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Prospects in International Investment Law and Policy

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Contents

Figures

Tables

Contributors

Preface

Abbreviations

1 Introduction and overview

Part I Current paradigms in the economics and political economy of international investment activity

2 Investment policies for sustainable development: addressing policy challenges in a new investment landscape

A. Introduction

B. The changing landscape of global investment

C. The sustainable development potential of foreign investment

D. Policy challenges

I. National policy challenges

1. Ensuring responsibility and addressing sensitivities

2. Industrial policies – the need to manage their interaction with investment policies

3. Business facilitation and investment climates

4. Liberalisation and regulation: a question of balance

II. International policy challenges

1. Systemic challenges – a ‘spaghetti bowl’ of IIAs that lacks coordination with other international policies?

2. Investor–state dispute settlement: going beyond its original objective?

3. The development dimension – a missing element?

E. Recent evolutions and initial responses

F. Way forward

3 Foreign direct investment and development: novel challenges

A. Overview: the argument in brief

B. Different kinds of FDI, distinctive policy challenges

C. New forces are emerging that can be used to create a level playing field on transparency and anti-corruption for all investors in the extractive sector

D. The period since the 1990s has exposed fundamental flaws in using FDI for infrastructure for which no workable solutions have been found

E. Using FDI to upgrade and diversify exports is the new frontier for international development policy

F. There is evidence of labour institution externalities – as well as more straightforward labour market externalities – from using FDI to move into more sophisticated activities

G. Corporate social responsibility advocates should focus their efforts in very targeted fashion towards shaping and magnifying the impact of main-line core FDI operations

4 Actors in the international investment scenario: objectives, performance and advantages of affiliates of state-owned enterprises and sovereign wealth funds

A. Introduction

B. The international expansion of SOEs and SWFs: definitions and legal background

C. Three policy concerns: non-commercial objectives, poor performance and unfair advantages

I. Non-commercial objectives of SOEs

II. Performance of SOEs

III. Uncompetitive behaviour of SOEs

D. A new firm-level dataset of foreign affiliates controlled by governments

E. Empirical analysis of investment strategies and performance of affiliates of public enterprises

I. Are there asymmetries in the investment patterns of public and private firms?

II. How do affiliates of SOEs perform relative to affiliates of private firms?

III. Is there any evidence of unfair advantages conferred to affiliates of SOEs?

F. Concluding remarks

5 Investment treaties and the globalisation of state capitalism: opportunities and constraints for host states

A. Introduction

B. Are investments made by sovereign investors protected by international investment treaties?

C. Sovereign investors and investment treaty obligations

I. The adjudication of investment disputes involving sovereign investors

II. Security

III. Corporate governance

IV. Subsidies

D. Conclusion

6 Reflections on the current paradigms of international investment activity

A. Introduction

B. Foreign direct investment and development: novel challenges

I. Extractive industries: corruption

II. Infrastructure FDI: take-or-pay and foreign exchange clauses

III. Using FDI to diversify and upgrade exports

IV. Advice for corporate social responsibility advocates

C. Investment treaties and the globalisation of state capitalism

D. Actors in the international investment scenario

7 A Southern perspective on the existing investment landscape

Part II The interaction between international trade and investment regulation

8 On the laws of attraction: examining the relationship between foreign investment and international trade

A. Introduction

B. The nexus between international investment and trade: historical context

I. Flirting with the co-existence of bilateralism and multilateralism: FCN treaties, the Havana Charter and the GATT

II. The emergence of BITs and the seduction of multilateralism

III. Renewing the bilateral and multilateral relationships between investment and trade: the WTO and other forms of economic integration

