The Investment Standards Construct – An Operational Model for Contemporary Challenges in International Investment Law (With Ukrainian Case Study)

A Interplay with other standards of investment protection In international investment agreements, fair and equitable treatment is usually part of a whole system of different standards of investment protection. While some of these standards of treatment are often combined with fair and equitable treatment in one clause, others are traditionally stipulated in distinct clauses. In any case, questions arise in relation to how fair and equitable treatment fits into that system and what intersections exist between the different standards. To this end, the interplay between fair and equitable treatment and a selection of other investment treaty provisions will be reviewed. National treatment (a) Meaning of national treatment National treatment standards aim at the creation of equal conditions in the host country market for the foreign investor in relation to domestic competitors. Pursuant to that aim, a national treatment standard imposes on the host country the obligation to accord a foreign investor, once established, with treatment no less favourable than the one granted to its own nationals. National treatment standards are well known and prominent features in international economic law. As such, they have found their way into the WTO framework, where obligations of national treatment are expressed in a series of provisions. In this context, national treatment, together with most-favoured-nation treatment, is considered to be a specification of a broader precept of non-discrimination. However, national treatment standards are driven by the intent to inhibit protectionism against foreign products or services and are therefore intimately connected to governmental regulatory measures.

Enforcing intellectual property (IP) rights abroad is not easy—not least because international IP treaties do not create global rights that can be invoked in national courts. International investment law offers potential routes for overcoming these hurdles. Whenever investment treaties include IP rights as an investment and allow for investor–state dispute settlement (ISDS), investors can challenge host state measures affecting their IP rights in ISDS proceedings. As this article will show, this in turn offers a unique opportunity for invoking the standards of protection under international investment agreements (IIAs) to challenge host state compliance with international IP treaties. While challenging national IP regimes is an attractive option for right holders, these challenges potentially amount to a sea change for the international IP regime and cause serious concern for host states. I, however, argue that most of the routes pursued by right holders under IIAs are unlikely to be successful. Investment protection standards such as fair and equitable treatment, umbrella clauses, and most-favoured nation treatment should not be construed to allow invoking alleged breaches of international IP norms in ISDS. Some IIAs, however, contain clauses that subject expropriation claims against compulsory licenses and other IP limitations to a test of consistency with the international IP rules governing these limitations. As they offer the only feasible route for investors to challenge host state compliance with international IP treaties, I review the implications of these clauses, recent reform proposals, and suggest alternative mechanisms for aligning international IP and investment protection based on general international law.

The investment arbitration launched by Philip Morris Asia (PMA) against Australia in 20111 in relation to Australia's mandatory plain packaging of tobacco products is a recent reminder of the significant protections for intellectual property rights (IPRs) in international investment agreements. Given its focus on trademarks, the Philip Morris dispute provides a useful case study for exploring the relationship between intellectual property and international investment law. The parallel legal challenges brought by various tobacco companies against Australia in the High Court of Australia2 on constitutional grounds and by Ukraine,3 Honduras,4 the Dominican Republic,5 Cuba6 and Indonesia7 against Australia in the World Trade Organization (WTO) also make this a valuable case for demonstrating the fragmenting nature of intellectual property law at the domestic and international levels. That fragmentation poses challenges for international trade and investment law, raising questions concerning the relationship between intellectual property rights conceived at the domestic level with the protections available in international fora. For example, what significance does the High Court's conception of intellectual property under Australian law have for the claims against plain packaging under the Agreement between the Government of Hong Kong and the Government of Australia for the Promotion and Protection of Investments (‘Hong Kong-Australia BIT’)8 and the WTO's Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement)? By using the Philip Morris case study, this chapter aims to explore the complex interaction between intellectual property and international investment agreements (IIAs), meaning bilateral investment treaties (BITs), plurilateral investment treaties such as the Energy Charter Treaty, and preferential trade agreements containing investment provisions. After explaining the background to the Philip Morris dispute in its various forms, we consider the protection of intellectual property as an ‘investment’ under IIAs. We then examine three substantive investment obligations in connection with intellectual property: most-favourednation obligations, expropriation, and so-called ‘umbrella clauses’. This chapter reveals the high degree of uncertainty permeating the relationship between intellectual property and international investment law.

