International Investment Agreements Research Articles

Building responsible and sustainable supply chain frameworks: limits of international investment law and the CSR initiatives taken by the EU and China

ABSTRACT Supply chains play a pivotal role in global economic relations, fostering growth, employment, and poverty alleviation. Multinational enterprises (MNEs) are central actors in these chains, bearing responsibilities towards workers and the environment. Corporate Social Responsibility (CSR) standards guide MNEs in assessing the societal and environmental impacts of their activities, though these standards remain largely voluntary. Recent investment treaty practice shows a trend to incorporate CSR provisions in international investment agreements (IIAs), but such clauses fail to impose direct human rights, labour and environmental obligations on investors. Amidst this landscape, the EU and China, major players in global trade and investment, have established diverging legal and policy frameworks to build responsible and sustainable supply chains. Considering these developments, the objectives of this article are twofold. First, the article explores the integration of CSR in international investment law. Second, it evaluates the different CSR initiatives taken by the EU and China that frame their foreign direct investments. Focusing on EU–China FDI relations, the article delineates implications for global supply chain governance offering insights into the evolving landscape of CSR frameworks, and the plagued path in adopting mandatory corporate responsibility standards.

Identifying Problems of International Investment Law (IIL) and Evaluating the Focus of Reform Initiatives

The normative structure of international investment law is highly asymmetrical. Generally, current IIAs grant investors significant substantive and procedural rights, while States and affected communities often lack equivalent safeguard. In recent years, scholars have critcised and identified many problems including human rights concerns ingrained in the international investment law framework. The States and other stakeholders also raised many concerns regarding international investment agreements and investor-State dispute settlement. Moreover, there’s agreement on the need for comprehensive reform of IIL to make ISDS effective. Yet, issues with ISDS go beyond systemic flaws, also entrenched in substantive deficiencies in existing IIAs. Furthermore, the current legitimacy crisis provides a unique chance to amend the international IIAs comprehensively. However, the WGIII and ICSID reform initiative primarily focuses on procedural aspects of ISDS, avoiding substantive issues raised by various stakeholders. While procedural reforms are essential, resolving substantive issues is equally necessary.

In the loop: revaluing public health in international investment agreements

In the loop: revaluing public health in international investment agreements

The Relationship between Transparency Obligations and Foreign Investment in Renewable Energies: Realising the Potential Role of IIAs

The global deployment of renewable energies has taken off and calls for a continuous increase in foreign investments and cooperation, particularly because many states cannot cover the costs and technological requirements of the energy transition on their own. Therefore, there should be policies and legal frameworks in place to protect and thereby promote foreign investments. International Investment Agreements (IIAs) can, ceteris paribus, contribute to this goal. These agreements contain a set of obligations that protect foreign investments against possible discriminatory or arbitrary conduct of the host states. This includes transparency obligations that can help to create a level playing field for national and foreign renewable energy investors. Unfortunately, the concept of transparency, and its inherent implications, has not been clearly defined to date, and its relationship with renewable energy investments is still under investigation. Therefore, it is important to realise the prevailing transparency obligations under IIAs, and the best practices that can better meet the particular requirements of renewable energy investments. Using a qualitative approach, this article intends to pursue this goal by providing an overview of the concept of transparency, exploring its status in the context of fair and equitable treatment (FET), and analysing favourable transparency clauses in the light of renewable energy investment considerations.

Mining in investment arbitration: an analysis of mining companies’ legitimate expectations

Abstract International investment agreements (IIAs) can be ‘obstacles’ to the green transition, but can also serve as potential ‘enablers’ of clean energy. This article analyses the role of IIAs in protecting mining investments, necessary to develop green technologies in the fight against climate change. As a result of increasing mineral extraction, more investment tribunals adjudicate mining disputes. The article provides a sectoral analysis of the legitimate expectations of investors in the mining sector. It argues that domestic norms are central to resolving investment treaty disputes and that investment tribunals must consider environmental and human rights domestic norms which impose limits on investment protection and configure investor’s property rights. Only by doing so can investment tribunals protect investments in accordance with the ethos of IIAs of promoting sustainable development.

