Investment Protection and Sustainable Development: Key Issues

Abstract

The subject matter of this paper is a central issue of growing concern in the area of legal regulation of international investments, namely how to ensure through treaty making and treaty application that the promotion and protection of foreign (direct) investment be beneficial for the recipient host countries, especially developing countries, and indeed does not hamper their development efforts. Seen form the point of view of those in charge of promoting development in “developing” host countries – the other side of the coin – the issue is how to ensure that those instruments effectively promote the contribution of foreign investment to the development goals of the recipient countries. My expose and analysis is a legal one: it is beyond my scope to address the economic policy issues concerning specific economic instruments (such as financial or tax incentive) that in a given situation or in respect to a given country may stimulate the flow of FDI in general or specifically according to certain policy choices. Thus, in order to promote investment in preferred sectors (such as mining or manufacturing), in certain part of the territory of that country, or in certain forms (such as joint-ventures), while possibly discouraging or prohibiting FDI which does not conform with those choices. Institutions such as UNCTAD and the World Bank have done great work in this area, studying the implication of such policies, which goes beyond my qualification. Still this remark may be of some interest also for us lawyers pointing out to the limits that legal instruments and legal analysis inherently have when addressing policy issues. In this respect one could note that while the first term of my theme “investment protection” is essentially legal, the second term “sustainable development” is essentially economic or policy-based. I just put to the readers a reflection on the issue of “balancing” such diverse, somehow heterogeneous concepts: it seems to imply an equation where the greatest the protection, the lesser will be the development, and vice-versa, something that cannot be accepted a priori. The interrelation between international legal instruments of protection and the promotion of sustainable development in a host country should consider that such instruments, though potentially significant, have a limited role compared with more sophisticated domestic instruments and policies. Traditionally IIAs, especially BITs, have been rather restricted in scope and generic in content. As I will underline further on, they have not been conceived as policy instruments but rather as a framework of minimum standards expressing in general but at the same time generic terms a pro-investment liberalisation approach.