C. Mapping the interlinkages between FDI and trade flows

I. The impact of intra-firm investment flows on the pattern of trade

II. The effect of international investment agreements on international trade and vice versa

D. The mutual attractiveness of investment and trade in dispute settlement

I. Investment law and policy issues in GATT/WTO dispute settlement

II. The attraction of WTO law and jurisprudence for investment arbitration

E. Possible future developments in the investment–trade relationship

9 Investment and trade: the ‘Lottie and Lisa’ of international economic law?

A. Introduction

B. Degrees of separation: a narrative of the trade–investment divide

C. Come together, right now? Contemporary convergence

D. Gaps between trade and investment regulation: the case of subsidies

E. Conclusion: time to consolidate

10 International trade and investment: towards a common regime?

A. Real world versus legal world

B. Trade and investment: separate or together?

C. Government measures are not designed solely for trade or investment purposes

D. There is more in the WTO on investment than meets the eye

I. Subsidies

II. Is history changing?

III. Is investment arbitration the cure or the curse?

E. Conclusion

11 Perspectives on the interaction between international trade and investment regulation

A. Introduction

B. Basic structure of the chapters by Footer and Broude

C. Some further thoughts

Part III The challenge of fostering greater coherence in international investment law

12 Practical and legal avenues to make the substantive rules and disciplines of international investment agreements converge

A. Introduction

B. Is convergence in the substantive rules and disciplines of IIAs desirable?

C. Where should convergence be sought?

D. Avenues to bring about convergence

I. Textual convergence

II. Interpretive convergence

E. Conclusion

13 Consistency in the interpretation of substantive investment rules: is it achievable?

A. Introduction

B. Treaty interpretation by arbitral tribunals: the unavoidable framework

I. The substantive framework imposed by international law: the rules of treaty interpretation as codified in Article 31 of the Vienna Convention on the Law of Treaties (VCLT)

II. The structural framework imposed by arbitration law: a decentralised system

C. Consistency and inconsistency in context

I. Interpretation of the provisions of the same treaty by different tribunals: is consistency required?

1. Denial of Benefits

2. Article XI of the USA–Argentina BIT

II. Interpretation of the same type of substantive protection or treaty mechanism: is consistency desirable?

1. Fair and equitable treatment

2. MFN treatment

3. Umbrella clauses

D. Achieving greater consistency: myth and reality

I. Centralised treaty interpretation: is it achievable or desirable?

1. The NAFTA’s FTC

2. The introduction of an appellate body

3. Can there be a control function for ICSID ad hoc committees?

II. Authentic treaty interpretation by contracting states: is it achievable or desirable?

1. Resorting to a treaty’s drafting history

2. Intervention of the home state as amicus curiae

III. Arbitral tribunals’ reliance on ‘precedents’: the development of a jurisprudence constante in investment treaty arbitrat

14 Coherence, convergence and consistency in international investment law

A. Introduction

B. Coherence

C. Convergence of substantive rules

D. Consistency in interpretation

E. Conclusion

15 The challenge of fostering greater coherence in international investment law

Part IV The policy- and rule-making challenges arising from the growth in investment litigation

16 ICSID at the crossroads: some thoughts and recommendations for improving the dispute settlement system

A. Introduction

B. A framework for change: ten suggestions

I. The ICSID Panel of Arbitrators

II. Training

III. Appointment of arbitrators by ICSID

IV. Explanatory notes to the arbitration rules

V. Ethics rules

VI. ICSID Users’ Committee

VII. Mediation and mediators

VIII. Case surveys

IX. Appointment of one or more Deputy Secretaries-General

X. ICSID and compliance with awards rendered under the ICSID Convention

C. Conclusion

17 Rules for investor–state mediation: draft prepared by the International Bar Association State Mediation Subcommittee

18 Complementing investor–state dispute resolution: a conceptual framework for investor–state conflict management

A. Introduction

B. The search for interest-based alternatives to investor–state arbitration

I. Interest-based dispute resolution and its advantages

II. Interest-based dispute resolution in the current international investment regime

1. Barriers related to the novelty of interest-based conflict resolution in the investor–state context

2. Barriers related to the private–public nature of treaty-based investor–state disputes

3. Barriers related to the lack of clarity and evolving nature of international investment law

4. Summary

C. Developing the concept of investor–state conflict management: a basis for protocols for dispute avoidance

I. The distinction between ‘conflict’ and ‘dispute’ and its application to the investment context

1. The investor–state conflict continuum

2. The practical implication of distinguishing between conflict management and dispute resolution: overcoming the barriers for amicable solutions to investment-related problems

