Treaties and Regulatory Risk in Infrastructure Investment: The Effectiveness of International Law Disciplines versus Sanctions by Global Markets in Reducing the Political and Regulatory Risk for Private Infrastructure Investment

Journal of World Trade

Volumn 34, Issue 2, 2000, Pages 1-61

  Wälde, Thomas ^a,b   Dow, Stephen ^b  

^a Nat Rsrc E ^*

^b CEPMLP Dundee   (United Kingdom)

Author keywords

[No Author keywords available]

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EID: 0347616206     PISSN: 10116702     EISSN: None     Source Type: Journal    
DOI: 10.1023/A:1009010609379     Document Type: Article

References (236)

1. Timothy Irwin et al. (ed.) (1997) Dealing with public risk in private infrastructure (World Bank); and Mateen Thobani (1999) Private infrastructure, public risk, in 36 Finance & Development, March.
2. Timothy Irwin et al. (ed.) (1997) Dealing with public risk in private infrastructure (World Bank); and Mateen Thobani (1999) Private infrastructure, public risk, in 36 Finance & Development, March.
3. Giorgio Sacerdoti (1997/1998) Bilateral Treaties and Multilateral Instruments on Investment Protection, 269 Recueil des Cours (Kluwer/Nijhoff, The Hague), 261; M. Sornarajah (1994) The International Law on Foreign Investment (Cambridge); Peter Muchlinski (1995) Multinational Enterprises and the Law (Blackwell, Oxford); Patrick Juillard (1994) L'évolution des Sources du Droit des Investissements, Recueil des Cours, vol. 250 (VI) (Nijhoff, The Hague), 21-213; and T. Wälde (ed.) (1996) The Energy Charter Treaty (Kluwer).
4. Giorgio Sacerdoti (1997/1998) Bilateral Treaties and Multilateral Instruments on Investment Protection, 269 Recueil des Cours (Kluwer/Nijhoff, The Hague), 261; M. Sornarajah (1994) The International Law on Foreign Investment (Cambridge); Peter Muchlinski (1995) Multinational Enterprises and the Law (Blackwell, Oxford); Patrick Juillard (1994) L'évolution des Sources du Droit des Investissements, Recueil des Cours, vol. 250 (VI) (Nijhoff, The Hague), 21-213; and T. Wälde (ed.) (1996) The Energy Charter Treaty (Kluwer).
5. Giorgio Sacerdoti (1997/1998) Bilateral Treaties and Multilateral Instruments on Investment Protection, 269 Recueil des Cours (Kluwer/Nijhoff, The Hague), 261; M. Sornarajah (1994) The International Law on Foreign Investment (Cambridge); Peter Muchlinski (1995) Multinational Enterprises and the Law (Blackwell, Oxford); Patrick Juillard (1994) L'évolution des Sources du Droit des Investissements, Recueil des Cours, vol. 250 (VI) (Nijhoff, The Hague), 21-213; and T. Wälde (ed.) (1996) The Energy Charter Treaty (Kluwer).
6. Giorgio Sacerdoti (1997/1998) Bilateral Treaties and Multilateral Instruments on Investment Protection, 269 Recueil des Cours (Kluwer/Nijhoff, The Hague), 261; M. Sornarajah (1994) The International Law on Foreign Investment (Cambridge); Peter Muchlinski (1995) Multinational Enterprises and the Law (Blackwell, Oxford); Patrick Juillard (1994) L'évolution des Sources du Droit des Investissements, Recueil des Cours, vol. 250 (VI) (Nijhoff, The Hague), 21-213; and T. Wälde (ed.) (1996) The Energy Charter Treaty (Kluwer).
7. Giorgio Sacerdoti (1997/1998) Bilateral Treaties and Multilateral Instruments on Investment Protection, 269 Recueil des Cours (Kluwer/Nijhoff, The Hague), 261; M. Sornarajah (1994) The International Law on Foreign Investment (Cambridge); Peter Muchlinski (1995) Multinational Enterprises and the Law (Blackwell, Oxford); Patrick Juillard (1994) L'évolution des Sources du Droit des Investissements, Recueil des Cours, vol. 250 (VI) (Nijhoff, The Hague), 21-213; and T. Wälde (ed.) (1996) The Energy Charter Treaty (Kluwer).
8. See Andrew Seck, in T. Wälde (ed.) (1996) Energy Charter Treaty (Kluwer).
9. "State contracts": contracts between investor/multinational company and a host State. These contracts, even if not always using the form of a company, tend to produce similar effects as equity investment if long-term and involving significant capital investment, risk assumption and management control by the investor: T. Wälde (1979) Methods and Mechanisms of International Industrial Enterprise Cooperation (UNIDO); and E. Passivirta, in T. Wälde (ed.) as note 2, above. Charles Oman (1986) New Forms of Investment in Developing Countries, in T. Moran (ed.) Investing in Development.
10. "State contracts": contracts between investor/multinational company and a host State. These contracts, even if not always using the form of a company, tend to produce similar effects as equity investment if long-term and involving significant capital investment, risk assumption and management control by the investor: T. Wälde (1979) Methods and Mechanisms of International Industrial Enterprise Cooperation (UNIDO); and E. Passivirta, in T. Wälde (ed.) as note 2, above. Charles Oman (1986) New Forms of Investment in Developing Countries, in T. Moran (ed.) Investing in Development.
11. Modern investment treaties employ a much wider notion of "property" than in the past. In essence, all "rights" (based on private or administrative law) including intangible rights, contractual claims with a financial value are now regarded as protected investment - viz. "proprietary' rights". This reflects modern discussion on property as consisting of a bundle of "proprietary rights": Michael Heller (1998) The Tragedy of the Anticommons: property in the transition from Marx to Markets, 111 Harvard Law Rev. 622-687.
12. Such as change by regulation of significant variables of the investment project's environment such as tariffs, non-tariff rules (health, safety, environment, social policies such as preferential supply or prohibition of cut-off of the infrastructure service, labour policies such as minimum employment conditions or other new employment rules; economic development policies such as various economic performance requirements, obligations to purchase from or supply to the domestic market at preferential terms). See T. Moran Political and Regulatory Risk in Infrastructure, in: www.worldbank.org/riskconference; L. Wells Is Foreign Infrastructure Investment Still Risky (1995) Harvard Business Review, September.
13. Such as change by regulation of significant variables of the investment project's environment such as tariffs, non-tariff rules (health, safety, environment, social policies such as preferential supply or prohibition of cut-off of the infrastructure service, labour policies such as minimum employment conditions or other new employment rules; economic development policies such as various economic performance requirements, obligations to purchase from or supply to the domestic market at preferential terms). See T. Moran Political and Regulatory Risk in Infrastructure, in: www.worldbank.org/riskconference; L. Wells Is Foreign Infrastructure Investment Still Risky (1995) Harvard Business Review, September.
14. Significant means in essence variables which have a meaningful influence on cost.
15. For example, by international financial and other institutions; home States; non-governmental organisation-engineered media pressure, see Barbara Frey (1997) The legal and ethical responsibilities of transnational corporations in the protection of international human rights, 6 Minn. J. Global Trade 153. G. Shaffer WTO Under Challenge (forthcoming).
16. For example, by international financial and other institutions; home States; non-governmental organisation-engineered media pressure, see Barbara Frey (1997) The legal and ethical responsibilities of transnational corporations in the protection of international human rights, 6 Minn. J. Global Trade 153. G. Shaffer WTO Under Challenge (forthcoming).
17. Anthony Ogus (1994) Regulation (Oxford University Press).
18. This seems to be the assertion made in a BIT-based arbitration complaint - Lander v. Czech Republic, FT 26/8/99. Here, the issue reportedly centres on the issue of fair regulation of TV licences in a dispute between a foreign and national investor.
19. This is perhaps similar to a traditional situation of political risk - a State's unwillingness, perhaps rather inability, to control insurgency movements imperilling the operations of a foreign investor. For an analysis of London Multicultural Investment Treaties' treatment of State responsibility for subnational actors, see T. Wälde and P. Wouters (1996) State Responsibility in a Liberalised World Economy: State, Privileged and Subnational Authorities Under the 1994 Energy Charter Treaty, an Analysis of Articles 22 and 23, in 27 Neth.YbkIntlL 143-194.
20. T. Wälde and J. Gunderson (1994) Legislative Reform in Transition Economies, in 43 Int'l&Comp.L.Q. vol. 43, April, pp. 347-379; T. Wälde and C von Hirschhausen (1999) Legislative Reform in the Energy Industry of Post-Soviet Societies, in R. Seidman et al. (eds) (1999) Making Development Work: Legislative Reform for Good Governance (Kluwer, London).
21. T. Wälde and J. Gunderson (1994) Legislative Reform in Transition Economies, in 43 Int'l&Comp.L.Q. vol. 43, April, pp. 347-379; T. Wälde and C von Hirschhausen (1999) Legislative Reform in the Energy Industry of Post-Soviet Societies, in R. Seidman et al. (eds) (1999) Making Development Work: Legislative Reform for Good Governance (Kluwer, London).
22. T. Wälde and J. Gunderson (1994) Legislative Reform in Transition Economies, in 43 Int'l&Comp.L.Q. vol. 43, April, pp. 347-379; T. Wälde and C von Hirschhausen (1999) Legislative Reform in the Energy Industry of Post-Soviet Societies, in R. Seidman et al. (eds) (1999) Making Development Work: Legislative Reform for Good Governance (Kluwer, London).
23. Francis Fukuyama Trust, The Social Virtues and the Creation of Prosperity, (1995) Hamish Hamilton.
24. Even these contracts are far from easily enforceable, particularly if they cover a transnational context: T. Wälde, Role of Law and Contract in International Business, CEPMLP Online Journal: www.cepmlp.org.
