ICC policy statement – WORKING DRAFT
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Foreign Direct Investment – Promoting and Protecting a Key Pillar for Development
and Growth
Executive Summary
Investment, including Foreign Direct Investment (FDI), plays a vital role in determining a
country’s economic fate. Countries that have consistently welcomed, nurtured and supported
foreign investors have consistently out-performed those either hostile to FDI or those that
have tried to extract maximum short-term benefits by squeezing foreign investors and
rewriting the rules at every turn. Investment, and FDI in particular, can be a unique resource
which host governments need to value, protect and nourish to build long-term “win-win”
partnerships. ICC strongly supports FDI as an effective tool to maximize economic growth and
development, and calls on governments to both maintain and strengthen investment
protection agreements. In the short and medium term, that can be done through highstandard bilateral and regional investment agreements, and in the longer term, through a
high-standard global investment agreement. Any investment agreement must continue to
include robust dispute resolution and enforcement provisions through strong investor-state
dispute settlement (ISDS), with independent arbitration proceedings to settle the handful of
investment disputes that prove intractable fairly.
Introduction
Investment drives economic growth, job creation and competitiveness, and thereby economic
development, improving lives in countries at all levels of development. Without investment,
economies stagnate and families suffer. Most investment in almost every economy is private
investment, and most private investment in almost any country – developed or developing, large or
small, agriculture, industry, or services-based – comes from the domestic private sector.
Governments increasingly recognize that most or all sectors of an economy function best when the
government focuses on infrastructure and getting the policies right, and the private sector allocates the
investment in productive sectors.
Foreign direct investment (FDI) can play an important supportive role in any economy. Successful
economies at any level of development tend to be those that get fundamental economic policies
“right,” and both welcome and are attractive to foreign investors. FDI is a competitive game in today’s
global value chain economy, and can significantly affect an economy’s competitiveness in that global
system. Foreign investors have multiple options and will seek the best investment opportunities –
those with best prospects for returns on investment, and the lowest perceptions of risk.
Businesses, large and small, based in OECD nations or in emerging and developing countries, all
realize that investing globally is critical for growth and competitiveness, even survival, in today’s (and
even more so, tomorrow’s) global economy. Many governments recognize the same realities – that
no country, at whatever level of development, has sufficient domestic resources to go it alone. FDI is
“win-win”, benefitting the economies of both the investing and the host nations. FDI flows take many
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This ICC working document is provided to you on condition that its contents remain confidential. Distribution is
restricted to ICC commission members and other experts designated by ICC National Committees and
Groups. Reproduction and/or dissemination in any form and by any means are strictly prohibited.
forms, touch every sector in our globalized economy, and today’s FDI flows and patterns are far
different from those of only a decade or so ago. Importantly, FDI is no longer one-way, from the
OECD “North” to the developing “South.” Countries like China, India and other emerging markets are
major investors around the world.
According to data collected by the United Nations Conference on Trade and Development (UNCTAD)
in their 2015 World Investment Report, in 2014, 9 of the 20 largest investor countries were from
developing or transition economies – Hong Kong (China), China, Russian Federation, Singapore,
Republic of Korea, Malaysia, Kuwait, Chile, and Chinese Taipei. In fact, developing Asia now invests
abroad more than any other region, having invested $432 billion in the period of 2012 to 2014. FDI
from developing economies, which have grown to make up over a third of global FDI flows also
include increasing amounts of South-South FDI flows.
The International Chamber of Commerce, as the voice of global business, believes that investment
broadly, and specifically FDI, can play a critical role in the development process. ICC has adopted the
following fundamental policy positions enumerated below which, if implemented on a global basis, can
help provide much-needed impetus to economic growth, job-creation, and better lives around the
world.
Good Investment Policies Attract Good Investors
Nations, as well as sub-central governmental units, with clear and well-implemented policies on
taxation, protection of property (including intellectual property) rights, common sense laws and
regulations (including labor and liability issues), and clean government, create a climate that nurtures
private investment, including FDI. A strong investment climate is much more important than
investment incentives in attracting FDI. Unfortunately, countries which fail to adopt sound proinvestment policies risk being left behind in today’s, and tomorrow’s, competitive global economy.
Strong Investment Protection Agreements Are More Important than Ever
International investment agreements provide essential protections for investors putting their capital,
intellectual property, management resources, and reputation at risk outside the comforts and security
of their home markets. Strong Bilateral Investment Treaties (BITs) and Investment chapters in bilateral
or regional Free Trade Agreements (FTAs) are very important tools to facilitate and protect FDI flows.
We strongly support the network of BITs and FTA Investment Chapters that the U.S. Government has
negotiated and brought into force, as well as comparable “gold standard” investment agreements
around the world.
In the Long Run, a Single ‘Gold-standard” Multilateral Agreement Could Be the Optimal
Solution
ICC has long been a leading advocate for, and supporter of, the multilateral system. A high-standard
global investment protection agreement, perhaps a “WTO for Investment” wherever located, could
provide one clear set of rules for investors, governments and other stake-holders. These would be
high standard rules of the road. However, ICC would insist that such a global investment protection
regime be high standard in terms of coverage, definitions, scope of protections, market-opening
provisions, and strong dispute settlement provisions. A global investment protection regime is only
worth doing if it can be done right, able to provide investors protections significantly beyond those
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Document 103/329
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restricted to ICC commission members and other experts designated by ICC National Committees and
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routinely found in most current investment agreements. No one should mislead themselves, or others,
into thinking that negotiating, ratifying and implementing such a gold standard global investment
regime would be easy or quick. By definition, it must be seen as a long-term effort. If done right, now
could be the time for serious and detailed initial discussions on what such a global investment regime
might look like, and how one might go about achieving it.
