International Investment Research Articles

The Proliferation of Special Regimes and the Unity of the International Legal System

AbstractInternational law is becoming increasingly more specialized and diversified. In response to these developments, international lawyers now widely refer to international investment law, European human rights law and many other branches as ‘special regimes’. Scholars in the field see the proliferation of special regimes as a threat to the unity of the international legal system. In so doing, they are applying the traditional definition of a special regime as a collection of norms. This article encourages readers to conceive instead of a special regime as a community of practice—as an activity structured around the normative presuppositions of the people and institutions that participate in it. This new understanding, the article argues, is compatible with all predominant theories of law. When you adopt it, importantly, the proliferation of special regimes does not have the disintegrating effect that many scholars believe it to have.

The Role of Financial Instruments in Corporate Exchange Rate Risk Management

As international investment increases with the process of economic globalization, managing exchange rate risk efficiently has become one of the most significant strategies for companies to reduce risk and make more profits. Due to the need to consider numerous internal and external factors, risk management is a sophisticated decision that executives need to make effectively. On the basis of accentuating the magnitude of hedging exchange rate risk for corporations and combining previous research findings and theoretical analysis, this research introduces some pragmatic approaches for firms to choose and utilize suitable financial instruments in hedging exchange rate risk, such as the rational use of financial instruments to hedge risks, the use of short-term and long-term foreign currency derivatives to reduce exchange rate risks, and the impact of board structure on hedging activities. The content of the analysis can provide companies with a deeper understanding of the ways to select and utilize the most appropriate financial instruments for risk management, thus improving corporate efficiency and achieving corporate objectives. The study would act as an available tool for corporations to improve efficiency and achieve their goals.

Reasonableness: a guiding light—A probe into the World Court’s landmark judgment on substantive standards of investment protection and its takeaways for investment treaty tribunals

Abstract In its recent Judgement on Certain Iranian Assets, the International Court of Justice (ICJ) extensively addressed various international investment law issues that arose from the interpretation and application of an FCN (Friendship, Commerce, and Navigation). This represents a rare instance of the World Court addressing such matters to such a great extent. Chief amongst the Court’s holdings was the test put forward by the ICJ for assessing the ‘reasonableness’ of state measures for the purpose of evaluating their compliance with international standards of investment protection such as ‘fair and equitable treatment’ and ‘non-expropriation’. Acknowledging a trend in investment treaty jurisprudence, the Court went on to introduce more concrete yardsticks for examining the ‘reasonableness’ of state measures. The ICJ’s holdings on this matter could contribute to the enhanced ‘certainty’ and ‘predictability’ in decisions concerning ‘fair and equitable treatment’ standard and ‘non-expropriation’ obligation. The application of the tests of ‘reasonableness’ formulated by the ICJ in the field of investment treaty law could provide states with a greater margin of appreciation when exercising their ‘right to regulate’. In practical terms, as opposed to a stringent ‘proportionality’ analysis, the ICJ’s formulation of ‘reasonableness’ would mean an alleviated burden of proof for states to justify the propriety of their measures towards foreign investors.

E-commerce and foreign direct investment: pioneering a new era of trade strategies

This study explores the dynamic interplay between foreign direct investment, e-commerce, and China’s export growth from 2005 to 2022 against the backdrop of the rapidly evolving global economy. Utilizing advanced analytical models that combine province- and year-fixed effects with fully modified ordinary least squares and dynamic ordinary least-squares methodologies, we delve into how foreign direct investment and e-commerce collectively boost China’s export capabilities. Our findings highlight a significant alignment between China’s export expansion and the global sustainable development agenda. We observe that China’s export growth transcends mere international investment and digital market engagement, incorporating sustainable practices such as effective utilization of local labor resources and an emphasis on technological advancements. This study also uncovers how knowledge capital and educational attainment positively impact export figures. A notable regional disparity is observed, with the eastern regions of China being more responsive to foreign direct investment and e-commerce influences on export trade compared to their western counterparts. This disparity underscores the need for region-specific policy approaches and sustainable strategies to evenly distribute the benefits of foreign direct investment and e-commerce. The study concludes that while foreign direct investment and e-commerce are crucial for China’s export growth, the underlying theme is sustainable development, with technological innovation and human capital being key to ongoing export success. The findings advocate for policies that balance economic drivers with sustainable development goals, ensuring both economic prosperity and environmental sustainability.

