national investment legislations and, as a result, be considered as having “created international obligation[s]”. The addressees of national investment legislations are foreign investors as well as the state that is itself […]
Analysis of the European Commission’s Draft Text on Investor-State Dispute Settlement for EU Agreements
With the European Union’s Lisbon Treaty, in force since December 2009, foreign direct investment fell under the exclusive competence of the European Union (). Since then the three European institutions—the European Commission, the European Council of Ministers and the European Parliament—have been engaged in a vigorous debate over a new legal framework and negotiating positions […]
After several cases assessing whether state regulation in the public interest gives rise to a claim under an investment treaty, commentators have begun asking questions about the applicable standard of review that should be applied in evaluating those claims. Now that there is emerging clarity around the interpretation of the most common substantive investment treaty […]
[T]he Tribunal must balance the legitimate and reasonable expectations of the Claimants with […] [the] right to regulate the provision of a vital public service. This quote from an investment arbitration tribunal highlights the relationship between international investment law and the regulation of public services. This essay illustrates areas of contention between the requirements of […]
Deference or No Deference, That is the Question: Legitimacy and Standards of Review in Investor-State Arbitration
The appropriate standard of review to be applied in investor-state arbitration—as well as in other dispute settlement contexts, for that matter—remains a recurrent and much debated topic. The reason is straightforward: In many cases, the outcome of arbitral proceedings hinges, inter alia, on the intensity with which a tribunal scrutinizes the conduct of the investment’s […]
Pro-Investor or Pro-State Bias in Investment-Treaty Arbitration? Forthcoming Study Gives Cause for Concern
Debates about investment treaties often raise questions about fairness and independence in international investment arbitration. Some observers argue that investment arbitration offers a neutral and impartial forum in which to resolve investor-state disputes as a basis for protecting foreign-owned assets and ensuring the rule of law. Others claim that the arbitration mechanism favours investors and […]
In January 2012, the Bolivarian Republic of Venezuela denounced the, becoming the third country – after Bolivia and Ecuador – to do so. The exit from the global forum for the settlement of investment disputes signals these countries’ apparent loss of faith in the system and raises questions about the Convention’s fitness for […]
In November 2011, an arbitral tribunal found the Republic of India guilty of violating the India-Australia bilateral investment treaty (). It is the first known investment-treaty ruling against India, despite the fact that the country has a mammoth portfolio of BITs with more than 70 countries. News of the award broke only in February 2012.[i] […]
A dispute will only fall within the jurisdiction of the International Centre for Settlement of Investment Disputes () if it directly arises out of an ‘investment’, as is provided by Article 25(1) of the Convention for the Settlement of Investment Disputes between States and Nationals of Other States ( ). However, not only does the ICSID Convention fail to provide any definition of what constitutes an ‘investment’, the drafters of the ICSID Convention, in fact, made an express decision not to include such a definition. This absence has given rise to interesting issues of interpretation as ICSID tribunals have sought to arrive at an understanding of how the term ‘investment’ should be properly understood for the purposes of the ICSID Convention.
As members of the Eurozone are now acutely aware, the lack of a sovereign debt restructuring regime is one of the most glaring gaps in the international financial architecture. That said, this summer’s decision by a tribunal of the International Centre for Settlement of Investment Disputes (), which grants a bilateral investment treaty ( ) jurisdiction […]
Advocates for the Trans-Pacific Partnership Agreement (TPPA) describe it as a “new generation agreement for the 21st century” that will go further behind the border than any previous free trade agreement (). This signals significant changes in the investment regime found in the current generation of FTAs and bilateral investment treaties (BITs). Precisely what those […]
UNASUR Arbitration Centre: The Present Situation and the Principal Characteristics of Ecuador’s Proposal
Five years ago, some Latin American countries started a critical movement against the International Centre for Settlement of Investment Disputes (), the World Bank institution for arbitrating disputes between foreign investors and host states. They perceived that ICSID arbitration proceedings had become problematic due to a lack of transparency and a failure to address the […]
It is an established fact that many transnational companies choose the jurisdiction of the Netherlands as a base for their global trade and investment operations, at least partly because of the country’s favourable tax regime that facilitates corporate tax avoidance strategies. A new report by the Centre for Research on Multinational Corporations (SOMO) entitled “Dutch […]
Over the past two decades, stabilization provisions in investment contracts (and in the domestic law in some developing countries) became a popular demand of investors into developing countries. Rarely used and largely unconstitutional in most developed countries, these provisions essentially limit the ability of governments to have new laws and regulations apply to a foreign […]
Principles for responsible contracts: Integrating the management of human rights risks into State-investor contract negotiations
The UN shines a spotlight on business and human rights In July 2005, the then United Nations Secretary-General Kofi Annan appointed John Ruggie as his Special Representative on Business and Human Rights. Ban Ki-Moon continued the appointment, and this June Ruggie delivered his final report to the Human Rights Council. Ruggie’s mandate is highly significant […]
The public began to hunger for information about investment in the agriculture sector when a massive wave of foreign investment in farmland and water was triggered, in 2008, by a confluence of the biofuels boom, global food crisis, sharp spike in oil prices and the financial crisis. Alarming information started to emerge in the media. […]
In recent years, economic liberalisation, improved transport and communication systems, and the global demand for energy, minerals and agricultural commodities have fostered investment in agriculture, mining and petroleum projects in many poorer countries. For some commentators, this trend provides new opportunities to promote growth, generate public revenues and create employment in countries that have limited […]
The oil and gas industry faces increasingly strict environmental standards in developed countries. However, the majority of the world’s proven oil reserves are in developing countries and economies in transition, which often lack sophisticated regimes for environmental protection. Even when legislative frameworks are well developed, there are often deficiencies in capacity and an unwillingness to […]
In April of this year, as a part of a broader rethink of Australia’s approach to international trade negotiations, the Gillard Government vowed that it will no longer include provisions on investor-state dispute settlement () in bilateral and regional trade agreements. The new policy is justified by reference to the principles of ‘no greater rights’ […]
Two international projects relating to foreign investment and sustainable development (SD) were completed in the past two months. These two projects individually and together show the emerging pathways to properly considering the linkages between new investments and SD in the host state and community. The first of these projects to be launched, on 4 April […]
Philip Morris v. Uruguay: Will investor-State arbitration send restrictions on tobacco marketing up in smoke?
For nearly two decades, the tobacco industry has used international investment rules to challenge governmentrestrictions on cigarette marketing. In 1994, R.J. Reynolds Tobacco Company threatened to bring a claim under the North American Free Trade Agreement’s () investment chapter as part of its successful lobbying campaign against Canada’s proposed “plain packaging” legislation, which would have […]
Investment arbitration and the Canada-EU Comprehensive Economic and Trade Agreement: Time for a change?
With the seventh round of negotiations between Canada and the European Union over the Canada-Comprehensive Economic and Trade Agreement ( ) completed this April, and the eighth round scheduled for July, the involved nations are closer than ever to being subject to the investment arbitration provisions of another free trade agreement. Canadian critics of CETA […]
The problem of moral hazard and its implications for the protection of ‘legitimate expectations’ under the fair and equitable treatment standard
While the concepts of sovereignty, human rights, the environment and the rule of law are often invoked in public debate about international investment treaties (IITs), there is relatively little discussion of the economic effects of such treaties. One of the most powerful legal protections provided by IITs is the protection of foreign investor’s ‘legitimate expectations’ under fair and equitable treatment () provisions, which are common to most IITs. This article draws on economic theory—specifically, the notion of moral hazard—to elucidate some of the problems with broader interpretations of the doctrine of legitimate expectations.