Research Institute of Economy, Trade and Industry (RIETI)
25 July 2008
Tokyo, Japan
Recent trends and key issues in
international investment agreements
Anna Joubin-Bret
Senior Legal Advisor
UNCTAD
Global trends in International
Investment Agreements
(IIAs)
2
The role of IIAs
„
„
Contribute to the creation of a stable, predictableand
transparent regulatory framework for international
investment
Facilitate the coordination of investment relations
(relations among international investors, host states,
home states, domestic investors and other development
stakeholders) through internationally agreed rights and
obligations on:
• Liberalization
• Protection
• Promotion of investment
3
The network of International
Investment Agreements (IIAs)
¾
¾
¾
¾
Bilateral investment treaties (BITs)
Free trade agreements / economic partnership
agreements with investment provisions (FTAs/EPAs)
Regional integration agreements (EU, EFTA, CARICOM,
MERCOSUR, ASEAN)
Multilateral agreements dealing with investment (GATS,
TRIMs, TRIPs, MIGA)
4
A. Bilateral Investment
Treaties
250
3000
200
2500
2000
150
1500
100
1000
50
Cumulative BITs
Annual BITs
The network of BITs continues to
grow rapidly, there are now over
2500 BITs
500
0
0
96 9 97 9 98 9 99 0 00 0 01 0 02 0 03 0 04 0 05 0 06 0 07
19
1
1
1
2
2
2
2
2
2
2
2
Years
6
BITs concluded by country group,
end 2007
4%
13%
25%
8%
10%
40%
Betw een developing countries
Betw een developed and developing countries
Betw een developing countries and countries of SEE&CIS
Betw een developed countries
Betw een developed and countries of SEE&CIS
Betw een countries of SEE&CIS
7
The top ten signatories of BITs in
the world, end 2007
Germany
China
Switzerland
United Kingdom
Egypt
Italy
France
Netherlands
Belgium and
Republic of Korea
0
20
40
60
80
100
120
140
Number of BITs concluded
8
Selected signatories of BITs from
the region, end 2007
China
Korea, Republic of
Malaysia
Indonesia
VietNam
Philippines
Australia
Japan
New Zealand
0
20
40
60
80
100
120
140
Numberof BITs concluded
9
B. Free Trade Agreements
10
B. Free Trade Agreements with
Investment Chapters
¾ International investment rules are increasingly being
formulated as part of agreements that encompass a
broader range of issues (including trade, services,
competition, intellectual property);
¾ 2 main types:
¾ Investment liberalization only (EU EPAs)
¾ Investment liberalization and protection (US, Can,
Japan FTAs)
¾ Regional integration with investment disciplines:
ASEAN investment liberalization and protection
¾ The total number of such economic agreements with
investment provisions exceeded 250, as of end 2007.
11
Over 250 trade agreements with
investment provisions by end 2007
Agreements other than BITs with
investment provisions
300
250
200
150
100
50
0
67
9
1
579
1
78
9
1
689
1
By period
89
9
1
799
1
00
0
2
909
1
07
0
2
010
2
Cumulative
12
Trade agreements with investment
provisions by country group, end
2007
8%
39%
36%
2%
5%
10%
South-South
North-North
North-South
North-transition economies
Transition economies-transition economies
South-transition economies
13
Recent FTAs with investment
chapters
¾
¾
¾
¾
¾
¾
¾
¾
Free Trade Agreement between the United States of
America and Peru
Free Trade Agreement between the United States of
America and Colombia (not ratified)
Free Trade Agreement between Singapore and Panama
Association Agreement between the European
Community and Albania
Economic Partnership Agreement between Japan and
Philippines
Economic Partnership Agreement between Japan and
Chile
Economic Partnership Agreement between Japan and
Thailand
Free Trade Agreement between the United States and
the Republic of Korea
14
Multiple overlapping FTAs with
investment provisions
• IIAs proliferate at all levels
•Constituting a complex system of multi-layered and
multi-faceted investment rules
15
Recent developments in
investor-State dispute
settlement
16
The increase in IIAs has been
paralleled by an increase in
investor-State disputes
→ The cumulative number of treaty-based cases
reached over 290 known claims by end 2007.
→ While the awards rendered in these proceedings
have helped to clarify the meaning and content of
individual treaty provisions, some contradictory
decisions have also created uncertainty.