Reconstruction of the Path of Balancing Interests between Investors and Host Countries in International Investment Agreements

Reconstruction of the Path of Balancing Interests between Investors and Host Countries in International Investment Agreements

Surface-Level Analysis of International Economic Agreements and Their Strangulatory Impact on Pakistan Economy

The international economic system that evolved after World War II, which was conceived by and rolled out on behalf of Global North states, essentially stood on a tripod of international economic agreements, that is, International Investment Agreements, Double Taxation Agreements, and International Trade Agreements. The ostensible purpose of these agreements was to (a) facilitate cross-border deployment of surplus investible capital, (b) export of finished and capital goods, and (c) allocate favorably taxing rights between states on various incomes earned by multinational enterprises in overseas jurisdictions. Intuitively, when these agreements are signed by and between states at par level of economic development, their resultant economic outcomes would be equal or near-equal. But when such agreements are signed in asymmetrical bilateral economic settings, that is, between a developed and a developing country, the resultant economic outcomes would most likely be lopsided and inimical to the economic interests of weaker partner in the equation. From the global south perspective, these agreements expose developing countries to international arbitration on account of suits filed by investors, erode their tax base by allowing multinational corporations to enter aggressive tax planning ploys, and undermine their export competitiveness vis-à-vis stronger economies. The paper premises that developing countries that signed more of these agreements, would find themselves in a deeper trouble than those which signed less of them, and that countries that signed the agreements in a quicker span of time, got into trouble quicker, too. In this connection, Pakistan is brought in to undertake a surface-level time-series analysis of its signing agreements and the corresponding trajectory of select economic indicators over the past seven decades.

What Can IIAs Contribute to Regulating Cross-border Data Transfer: A Threshold Analysis

Abstract States are using legislation to regulate cross-border data transfer, which has raised new concerns that international investment agreements (IIAs) may be used to protect foreign investment. According to current IIA texts and arbitration practices, some data is likely to be regarded as ‘investment’, but indefinite data ownership and invisibility ‘in the territory’ make use traditional IIA structures to regulate cross-border data transfer uncertain. What IIAs can contribute to regulating cross-border data transfer has a significant impact on the protection of foreign investments. IIAs need to be reformed to keep their vitality in the face of the challenges brought by digital technology. As a response, they can clarify essential concepts, including when is data an ‘investment’ and who is the ‘investor’ that is entitled to bring claims. Considering the distinct data realms, IIA reform is more likely to be initiated through bilateral or regional negotiations among States with similar cultures or complementary interests.

Enforcement of Multilateral Trade Regulation by Non-State Actors – Desirable and Feasible?

Abstract Since its inception, the inter-state dispute settlement system of the World Trade Organisation has generally been praised for effectively protecting the rule of law in international trade relations. While the relatively recent dismantling of this system does not necessarily mean the end of the WTO nor of the binding nature of its rules, the current crisis may be a good opportunity to reconsider the role of the rule of law in international trade relations and the ways in which it could further be accommodated. One suggestion, occasionally raised in the past, would be strengthening the enforcement of WTO rules by opening it to private action, either before national courts or through international adjudication. After all, the latter has been widely available to foreign investors covered by thousands of international investment agreements in force for decades. This contribution recalls the reasons behind the current lack of private enforcement of WTO law and argues that developments in international trade relations and experiences with investor-state dispute settlement are likely to work against rather than in favor of its introduction in the foreseeable future. Increased transparency and institutionalisation of non-state actors’ role in trade enforcement is therefore recommended instead.

The ‘no greater rights’ principle: heading to a new Calvo Clause?

