Investment Chapter Research Articles

The Investment Chapters of the EU's International Trade and Investment Agreements in a Comparative Perspective

Investor-State Dispute Settlement (ISDS) clauses in international investment agreements have traditionally been based on an approach which may be termed ‘light touch regulation’ of investment protection. The avenue taken by the recently negotiated EU draft agreements, the Comprehensive Economic and Trade Agreement (CETA) and the EU-Singapore Free Trade Agreement (EUSFTA), can be described as ‘more comprehensive regulation’. Likewise, EUSFTA and CETA provide a rather detailed body of law on substantive standards for the protection of foreign investment. While this may add to the clarity and predictability of the current regime of international investment law, it may also lead to a reduced standard of protection. Compared with other agreements, EUSFTA and CETA have attempted to rebalance the protection of private property and the host state’s regulatory autonomy. In terms of the regulation of ISDS proceedings, EUSFTA and CETA preserve its principle characteristics but deliver moderate change in five areas: (1) consultation mechanisms, (2) the relationship between ISDS and domestic remedies, (3) the appointment and conduct of arbitrators, (4) cost allocation, and (5) transparency rules. This study proposes (1) further development regarding the coordination between effective domestic legal systems and ISDS and (2) the start of negotiations for the establishment of a permanent appeals mechanism in a regional or bilateral context.

Investor Rights and the Judicial Denial of the Neoliberal Constitutionalism

This paper argues that the Canadian judiciary engages in a form of constitutional abnegation by insisting that international investment law, as represented by NAFTA’s investment chapter, plays no role in Canada’s constitutional order. By conferring rights upon investors, enforceable against states in private arenas, for breach of investment treaty obligations, states are subject to the disciplines that sometimes mimic, and other times go well beyond, those found in dominant national constitutional systems. The Canadian judiciary lacks the courage – ‘constitutional courage,’ in Harry Arthur’s words – to admit that external legal regimes can have the effect of significantly transforming domestic constitutionalism. To illustrate, I take up constitutional litigation initiated by the Council of Canadians, the Canadian Union of Canadian Union of Postal Workers, and the Charter Committee on Poverty Issues challenging the consistency NAFTA’s investment chapter with Canada’s constitution. Predictably, their arguments were dismissed by various levels of court on the basis that international law and domestic constitutional law operate in ‘different spheres.’ It turns out that, according to these judges, the international investment regime has no connection with constitutionalism here or abroad.

Corporate Power Unbound: Investor-State Arbitration of IP Monopolies on Medicines - <I>Eli Lilly v. Canada</I> and the Trans-Pacific Partnership Agreement

Despite the deep irony of free trade agreements being subverted to codify and extend anti-competitive monopoly rights and despite the equally deep irony of foreign investors having greater enforcement rights than local investors, the joining of enhanced intellectual property rights (IPRs) and protections and strengthened investor rights is creating a wild-west opportunity for unbounded corporate power. Two current contestations show the dangers of this expanded power in sharp relief. In the Trans-Pacific Partnership Agreement (TPPA), at the behest of its powerful pharmaceutical lobby, the United States is seeking the most extreme forms of pharmaceutical patent, data, and enforcement rights that have ever been proposed at the same time that it is seeking enhanced IP-related investor rights in the most recently leaked Investment Chapter. In the pending investor-state-dispute-settlement case under an older but parallel North America Free Trade Agreement (NAFTA) investment clause, an American pharmaceutical company, in Eli Lilly v. Canada, is for the first time claiming $500 million in investment-related damages because of Canada’s sovereign decision to invalidate previously granted patents on two medicines on the grounds that those patents failed to meet well-established Canadian standards of patentability.This article is not written as an abstract juxtaposition of these two current events. It is written to expose the dangers that countries face, especially low- and middle-income countries, in trade negotiations with the U.S., Europe, and Japan that seek to impose stronger patent, data, and market entry protections and at the same time seek to expand the armamentarium of enforcement powers available to pharmaceutical behemoths. Part II of the paper contains a brief introduction to the international IP regime, namely the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and the TRIPS-plus pharmaceutical protections being sought in the mostly recently leaked TPPA Intellectual Property Chapter and Transparency Chapter still being negotiated between twelve Pacific rim countries. Part III gives a brief historical background on investment treaties and investor-state-dispute-settlement (ISDS). Part IV analyses the TPP Investment Chapter in more depth, particularly its provisions that deal with protection for and enforcement of IP-related investments. Part IV discusses the pending Eli Lilly v. Canada ISDS arbitration, including the claims and defenses of the parties. Part V concludes with a recommendation that investment chapters be struck from the TPP and other trade agreements or that such chapters should not apply whatsoever to the protection or enforcement of IPRs given the many other enforcement powers available to patent holders. The article claims that extending boundless corporate power to Big Pharma through adoption of ISDS for IPRs presents a grave danger to the communal right to health and the right of access to affordable medicines for all.