25. See, in particular, the official views of the major international financing institutions, now the main players in legislative reform guidance and assistance reflected in the World Bank and Asian Development Bank-originated contributions in Seidman/Seidman/Wälde; Ibrahim Shihata, Douglas Webb, Barry Metzger and Cheryl Gray (1999) Making Development Work (Kluwer, London).
26. Again, this is not limited to developing countries. The privatisation of British Gas in the UK in 1986 created a lucrative privately owned monopoly sold at a high price. It took 15 years to de-monopolise this structure; see Stephen Dow, UK Energy Privatisation, CEPMLP Online Journal, www.cepmlp.org.
27. See Financial Times, 30 June 1999, on Indonesian independent power plant contracts.
28. For a review of the discussion on "stranded investment" see Jim Rossi (1998) The irony of deregulatory takings, 77 Texas Law Review 207-320.
29. See T. Wälde and A. Kolo (1999) Renegotiation of long-term investment agreements, CEPMLP Online Journal vol. IV, with extensive discussion of post-deregulation stranded investment projects and similarly stranded long-term supply agreements, e.g. by British Gas in the UK or by the LNG industry' in the United States.
30. F.T., 20/8/99 "PLN Fails to Pay Power Consortium"; 27/1/00 "Tractebel Sues Kazakhstan"; and 10/3/00 "Interim Deal in Indonesia Power Dispute".
31. There is a conventional wisdom among the institutions that participatory democracy is always associated with increasing investment flows. It is argued that democratic systems are correlated with higher flows of private investment (see 13. Weder, www.worldbank.org/riskconference), but this is certainly not always the case. The counter-argument is that investors look for long-term stability and security, and this can be secured by governments of various persuasions. In reality, democratic participation/people's pressure can and is easily activated to attack deals made by previous (in particular authoritarian) governments, see "Investors urged to be flexible over contracts", a report of a speech by the Indonesian Minister of Mines and Energy, Jakarta Post, 17 December 1999 and the requests by the power company PLN to renegotiate previous contracts allegedly the result of "collusion, corruption and nepotism during the former reign" Indonesia backtracks in power dispute, Financial Times, 21 December.
32. There is a conventional wisdom among the institutions that participatory democracy is always associated with increasing investment flows. It is argued that democratic systems are correlated with higher flows of private investment (see 13. Weder, www.worldbank.org/riskconference), but this is certainly not always the case. The counter-argument is that investors look for long-term stability and security, and this can be secured by governments of various persuasions. In reality, democratic participation/people's pressure can and is easily activated to attack deals made by previous (in particular authoritarian) governments, see "Investors urged to be flexible over contracts", a report of a speech by the Indonesian Minister of Mines and Energy, Jakarta Post, 17 December 1999 and the requests by the power company PLN to renegotiate previous contracts allegedly the result of "collusion, corruption and nepotism during the former reign" Indonesia backtracks in power dispute, Financial Times, 21 December.
33. There is a conventional wisdom among the institutions that participatory democracy is always associated with increasing investment flows. It is argued that democratic systems are correlated with higher flows of private investment (see 13. Weder, www.worldbank.org/riskconference), but this is certainly not always the case. The counter-argument is that investors look for long-term stability and security, and this can be secured by governments of various persuasions. In reality, democratic participation/people's pressure can and is easily activated to attack deals made by previous (in particular authoritarian) governments, see "Investors urged to be flexible over contracts", a report of a speech by the Indonesian Minister of Mines and Energy, Jakarta Post, 17 December 1999 and the requests by the power company PLN to renegotiate previous contracts allegedly the result of "collusion, corruption and nepotism during the former reign" Indonesia backtracks in power dispute, Financial Times, 21 December.
34. Such as the 1997 UK retroactive tax on windfall profits by privatised utilities to, in effect, add ex post an additional price to earlier privatisation and let the new government gain politically from both the symbolic effect of the action and the political use of the additional revenue thus generated; T. Wälde (1999) Renegotiating previous governments' privatization deals: the 1997 UK windfall tax on utilities and international law, 19 Northwestern J Int'l Law & Business, 405-424.
35. T. Wälde (1998) Legal boundaries for extraterritorial ambitions, in John Mitchell (ed.) Companies in a world of conflict (RIIA, London).
36. The Additional Protocol I of the European Convention on Human Rights protects - in a different way from investment treaties - domestic investors too. There is also sometimes a limited scope for flexibility in defining who is a "foreign" investor. See Art. 25 of the ICSID Convention and C. Schreuer, Access to ICSID dispute settlement for locally incorporated companies, in Friedl Weiss (ed.) International Economic Law with a Human Face (Kluwer Law International, 1998), 497-513.
37. T. Wälde (1999) International law of foreign investment: towards regulation by multilateral treaties, in Business Law International, 1 BL1 50-80.
38. Legislative reform in transition economics (with J. Gunderson), in 43 Int'l&Comp.L.Q. vol. 43, April 1994, 347-379, now reprinted in: A. Seidman, R. Seidman and T. Wälde (1999) .Making development work: legislative reform for good governance (Klmver, London).
39. Legislative reform in transition economics (with J. Gunderson), in 43 Int'l&Comp.L.Q. vol. 43, April 1994, 347-379, now reprinted in: A. Seidman, R. Seidman and T. Wälde (1999) .Making development work: legislative reform for good governance (Klmver, London).
40. For the text of the convention of the Organisation for Economic Co-operation and Development: UNCTAD (1996) International Investment Instruments: A Compendium, Sales No. 96.II.A.9, June. G. Brown (ed.) (1999) Controlling bribery and corruption in international business (Nabarro Nathanson).
41. For the text of the convention of the Organisation for Economic Co-operation and Development: UNCTAD (1996) International Investment Instruments: A Compendium, Sales No. 96.II.A.9, June. G. Brown (ed.) (1999) Controlling bribery and corruption in international business (Nabarro Nathanson).
42. T. Wälde Sustainable development and the 1994 Energy Charter Treaty: between pseudo-action and the management of environmental investment risk: in Friedl Weiss et al. (eds) (1998) International Economic Law with a Human Face (Kluwer Law, London), 223-271. One of the current Nafta Chapter XI cases (Myers v. Canada) raises the issue of conflict between the Nafta and international hazardous waste conventions.
43. While there are similarities, there are significant differences between the various bilateral investment treaties (BITs). The US BITs now emphasise national/MFN treaties with respect to access, different from the UK treaties. On BITs, see Jeswald Salacuse, in T. Wälde (Ed.) Energy Charter Treaty (Kluwer, London); Rudolf Dolzer and Margrete Stevens (1995) Bilateral Investment Treaties (Kluwer/NijhofF, Dordrecht); Kenneth Vandevelde, The Political Economy of bilateral investment treaties (1998) 92A J.I.L. 621.
44. While there are similarities, there are significant differences between the various bilateral investment treaties (BITs). The US BITs now emphasise national/MFN treaties with respect to access, different from the UK treaties. On BITs, see Jeswald Salacuse, in T. Wälde (Ed.) Energy Charter Treaty (Kluwer, London); Rudolf Dolzer and Margrete Stevens (1995) Bilateral Investment Treaties (Kluwer/NijhofF, Dordrecht); Kenneth Vandevelde, The Political Economy of bilateral investment treaties (1998) 92A J.I.L. 621.
45. While there are similarities, there are significant differences between the various bilateral investment treaties (BITs). The US BITs now emphasise national/MFN treaties with respect to access, different from the UK treaties. On BITs, see Jeswald Salacuse, in T. Wälde (Ed.) Energy Charter Treaty (Kluwer, London); Rudolf Dolzer and Margrete Stevens (1995) Bilateral Investment Treaties (Kluwer/NijhofF, Dordrecht); Kenneth Vandevelde, The Political Economy of bilateral investment treaties (1998) 92A J.I.L. 621.
46. For a comprehensive collection, see UNCTAD (1996) International Investment Instruments: A Compendium (New York/Geneva), vol. I-III Sales No. E.96.IIA.10 (currently being updated).
47. But this is the frequent, explicit or implicit, assumption made about the effect of such treaties, both by advocates and critics: Andrew Guzman (1998) Why LDCs sign treaties that hurt them: Explaining the popularity of bilateral investment treaties, in 328 VAJ Int'L 1 639.
48. Some pundits have pointed in fact to a negative correlation: developing countries which largely abstain from such treaties (e.g. India, Mexico (although member of the NAfTA), Brazil and Nigeria) have attracted very large investment flows while countries which have signed up to relatively many BITs (e.g. countries in Central Africa or Central America) do not have much to show for it.
49. For example, Scott-Gudgeon, a US BIT negotiator: S. Gudgeon (1986) US Bilateral investment treaties, in Int'l Tax & Business Lawyer 105; see also on UK BITs, E. Denza and S. Brooks (1987) Investment protection treaties: UK experience, 36 ICQL 908 and the sophisticated analysis by Detlev Vagts (1990) Protecting foreign direct investment: an international law perspective, in Cynthia D. Wallace (ed.) Foreign Direct Investment in the 1990s (Dordrecht, Nijhoff) and J.W. Salacuse (1990) BIT by BIT: the growth of BITS and their impact on foreign investment in developing countries, 24 Intl. Law 655.
50. For example, Scott-Gudgeon, a US BIT negotiator: S. Gudgeon (1986) US Bilateral investment treaties, in Int'l Tax & Business Lawyer 105; see also on UK BITs, E. Denza and S. Brooks (1987) Investment protection treaties: UK experience, 36 ICQL 908 and the sophisticated analysis by Detlev Vagts (1990) Protecting foreign direct investment: an international law perspective, in Cynthia D. Wallace (ed.) Foreign Direct Investment in the 1990s (Dordrecht, Nijhoff) and J.W. Salacuse (1990) BIT by BIT: the growth of BITS and their impact on foreign investment in developing countries, 24 Intl. Law 655.