International investment law (IIL) is an attractive subfield within international economic law (IEL). China and Chinese investors are important actors in international investment law and process. With the rise of China, its influence on international investment law and governance is also growing. Since its reform and opening-up, China has been one of the most popular destinations for foreign direct investment (FDI), and since 2008, China has gradually become one of the largest overseas direct investment (ODI) countries. China is an active participant in the international investment regime and has concluded more than one hundred international investment agreements (IIAs), including more than ten free trade agreements (FTAs) with investment chapters. Chinese IIAs have experienced important shifts from the conservative IIAs providing limited investment protection, to the liberal IIAs providing high-level investment protection in the early 2000s, and then to the balanced IIAs protecting investment while safeguarding the regulatory rights of the host state. China has been respondent only in a few investor-state dispute settlement (ISDS) cases. China has also been participating in the ISDS reform process through its IIA practice and at the UN Commission on International Trade Law (UNCITRAL) forum. With the paradigm shift from the liberal IIAs to the balanced IIAs in IIL and the implementation of the Belt and Road Initiative (BRI), China has also been updating its old bilateral investment treaties (BITs) and participating in international investment governance reform. For example, China played the leadership role in the adoption of the G20 Guiding Principles for Global Investment Policymaking in 2016, and, more recently, the negotiations on the agreement on investment facilitation among World Trade Organization (WTO) members. At the domestic level, China has been constantly improving its FDI and ODI laws and system. For example, China adopted the negative list model for foreign investment admission in 2013, and formulated the new and united Foreign Investment Law. In recent years, Chinese investors have been actively participating in international investment arbitration. In international investment law and practice, China has faced many unique or special legal issues nationally and internationally, such as national security screening, transnational investment subsidy, state-owned enterprises’ overseas investment, the applicability of Chinese BITs to Hong Kong SAR and Macao SAR, restrictive arbitral jurisdiction provisions in old Chinese BITs, the role of labor provisions and sustainable development provisions in IIAs, the impact of the China-US trade war on IIL, compulsory technology transfer, the state capitalism debate, the BRI investment dispute settlement mechanism innovation, and the impact of the BRI and even the Chinese Model on the global economic legal order. China’s international investment law and practice and its role in the global economic order have attracted many legal scholars and practitioners both from China and from other countries. Since the 2010s, the study of the interaction between China and IIL has grown rapidly, and much academic literature on this subject has been produced.

This chapter analyzes the interaction between international investment law and human rights instruments from a socio-cultural perspective. It is argued that legal interactions between various branches of international law (either integration or fragmentation) may be analyzed as social interactions between the relevant communities. These legal interactions are affected by the particular features of relevant social settings, as well as the mutual relationships between the relevant social groups. More specifically, it is argued that the socio-cultural distance between the particular international legal settings affects the inclination of relevant decision-makers to incorporate or reject parallel legal rules developed in other branches of international law. Consequently, greater socio-cultural ‘distance’ between the involved social settings and groups is likely to decrease the prospects for mutual incorporation of legal rules developed in the other legal sphere. As to the relationship between international investment and human rights laws, the likelihood of investment tribunals to accord a significant role to human rights treaties is influenced by the cultural distance between these two branches of international law. An analysis of investment tribunals' jurisprudence indicates that investment tribunals do not hesitate to apply rules derived from certain non-investment branches of international law (state responsibility, treaty law and general principles of law regarding corruption). Despite that, they are generally reluctant to accord significant weight to human rights treaties in international investment law. An analysis of the relationships between the social settings involved in international human rights and investment laws reveals a considerable socio-cultural distance between these branches of international law. In light of this and the deep-rooted tensions between the relevant communities, it is not surprising that investment tribunals are generally reluctant to accord significant weight to human rights treaties in international investment law. Thus, the considerable socio-cultural distance between these socio-cultural settings parallels the normative distance between these branches of international law. The existing social and normative gaps between investment and human rights laws may change in the future. Past experience shows that the relationship between various branches of international law is often dynamic. Future socio-cultural changes within each community – or changes in the social interactions between the relevant communities – may narrow the normative distance between international human rights and investment laws.