Abstract Recently, the very developed countries that championed the spread of international investment agreements began to challenge these treaties on the grounds that they afford foreign investors with greater rights vis-à-vis domestic investors and thus violate the constitutional principle of equality. This represented, under the banner of the ‘no greater rights’ principle, the resurgence of a once fiercely opposed doctrine of international law that originated in Latin America during the XIX century: The Calvo Doctrine. This contribution seeks to establish the actual breadth and significance of this new Calvo Doctrine. It concludes that the ‘no greater rights’ has a political, rather than a legal meaning, and is thus generally unsuitable to assure the desired equality between foreign and domestic investors. It also reveals that a recent decision of the Colombian Constitutional Court may give the ‘no greater rights’ a new (more real) meaning, by reviving a forgotten by-product of the Calvo Doctrine, the Calvo Clause.

Enhancing Investor-State Dispute Resolution: Suggestions to Optimize the Effectiveness of Cooling-Off Clauses in International Investment Agreement Negotiations

Abstract The cooling-off clause in international investment agreements, intended to foster amicable dispute resolution before arbitration, often causes varied tribunal interpretations and jurisdictional disputes due to its unclear drafting. This article aims to comprehensively explore the cooling-off clause, covering its definition, the beginning and ending points of the cooling-off period, function, and enforceability in investor-state dispute settlement practice. It also delves into two different approaches adopted by investment tribunals in case of non-compliance with the cooling-off clause. Drawing from this analysis, the article provides recommendations for Vietnam as a host state to ensure the effective application of this clause.

Article: The FET Standard between Treaty Reform and ISDS Practice: An Analysis of the Modernized ECT

The Modernization of the Energy Charter Treaty (ECT) counts as a prominent attempt to better incorporate climate change considerations into an investment treaty that is highly impactful from a climate change perspective. Among other initiatives, reform efforts in the ECT Modernization have led to amendments of key standards of treatment providing the substantive legal basis for claims by foreign investors. Focusing on the Fair and Equitable Treatment (FET) standard, this article contrasts the new treaty provision under Article 10 of the ‘modernized’ ECT with consolidated interpretations of the FET standard in previous arbitral practice. Building on such a jurisprudential analysis, this article evaluates the extent to which reformed standards of investment protection in the Modernized ECT can lead to an increased likelihood of climate-aligned outcomes in investor-State disputes, thereby providing an analytical assessment as to the potential of the newly introduced ECT provisions on FET – which may also serve as benchmark for further reforms of international investment agreements (IIAs) – to expand regulatory space for host States and support the adoption of more stringent climate policies. Fair and Equitable Treatment, Energy Charter Treaty, Modernization, Investor-State Dispute Settlement, Climate Change, Regulatory Space, Investment Arbitration, Fossil Fuels, Legitimate Expectations, Treaty Reform

The use of MFN clauses in investment arbitration: the problem of importation

Abstract The nature of most-favoured-nation clauses (MFN clauses) is a constant source of debate and controversy. While the traditional position has been that they allow an investor to import provisions from another International Investment Agreement (IIA)—a practice that has been defined by some as ‘importation’1—there is a new trend that considers this a misuse of MFN clauses. This article endorses the latter position and will explain that the practice of importation derives from a misinterpretation of MFN clauses contained in IIAs. This error involves requesting a remedy for the specific performance of the MFN clause without first having claimed its breach. The claimant asks an arbitral tribunal simply to enforce the MFN clause by granting him the same provisions conferred to another investor. However, in this exercise, the investor forgets that, in order for an arbitral tribunal to order such a remedy, it must first be proven that such an obligation exists and was breached by the host state.

From Fact to Applicable Law: What Role for the International Climate Change Regime in Investor-State Arbitration?