51. For example, Scott-Gudgeon, a US BIT negotiator: S. Gudgeon (1986) US Bilateral investment treaties, in Int'l Tax & Business Lawyer 105; see also on UK BITs, E. Denza and S. Brooks (1987) Investment protection treaties: UK experience, 36 ICQL 908 and the sophisticated analysis by Detlev Vagts (1990) Protecting foreign direct investment: an international law perspective, in Cynthia D. Wallace (ed.) Foreign Direct Investment in the 1990s (Dordrecht, Nijhoff) and J.W. Salacuse (1990) BIT by BIT: the growth of BITS and their impact on foreign investment in developing countries, 24 Intl. Law 655.
52. For example, Scott-Gudgeon, a US BIT negotiator: S. Gudgeon (1986) US Bilateral investment treaties, in Int'l Tax & Business Lawyer 105; see also on UK BITs, E. Denza and S. Brooks (1987) Investment protection treaties: UK experience, 36 ICQL 908 and the sophisticated analysis by Detlev Vagts (1990) Protecting foreign direct investment: an international law perspective, in Cynthia D. Wallace (ed.) Foreign Direct Investment in the 1990s (Dordrecht, Nijhoff) and J.W. Salacuse (1990) BIT by BIT: the growth of BITS and their impact on foreign investment in developing countries, 24 Intl. Law 655.
53. M. Omalu, note 35, below; James Otto (1994) Evaluation of Mineral Investment Conditions, CEPMLP Working Paper.
54. M. Omalu, note 35, below; James Otto (1994) Evaluation of Mineral Investment Conditions, CEPMLP Working Paper.
55. Philip Andrews-Speed (1996) The Energy Charter Treaty: Its importance to Western European Energy Companies, in 9 OGTLR 373-378; Mirian Omalu (1998) NAFTA and the Energy Charter Treaty (Kluwer, London); and David Jenkins and Julia Dore, in T. Wälde (ed.) as note 29, above.
56. Philip Andrews-Speed (1996) The Energy Charter Treaty: Its importance to Western European Energy Companies, in 9 OGTLR 373-378; Mirian Omalu (1998) NAFTA and the Energy Charter Treaty (Kluwer, London); and David Jenkins and Julia Dore, in T. Wälde (ed.) as note 29, above.
57. Philip Andrews-Speed (1996) The Energy Charter Treaty: Its importance to Western European Energy Companies, in 9 OGTLR 373-378; Mirian Omalu (1998) NAFTA and the Energy Charter Treaty (Kluwer, London); and David Jenkins and Julia Dore, in T. Wälde (ed.) as note 29, above.
58. David Landes (1998) The Wealth and Poverty of Nations (W. Norton, London).
59. Robert Putnam found that over several centuries Italian governance, in spite of formal identity of law and institutions, has differed significantly between the Northern regions with a long culture of civic traditions and the Southern regions with a more feudal culture. See Robert Putnam et al. (1998) Making Democracy Work: Civic Traditions in Modern Italy (Princeton). Laws can be made and treaties can be joined rather rapidly, but the underlying institutions, structures, attitudes and practices of governance tend to be much more resistant to material as contrasted with purely formal change of the legal suprastructure.
60. Thilo Marauhn (1996) Towards a procedural law of compliance control in international environmental relations, in 56 ZaoeRV/Heidelberg J. Int'l Law 696-731.
61. UN (1996) International Investment Instrument: A Compendium, 3 vols, Sales No. E.96.II.A.9, 4 (New York/ Geneva); the ICSID Secretariat edits a series on bilateral investment treaties published by Oceana.
62. Iran, another typical hold-out against BITs, is now very keen to negotiate BITs to promote imvard investment. According to a statement made by the Deputy Minister of Finance at the October 1999 Mining Investment Conference in Teheran, it is negotiating over 50 BITs at the moment. The Financial Times reports the negotiation of a BIT with the UK (12 January 2000).
63. See A. Stanimirow "The role of bilateral investment treaties in protecting foreign investors and their investments", reporting on individual cases where investors reportedly have relied successfully on BITs in order to settle existing disputes, presentation for World Bank risk conference, worldbank.org/riskconference (to be published).
64. For details of the requirement of nationality, seat and control, see G. Sacerdoti, as note 2, above. There are ways of manipulating the home State requirement-usually by use of subsidiaries incorporated in the home State, but in general the subsidiary must be more than a mere corporate shell. 43 Diplomatic protection is the use of diplomatic channels to discuss investor complaints and to seek to settle them quietly through inter-governmental negotiation.
65. Negotiating protocols to existing BITs or, as a less effective, but probably less time-consuming alternative, interpretative agreements by exchange of letters would be a practical way of adapting existing BITs.
66. Rex Zedalis (1996) Claims by individuals in international economic law: NAFTA developments, 7 American Review of Int'l Arbitration, 115; there is a website listing current cases (www.harmonizationalert.org/NAFTA/ chapter11.htm); see also www.worldbank/icsid.
67. Rex Zedalis (1996) Claims by individuals in international economic law: NAFTA developments, 7 American Review of Int'l Arbitration, 115; there is a website listing current cases (www.harmonizationalert.org/NAFTA/ chapter11.htm); see also www.worldbank/icsid.
68. For the text of this award of November 1999, see: www.worldbank.org/icsid. The case deals with what was in essence a commercial dispute about a waste disposal site management contract between a US company and a Mexican municipality. The panel - rightly in our view - rejected the complaint as it found no evidence of denial of justice or unfair or unreasonable treatment of the investor.
69. There was an extensive Internet campaign against the NAFTA-and ECT-based investment arbitration method of the MAI. See Wälde and Kolo (1999) Environmental Taking, and CEPMLP Online Journal, www.cepmlp.org for references. The government of Canada has now, prompted by NGO pressure following the Ethyl case, proposed a narrowing of the NAFTA Chapter XI arbitration facility: BRIDGES Weekly Trade News Digest, vol. 3, No. 17, 3 May 1999.
70. There was an extensive Internet campaign against the NAFTA-and ECT-based investment arbitration method of the MAI. See Wälde and Kolo (1999) Environmental Taking, and CEPMLP Online Journal, www.cepmlp.org for references. The government of Canada has now, prompted by NGO pressure following the Ethyl case, proposed a narrowing of the NAFTA Chapter XI arbitration facility: BRIDGES Weekly Trade News Digest, vol. 3, No. 17, 3 May 1999.
71. Published in 34 ILM 360 (1995) with introduction T. Wälde; also, with numerous commentaries and analyses, in T. Wälde (ed.) Energy Charter Treaty (Kluwer, London) International Investment under the 1994 Energy Charter Treaty, in 29 JWT 5, 72 (1995); information on current developments: www.encharter.org.
72. Published in 34 ILM 360 (1995) with introduction T. Wälde; also, with numerous commentaries and analyses, in T. Wälde (ed.) Energy Charter Treaty (Kluwer, London) International Investment under the 1994 Energy Charter Treaty, in 29 JWT 5, 72 (1995); information on current developments: www.encharter.org.
73. See both the article Foreigners feel the pain as well as the advertisement by a dissatisfied investor in Financial Times, Kazakhstan Supplement, 1 July 1999.
74. For example, in the Russian Petroleum Investor or the Financial Times. For a conceptual analysis, see T. Wälde and C. von Hirschhausen, in R. Seidman et al. (1999) op. cit., supra.
75. This is the gist of the criticism against investment treaty practice by Sol Picciotto (1998) Linkages in international investment regulation, 19 U of Pennsylvania J of Int'l Ec. Law 731. In response to the MAI experience, the OECD is now working on upgrading its non-lending guidelines for multinational companies.
76. There is at the moment a (confidential) draft Supplementary Treaty which covers access/pre-investment matters and in particular obligations relevant to the privatisation process. But this draft appears far from being ready for signature and ratification, and it does not deal with obligations of investors and a full transparency and propriety of the investment process per se. For recent developments: www.encharter.org and Bamberger/Linehan/Wälde, The Energy Charter Treaty - Recent Developments: in: M. Roggenkamp et al. (eds) European Energy Law, Oxford University Press, 1999 - short version on CEPMLP Online Journal: www.cepmlp.org.
77. There is at the moment a (confidential) draft Supplementary Treaty which covers access/pre-investment matters and in particular obligations relevant to the privatisation process. But this draft appears far from being ready for signature and ratification, and it does not deal with obligations of investors and a full transparency and propriety of the investment process per se. For recent developments: www.encharter.org and Bamberger/Linehan/Wälde, The Energy Charter Treaty - Recent Developments: in: M. Roggenkamp et al. (eds) European Energy Law, Oxford University Press, 1999 - short version on CEPMLP Online Journal: www.cepmlp.org.
78. For a collection, see UN (1996) Investment Compendium, as note 39, above (being updated for publication in 2000).
79. Reporting in the Financial Times and The Economist; Financial Times, 8 January 1998; Financial Times, 24 February 1998; The sinking of the MAI, Economist, 14 March 1998; Financial Times, 19 February 1998; Financial Times, 30 April 1998 (Guy de Jonquieres). See also P.M. Dupuy and Ch. Leben (1999) Un Accord Multilatéral sur l'investissement (Paris, Pedone); for an informed post mortem, see David Henderson The MAI Affair: A Story and its Lessons (Royal Institute of Int'l Affairs, London). See also Robert Stumberg, 31 Cornell Int'l L.J. 49 (1998) 1, Direct Investment: Sovereignty by Subtraction: The Multilateral Agreement on Investment; and Edward M. Graham on the national treatment of foreign investment. M. Graham (1998) Exceptions and conditions: Regulatory Takings, Supernational Treatment, and the Multilateral Agreement on Investment: Issues Raised by Nongovernmental Organisations, 31 Cornell Int'l L.J. 599.