Fair and equitable treatment is a central norm in international investment law. This norm is contained in the vast majority of international investment agreements as one of the main standards for the protection of foreign investors. Historically, international investment agreements contained short and general clauses of fair and equitable treatment, which were formulated either as free-standing provisions with a reference to general international law, or to the international minimum standard of customary international law. Especially since the first decade of the 21st century, drafting approaches to fair and equitable treatment became increasingly diverse and generated complex and elaborate clauses seeking to address the different elements of the norm that have developed over time. The drafting approaches reflect the long-standing controversies with regard to fair and equitable treatment and the question of whether this concept is to be constructed in accordance with the international minimum standard or as an independent and self-contained standard possibly exceeding customary international law. Both concepts have remained vague and have created difficulties in the interpretation of fair and equitable treatment, which due to its general character became a prominent cause of action in investor-state arbitration proceedings. The evolution of arbitral jurisprudence stimulated the emergence of different elements of fair and equitable treatment, including the protection of the investor’s legitimate expectations, the protection against discrimination and arbitrary treatments, and the principles of due process, denial of justice, and transparency. The increasing number of cases on the basis of fair and equitable treatment also led to concerns and criticism that a far-reaching concept of the norm would threaten the host states’ sovereignty and their right to regulate, as well as the principle of sustainable development. These concerns and the fact that a growing number of investment disputes were brought against developed countries motivated first the North American Free Trade Agreement member states and subsequently other states and the European Union to adapt their international investment agreements in order to try to concretize the concept of fair and equitable treatment and to limit the discretion of arbitrators. The concept of fair and equitable treatment has also received considerable attention by scholars who propose a variety of different approaches to the interpretation of the norm and the balancing of the conflicting private and public interests at stake.

Since the inception of the international investment law system, investment promotion and protection have been the raison d’être of investment treaties and states have confined their policy space in order to attract foreign investment and protect their investors abroad. Languishing in relative obscurity until recently, the right to regulate has gradually come to the spotlight as a key component of negotiations on new generation investment agreements around the globe. States and regional organisations, including, notably, the European Union and the United States, have started to examine ways in which to safeguard their regulatory power and guide – and delimit – the interpretive power of arbitral tribunals, by reserving their right to pursue specific public policy objectives. The monograph explores the status quo of the right to regulate, in order to offer an appraisal and a reference tool for treatymakers, thus contributing to a better understanding of the concept and the broader discourse on how to enhance the investment law system’s legitimacy.

This chapter discusses the relative standards of treatment that protect investors against discrimination, namely national treatment and most-favoured-nation (MFN)—the only standards which exists by and large as equivalent principles in international intellectual property (IP) and investment law. It provides a comparative review of the non-discrimination principles in international trade, investment, and IP law, and looks at the national treatment provisions in the Paris and Berne Conventions, as well as the TRIPS Agreement. The TRIPS Agreement also includes an MFN clause and a patent-specific non-discrimination rule. The chapter then studies how the core elements of a national treatment (and MFN) claim under an international investment agreement (IIA) apply to IP rights as protected investment, focusing on scope, comparability, the standard of treatment owed, and possible defences and justifications. An important part of this discussion forms the careful review of the potential role for the parallel standards in IP treaties, and IIA clauses that import specific exceptions from the non-discrimination principles in, for example, TRIPS into the IIA.