Abstract While many investor-state dispute settlement (ISDS) proceedings based on international investment agreements have dealt, directly or incidentally, with environmental issues, state measures relating to the mitigation and adaptation to climate change have been subject to a small number of reported cases. This article demonstrates that there is a significant gap between the number of investor-state disputes having a direct relevance with climate change, on the one hand, and the number of such cases that have actually raised climate change as a material legal or factual issue. In addition, arbitral tribunals faced with disputes related to measures or sectors that are of direct relevance to climate action have, to date, virtually never engaged in any sort of substantial analysis of international climate change treaties and related instruments, rules, or practices. Against this backdrop, this article will explore ways for arbitrators and parties to ISDS proceedings to better consider the climate regime — in particular, the Paris Agreement and instruments arising therefrom — in ISDS proceedings beyond its current limited role as an element of context. While the literature has mostly focused on integrating climate change concerns in ISDS, this article goes further by exploring how states’ international climate obligations could play a greater role in the adjudication of investor-state disputes, including by providing states with a justification for implementing more ambitious regulations as well as tribunals with guidance for interpreting substantive obligations in investment treaties.

The Practice of International Investment Agreements in the Context of Climate Change Conflicts and Solutions

Climate change is an issue of growing importance on a global scale. The traditional International Investment Agreements (IIAs) and the provisions made in response to climate change often conflict with one another. This has led to a need to find a way to reconcile these differences and establish a complementary and mutually reinforcing relationship between IIAs and climate change treaties. This paper aims to identify the focal points of conflict and explore potential solutions through case analysis and other methods. One potential solution is to make reasonable adjustments to the IIAs to align them with the specific provisions needed to address climate change. By doing so, it may be possible to bridge the gap between traditional IIAs and the requirements of climate change treaties. This approach is essential in ensuring that investment agreements do not hinder the progress of climate change initiatives. It is crucial to find a balance that allows for sustainable economic development while also addressing the pressing concerns of climate change. Finding a way to reconcile the conflicts between traditional IIAs and climate change treaties is of paramount importance. By making targeted adjustments and seeking common ground, it is possible to establish a framework that supports both economic growth and environmental sustainability.

Digital Assets in International Investment Arbitration: Potential Barriers to Qualifying Investments?

In the context of advancing technology and economic progress, data has emerged as a critical factor of production, characterized by its proprietary attributes and inherent investment value. Within the domain of international investment arbitration, the concept of qualifying investment assumes paramount importance, serving as a linchpin for delineating the scope of applicability of international investment agreements and establishing the jurisdiction of arbitral tribunals. Consequently, the question of whether data, in conjunction with other associated assets involved in data processing activities, can qualify as a qualifying investment and thereby warrant protection under international investment agreements, stands as a primary concern demanding precise explication within the purview of international investment law. Currently, the determination of the qualifying of digital investments predominantly follows two distinct paths: firstly, by interpreting the broad definition of investment and the non-exclusive enumerations contained in international investment agreements, thereby aligning digital assets with the applicable scope of such agreements; secondly, by adopting objective methodologies developed through arbitral practice, wherein digital assets, under specific circumstances, fulfill the criteria elucidated in the “Salini text”. Nevertheless, the significant disparities between digital assets and traditional forms of investment pose certain challenges for arbitral tribunals in determining the qualifying digital investments, which may result in uncertain arbitral awards in this area. Such uncertainty could hinder the process of digital transformation of economic and social life. To respond to this challenge, a potential solution is to stipulate in concluded and revised international investment agreements that digital assets can qualify as qualifying investments.

International investment agreements and the global minimum tax: of treaty troubles and investment incentives

Abstract Statutory and effective tax rates have witnessed a marked decline over the past decades, prompting international tax policymakers to grapple with the challenge of tax competition. The latest tool in this struggle is the global minimum tax (GMT). This paper examines the intersection between the GMT and International Investment Agreements (IIAs). It first briefly explains the operation of the GMT and reviews how IIAs address domestic tax measures. It goes on to argue that multinational enterprises (MNEs) affected by the GMT are unlikely to file large numbers of investor-State dispute settlement cases to challenge its implementation. Instead, MNEs will leverage IIAs in seeking to replace corporate income tax incentives captured by the minimum tax with alternative economic benefits. Given how income-tax-based investment incentives are administered in practice, many MNEs could plausibly argue that the withdrawal or undermining of these incentives through top-up taxes violates IIA protection standards. The paper concludes by outlining the potential motivations and options for MNEs seeking to replace tax incentives and the implications for the ongoing global effort to address tax challenges. Ultimately, the GMT’s design means that the race to the bottom is likely to shift elsewhere.