The Political Economy of FDI Flows into Developing Countries: Does the Depth of International Trade Agreements Matter?

There is considerable debate whether the domestic political institutions (specifically, the country’s level of democracy) of the host developing country toward foreign investors are effective in establishing the credibility of commitments are still underway. Researchers have also analyzed the effect of international institutions such as (GATT-WTO) membership and Bilateral Investment treaties (BIT) in their role of establishing the credibility of commitment to attract foreign investments. In addition, most recent studies have examined the effect of International Trade Agreements (TAs) on FDI flows as they contain separate investment chapters and dispute settlement mechanism, thus providing confidence to investor regarding the security of their investments. We argue that there are qualitative differences among various types of trade agreements and full-fledged trade agreements (FTA-CU) provide credibility to foreign investors and democracy level in the host country conditions this effect whereas the partial scope agreements (PSA) are not sufficient in providing credibility of commitments and not moderated by democracy. This paper analyses the impact of heterogeneous TAs, and their interaction with domestic institutions, on FDI inflows. Statistical analyses for 122 developing countries from 1970 to 2005 support this argument. The method adopted relies on fixed effects estimator which is robust to control endogeneity on a large panel dataset. The strict erogeneity of results by using a method suggested by Baier and Bergstrand (2007) and no feedback effect found in sample. The results state that (1) More the FTA-CU concluded, larger the amount of FDI inflows are attracted into the developing countries and PSA are insignificant in determining the FDI inflow; (2) FTA CU are complementary to democratic regime whereas the conditional effect of PSA with democracy on levels of FDI inflows is insignificant.

Composing an Investment Chapter of the Korea-China-Japan FTA: A Quest for Better International Investment Governance?

The Korea-China-Japan Investment Promotion, Facilitation and Protection Agreement is the first treaty in the economic field that binds the three Northeast Asian countries together under a single legal instrument. The existence of effective dispute-settlement procedures under the treaty will contribute to the creation of a favourable investment climate in the host country. Nevertheless, there have been fears about frivolous or vexatious claims that could inhibit legitimate regulatory actions by governments. How to compose an investment chapter of the Korea-China-Japan FTA that is being negotiated is a pressing demand for all in the region. Any pertinent answers to such a quest require a thorough comparison of the benefits and drawbacks of any development of relevant rules and governance. In the end, a quest for better international investment governance in Northeast Asia in the future requires sound evaluation of lessons from the past and present.

Investor-State Dispute Settlement Mechanism and Intellectual Property Matters

The proposed IP and Investment Chapters in the Trans-Pacific Partnership Agreement (TPP) and the recent North American Free Trade Agreement (NAFTA) investor dispute notifications by Eli Lilly against Canada has initiated the discussion concerning the impact of introducing intellectual property rights (IPR) in the purview of investment chapters of trade agreements. In this paper we will try to examine the effect of treating IP as an investment in the trade agreements and utilization of ISDS to resolve IP matters by way of analyzing the IPR cases that have been brought before the courts by the foreign investors in various countries.

Composing an Investment Chapter of the Korea-China-Japan FTA: A Quest for Better International Investment Governance?