A reassessment of the challenges of enforcement of foreign judgments in Nigeria: the need for legislative reform to ease business

Enforcement of foreign judgments has significant relevance in this era of increased international investments and commercial relations across borders. Focusing on Nigeria as the central jurisdiction of analysis, this paper takes the position that rules of private international law form an often understated yet important aspect of the governance system of a country often measured by the Ease of Doing Business (EDB) ranking of the World Bank. This paper further argues that central to opening up the economy and inviting FDI into the country, the obvious matter of the inconsistency in the application of the foreign judgment enforcement statutes ought to be settled so as to create determinacy in Nigeria’s legal system – a potential attraction for foreign investors who appreciate predictability in the laws of a host country. It recommends the review and adoption of the Foreign Judgment (Reciprocal Enforcement) Act 1990 in order to quell the circumspection of the investor and trade participant due to uncertain legislation.

Indonesiaʼs energy transition: Dependency, subsidies and renewables

AbstractIndonesiaʼs economy is highly dependent on the fossil fuel industry as evidenced in measures of non‐taxable revenue, energy subsidy, energy mix and regulatory flexibility. To cut carbon emissions by 41% in 2030, the energy system needs to transition faster than anticipated through progressive reforms and investment. Policy makers understandably are fearful of the shocks and unrests resulted from fossil fuel subsidy reform. However, the fears were shown to be an over‐reaction, especially if poorer households were supported. The state‐owned enterprise, Perusahaan Listrik Negara, is the central player in the tug of war between the fossil fuel and renewable sectors. The government should signal unwavering support for international investment in the renewables, and update the regulation on rooftop solar that boosts return on investment for domestic households. International investors will need modelling of cost competitiveness of wind farms against coal‐fired plants in more remote areas.

From currents to controversies: Unveiling performances of and perceptions on China's investments in the Philippine grid

The electrical grid system is a technology and a complex amalgamation of various factors, including geography, relationships, institutions, and socio-political-economic influences. Although China's involvement in international grids has primarily been analysed from the political economy perspective, little attention has been given to its impact on the electricity systems of host countries and how it affects their performance. This article addresses this gap by combining insights from international relations, political economy, and electricity systems transitions to analyse databases, news accounts and interview data on the performance and perceptions of energy actors regarding China's involvement in the Philippine electricity grid. Dissatisfaction with delays in project implementations, declining contributions to the development of in-house technological capabilities of the national grid company and transmission lines, diversification of local economic elites and oligarchs, and a lack of transparency have intensified mutual distrust between the Chinese grid company and prominent energy actors in the Philippines and failed to mitigate national security concerns. Our findings imply that changes in the constellation of local energy actors amid the electricity sector reform and integration of renewable energy in grids affect the role of the grid and justification for international grid investors. The perception of unsatisfactory performances raises concerns about national security during the worsening of bilateral relations.

ISDS disputes, adjudication and cross-border M&As

ISDS claims are associated with reductions in the likelihood, frequency, and dollar volume of M&As from claimant home countries to respondent states. The host-state expropriation events underlying ISDS claims show no significant effects. The impact of ISDS claims remains after including traditional country risk metrics. Thus, ISDS claims play a unique role in guiding international investment. They prompt foreign acquirers to adopt risk-avoiding strategies, which affect various deal characteristics. We detect strong substantiation effects of investor-win cases and some acquittal effects of state-win cases. The ISDS claims related to direct expropriations and strong-institution respondent states typically produce more striking effects.