17
50
350
300
250
200
150
100
50
0
40
30
20
10
0
9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7
198 199 199 199 199 199 199 199 199 199 199 200 200 200 200 200 200 200 200
ICSID
Non-ICSID
Cumulative number of cases
Known investment treaty arbitrations
(cumulative and newly instituted cases, 1987-2007)
All cases cumulative
18
Disputes by Forum of arbitration:
5%
2% 2%1%
28%
62%
ICSID UNICTRAL SCC ICC Ad-hoc
Other/unknow n
19
Sectors involved in known
investment treaty arbitration
6%
24%
39%
31%
Tertiary sector
Secundary sector
Primary sector
Unknown
20
Known investment treaty claims, by
defendants (December 2007)
Argentine Republic
Mexico
Czech Republic
United States
Canada
Ecuador
India
Poland
Egypt
Romania
Russian Federation
0
10
20
30
40
50
Number of cases
21
ISDS mechanism: concerns
¾
Increasing use of ISDS mechanism
¾
High costs involved in conducting procedures
¾
Arbitration awards can involve huge sums
¾
¾
¾
Potential impact on country’s reputation as investment
location
Impact on the country’s right to regulate
Possible to address in future investment treaties but what
about the existing network ? What about the MFN provision
?
22
Key issues and systemic
implications in international
investment agreements
23
Policy coherence
Because of the:
Increasingly complicated network of IIAs
„ Overlapping commitments at the national (State contracts,
procurement), bilateral, regional levels on investment
protection and liberalization
„ South-South cooperation: net capital importing countries
becoming capital exporters
„ Different interpretations of treaty provisions by arbitration
tribunals
„ Evolution of international investment law
The maintenance of policy coherence
becomes a major challenge for countries (whether developing or
24
developed).
„
Policy coherence – two facets
„
„
First, coherence needs to be ensured between different
IIAs, including State Contracts to which host countries
are a party; sometimes, this may even be a concern with
regard to different provisions of the same IIA.
Second, coherence has to be established between the
obligations arising from these IIAs and investment
contracts, on the one hand, and the development policy
of the host country, on the other hand. Policy space and
flexibility issue.
25
Pro-active vs. Sit-back-andwait approach
„
„
Pro-active: Review of commitments, active monitoring of
the IIA network, adapt model agreements, active control of
the State over ISDS, coordination, re-negotiation of old
agreements
Wait and see: great majority of countries. EU countries:
Admission model is not challenged ? Balance of
costs/benefits (Mexico’s approach). China’s approach
26
Pro-active approach vs. sit back
and wait
„
„
„
„
In ISDS:
Countries in Latin America are walking away from ICSID.
Inconsistent approach: denouncing ICSID but not BITs
(Bolivia/Ecuador)
Countries getting under pressure: South Africa
Countries restricting the access to ISDS: United
States/Canada
27
Re-thinking investment relations
„
„
„
„
BITs are historically dated. Are they still reflecting the
state of play of investment relations ?
Yes: expro is still an issue, FET is more and more an
issue, new players also want protection, renewed
protectionism
No: tension between regulating and protecting foreign
investment, strengthening of the rule of law, new players
feel the tension even more
Developing and developed countries are more and more
in the same boat
28
IIAs – a tool for development ?
The uncertainties about the scope and content of rights
and obligations and the undesired effects it might have
may jeopardize the coherence of a host country's
development policies.
→ It becomes more difficult to use IIAs as a tool for
achieving certain development goals, if the multitude of
devices deriving from them head into different directions.
→ For instance, a policy of selected intervention vis-à-vis
foreign investors might be undermined by the combined
effect of granting establishment rights in individual IIAs
and the application of the MFN clause, which could have
the effect of opening the sector concerned to any foreign
investor.
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SUMMARY
Fairy tale conclusion: Sleeping beauty has been kissed
and turned into an ugly toad or are we all playing the
sorcerer’s apprentice ?
In any event:
Negotiating, concluding, and implementing the "right"
IIAs, and coping with an increasingly complex
hodgepodge of agreements represents a major
challenge for all countries, in particular developing
countries.
This underlines the importance of capacity-building
and technical cooperation.
UNCTAD can lend a helpful hand.
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Thank you
31