80. Reporting in the Financial Times and The Economist; Financial Times, 8 January 1998; Financial Times, 24 February 1998; The sinking of the MAI, Economist, 14 March 1998; Financial Times, 19 February 1998; Financial Times, 30 April 1998 (Guy de Jonquieres). See also P.M. Dupuy and Ch. Leben (1999) Un Accord Multilatéral sur l'investissement (Paris, Pedone); for an informed post mortem, see David Henderson The MAI Affair: A Story and its Lessons (Royal Institute of Int'l Affairs, London). See also Robert Stumberg, 31 Cornell Int'l L.J. 49 (1998) 1, Direct Investment: Sovereignty by Subtraction: The Multilateral Agreement on Investment; and Edward M. Graham on the national treatment of foreign investment. M. Graham (1998) Exceptions and conditions: Regulatory Takings, Supernational Treatment, and the Multilateral Agreement on Investment: Issues Raised by Nongovernmental Organisations, 31 Cornell Int'l L.J. 599.
81. Reporting in the Financial Times and The Economist; Financial Times, 8 January 1998; Financial Times, 24 February 1998; The sinking of the MAI, Economist, 14 March 1998; Financial Times, 19 February 1998; Financial Times, 30 April 1998 (Guy de Jonquieres). See also P.M. Dupuy and Ch. Leben (1999) Un Accord Multilatéral sur l'investissement (Paris, Pedone); for an informed post mortem, see David Henderson The MAI Affair: A Story and its Lessons (Royal Institute of Int'l Affairs, London). See also Robert Stumberg, 31 Cornell Int'l L.J. 49 (1998) 1, Direct Investment: Sovereignty by Subtraction: The Multilateral Agreement on Investment; and Edward M. Graham on the national treatment of foreign investment. M. Graham (1998) Exceptions and conditions: Regulatory Takings, Supernational Treatment, and the Multilateral Agreement on Investment: Issues Raised by Nongovernmental Organisations, 31 Cornell Int'l L.J. 599.
82. Reporting in the Financial Times and The Economist; Financial Times, 8 January 1998; Financial Times, 24 February 1998; The sinking of the MAI, Economist, 14 March 1998; Financial Times, 19 February 1998; Financial Times, 30 April 1998 (Guy de Jonquieres). See also P.M. Dupuy and Ch. Leben (1999) Un Accord Multilatéral sur l'investissement (Paris, Pedone); for an informed post mortem, see David Henderson The MAI Affair: A Story and its Lessons (Royal Institute of Int'l Affairs, London). See also Robert Stumberg, 31 Cornell Int'l L.J. 49 (1998) 1, Direct Investment: Sovereignty by Subtraction: The Multilateral Agreement on Investment; and Edward M. Graham on the national treatment of foreign investment. M. Graham (1998) Exceptions and conditions: Regulatory Takings, Supernational Treatment, and the Multilateral Agreement on Investment: Issues Raised by Nongovernmental Organisations, 31 Cornell Int'l L.J. 599.
83. Reporting in the Financial Times and The Economist; Financial Times, 8 January 1998; Financial Times, 24 February 1998; The sinking of the MAI, Economist, 14 March 1998; Financial Times, 19 February 1998; Financial Times, 30 April 1998 (Guy de Jonquieres). See also P.M. Dupuy and Ch. Leben (1999) Un Accord Multilatéral sur l'investissement (Paris, Pedone); for an informed post mortem, see David Henderson The MAI Affair: A Story and its Lessons (Royal Institute of Int'l Affairs, London). See also Robert Stumberg, 31 Cornell Int'l L.J. 49 (1998) 1, Direct Investment: Sovereignty by Subtraction: The Multilateral Agreement on Investment; and Edward M. Graham on the national treatment of foreign investment. M. Graham (1998) Exceptions and conditions: Regulatory Takings, Supernational Treatment, and the Multilateral Agreement on Investment: Issues Raised by Nongovernmental Organisations, 31 Cornell Int'l L.J. 599.
84. Reporting in the Financial Times and The Economist; Financial Times, 8 January 1998; Financial Times, 24 February 1998; The sinking of the MAI, Economist, 14 March 1998; Financial Times, 19 February 1998; Financial Times, 30 April 1998 (Guy de Jonquieres). See also P.M. Dupuy and Ch. Leben (1999) Un Accord Multilatéral sur l'investissement (Paris, Pedone); for an informed post mortem, see David Henderson The MAI Affair: A Story and its Lessons (Royal Institute of Int'l Affairs, London). See also Robert Stumberg, 31 Cornell Int'l L.J. 49 (1998) 1, Direct Investment: Sovereignty by Subtraction: The Multilateral Agreement on Investment; and Edward M. Graham on the national treatment of foreign investment. M. Graham (1998) Exceptions and conditions: Regulatory Takings, Supernational Treatment, and the Multilateral Agreement on Investment: Issues Raised by Nongovernmental Organisations, 31 Cornell Int'l L.J. 599.
85. Reporting in the Financial Times and The Economist; Financial Times, 8 January 1998; Financial Times, 24 February 1998; The sinking of the MAI, Economist, 14 March 1998; Financial Times, 19 February 1998; Financial Times, 30 April 1998 (Guy de Jonquieres). See also P.M. Dupuy and Ch. Leben (1999) Un Accord Multilatéral sur l'investissement (Paris, Pedone); for an informed post mortem, see David Henderson The MAI Affair: A Story and its Lessons (Royal Institute of Int'l Affairs, London). See also Robert Stumberg, 31 Cornell Int'l L.J. 49 (1998) 1, Direct Investment: Sovereignty by Subtraction: The Multilateral Agreement on Investment; and Edward M. Graham on the national treatment of foreign investment. M. Graham (1998) Exceptions and conditions: Regulatory Takings, Supernational Treatment, and the Multilateral Agreement on Investment: Issues Raised by Nongovernmental Organisations, 31 Cornell Int'l L.J. 599.
86. Reporting in the Financial Times and The Economist; Financial Times, 8 January 1998; Financial Times, 24 February 1998; The sinking of the MAI, Economist, 14 March 1998; Financial Times, 19 February 1998; Financial Times, 30 April 1998 (Guy de Jonquieres). See also P.M. Dupuy and Ch. Leben (1999) Un Accord Multilatéral sur l'investissement (Paris, Pedone); for an informed post mortem, see David Henderson The MAI Affair: A Story and its Lessons (Royal Institute of Int'l Affairs, London). See also Robert Stumberg, 31 Cornell Int'l L.J. 49 (1998) 1, Direct Investment: Sovereignty by Subtraction: The Multilateral Agreement on Investment; and Edward M. Graham on the national treatment of foreign investment. M. Graham (1998) Exceptions and conditions: Regulatory Takings, Supernational Treatment, and the Multilateral Agreement on Investment: Issues Raised by Nongovernmental Organisations, 31 Cornell Int'l L.J. 599.
87. Reporting in the Financial Times and The Economist; Financial Times, 8 January 1998; Financial Times, 24 February 1998; The sinking of the MAI, Economist, 14 March 1998; Financial Times, 19 February 1998; Financial Times, 30 April 1998 (Guy de Jonquieres). See also P.M. Dupuy and Ch. Leben (1999) Un Accord Multilatéral sur l'investissement (Paris, Pedone); for an informed post mortem, see David Henderson The MAI Affair: A Story and its Lessons (Royal Institute of Int'l Affairs, London). See also Robert Stumberg, 31 Cornell Int'l L.J. 49 (1998) 1, Direct Investment: Sovereignty by Subtraction: The Multilateral Agreement on Investment; and Edward M. Graham on the national treatment of foreign investment. M. Graham (1998) Exceptions and conditions: Regulatory Takings, Supernational Treatment, and the Multilateral Agreement on Investment: Issues Raised by Nongovernmental Organisations, 31 Cornell Int'l L.J. 599.
88. Reporting in the Financial Times and The Economist; Financial Times, 8 January 1998; Financial Times, 24 February 1998; The sinking of the MAI, Economist, 14 March 1998; Financial Times, 19 February 1998; Financial Times, 30 April 1998 (Guy de Jonquieres). See also P.M. Dupuy and Ch. Leben (1999) Un Accord Multilatéral sur l'investissement (Paris, Pedone); for an informed post mortem, see David Henderson The MAI Affair: A Story and its Lessons (Royal Institute of Int'l Affairs, London). See also Robert Stumberg, 31 Cornell Int'l L.J. 49 (1998) 1, Direct Investment: Sovereignty by Subtraction: The Multilateral Agreement on Investment; and Edward M. Graham on the national treatment of foreign investment. M. Graham (1998) Exceptions and conditions: Regulatory Takings, Supernational Treatment, and the Multilateral Agreement on Investment: Issues Raised by Nongovernmental Organisations, 31 Cornell Int'l L.J. 599.
89. NGOs that had sharpened their teeth in the NAFTA and GATT/WTO debate, but missed out on the ECT, were able, without too much difficulty, to re-direct their attack on the MAI. Furthermore, the MAI strategy pursued by the OECD Secretariat and the MAI negotiators had serious flaws. The idea of negotiating a multilateral investment treaty in the cosy club of the OECD, to the exclusion of the rest of the world, and then pressuring non-OECD countries to join, had a strong streak of paternalism which does not go down well in a post-colonial world. The practice of keeping the negotiations - at least until the end-game phase - confidential did not once help the NGOs and the media started to appreciate that there was another suitable target, which to their delight got muddled in a combination of secrecy and confusion. While the ECT had very strong and focused leadership committed to completion, such leadership seems to have been diffused in the MAI negotiations. The negotiating diplomats ran for cover from the media and NGOs once the going got tough. The OECD could not develop the political support that ultimately helped the GATT/WTO and the NAFTA to overcome a much more heavily politicised onslaught. Traditional investment issues - nationalisation without compensation - have not been a problem among the OECD countries. Spending political capital for an agreement that would be of little direct economic impact in the ostensibly principal target countries did not make sense. While the ECT was initiated, and had the continuing political, organisational and financial support from the EU, fitting as the Treaty did into the EUs eastwards economic integration strategy, the MAI had no such political sponsor. US support for multilateral treaties where it is not the prime and principal mover and shaker is rarely very keen, as the US withdrawal from the ECT illustrates; in US thinking, a multilateral approach is good as long as it covers US actions, but not if it threatens to constrain US freedom of action. The MAI, with its multilateral outlook, had the potential for troubling domestic US policies regarding foreign investment, but was not seen (rightly or wrongly) to promise a great benefit towards US interest. Both with the ECT (where it withdrew) and the MAI, the United States places trust in its leverage through bilateral investment agreements (with respect to Russia, so far, in vain). In consequence, the MAI was left to face a boiling Internet campaign with no other parent than a meek bureaucracy unused to engaging in a political debate. The last straw seems to have been the withdrawal of France which in turn weakened EU interest. The French withdrawal was motivated mainly by protectionist sentiment in the area of cultural industries. The fear was, and is, that the non-discrimination rule would threaten Francophone culture by open access to the US media industry. Similar fears exist with respect to the suitability of the expropriation rule to impede national regulation, see La Francophonie vent son exception économique, Le Monde, 27 April 1999; and Michael Hahn (1996) Eine kulturelle Bereichsausnahme im Recht der WTO, 56 ZaoeRV Heidelberg J. Int'l Law, 315-352 (cultural exception in WTO law). The most extensive analysis and post mortem is Henderson, 1999, op. cit., supra.