Chronicle 2023 on European Investment Law and Arbitration Developments

In 2023, major developments took place in the field of investment treaty arbitration. In this Chronicle I have selected a few major developments, which highlight the impact of EU law on international investment law and arbitration practice. The conclusion is that further significant developments can be expected during 2024, which will be covered by this Review. ECT, UNCITRAL Working, Group III, enforcement of awards, CJEU, domestic courts of EU Member States

Emerging markets' response to COVID-19: Insights from arbitrages strategies

Global capital markets are sensitive to extreme and physical events. This research explores the influence of COVID-19 on cross-border arbitrage strategies in emerging markets. Specifically, this study develops a novel cross-market pairs trading strategy centered on healthcare stocks, tailored for the unique dynamics of the emerging market environment. The feasibility of cross-border arbitrage strategies in emerging markets is demonstrated by comparing the performance of the strategy before and after the outbreak. Additionally, sensitivity analysis of the risk preference factors before and after the COVID-19 outbreak further supports this argument. These findings offer valuable insights for international investors seeking arbitrage between emerging and other markets and, effectively responding to global shocks.

ENFORCEABILITY OF UMBRELLA CLAUSES BY INVESTMENT ARBITRATION TRIBUNALS

Over the last few decades, one of the most contentious issues of the international investment law has been the interpretation of the ‘umbrella clauses’. Since the umbrella clauses are generally vague, short and hidden in international investment agreements, the interpretation of the clause is in a controversial position and thereby having been subject to the scholarly interest. Should umbrella clauses in international investment agreements be enforceable by arbitration tribunals? Or to what extent investor’s claims stemming from a contractual bre-ach could be enforceable by arbitration tribunals? SGS v Pakistan and SGS v Philippines have addressed these questions and reached opposite decisions. This article aims to examine the contradictory arbitral deci-sions and to discuss broad and restrictive approaches. The article begins with a brief review of umbrella clauses. Then, it analyses leading arbitral cases with the help of scholar views in order to shed the light on critical aspects of the issue.

Is the exchange rate exposure puzzle really a puzzle? International evidence

PurposeGiven the difficulties in finding significant exchange rate exposure in the extant literature, this paper attempts to resolve the so-called “exposure puzzle” by investigating whether currency movements have any significant impact on international industry returns.Design/methodology/approachThis paper utilizes the multivariate Generalized AutoRegressive Conditional Heteroskedasticity (MGARCH) methodology to estimate both symmetric and asymmetric exchange rate exposures for each industry common across 12 countries simultaneously.FindingsThe empirical results show that exchange rate exposure is not only statistically significant but also economically important based on the estimation of an asymmetric three-factor exposure model using MGARCH methodology. This is an extremely important finding as it suggests that the “exposure puzzle” may not be a puzzle at all once a better methodology is utilized in the estimation.Research limitations/implicationsBecause this study tries to resolve the exchange rate exposure puzzle by focusing on whether exchange rate movements affect ex-post returns as opposed to ex ante expected returns and given the significant exposures with respect to different risk factors found in the study, it is interesting to see if any of these risk factors commands a risk premium. In other words, a natural extension of this study is to test whether any of these risk factors is priced in international industry returns.Practical implicationsThe findings of the study have interesting implications for international investors who would like to diversify their portfolios across different industries and are concerned about whether the unexpected movements in the bilateral exchange rates will affect their portfolio returns in addition to its interest rate and world market risk exposures.Originality/valueThe study utilizes the MGARCH methodology, which has not been fully exploited in the exchange rate exposure literature.

The Reform of International Investment Law: Whose Rule of Law?

Abstract Public and political controversies over Investor–State Dispute Settlement (ISDS) have prompted reform processes in international investment law, at bilateral, regional and multilateral levels, with different actors shaping the future of international investment governance. In its essence, the options for the ISDS reform reflect the diverging perspectives on the rule of law in international law. Ultimately, they present a choice about who should control power over States’ action in issues of public importance – the States who have created the system, or international investment tribunals who have shaped the legal development of the system. This paper considers the application of the rule of law as a normative meta-principle to international investment law and its dispute settlement, and it sheds light on different perspectives of this concept, as they shape the ongoing ISDS reform(s).