The Korea-China-Japan Investment Promotion, Facilitation and Protection Agreement is the first treaty in the economic field that binds the three Northeast Asian countries together under a single legal instrument. The existence of effective dispute-settlement procedures under the treaty will contribute to the creation of a favourable investment climate in the host country. Nevertheless, there have been fears about frivolous or vexatious claims that could inhibit legitimate regulatory actions by governments. How to compose an investment chapter of the Korea-China-Japan FTA that is being negotiated is a pressing demand for all in the region. Any pertinent answers to such a quest require a thorough comparison of the benefits and drawbacks of any development of relevant rules and governance. In the end, a quest for better international investment governance in Northeast Asia in the future requires sound evaluation of lessons from the past and present.

The Investment Chapter of the Trans-Pacific Partnership Agreement and Latin America: A Possibility of Change and Convergence?

This paper analyses the possible effects that would create for Latin American countries, the inclusion of an investment chapter in the Trans-Pacific Partnership (TPP) agreement, currently in negotiation. The article discusses four aspects that are of particular importance given the divergence of interests between some of the negotiating States of the TPP: the substantive protection of foreign investment and its scope; domestic regulations on capital controls; the emergence of state entities as foreign investors; and the settlement of disputes through investor-state arbitration. The author concludes that compared to the current international investment agreements signed by the Latin America countries that are negotiating the TPP, the inclusion of an investment chapter in this agreement is an opportunity to advance in the convergence on the regulation of foreign investment, both in terms of substantive standards of investment protection and to improve investor-state arbitration as a mechanism of dispute resolution.

The Investment Chapter of the EU-Canada Comprehensive Economic and Trade Agreement

Born out of the considerable Canadian experience with investor-state arbitration, and the no less considerable European skepticism towards that process, the Investment Chapter of the Comprehensive Economic and Trade Agreement (CETA) is a uniquely balanced and innovative document, which could serve as template for modern investment agreements, including the Transatlantic Trade and Investment Partnership (TTIP) currently being negotiated by the European Union (EU) and the United States.

Corporate Social Responsibility in EU Comprehensive Free Trade Agreements: Towards Sustainable Trade and Investment

This article explores how Corporate Social Responsibility (CSR) could effectively be integrated into the trade and investment chapters of post-Lisbon comprehensive EU Free Trade Agreement (FTAs) and to which extent the various options could impose obligations on Multinational Enterprises (MNEs). It argues that promoting CSR in the trade aspects of a comprehensive FTA can, at most, indirectly impose obligations on MNEs due to the lack of vertical effect. Therefore, the likely evolution would be to include investor obligations that reflect CSR objectives in the investment chapters of comprehensive EU FTAs where there is vertical effect. By analysing the draft text of the Comprehensive Economic and Trade Agreement (CETA) within the context of international developments as regards incorporating non-trade objectives in regional and bilateral FTAs and IIAs, this article aims to illustrate the Commission's approach towards introducing CSR in future comprehensive EU FTAs.

Arbitration Under Investment Protection Agreements between the EU and Non-Member States

This paper analyzes the issues relating to investment protection agreements and arbitration in the light of the European Union’s newly acquired exclusive external competence in investment matters. It first considers the status of existing bilateral investment treaties between Member States and third States and the transitional regime established by Regulation (EU) No 1219/2012. It then goes on to examine the developing EU policy in respect of investment protection agreements, including the relations between the competence of the EU and that of Member States and Regulation No. 912/2014 on Financial Responsibility linked to Investor-State Dispute Settlement, which implies that the EU accepts the principle that future investor protection agreements concluded by the EU will provide for investor-state arbitration. It then goes on the examine the substantive and procedural rules in the investment chapters of the agreements that the EU is negotiating with Canada, Singapore and the United States and the results of the European Commission’s public consultation on such provisions. In light of the current criticism against investor state investment protection and Investor State Dispute Settlement, the article considers the possible future evolution of investor state protection and arbitration, and foresees that the current regime might face considerable changes.

Why TTIP Should Have an Investment Chapter Including ISDS

TTIP provides for a unique opportunity to introduce procedural and substantive reforms for Investor-State Dispute Settlement (ISDS). The EU and the US can define a modern investment chapter protecting foreign direct investment against unjustifiable interferences by the host state whilst ensuring the sovereign right of the state to regulate. TTIP should create a system of binding international arbitration with a transparent system of adjudication made by impartial arbitrators and guaranteed by an appellate review conducted by independent 'judges'. Such an agreement would function as a catalyst to overcome the fragmented network of bilateral investment agreements. Not to include ISDS in TTIP would demonstrate that the two economic champions of the world are unable to lead by example.