Keyfi veya ayrımcı tedbirlere karşı koruma, uluslararası yatırım andlaşmalarında kendisine yer verilen yabancı yatırımların korunmasına yönelik bir kayıttır. Kayıt, yatırımın yapıldığı devlete, yabancı yatırımlara karşı keyfi veya ayrımcı tedbirlerle zarar vermeme yükümlülüğü getirir. Uluslararası yatırım tahkiminde bazen diğer yatırımların korunması standartlarının gölgesinde kalsa da aslında yatırım andlaşmalarında sıkça düzenlenen, bağımsız bir standarttır. Bu makalede öncelikle keyfi veya ayrımcı tedbirlere karşı koruma kaydının uluslararası yatırım andlaşmalarında kaleme alınışı, unsurları ve tarihi gelişimi ele alınmıştır. Sonrasında ise iki unsuru olan “keyfilik” ile “ayrımcılık” kavramlarının anlam ve kapsamı incelenmiştir.

The Energy Charter Treaty (ECT) in its Part III which regulates standards of protection guaranteed to foreign investors by the ECT States members, together with the Article 24 of the ECT, constitutes a kind of autonomous investment treatment within the ECT. The ECT provides for a very broad spectrum of standards of protection: fair and equitable treatment; most constant protection and security; prohibition of unreasonable or discriminatory measures; „umbrella clause”; national treatment; most favoured-nation standard and effective means to assert the claims. It can be said that at the time of its drafting the ECT enclosed all standards of protection as recognized in BITs and NAFTA. There have been more than 100 publicly known investment arbitration cases where the ECT was invoked, more than 30 of which concluded by arbitral awards. This comprehensive arbitral practice strongly influences the practice applying other IIAs and vice versa.

The article is dedicated to analyzing the issue of determining the boundary of the legitimacy of state measures in regulating and controlling foreign investments within national jurisdiction, in accordance with national laws and regulations, and in line with national objectives and priorities. Additionally, this article reviews key regulatory trends in the international legal sphere concerning the protection of foreign investments. Through the analysis, the content of the main issues in international investment law has been clarified, including the protection of foreign investments and the differentiation (legal classification) of state actions that constitute indirect expropriation, discrimination, unfair treatment, or other violations of international obligations under international investment agreements. Such actions create the right to challenge them through international arbitrations, potentially leading to compensation obligations. On the other hand, state measures taken within their right to regulate in the public interest are not subject to compensation. Moreover, previously published theoretical insights regarding the interaction between the legal regime of foreign investment (international investment treatment) and the state guarantees for the protection of foreign investments have been importantly refined. Relevant examples are provided concerning both these guarantees and the key approaches to forming a regulatory framework for the domestic regulation of foreign investments, including their admission and restrictions. The first approach assumes that special regulations apply to foreign investors, partially overlapping with those established for national investors. In developing countries in Africa, Latin America, and Asia, special foreign investment laws typically exist, which may include separate laws or investment codes. The second approach is more characteristic of countries with developed economies. Under this approach, legislators do not establish special laws governing foreign investments but introduce significant restrictions. Such restrictions usually apply to specific industries or sectors in which foreign participation may be entirely prohibited or limited. Additionally, investment activities may require obtaining special permits, and states may implement special screening mechanisms. But the key research finding is that national law establishes the legal framework for creating the general legal regime of foreign investment, which is realized, among other things, through the sub-institution of state guarantees for the protection of foreign investments. This sub-institution may and may not be even directly linked to the actual implementation of foreign investments, but always exists in national legislations. It is also worth noting that the prevailing trend is the continuous development of national foreign investment legislation to implement policies that contribute to global economic growth and the overall welfare of the population. An empirical legal indicator of this trend is the gradual disappearance of differences between legal regimes for national and foreign investors, facilitated by the introduction of legal mechanisms for foreign investor access. Key words: international investment law, international investments, investment treatment, bilateral/multilateral investment treaties, international investment arbitration, state guarantees for the protection of foreign investments.