EFFECTIVENESS ASSESSMENT OF INTERNATIONAL INVESTMENT IN THE UKRAINIAN TERRITORIAL COMMUNITIES’ ACTIVITIES

The article titled systematically examines and evaluates the impact and efficiency of international investments within the context of Ukrainian territorial communities. The research employs a comprehensive approach, delineating key factors influencing investment attractiveness and proposing indicators categorized into financial, economic, social, environmental, and legal dimensions. The study goes beyond theoretical considerations by conducting a survey involving experts from diverse fields, including state and municipal administration, community representatives, business stakeholders, and the education sector. Through this empirical assessment, the article provides a nuanced understanding of the multifaceted effects of international investments on Ukrainian territorial communities. It concludes with practical recommendations geared towards optimizing the efficiency of international investments within the activities of these communities, contributing valuable insights for policymakers, investors, and community stakeholders alike. In general, the article explores the critical role of international investment in Ukrainian territorial communities as a key avenue for economic development and the enhancement of the population's quality of life. The study aims to assess the effectiveness of international investment in these communities, recognizing their potential to significantly impact economic and social spheres. By conducting an assessment and taking the necessary measures based on the received data, the territorial communities of Ukraine can attract more international investments and contribute to the sustainable development of the territorial communities, and the conclusions can be used to make decisions on investment support, correction of development strategies and improvement of the investment climate.

Inter-linkages Among Selected Stock Markets of South Asia: Revisit

The present study investigates the inter linkages among South Asian stock markets namely India, Sri Lanka and Pakistan. The topic is important for international investors because if the stock markets are found integrated with each other then they cannot reap profits from portfolio diversification or reduction in risk. Daily closing prices of the bench mark indices of three countries are taken for a period from 1 Jan. 2001 to 23th Feb. 2023. The paper used statistical tools such as descriptive statistics and correlation analysis and on the other hand, the econometric techniques namely Johansen’s Co integration test, VAR, Variance Decomposition Analysis, Impulse response function and Granger causality test and the selected stock markets are found interlinked in long run as well as in short run.

Navigating the complexities of GCC real state markets: An analysis of interlinkages amidst shocks and oil effects

The study investigates the interconnectedness of GCC real estate markets using wavelet coherence analysis of daily data from 2013 to 2023 and analyzes the impact of various external shocks (political, economic, regulatory, and pandemic) and oil dependence on these dynamics. Despite shared cultural ties and energy intensity, findings reveal primarily weak to moderate linkages, with increased coherence observed during significant events. These linkages exhibit temporal variability, characterized by short-term spikes, loose medium-term correlations, and evolving long-term relationships. Isolating the effect of oil prices yielded limited impact, suggesting the influence of country-specific factors. This research offers valuable insights for policymakers, investors, and stakeholders, aiding informed decision-making during sensitive periods and fostering a deeper understanding of international finance and investments.

Breaking the Double Tax Paradigm

The success story of economic globalization is often linked to an increased freedom of capital movement, facilitated by the existence of more than 3,000 bilateral tax treaties, the primary purpose of which is to prevent double taxation. Even the most outspoken critics of the international tax regime subscribe to the notion that double taxation is detrimental to global growth, development and welfare. Yet, they argue that, all things considered, tax treaties might not be worth signing. Based on an extensive review of the available tax policy and economics literature, this article shows that there is not enough of a normative or empirical basis for thinking that double taxation will necessarily restrict capital flows, provided that the combined effective tax burden is kept at a reasonable level. At the same time, treaties seem to provide investors with a legal certainty that is key to cross-border business activity. This article posits that there should be more emphasis on the legal certainty aspect of tax treaties and less on their limited capacity to prevent double taxation. In fact, relaxing the double tax paradigm could help to significantly improve tax treaties, with a view to preserving their role in fostering international commerce and investment. In this respect, the authors propose a simplified tax treaty model that, by allowing an agreed overlap between home-state and host-state taxes, would diminish overall implementation costs while increasing legal certainty and reducing the risk of lengthy tax disputes, thus benefiting both taxpayers and tax administrations. The article further demonstrates that this approach is superior to the current Pillar One proposal and other popular systemic reform suggestions in the literature, specifically the destination-based cashflow tax (DBCFT) and global formulary apportionment.