Comparison and Implications of BIT and the Investment Chapter of FTA - Policy Analysis for Korea's Bilateral Investment Negotiations -

Comparison and Implications of BIT and the Investment Chapter of FTA - Policy Analysis for Korea's Bilateral Investment Negotiations -

Investment Treaty Arbitration 'Down Under': Policy and Politics in Australia

Disaffection regarding treaty-based investor–State dispute settlement (ISDS), especially binding arbitration, is slowly spreading from a few, mostly leftist regimes in South America,3 to middle-income and developed countries in other parts of the world. In particular, now that the European Union (EU) has exclusive competence to conclude treaties relating to foreign direct investment (FDI),4 tension has emerged between the European Commission and the European Parliament, particularly in the context of the Trans-Atlantic Trade and Investment Partnership (TTIP),5 given the potential economic impact of such a free trade agreement (FTA) still being negotiated between the EU and the USA. However, there has also been some debate over the advisability of having included ISDS in the FTAs recently concluded with Canada6 and even Singapore.7 The reverberations are now being felt in the rapidly growing Asian region.8 Asian States have gradually come to accept extensive ISDS provisions not only in their bilateral investment treaties (BITs) and FTA investment chapters, but also in their existing regional agreements, notably the Association of Southeast Asian Nations (ASEAN) Comprehensive Investment Agreement and the ‘ASEAN+’ agreements with Australia and New Zealand (AANZFTA), China, Korea9 and India (signed in September 2014).10 Yet the path has been a winding one, with a few dead ends. For example, an investment chapter was omitted altogether from the ASEAN–Japan FTA. Although Japan has FTAs and/or BITs with all ASEAN Member States, including Myanmar (signed in December 2013),11 which all incorporate ISDS provisions, it agreed to a request from the Philippines to omit ISDS from its bilateral FTA.12 Neither Vietnam, Laos, Myanmar, Thailand or India are State parties to the 1965 ICSID Convention.13 More generally, it has been suggested that a ‘combination of a historical sense of hostility, nationalism that continues to dictate events, pragmatism and competition among themselves to attract foreign investment underlies the different policies of the Asian states’ towards FDI.14

European Investment Policy and ISDS

In late September 2014, the text of the EU-Canada Comprehensive Trade Agreement (CETA), which includes an ISDS chapter, has been finalized. However, it is very controversial and unclear whether and, if it all, ISDS will form part of an agreement with the United States. In late September 2014, the text of the EU-Canada Comprehensive Trade Agreement (CETA),1 which includes an ISDS chapter, was finalised. However, it is very controversial and unclear whether ISDS will form part of an agreement with the United States. The negotiations on a possible investment chapter in EU-US Transatlantic Trade and Investment Partnership (TTIP) were officially suspended because of massive public and political opposition, in particular against ISDS. All the more, it is important to look at the agreement with Canada and to see to what extent points of criticism that have been raised in the past are addressed in a sufficiently clear and satisfactory way. The following overview will, in a very selective way, analyse a few of the provisions contained in Section 6: Investor-State Dispute Settlement of the 26 September 2014 draft of the CETA. There is no claim to an exhaustive treatment.

Principles of Non-Discrimination after US – Clove Cigarettes, US – Tuna II, US – COOL and EC – Seal Products and their Implications for International Investment Law

Recent disputes have clarified principles of non-discrimination under WTO law. US – Clove Cigarettes clarifies that under the Agreement on Technical Barriers to Trade, a regulation modifying conditions of competition to the detriment of imported products will not be discriminatory if that detrimental impact stems exclusively from a legitimate regulatory distinction. This test was applied in US – Tuna II and US – COOL, which begin to clarify how to judge whether a regulation is based exclusively on a legitimate regulatory distinction. EC – Seal Products clarifies that in the context of the General Agreement on Tariffs and Trade (GATT) 1994, whether a measure is legitimate in regulatory terms is to be adjudged solely under the general exceptions and not provisions governing non-discrimination. Although generalizing about the implications of WTO disputes for investment treaty interpretation is perilous, these disputes raise new questions, particularly for interpretation of investment chapters in trade agreements.