Public procurement law inter alia provides a means to foster competition in the purchasing of goods and services by governments. For tenderers incurring significant expenditures during the procurement procedure, legal remedies are of vital importance. Since these are not equally guaranteed by all states, the issue occurs as to whether international investment law can serve as a gap-filling regime to protect foreign tenderers against harmful state conduct during procurement proceedings. The chapter therefore examines the applicability of international investment agreements (IIAs) to the procurement procedure and, hence, the qualification of a tender and the pre-award expenditure as protected investments. However, the question is neither regulated adequately in most IIAs, nor has a definite approach developed in arbitral practice so far. While successful bidders can claim compensation for damages arising from the pre-award phase, the protection of unsuccessful bidders must be answered in a differentiated manner. The chapter argues that a distinction has to be made between an open and a pre-elective award procedure. In the latter case, the host state invites the foreign tenderer to participate in the procurement proceeding and thus provides the consent to admit the investment in its territory. Moreover, foreign tenders increase competition within the award procedure, fostering competition in the host state’s procurement market. Assuming that the IIA is applicable, the chapter argues that the ordinary business risks of participating in a tender procedure can be sufficiently taken into account when assessing liability.

Reconciling the Conflict between International Investment Arbitration and Protection of Human Rights: Way Out

Investment law and intellectual property (IP) law have largely developed unaffected by each other and, so far, any discussion on their interaction has been largely theoretical. That is until recently, when a small number of high-profile investment disputes has drawn attention to the interaction between national IP regimes and the international investment system. Christophe Geiger brought together experts from the worlds of IP and trade and investment law to explore the many questions that the interplay between these two conceptually very different systems raise. The Research Handbook on Intellectual Property and Investment Law addresses this evolving relationship in two parts. First of all, it analyses the systemic interaction between investment law and IP law in its national and international dimensions. Within the first part, one section addresses the protection of IP in trade and investment treaties, and another discusses the impact of investment protection on policy and regulatory autonomy. The section part begins with Henning Grosse Ruse-Khan, the author of an authoritative monograph on IP protection in international law, who sets the scene by outlining the elements of IP protection in trade and investment agreements. He notes opposing trends in international IP treaties and international investment agreements. Whereas the former limit the scope of national regulatory powers, the latter seem to grant Member States greater policy space. These opposing trends are further analysed by Susy Frankel who contrasts the object and purpose of IP and investment protection in treaties that protect both. The fundamental question of whether IP is protected as an investment and therefore falls within the scope of protection of investment law in the first place is addressed by Ruth Okediji and Carlos Correa. Both discuss the conditions for protection and how the scope of protection should be defined in order to retain policy space for states and to avoid abusive investor claims. The other chapters discuss the fundamental protection standards of international investment agreements (national treatment, most favoured nation and fair and equitable treatment) as applied to IP. Three chapters in the second section return to the question of national autonomy. They address issues raised by recent investment cases that involved IP claims. While Cynthia Ho argues that investor–state arbitration might have negative aspects on TRIPS flexibilities, Simon Klopschinski and Daniel Gervais focus on the notion of public policy in an investment context and how investment tribunals should approach this notion.

There is substantial scholarship on the limitations that international investment agreements (IIAs) place on States’ authority to regulate in the public interest. An area of fundamental importance that has not received scholarly attention in connection with IIAs is public procurement regulation. Given that public procurement is about the needs of States and their citizens, States would want to retain their authority within municipal public procurement laws to decide with whom to contract to meet those needs, and to pursue socioeconomic and industrial policies through procurement. However, most States are parties to IIAs, which impose obligations on them with respect to the protection of foreign investment. This article explores this seminal issue of whether IIAs stand to limit the authority of States in the implementation of procurement legislation and policies. Based on textual analysis and arbitral case study, it argues that treaty-based standards of investment protection can limit States’ authority on the implementation of methods of procurement (such as national competitive tendering or restricted tendering) and socioeconomic policies in procurement. A question that needs fuller engagement is the extent of conflict between specific IIAs and public procurement laws and policies, either regionally or globally, and how to reconcile conflicting obligations to promote foreign investment and sustainable development. This article provides the foundation for such future research.