90. NGOs that had sharpened their teeth in the NAFTA and GATT/WTO debate, but missed out on the ECT, were able, without too much difficulty, to re-direct their attack on the MAI. Furthermore, the MAI strategy pursued by the OECD Secretariat and the MAI negotiators had serious flaws. The idea of negotiating a multilateral investment treaty in the cosy club of the OECD, to the exclusion of the rest of the world, and then pressuring non-OECD countries to join, had a strong streak of paternalism which does not go down well in a post-colonial world. The practice of keeping the negotiations - at least until the end-game phase - confidential did not once help the NGOs and the media started to appreciate that there was another suitable target, which to their delight got muddled in a combination of secrecy and confusion. While the ECT had very strong and focused leadership committed to completion, such leadership seems to have been diffused in the MAI negotiations. The negotiating diplomats ran for cover from the media and NGOs once the going got tough. The OECD could not develop the political support that ultimately helped the GATT/WTO and the NAFTA to overcome a much more heavily politicised onslaught. Traditional investment issues - nationalisation without compensation - have not been a problem among the OECD countries. Spending political capital for an agreement that would be of little direct economic impact in the ostensibly principal target countries did not make sense. While the ECT was initiated, and had the continuing political, organisational and financial support from the EU, fitting as the Treaty did into the EUs eastwards economic integration strategy, the MAI had no such political sponsor. US support for multilateral treaties where it is not the prime and principal mover and shaker is rarely very keen, as the US withdrawal from the ECT illustrates; in US thinking, a multilateral approach is good as long as it covers US actions, but not if it threatens to constrain US freedom of action. The MAI, with its multilateral outlook, had the potential for troubling domestic US policies regarding foreign investment, but was not seen (rightly or wrongly) to promise a great benefit towards US interest. Both with the ECT (where it withdrew) and the MAI, the United States places trust in its leverage through bilateral investment agreements (with respect to Russia, so far, in vain). In consequence, the MAI was left to face a boiling Internet campaign with no other parent than a meek bureaucracy unused to engaging in a political debate. The last straw seems to have been the withdrawal of France which in turn weakened EU interest. The French withdrawal was motivated mainly by protectionist sentiment in the area of cultural industries. The fear was, and is, that the non-discrimination rule would threaten Francophone culture by open access to the US media industry. Similar fears exist with respect to the suitability of the expropriation rule to impede national regulation, see La Francophonie vent son exception économique, Le Monde, 27 April 1999; and Michael Hahn (1996) Eine kulturelle Bereichsausnahme im Recht der WTO, 56 ZaoeRV Heidelberg J. Int'l Law, 315-352 (cultural exception in WTO law). The most extensive analysis and post mortem is Henderson, 1999, op. cit., supra.
91. One should perhaps recall that the 1948 GATT is still the foundation agreement of the expanding body of WTO rules - with evolution largely through interpretative agreements and now dispute panel practice.
92. Sol Piciotto, Lessons of the MAI: towards a new regulatory framework for international investment, http:// elj.warwick.ac.uk/global/issue/199-1/lessonsmai.
93. See Fourth Protocol to the GATS (telecommunications) of 30 April 1996, in particular annex, www.wto.org.; press release of 6 March 1997.
94. Ernst-Ulrich Petersmann (ed.) (1977) International Trade Law and the GATT/WTO Dispute Settlement System (Kluwer Law, London).
95. BRIDGES Weekly Trade News Digest, vol. 3. No. 18, 10 May 1999.
96. General Agreement on Trade in Services. Trade in telecommunication services has led to several agreements, the latest one being the Fourth GATS protocol on liberalisation of telecommunications services (www.wto.org).
97. OECD drafts tough rules for multinationals. Financial Times, 12 January 2000.
98. Sol Picciotto (1998) Linkages in international investment regulation, 19 U Pennsylvania J of Int'l Ec. Law 731.
99. This is in essence what happened with the MAI; with the failure of the OECD ambitions to set up the MAI as a binding global investment treaty, the OECD is now reverting to the more modest, sub-treaty goal of modernising its guidelines for multinational companies.
100. The World Bank 1992 Guidelines contain a measure of professional input through the contributions of the World Bank legal department.
101. Professor Wälde has supervised two comparative studies on corporate guidelines - one on the environment (carried out and later published by Ayesha Dias in preparation for the 1991 UN conference on mining and the environment) and the other by Susanne Kortekaas on anti-corruption guidelines in international oil and gas companies (the latter a 1995 CEPMLP/Dundee LL.M. thesis).
102. Such as imposition of tariffs which are insufficient to recover a reasonable return; obligation to supply at non-economic rates all or certain groups of customers; non-collection of debt for supply due to regulatory intervention or simply insufficiency of the legal system; and other collection obstacles, e.g. non-authorisation for cut-off of non-paying customers.
103. The formulations used are "tantamount" or "equivalent to" expropriation; "constructive" expropriation or "expropriation de fait", "creeping expropriation" or "partial expropriation". The term "regulatory taking" has, to our knowledge, not yet been used in a BIT or MIT. For a more detailed analysis, see T. Wälde and A. Kolo (forthcoming) Environmental regulation as expropriation under multilateral treaties, ICQL 2000.
104. " . . . shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest . . . "; for a detailed analysis, see Luigi Condorelli (1995) Premier Protocole Additioned in Pettiti, La Convention Européenne des Droits de l'Homme (Economica, Paris); and M. Frigo (1998) Le Limitazioni al diritto di proprieta e al'esercizio delle attivita economiche nella giurisprudenza della corte di giustizia, 34 Rivista di diritto internazionale privato e processuale, 51-78.
105. " . . . shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest . . . "; for a detailed analysis, see Luigi Condorelli (1995) Premier Protocole Additioned in Pettiti, La Convention Européenne des Droits de l'Homme (Economica, Paris); and M. Frigo (1998) Le Limitazioni al diritto di proprieta e al'esercizio delle attivita economiche nella giurisprudenza della corte di giustizia, 34 Rivista di diritto internazionale privato e processuale, 51-78.
106. Wälde and Kolo, with further references; S. Rose-Ackerman and J. Rossi, for a World Bank risk conference (www.worldbank.org/riskconference). One may note also the contribution by van der Walt to the World Bank risk conference which contains a textual comparison of the provisions of national constitutions with respect to nationalisation of property. Such a comparison needs to be further developed into an in-depth focus on actual case histories as the cases, rather than the text of the constitution, reflect the real meaning.
107. International arbitral jurisprudence does not make very clear if there is a separate cause of action for breach of agreement or if the government-induced revocation of an agreement (including investment contracts, licences and concessions) by use of sovereign powers should be dealt with under the heading of expropriation. The main authority - Texaco v. Calasiatic - sees such revocation as a case of expropriation requiring not only compensation, but also restitution. Restitution is likely to be less practical and prevailing opinion probably considers that such cases fall under expropriation rules and require compensation: Rosalyn Higgins (1981) The International Law Perspective, in T. Daintith (ed.) The Legal Character of Petroleum Licences, p. 56; R. Higgins (1994) Problems and Process (Clarendon, Oxford), pp. 140-145: "It is now well acccepted that contract rights are themselves a form of property." One needs to make the distinction between mere breach of contract (in a commercial setting) and sovereignty-based revocation of contract, Higgins as above, p. 140 and similarly the new Azinian ICSID award based on NAFTA Chapter XI (www.worldbank.org/icsid of November 1999).
108. International arbitral jurisprudence does not make very clear if there is a separate cause of action for breach of agreement or if the government-induced revocation of an agreement (including investment contracts, licences and concessions) by use of sovereign powers should be dealt with under the heading of expropriation. The main authority - Texaco v. Calasiatic - sees such revocation as a case of expropriation requiring not only compensation, but also restitution. Restitution is likely to be less practical and prevailing opinion probably considers that such cases fall under expropriation rules and require compensation: Rosalyn Higgins (1981) The International Law Perspective, in T. Daintith (ed.) The Legal Character of Petroleum Licences, p. 56; R. Higgins (1994) Problems and Process (Clarendon, Oxford), pp. 140-145: "It is now well acccepted that contract rights are themselves a form of property." One needs to make the distinction between mere breach of contract (in a commercial setting) and sovereignty-based revocation of contract, Higgins as above, p. 140 and similarly the new Azinian ICSID award based on NAFTA Chapter XI (www.worldbank.org/icsid of November 1999).
109. For a survey of relevant (mainly post Second World War and post First World War cases), see Asif Qureshi (1994) The public international law of taxation (Graham and Trotman, London), pp. 291-315.