II. The two fundamental dimensions of dispute prevention

D. Creating the infrastructure for management of investor–state conflicts

I. Dispute prevention policies (DPPs)

II. Conflict management mechanisms (CMMs)

1. Contractual CMMs

2. Institutional CMMs

E. Conclusions

19 The growth in investment litigation: perspectives and challenges

20 Different approaches to address challenges arising from increased investor–state litigation

Part V The quest for an adequate balance between ­investment protection and liberalisation and other public policy objectives

21 Sustainable development and international investment law: a harmonious view from economics

A. Introduction

B. The concept of sustainable development

C. Empirical insights into investment and development

D. The neglected variable: institutions

I. The possible impact of IIAs on host state institutions

II. The political economy question

E. A possible way forward

I. The object and purpose of IIAs

II. Jurisdiction or merits: where to consider sustainable development?

III. Proportionality

IV. Other norms of IIAs

F. Conclusion

22 GATT Article XX and international investment law

A. Introduction

B. Positions expressed in legal literature

C. Review of state practice

D. Comparative analysis of customary international law defences and GATT Article XX

E. Relevance of ‘general exceptions’ clauses for the investment law regime

I. National treatment

II. Fair and equitable treatment

III. Full protection and security

IV. Free transfers

V. Performance requirements

VI. Expropriation

F. Conclusion

23 The inclusion of GATT Article XX exceptions in IIAs: a potentially risky policy

A. Introduction

B. National treatment

C. Expropriation

D. Conclusion

24 Managing expectations: beyond formal adjudication

A. Introduction

B. Managing expectations about investment

Understanding the causal link between IIAs and investment

C. Alignment of interest in investment

D. Systemic regulatory opportunities

I. The framework of global administrative law

II. Exploring untapped value

III. Formal rule-making

IV. Informal rule-making and informal adjudication

E. Conclusion

Part VI From an uneven international investment regime towards a coherent international investment ­system: the way forward

25 Coherence and consistency in international investment law

A. The role of nationality

B. MFN clauses

C. Nationality-planning

D. A Multilateral Agreement on Investment (MAI)

E. Rights for nationals of non-contracting states

F. Conflicting interpretations

G. Preliminary rulings

H. Summary and conclusions

26 Perspectives for investment arbitration: consistency as a policy goal?

A. Diversity: an institutional and substantive choice?

B. Line one: embracing the status quo

C. Line two: a call for serious overhaul

D. Line three: improving the current regime

E. Conclusion

27 Towards a coherent international investment system: key issues in the reform of international investment law

A. Introduction

B. Reconsidering the conceptual basis of IIAs

I. Development and IIAs

II. Sustainable development and IIAs

III. Human rights and IIAs

C. IIAs and constitutional legitimacy

D. Recalibrating the balance of rights and responsibilities

E. Concluding remarks

28 Less may be more: the need for moderation in international investment law

A. Introduction

B. Investment protection and investor–state dispute settlement (ISDS)

C. Investment protection v. investment liberalisation

D. Conclusions

29 The way forward for the international investment regime: lessons from the past – perspectives for the future

I. Areas of convergence

First conclusion: the shift of wealth and power in the international economy

Second conclusion: convergence of key provisions in international investment agreements

Third conclusion: the broadening of the objectives of international investment agreements

Fourth conclusion: the current financial crisis has demonstrated the systemic importance of investment as a driver for growth and competitiveness

Fifth conclusion: the current system of investor–state treaty arbitration has serious deficiencies and needs to be remodelled

Sixth conclusion: the failure of the Multilateral Agreement on Investment (MAI) should not deter renewed efforts towards international rule-making

Seventh conclusion: investment and development – a new paradigm

II. Avenues for action

Index