Norway shelves its draft model bilateral investment treaty

By Damon Vis-Dunbar
8 June 2009

Norway has abandoned a draft model bilateral investment treaty (BIT), following public input that was largely critical.

The draft text of the model BIT, released to the public in December 2007, features a number of innovations over previous Norwegian BITs, including transparent investor-state dispute settlement procedures, the requirement to exhaust local remedies before recourse to international arbitration, and efforts to limit the ability of so-called mailbox companies from using the treaty’s protections.

In addition, a lengthy preamble to the proposed model BIT affirms the desire for “stable equitable, favourable and transparent conditions for investors”, but also emphasises the importance of corporate social responsibility, human rights and sustainable development.

Yet despite efforts to achieve a model BIT that balanced investor protections with consideration of public goods, a number of nongovernmental organizations and businesses charged that the proposed model agreement was imbalanced.

Indeed, public feedback fell broadly in two categories, said a Norwegian government official: groups that felt the model did not provide investors with enough protection, and those that felt the model would restrain governments’ ability to regulate in the public interest.

The feedback was so polarized that Norway “decided that achieving a proper balance was too difficult,” said this person.

The Norwegian government is currently a coalition between the Labour Party, the Socialist Left Party and the Center Party. The Socialist Left Party and the Center Party both opposed the model BIT.

In a statement to the press, the Minister of Finance, Kristin Halvorsen, who belongs to the Socialist Left Party, praised the decision to “put away the model agreement,” saying that doing so was an important cause for the Socialist Left Party, the Center Party, and environmental and develoment organizations.

It is uncertain whether Norway will negotiate BITs in the future. For now, Norway will only consider agreeing to provisions on investor protection in the context of free trade agreements with India, China, the Ukraine and Russia. Norway has already embarked on negotiations for FTAs with India, China and the Ukraine, and preliminary discussions are underway with Russia.

“What happens after that is unclear,” said a government source.

For earlier analysis of the proposed draft Norwegian BIT, see: “Norway proposes significant reforms to its investment treaty practices”, By Luke Eric Peterson, Investment Treaty News, March 27, 2008, available here: http://www.IISD.org/pdf/2008/ITN_mar27_2008.pdf