110. Different, in a discussion of the US-Argentina BIT, Golsong in 31 ILM 124 (1992).
111. First, rights acquired through corruption are universally seen as tainted and in most legal systems as void. Second, breach of mandatory rules on acquisition (e.g. prescription of tendering) sometimes (the situation here is more difficult) can result in invalidation of the acquisition of right, but otherwise in weakening rights with respect to renegotiation. Reliance on rights acquired in an improper manner is usually seen as weak: "He who comes to equity must come with clean hands." On comparative corruption law, see G. Brown, supra. On concepts of unconscionable bargains, see R.W. Clark (1987) Inequality of Bargaining Power: Judicial Intervention in Improvident and Unconscionable Bargains (Caswell Co., Toronto) and J. Dawson (1945) Economic Duress - An Essay in Perspective, 45 Mich. L. Rev. 253.
112. First, rights acquired through corruption are universally seen as tainted and in most legal systems as void. Second, breach of mandatory rules on acquisition (e.g. prescription of tendering) sometimes (the situation here is more difficult) can result in invalidation of the acquisition of right, but otherwise in weakening rights with respect to renegotiation. Reliance on rights acquired in an improper manner is usually seen as weak: "He who comes to equity must come with clean hands." On comparative corruption law, see G. Brown, supra. On concepts of unconscionable bargains, see R.W. Clark (1987) Inequality of Bargaining Power: Judicial Intervention in Improvident and Unconscionable Bargains (Caswell Co., Toronto) and J. Dawson (1945) Economic Duress - An Essay in Perspective, 45 Mich. L. Rev. 253.
113. Sacerdoti, 1999, supra.
114. Patrick Norton, in T. Wälde, as note 29, above.
115. Thomas Stauffer (1996/1997) Valuation of assets in international takings, in 17 Energy Law Journal 459-288.
116. See Cheryl Richer from Standard and Poor's, for the World Bank risk
117. T. Wälde and G. Ndi (1996) Stabilising international investment commitments, in 31 Texas Int'lLJ 215-268.
118. For the collapse of demand and prices for the infrastructure product/service; and insolvency of contracted purchasers, see Indonesia 1999: no need for independent power plant production any longer, Financial Times, 2 July 1999; also Jakarta asks Japan to save power deal (9 July 1999) and Bangladesh pressed to allow gas exportation (2 July 1999). Investment treaties do not have an escape/force majeure clause for cases of national economic emergency. We have concurred with Sacerdoti that in such cases one should be able to rely on general economic and monetary emergency exceptions based on both the IMF Agreement and the GATT.
119. For the collapse of demand and prices for the infrastructure product/service; and insolvency of contracted purchasers, see Indonesia 1999: no need for independent power plant production any longer, Financial Times, 2 July 1999; also Jakarta asks Japan to save power deal (9 July 1999) and Bangladesh pressed to allow gas exportation (2 July 1999). Investment treaties do not have an escape/force majeure clause for cases of national economic emergency. We have concurred with Sacerdoti that in such cases one should be able to rely on general economic and monetary emergency exceptions based on both the IMF Agreement and the GATT.
120. For the collapse of demand and prices for the infrastructure product/service; and insolvency of contracted purchasers, see Indonesia 1999: no need for independent power plant production any longer, Financial Times, 2 July 1999; also Jakarta asks Japan to save power deal (9 July 1999) and Bangladesh pressed to allow gas exportation (2 July 1999). Investment treaties do not have an escape/force majeure clause for cases of national economic emergency. We have concurred with Sacerdoti that in such cases one should be able to rely on general economic and monetary emergency exceptions based on both the IMF Agreement and the GATT.
121. Existence or assertion of prior corruption and political favouritism resulting in lack of propriety in acquisition; the exploitation of governmental ignorance or inferior bargaining power, the non-collection and non-enforcement of contractual payments due to political opposition and the need to favour domestic consumers over foreign investor, see Foreigners feel the pain - future commitments are being threatened by complaints of harassment and corruption from overseas investors, Financial Times, 1 July 1999.
122. E. Paasivirta, in T. Wälde as note 29, above.
123. Art. 10(1) of the ECT; similar provisions are found in the NAFTA and recent BITs.
124. As the investment treaties tend to allow arbitration only for specific treaty-constituted disciplines, the contractual commitment clause will make breaches of contract actionable under such treaty-based arbitration. In most cases, it could be considered actionable under the expropriation clause, but an additional and specific contractual commitment clause determines more clearly the arbitral jurisdiction for breaches of contract.
125. Art. 18(1) of the ECT.
126. The reference to sovereignty is viewed by negotiators (in the case of the ECT: Norway; see Julia Dore in T. Wälde (1996)) as a weakening of the legal force of contract, but it is not realised that sovereignty may be relied upon for a revocation of an agreement, but not for refusing to pay compensation.
127. US v. Winstar, 116 SCt 2432 (1996).
128. T. Wälde and A. Kolo (1999) Renegotiation of International Investment Agreements, CEPMLP Online Journal, vol. IV. Sacerdoti (1999) op. cit. on the related "hardship" concept. Denis Philippe (1986) Changement de circonstances et bouleversement de l'économie contractuelle (Bruylant, Bruxells).
129. T. Wälde and A. Kolo (1999) Renegotiation of International Investment Agreements, CEPMLP Online Journal, vol. IV. Sacerdoti (1999) op. cit. on the related "hardship" concept. Denis Philippe (1986) Changement de circonstances et bouleversement de l'économie contractuelle (Bruylant, Bruxells).
130. T. Wälde and A. Kolo (1999) Renegotiation of International Investment Agreements, CEPMLP Online Journal, vol. IV. Sacerdoti (1999) op. cit. on the related "hardship" concept. Denis Philippe (1986) Changement de circonstances et bouleversement de l'économie contractuelle (Bruylant, Bruxells).
131. R. Geiger (1974) The Unilateral Change of Economic Development Agreements, 20 I.C.L.Q 73; Peter Cameron (1980) "Property Rights and the Role of Government: The Problem of Property in North Sea Oil", PhD thesis, Edinburgh; T. Daintith (ed.) (1981) The Legal Character of Petroleum Licences: A Comparative Study (CPMLS, Univ. of Dundee & IBA).
132. R. Geiger (1974) The Unilateral Change of Economic Development Agreements, 20 I.C.L.Q 73; Peter Cameron (1980) "Property Rights and the Role of Government: The Problem of Property in North Sea Oil", PhD thesis, Edinburgh; T. Daintith (ed.) (1981) The Legal Character of Petroleum Licences: A Comparative Study (CPMLS, Univ. of Dundee & IBA).
133. R. Geiger (1974) The Unilateral Change of Economic Development Agreements, 20 I.C.L.Q 73; Peter Cameron (1980) "Property Rights and the Role of Government: The Problem of Property in North Sea Oil", PhD thesis, Edinburgh; T. Daintith (ed.) (1981) The Legal Character of Petroleum Licences: A Comparative Study (CPMLS, Univ. of Dundee & IBA).
134. This seems to be the rule in the Azinian case, the first NAFTA Chapter XI-based judgment of an ICSID tribunal (November 1999, www.worldbank.org/icsid).
135. R. Higgins, Problems and Process, op. cit., supra, p. 140 and the new ICSID Azinian award of November 1999.
136. R. Geiger (1974) The Unilateral Change of Economic Development Agreements, 20 I.C.L.Q. 73.
137. Aminoil v. Kuwait 22 ILM (1983) 976; see also the commentary by R. Higgins, pp. 140-165. T. Wälde and A. Kolo, Renegotiation of Long-Term Investment Agreements, CEPMLP Online Journal, www.cepmlp.org.
138. Aminoil v. Kuwait 22 ILM (1983) 976; see also the commentary by R. Higgins, pp. 140-165. T. Wälde and A. Kolo, Renegotiation of Long-Term Investment Agreements, CEPMLP Online Journal, www.cepmlp.org.
139. There was a long debate in the 1970s and 1980s on renegotiation of long-term investment agreements -T. Wälde (1982) Règlement des Litiges et Renégociation, in Revue de l'Arbitrage, 203; and T. Wälde (1978) Revision of Transnational Investment Agreements, Lawyer of the Americas 10, 265-298. See also M. Sornarajah (1988) Supremacy of the renegotiation clause in international contracts, 5 J. Int. Arb. 2, p. 97. Both ICSID ("Additional Facility") and ICC have introduced institutional facilities for helping contract adaptation, but they do not seem to have been used much. Similarly, a long debate was launched in the 1980s about the usefulness of including "hardship" clauses in international commercial contracts - essentially a clause providing for adaptation and/or renegotiation in case of a substantial change in the economic equilibrium of the contract due to unforeseen events which made it excessively onerous for one party to continue to deliver its contributions under a long-term contract. On this debate and on contractual practice, see Marcel Fontaine (1989) Les Clauses de Hardship, in Droit des Contrats Internationaux, Analyse et rédaction de clauses (FEC, Paris), pp. 249-280; and Dominique Blanco (1993) Négocier et rédiger un contrat international (Dunod, Paris), pp. 179, 186.
140. There was a long debate in the 1970s and 1980s on renegotiation of long-term investment agreements - T. Wälde (1982) Règlement des Litiges et Renégociation, in Revue de l'Arbitrage, 203; and T. Wälde (1978) Revision of Transnational Investment Agreements, Lawyer of the Americas 10, 265-298. See also M. Sornarajah (1988) Supremacy of the renegotiation clause in international contracts, 5 J. Int. Arb. 2, p. 97. Both ICSID ("Additional Facility") and ICC have introduced institutional facilities for helping contract adaptation, but they do not seem to have been used much. Similarly, a long debate was launched in the 1980s about the usefulness of including "hardship" clauses in international commercial contracts - essentially a clause providing for adaptation and/or renegotiation in case of a substantial change in the economic equilibrium of the contract due to unforeseen events which made it excessively onerous for one party to continue to deliver its contributions under a long-term contract. On this debate and on contractual practice, see Marcel Fontaine (1989) Les Clauses de Hardship, in Droit des Contrats Internationaux, Analyse et rédaction de clauses (FEC, Paris), pp. 249-280; and Dominique Blanco (1993) Négocier et rédiger un contrat international (Dunod, Paris), pp. 179, 186.