Repellent Forces: The CJEU and Investor-State Dispute Settlement

The European Union (EU) aspires to conclude and ratify comprehensive trade agreements with Canada, Singapore, the USA and other States containing investment chapters which also provide for investor-State dispute settlement (ISDS). Surprisingly, the conditions and limits stipulated by the Treaties upon which the European Union is founded, i.e. the Treaty on European Union (TEU) and the Treaty on the Functioning of the European Union (TFEU), have received only selective attention. When it comes to the establishment of dispute resolution bodies in international agreements concluded by the EU the concept of autonomy of EU law has proven to be the crucial touchstone. The role of this concept, mainly developed in a series of opinions of the Court of Justice of the European Union (CJEU), in limiting the Union’s leeway to subject itself to the current model of investor-State arbitration has so far not sufficiently been explored. This paper suggests that, in the light of recent decisions, it is not a purely theoretical possibility that the CJEU might take issue with the scope of ISDS currently contained in the CETA Text and similar draft treaties. The means available to sufficiently address the conditions stipulated by EU law might not just bring some modification to the current model of investor-State arbitration, but could completely alter its DNA.

Instituting Investment Claims Under the Trans-Pacific Partnership Agreement

This chapter examines that draft Investment Chapter and analyses provisions bearing on the resolution of investor-state disputes arising under the Trans-Pacific Partnership Agreement (TPPA). It also briefly examines the significance of Australia's insistence on an exemption from investor-state arbitration (ISA), and what this means in terms of the institutional differences between ISA and the use of domestic courts to resolve investment disputes. The draft version of the Investment Chapter of the TPPA leaked to the public in June 2012, while undoubtedly authentic, is unlikely to constitute the final version of the investment chapter. This is especially so in light of the need for public consultation and the need to secure agreement from some states that are apparently pushing for amendments to the Chapter. Given the political nature of TPP negotiations, it is difficult to predict the precise form of ISA provisions that the TPP negotiators will finally adopt. Keywords: Australia; draft Investment Chapter; investor-state arbitration (ISA); Trans-Pacific Partnership Agreement (TPPA)

Umbrella Clauses and Transfer Provisions in the (Invisible) EU Model BIT

The draft Investment Chapter of the CETA between the EU and Canada includes an umbrella clause, on EU's proposal. Nevertheless, the inclusion of such a clause appears to be quite uncertain. Furthermore, the wording of the umbrella clause, proposed by the EU, fails to address all uncertainties regarding the effects and scope of application of umbrella clauses still existing in jurisprudence. Conversely, the inclusion in the draft Investment Chapter of a transfer provision, accompanied with safeguard provisions in case of serious balance-of-payments difficulties and external financial difficulties, does not seem to be a contested issue among the Member States. A new development at the EU level might make investment protection matters more complicated, Following the opening of the negotiation on a free trade agreement with the US, some Member States oppose investment arbitration tout court at least in the prospective EU-US CETA.

Article: Converging Towards NAFTA: An Analysis of FTA Investment Chapters in the European Union and the United States

The present study is concerned with the evolution of investment chapters of Free Trade Agreements (FTAs). Our purpose is to observe the structure and recurrent patterns of the normative content of these chapters in order to ascertain and analyse certain trends. The sample of agreements reviewed is limited to the investment agreements concluded (or about to be concluded, when there is sufficient information) by the two major importers and exporters of Foreign Direct Investment (FDI) — the United States and the European Union.After an overview illustrating the history and layout of the EU and U.S. systems of investment protection (Part I), we provide a breakdown of the provisions that create a gulf between the two models (Part II). In Part III, we describe and analyse the current impasse in the European Union’s newly centralised management of investment policies. Our central claim is then illustrated in Part IV, where we argue that the U.S. (NAFTA-like) template is likely to prevail over the European one, in the long run, because it fills the gaps in incomplete treaty regimes like those recurrent in European Bilateral Investment Treaties (BITs). The Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union seems to confirm this trend. In light of these remarks, we conclude that, in the future, pluri- and multilateral negotiations will increasingly lean towards the NAFTA model and gradually distance themselves from the European BIT standard.