In the medium term, strong bilateral, regional, and plurilateral agreements with high-standard
investment provisions can be useful stepping-stones toward a possible global investment regime down
the road. In this regard, the Trans Pacific Partnership (TPP), Transatlantic Trade and Investment
Partnership (TTIP), and the Regional Comprehensive Economic Partnership (RCEP), can be
particularly constructive. ICC endorses these and similar efforts to negotiate high-standard bilateral,
regional and plurilateral investment agreements.
Independent, Effective Dispute Settlement is Critical to Any Successful Investment Agreement,
from Today’s BITs to a Potential Global Investment Regime
Unfortunately, it is a reality that a small percentage of foreign investments result in serious disputes
between the investor and the host government. It is critical for those investors to have direct access to
independent and effective dispute settlement, outside of host government–controlled bodies, to
resolve those disputes. These disputes cannot be allowed to fester for years, even decades, stuck
deep in host government–controlled judicial or regulatory processes. Typically, investment
agreements have included ISDS provisions to ensure such independent arbitration to resolve these
key disputes. ICC strongly endorses the inclusion of effective and independent dispute resolution
mechanisms in all investment agreements.
Sectoral Restrictions or “Carve-Outs” Make Bad Investment Policy
A disturbing trend among some governments is the proposal of sectoral limitations on substantive
protections or access to dispute settlement arbitration. Some of these proposals seem blatantly
politically motivated. The idea that governments might decide, on whatever basis, that certain legal
products are somehow problematic and should be denied coverage under investment agreements is
both very troubling and setting a terrible precedent. Discrimination against certain products or sectors
is never a good idea. ICC calls on governments to avoid sectoral discriminations in the negotiation or
implementation of investment treaties or investment chapters in free trade agreements.
Emerging SOE Investment Issues Deserve Greater Attention
As in trade and other broad policy areas, State-Owned Enterprises (SOEs) raise several important
issues in the investment area. SOEs, and more broadly state-championed enterprises, can enjoy a
range of preferential benefits, which give them clear advantages when competing with private firms,
domestic or international, for investment opportunities. SOEs may receive direct or indirect subsidies,
favorable tax treatment, preferential treatment, or even exemption from regulations applied to private
investors. In some cases, SOEs even act as the government regulator within a sector, granted
regulatory oversight of themselves as well as their private competitors. Operations invested in SOEs
can also indirectly benefit from government directed procurement. Large, powerful SOEs may even
gain from monopoly or oligopoly power and/or favorable treatment in their home markets, generating
excess profits they can use to subsidize investment in foreign markets. For all these reasons, we
encourage governments around the world, at all levels of development, as well as relevant
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Document 103/329
This ICC working document is provided to you on condition that its contents remain confidential. Distribution is
restricted to ICC commission members and other experts designated by ICC National Committees and
Groups. Reproduction and/or dissemination in any form and by any means are strictly prohibited.
international organizations, to devote greater attention and resources to the emerging issues of SOEs.
It is important to ensure level playing fields when SOEs compete with the private sector, including in
investment and trade areas.
National Security Reviews of FDI Are a Fact of Life but Must be Disciplined
One feature of most BITs and FTA investment chapters is a broad “national security” or “essential
security” exception, allowing each partner government to invoke security provisions to trump open
investment commitments. It is long-established standard practice for governments to have various
essential security procedures in their trade and investment agreements. While these exceptions may
be inevitable, their use needs to be limited. International businesses have seen signs that some
governments may be tempted to abuse the “security” provisions for blatantly protectionist purposes,
simply to block or discriminate against foreign investors.
Business groups, as well as many economists, have complained that abuses of the national security
FDI reviews in some countries can interfere with market efficiencies, deny companies legitimate
investment opportunities, and can be abused for protectionist purposes. ICC highlights this serious
challenge to the global investment system and calls upon all governments to refrain from abusing
these security provisions. National security exceptions should be the exception, used in extremely
rare circumstances where the relationship to real national security concerns is clear and obvious to
any neutral observer.
“Forced Localization” Provisions Must Be Resisted
One particularly troubling trend businesses are increasingly confronting around the world is
governments attempting to condition investment approvals on localization commitments such as local
procurement, research and development commitments, export quotas or similar requirements,
sometimes referred to as “performance requirements.” While the temptation for a government to try to
extract maximum local benefit out of a foreign investor may seem understandable, this practice has
serious negative repercussions on both the investor and on the host country’s competitiveness and
reputation as an investment destination. By imposing extravagant or extraneous conditions on foreign
investors, governments risk killing the proverbial golden-egg laying goose, and forgoing beneficial
future FDI because of a perceived poor investment climate.
ICC Policy Work on Investment
ICC’s Commission on Trade and Investment Policy has long been a strong voice for international
business on the full range of investment policy issues. The Commission will continue to be the locus
of ICC work on investment policy. We encourage all ICC member national commissions and member
companies to participate in the investment policy work of the Commission. ICC’s “Guidelines for
International Investment” (available here) provides an excellent checklist of the responsibilities of key
players in the FDI process – host government, home governments, investors, and other stakeholders.
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