141. There was a long debate in the 1970s and 1980s on renegotiation of long-term investment agreements - T. Wälde (1982) Règlement des Litiges et Renégociation, in Revue de l'Arbitrage, 203; and T. Wälde (1978) Revision of Transnational Investment Agreements, Lawyer of the Americas 10, 265-298. See also M. Sornarajah (1988) Supremacy of the renegotiation clause in international contracts, 5 J. Int. Arb. 2, p. 97. Both ICSID ("Additional Facility") and ICC have introduced institutional facilities for helping contract adaptation, but they do not seem to have been used much. Similarly, a long debate was launched in the 1980s about the usefulness of including "hardship" clauses in international commercial contracts - essentially a clause providing for adaptation and/or renegotiation in case of a substantial change in the economic equilibrium of the contract due to unforeseen events which made it excessively onerous for one party to continue to deliver its contributions under a long-term contract. On this debate and on contractual practice, see Marcel Fontaine (1989) Les Clauses de Hardship, in Droit des Contrats Internationaux, Analyse et rédaction de clauses (FEC, Paris), pp. 249-280; and Dominique Blanco (1993) Négocier et rédiger un contrat international (Dunod, Paris), pp. 179, 186.
142. There was a long debate in the 1970s and 1980s on renegotiation of long-term investment agreements - T. Wälde (1982) Règlement des Litiges et Renégociation, in Revue de l'Arbitrage, 203; and T. Wälde (1978) Revision of Transnational Investment Agreements, Lawyer of the Americas 10, 265-298. See also M. Sornarajah (1988) Supremacy of the renegotiation clause in international contracts, 5 J. Int. Arb. 2, p. 97. Both ICSID ("Additional Facility") and ICC have introduced institutional facilities for helping contract adaptation, but they do not seem to have been used much. Similarly, a long debate was launched in the 1980s about the usefulness of including "hardship" clauses in international commercial contracts - essentially a clause providing for adaptation and/or renegotiation in case of a substantial change in the economic equilibrium of the contract due to unforeseen events which made it excessively onerous for one party to continue to deliver its contributions under a long-term contract. On this debate and on contractual practice, see Marcel Fontaine (1989) Les Clauses de Hardship, in Droit des Contrats Internationaux, Analyse et rédaction de clauses (FEC, Paris), pp. 249-280; and Dominique Blanco (1993) Négocier et rédiger un contrat international (Dunod, Paris), pp. 179, 186.
143. There was a long debate in the 1970s and 1980s on renegotiation of long-term investment agreements - T. Wälde (1982) Règlement des Litiges et Renégociation, in Revue de l'Arbitrage, 203; and T. Wälde (1978) Revision of Transnational Investment Agreements, Lawyer of the Americas 10, 265-298. See also M. Sornarajah (1988) Supremacy of the renegotiation clause in international contracts, 5 J. Int. Arb. 2, p. 97. Both ICSID ("Additional Facility") and ICC have introduced institutional facilities for helping contract adaptation, but they do not seem to have been used much. Similarly, a long debate was launched in the 1980s about the usefulness of including "hardship" clauses in international commercial contracts - essentially a clause providing for adaptation and/or renegotiation in case of a substantial change in the economic equilibrium of the contract due to unforeseen events which made it excessively onerous for one party to continue to deliver its contributions under a long-term contract. On this debate and on contractual practice, see Marcel Fontaine (1989) Les Clauses de Hardship, in Droit des Contrats Internationaux, Analyse et rédaction de clauses (FEC, Paris), pp. 249-280; and Dominique Blanco (1993) Négocier et rédiger un contrat international (Dunod, Paris), pp. 179, 186.
144. D.F. Vagts (1978) Coercion and Foreign Investment Rearrangements, 72 A.J.I.L. 17.
145. Offshore Infrastructure Code of Practice, consultation document by the DTI, May 1995; see also the UK "network" code and similar agreements now emerging throughout the EU in implementation of the EU gas and electricity directives of 1996-1997 such as the German "Verbaende-Vereinbarung" of 1998-2000.
146. Sacerdoti, 1999.
147. Peter von Wilmowski (1990) Zugang zu den Boden- und sonstigen Natureschaetzen anderer Mitgliedsstaaten: EWG-Vertrag und US-Verfassung im Vergleich (Access to natural resources located in other member States: A comparison of the EEC Treaty with the US Constitution), 54 RabelsZ 692-732.
148. Arbitral decision accepting jurisdiction: Ethyl Corpn v. Government of Canada, 38 ILM 700 (1999); the case was settled - Canada paid substantial compensation.
149. Reportedly: Statement of Claim under UNCITRAL arbitration rules of October 1998, confidential. A similar case is Pope & Talbot, statement of claim of March 1999.
150. For a more detailed review of these and other cases, see T. Wälde and A. Kolo (forthcoming) Environmental Regulation as Expropriation under Multilateral Investment Treaties: A New Discipline for Governments on "Regulatory Takings" in the Emerging Legal Order of the Global Economy, I.C.Q.L. 2000.
151. For a review of several relevant ECJ cases, see Friedrich von Burchard and Lutz Eckert (1995) Natural Cas and EU Energy Law (Nomos, Baden-Baden).
152. For arguments to make treaty obligations directly incumbent on private and State actors within a national system by direct vertical and horizontal effect, in an analogy to EU law, see T. Wälde (1995) International Investment under the 1994 Energy Charter Treaty 29 J.W.T. 5; M. Omalu, ECT and NAFTA, op. cit., supra.
153. For arguments to make treaty obligations directly incumbent on private and State actors within a national system by direct vertical and horizontal effect, in an analogy to EU law, see T. Wälde (1995) International Investment under the 1994 Energy Charter Treaty 29 J.W.T. 5; M. Omalu, ECT and NAFTA, op. cit., supra.
154. Harvard Business School Case 9-797-085, 4 February 1997 (L. Wells) Enron Development Corporation: The Dabhol power project in Maharashtra.
155. www.worldbank.org/icsid/.
156. NAFTA Art. 902(2): "Each party shall seek, through appropriate measures, to ensure observance of Articles 904 through 908 by State or provincial governments and by non-governmental standardising bodies in its territories". The general NAFTA provision regarding State and provincial governments is considerably more rigorous. It requires the "federal government" to "ensure compliance". See also Art. 7 and Art. 14.4 of the WTO Agreement on technical barriers to trade and Art. 13 of the WTO Agreement on sanitary and phyto-sanitary measures. I am grateful to Todd Weiler, University of Toronto, for his manuscript of July 1999 on "Finding, Implementing and Enforcing International Regulatory Reform Obligations: The Canadian Experience" which discusses these issues in more detail.
157. In our view, the ECT goes beyond this clarification of traditional principles by imposing on the national government an obligation to ensure treaty compliance not just by government agencies, but also by State-owned, but otherwise commercially organized companies and, in particular, by private companies with "exclusive rights or privileges". The meaning is not clear and is derived from GATT and EU Treaty (Art. 90 II) precedent. We view this clause (Arts 22 and 23 of the ECT) as imposing on national governments a duty to regulate against discrimination by private companies controlling "essential facilities", a term that has been well defined in the context of US and now EU competition law (Art. 86 of the EU Treaty; and Art. 1 of the Sherman Act). If one of these companies breaches the duty, e.g. not to discriminate or not to breach a quasi-public contract with a foreign infrastructure investor, then the government is obligated to prevent such misconduct by regulation or to pay damages to the foreign investor. This view would provide the foreign investor with a remedy to compel the national government to regulate effectively or to pay compensation. In the Maharashtra or Russia situation raised earlier, the foreign infrastructure investor could invoke an applicable treaty to pressure the national government to intervene in an investor-subnational entity dispute. Nevertheless, this remedy is far from perfect. First, the treaty solutions portrayed here are achieved by extensive interpretation on the basis of a very ambiguous text, and are not tested anywhere. Second, in countries with weak central and powerful subnational power structures, which is increasingly frequent under the sign of the global economy, pressuring national governments may be of little help. It would be much better if the evolution of international law would reflect the devolution of national power. This means that the relevant actors in a country - be it federated States, independent agencies or special private companies - should be directly involved in treaties or similar international regulatory instruments in negotiation, implementation and enforcement procedures. So far, this has only happened to a limited extent within the relatively homogeneous European Union.
158. See Art. 26(8) of the ECT. There is now extensive literature and recent US court judgments on the right of US States to develop their own international commercial policy - mainly with respect to US obligations dealing with public agency procurement and non-discrimination under the WTO treaties: Matthew Schaefer (1977) Searching for Pareto gains in the relationship between free trade and federalism: revisiting the NAFTA, Eyeing the FTAA, 23 Canada-US Law Journal 441-488.
159. See Sacerdoti (1999) supra; and Art. 10(1) of the ECT: "Each party shall . . . accord . . . fair and equitable treatment . . . most constant protection and security and no party shall in any way impair by unreasonable or discriminatory measures their management, maintenance, use, enjoyment or disposal." See s. IV(1) of the draft MAI: "Each . . . party shall accord fair and equitable treatment and full and constant protection and security . . . and shall not impair by unreasonable or discriminatory measures the operation, management, maintenance, use, enjoyment or disposal of investments . . ."
160. It is rarely discussed and may be a taboo subject, but the benchmark for the international minimum standards was in the past and still is the Western, i.e. developed market economy, countries.
161. As reported from a power production project in Pakistan involving, inter alia, the World Bank and UK PowerGen, Financial Times, 1998; a similar example comes from Equatorial Guinea: see Robert Klitgaard (1990) Tropical Gangsters, One man's experience with development and decadence in deepest Africa (Basic Books).