Peculiarities of the IT clusters development in Ukraine: problems and prospects for growth

The strategic importance of IT in today's innovation and information technology-oriented economy cannot be overstated. Its active introduction is crucial to promote economic development, increase civic engagement, and strengthen the national economy's competitive position. The development of information technologies not only catalyzes the transition from extensive to intensive production growth but also brings about significant changes in labor organization and management technologies. This article is dedicated to a comprehensive study of the economic processes in Ukraine's IT sector, with a particular focus on IT clusters. The primary objective is to determine the current state of these clusters and outline the directions of their future development. The article describes the key factors that limit the competitiveness of the Ukrainian IT sector and outlines ways to overcome them. The characteristics of IT cluster development in Ukraine are studied. The dynamics of IT exports are analyzed. The activities of the top 25 IT companies in Ukraine are characterized. The study shows that Ukraine's IT sector has demonstrated impressive resilience and adaptability during the war, successfully responding to digitalization and cybersecurity needs despite serious challenges such as the migration of professionals and changes in professional life. Key factors contributing to the development of IT clusters in Ukraine are identified. The article establishes that the state of development of the country's relevant technologies, innovation ecosystem, and infrastructure is the primary driver of the Ukrainian IT sector development. The main activities of these clusters aimed at improving innovative products are outlined. After the war, IT clusters are expected to play a vital role in the country's economic recovery, using their experience to develop innovations and stimulate growth through international investment and integration into international markets. Keywords: ІТ cluster, ІТ sector, innovation, investment, competitiveness, entrepreneurship

The Influence of the Banking Sector on Economic Growth and Commodity Prices: A Panel Data Analysis of Spain, France, and Romania

This study aims to investigate the impact of the banking sector on economic growth and commodity prices. Through panel data analysis, the research explores the relationship between the banking sector and economic growth in Spain, France, and Romania from 2000 to 2020. The findings reveal a positive correlation between the strength of the banking sector and economic growth across these nations, underscoring its pivotal role in fostering economic expansion and subsequently improving commodity prices. Additionally, this study evaluates various regulatory measures crucial ensuring the banking sector’s sustainability and preventing financial crises, including credit risk management, lending policies, liquidity constraints, and international financing and investment strategies. By analyzing the interplay between regulatory measures and banking sector performance, incorporating variables such as non-performing loans, household debt, liquid liabilities, government consumption expenditure, foreign investments, and trade openness, this research provides policymakers with valuable insights to formulate effective strategies for promoting economic stability and ensuring the sustainability and growth of the banking sector.

Monetary Policy Spillovers and Inter-Market Dynamics Perspective of Preferred Habitat Model

This study advances the understanding of the Preferred Habitat Model’s capacity to shed light on the inter-market transfer of mean returns and the diffusion of price volatility in Pakistani investment markets. It examines the extent to which returns in one market exert a systematic influence on returns across others under the potential sway of interest rate policy shifts, USD exchange rate volatility, and domestic inflation trends. Employing a methodological arsenal that includes the GARCH process, enhanced by Dynamic Conditional Correlations (DCC), as well as the Markov Switching Model, this research assesses the propagation of mean returns and volatility across markets. The analysis uncovers significant linkages between monetary policy and stock market indices, underscoring the profound impact of monetary policy on cross-market performance transmission. These insights are pivotal for regulators overseeing the nuanced interaction between monetary policy and market performance. They are crucial for local and international investors interested in developing economies, especially in Pakistan’s markets.