An NLP-based novel approach for assessing national influence in clause dissemination across bilateral investment treaties.

International investment agreements (IIAs) promote foreign investment. However, they can undermine crucial health programs, creating a dilemma for governments between corporate and public health interests. For this reason, including clauses that safeguard health has become an essential practice in IIAs. According to the current literature, some countries have played a pivotal role in leading this inclusion, while others follow the former ones. However, the existing literature needs a unique approach that can quantify the influence strength of a country in disseminating clauses that explicitly mention health provisions to others. Following an NLP (Natural Language Processing)-based text similarity analysis of Bilateral Investment Treaties (BITs), this study proposes a metric, 'Influence' (INF), which provides insights into the role of different countries or regions in the propagation of IIA texts among BITs. We demonstrate a comprehensive application of this metric using a large agreement dataset. Our findings from this application corroborate the evidence in the current literature, supporting the validity of the proposed metric. According to the INF, Germany, Canada, and Brazil emerged as the most influential players in defensive, neutral, and offensive health mentions, respectively. These countries wield substantial bargaining power in international investment law and policy, and their innovative approaches to BITs set a path for others to follow. These countries provide crucial insights into the direction and sources of influence of international investment regulations to safeguard health. The proposed metric holds substantial usage for policymakers and investors. This can help them identify vital global countries in IIA text dissemination and create new policy guidelines to safeguard health while balancing economic development and public health protection. A software tool based on the proposed INF measure can be found at https://inftool.com/.

Towards Foreign Direct Investment for Development in the Host State? Revisiting Charter Cities

Abstract The phenomenon of population growth, scramble for employment, congestion in cities coupled with underdevelopment has been a cause for concern over the years. Many solutions, such as aid and conclusion of international investment agreements with a view to attract foreign direct investment, have been explored and tried with no real changes. In recent years, there is a strong movement on charter cities, championed by the former World Bank Chief Economist, Paul Romer. Romer’s grand charter city would be developed on a vacant land, offered by the host State, for free, to the developer of the city. The city adopts a constitutive act, spelling out basic rights of the residents and the responsibilities of the city government but then imports functional rules from a developed country/countries being guarantor(s), and the latter ensure(s) enforcement of these rules. This paper explores charter cities as a panacea to poverty and underdevelopment in Africa and it lays bare the problematic conceptual issues on charter cities. Thus, it finds that charter cities could be another vehicle facilitating scramble for land in Africa as seen in Madagascar where the idea was explored. In addition, a need for uninhabited land threatens relocations and removals, which have often been forceful and impacts on the socio-economic conditions of communities as witnessed in Lesotho when the highlands water project, serving South Africa with water, began construction. Relocations are not only economically debilitating; they are highly emotive to many Africans based on the past experiences. Further, substituting the host state’s control with that of developed nation/s (sponsor/guarantor) can only be regarded as neo-liberal colonialism. Another problem is in relation to freedom to reside in the city, thereby extending free residency to everyone from anywhere in world, compromising sovereignty for the host and not solving employment crisis. While charter cities can solve poverty and underdevelopment in Africa, these conceptual problems need to be addressed; otherwise, we are facing neoliberal land dispossessions.

Addressing Climate Change through International Investment Agreements: Obstacles and Reform Options

The current international investment treaty network is not well suited to climate goals. The tension stems from the fact that “old generation” of international investment agreements were concluded before the widespread climate action and they were “climate neutral” or “climate blind”. This study explores the obstacles for international investment agreements and investment arbitration to tackle climate change issues, indicating the need for reform. Despite the fact that some states have begun to reform their international investment agreements in light of climate change, there are still many shortcomings to be addressed. The current international investment agreement regime should be reformed to incorporate climate change considerations for investment arbitration to contribute to climate change mitigation. According to the findings, updating investment treaties based on a climate-oriented model would be a viable option for states.