162. As reported from a power production project in Pakistan involving, inter alia, the World Bank and UK PowerGen, Financial Times, 1998; a similar example comes from Equatorial Guinea: see Robert Klitgaard (1990) Tropical Gangsters, One man's experience with development and decadence in deepest Africa (Basic Books).
163. Some references in AAPL v. Sri Lanka (foreign investor gets caught up in military campaign in Sri Lanka): 30 ILM (1991) 577); see also the ICSID case dealing with foreign investment in Congo (criminal acts by the military against foreign investor's operations tolerated by the government), American Manufacturing & Trading, Inc. v. Democratic Republic of Congo (ICSID Case No. ARB/93/1) - www.worldbank.org/icsid/.
164. Some references in AAPL v. Sri Lanka (foreign investor gets caught up in military campaign in Sri Lanka): 30 ILM (1991) 577); see also the ICSID case dealing with foreign investment in Congo (criminal acts by the military against foreign investor's operations tolerated by the government), American Manufacturing & Trading, Inc. v. Democratic Republic of Congo (ICSID Case No. ARB/93/1) - www.worldbank.org/icsid/.
165. In an unpublished manuscript on "The Minimum Standard of Treatment in International Law" prepared for a Toronto workshop in November 1999.
166. US - Import prohibition of certain shrimp and shrimp products, WT/DS58/.AB/R, October 12, 1998 at paras 177-183. Here, the appellate body found that a regulatory scheme was not transparent, did not provide for sufficient notice or comment by affected companies and lacked a formal procedure for review, leading to inconsistence with Art. X:3 of the GATT
167. Most of the current NAFTA investor-State disputes involve allegations of lack of transparence and procedural fairness (i.e. non-consultation, non-notification) and an intention to harm the investor in favour of its competitors, with the exclusive participation of domestic competitors in the drafting process.
168. Weiler, so far, suggests that such standards might be seen as emerging international customary law or, alternatively, as covered by the reference in MITs to comply with international law - such reference would include the duty to comply with existing agreements (e.g. trade agreements). The reliance on customary law requires, though, a long period of use based on an "opinio iuris sive necessitatis" while reference to the "pacta and servanda" principle in international law probably requires that the agreement (e.g. multilateral trade agreement) creates direct rights for the investor affected. We would favour a modernised interpretation of the "fair and equitable treatment" principle by reference to standards now accepted in multilateral and bilateral economic agreements, arbitral awards and generally recognised or at least authoritative international guidelines.
169. Todd Weiler, Finding, Implementing and Enforcing International Regulatory Reform Obligations, Manuscript July 1999, op. cit., supra; WTO dispute panel decision in the US-EU dispute on hormones in beef, of 18 August 1997.
170. But note also the OECD "Regulatory Checklist" of 1995, OCDE/GD (95) 95, Paris, OECD Working Party on Regulatory Reform and Trade, OECD Document TD/TC/WP (97) 23 of 11 September 1997.
171. T. Wälde and G. Ndi (1996) supra; J. Schmidt, ALCOA v. Jamaica, 17 Harv. Intl. LJ, 90, 1976.
172. T. Wälde and A. Kolo (1999) Confiscatory Taxation in International Law, CEPMLP Online Journal: www.cepmlp.org.
173. A. Albrecht (1952) The taxation of aliens under international law; 29 BYIL 170; Rosalyn Higgins (1981) The International Law Perspective, in T. Daintith (Ed.) The Legal Character of Petroleum Licenses, p. 56 states there is an international wrong if "the acquired right is effectively taken away. Nor can they with impunity legislate so as to deprive those very parties with whom they have entered contracts of their rights thereunder".
174. A. Albrecht (1952) The taxation of aliens under international law; 29 BYIL 170; Rosalyn Higgins (1981) The International Law Perspective, in T. Daintith (Ed.) The Legal Character of Petroleum Licenses, p. 56 states there is an international wrong if "the acquired right is effectively taken away. Nor can they with impunity legislate so as to deprive those very parties with whom they have entered contracts of their rights thereunder".
175. T. Wälde (1996) Investment Arbitration, under the Energy Charter Treaty, 12 Arbitration International 429; J. Paulsson, in T. Wälde (Ed.) Energy Charter Treaty, as note 29, above; Olivia Swaak-Goldman (1995) The Dispute Resolution Procedures of the Energy Charter Treaty: Made to Measure, in 6 American Review of Int'l Arbitration 317-337 (1995); for NAFTA, see Geneviève Burdeau (1995) Nouvelles perspectives pour l'arbitrage, dans le contentieux économique intéressant les états, Rev de l'arbitrage, 2-37; Richard Dearden (1995) Arbitration of Expropriation Disputes between an Investor and the State and the NAFTA, 29 J.W.T. 1, pp. 113-127. Current research by M. Benhamida (Paris II) and Richard Happ (U. of Kiel) is focusing on such treaty-based arbitration.
176. T. Wälde (1996) Investment Arbitration, under the Energy Charter Treaty, 12 Arbitration International 429; J. Paulsson, in T. Wälde (Ed.) Energy Charter Treaty, as note 29, above; Olivia Swaak-Goldman (1995) The Dispute Resolution Procedures of the Energy Charter Treaty: Made to Measure, in 6 American Review of Int'l Arbitration 317-337 (1995); for NAFTA, see Geneviève Burdeau (1995) Nouvelles perspectives pour l'arbitrage, dans le contentieux économique intéressant les états, Rev de l'arbitrage, 2-37; Richard Dearden (1995) Arbitration of Expropriation Disputes between an Investor and the State and the NAFTA, 29 J.W.T. 1, pp. 113-127. Current research by M. Benhamida (Paris II) and Richard Happ (U. of Kiel) is focusing on such treaty-based arbitration.
177. T. Wälde (1996) Investment Arbitration, under the Energy Charter Treaty, 12 Arbitration International 429; J. Paulsson, in T. Wälde (Ed.) Energy Charter Treaty, as note 29, above; Olivia Swaak-Goldman (1995) The Dispute Resolution Procedures of the Energy Charter Treaty: Made to Measure, in 6 American Review of Int'l Arbitration 317-337 (1995); for NAFTA, see Geneviève Burdeau (1995) Nouvelles perspectives pour l'arbitrage, dans le contentieux économique intéressant les états, Rev de l'arbitrage, 2-37; Richard Dearden (1995) Arbitration of Expropriation Disputes between an Investor and the State and the NAFTA, 29 J.W.T. 1, pp. 113-127. Current research by M. Benhamida (Paris II) and Richard Happ (U. of Kiel) is focusing on such treaty-based arbitration.
178. T. Wälde (1996) Investment Arbitration, under the Energy Charter Treaty, 12 Arbitration International 429; J. Paulsson, in T. Wälde (Ed.) Energy Charter Treaty, as note 29, above; Olivia Swaak-Goldman (1995) The Dispute Resolution Procedures of the Energy Charter Treaty: Made to Measure, in 6 American Review of Int'l Arbitration 317-337 (1995); for NAFTA, see Geneviève Burdeau (1995) Nouvelles perspectives pour l'arbitrage, dans le contentieux économique intéressant les états, Rev de l'arbitrage, 2-37; Richard Dearden (1995) Arbitration of Expropriation Disputes between an Investor and the State and the NAFTA, 29 J.W.T. 1, pp. 113-127. Current research by M. Benhamida (Paris II) and Richard Happ (U. of Kiel) is focusing on such treaty-based arbitration.
179. T. Wälde (1996) Investment Arbitration, under the Energy Charter Treaty, 12 Arbitration International 429; J. Paulsson, in T. Wälde (Ed.) Energy Charter Treaty, as note 29, above; Olivia Swaak-Goldman (1995) The Dispute Resolution Procedures of the Energy Charter Treaty: Made to Measure, in 6 American Review of Int'l Arbitration 317-337 (1995); for NAFTA, see Geneviève Burdeau (1995) Nouvelles perspectives pour l'arbitrage, dans le contentieux économique intéressant les états, Rev de l'arbitrage, 2-37; Richard Dearden (1995) Arbitration of Expropriation Disputes between an Investor and the State and the NAFTA, 29 J.W.T. 1, pp. 113-127. Current research by M. Benhamida (Paris II) and Richard Happ (U. of Kiel) is focusing on such treaty-based arbitration.
180. Fouchard, Gaillard and Goldman (1999) International Commercial Arbitration (Kluwer, London), pp. 103-151; websites of the ICC (www.icc.org) ICSID (www.worldbank.org/icsid); Amazu Azouzou (1996) "African States and International Commercial Arbitration", PhD thesis, LSE.
181. Fouchard, Gaillard and Goldman (1999) International Commercial Arbitration (Kluwer, London), pp. 103-151; websites of the ICC (www.icc.org) ICSID (www.worldbank.org/icsid); Amazu Azouzou (1996) "African States and International Commercial Arbitration", PhD thesis, LSE.
182. Fouchard, Gaillard and Goldman (1999) International Commercial Arbitration (Kluwer, London), pp. 103-151; websites of the ICC (www.icc.org) ICSID (www.worldbank.org/icsid); Amazu Azouzou (1996) "African States and International Commercial Arbitration", PhD thesis, LSE.
183. This is the case for US BITs, the NAFTA and the ECT. Many European BITs cover "any dispute" between the host State and covered investors.
184. See www.worldbank.org/icsid/ for a list of settled and pending cases, indicating broadly their subject-matter.
185. In practice, this may be less relevant as these disciplines/duties may encompass most aspects of government conduct.
186. As Norway in the ECT, by skilful use of a national exceptions and reservations included in various annexes.
187. Cheryl Richer, Standard and Poor's, World Bank risk conference: www.worldbank.org/riskconference.
188. The EU Commission has had similar experiences when trying to enforce its restrictions on State aids to industry, e.g. when trying to prohibit State aids to Volkswagen in the East German State of Saxony.
189. Although in practice one can envisage that the national government will want the difficulty-creating subnational actor participate (and perhaps fund) the litigation as well as to assume any financial liability.
190. If the problem-causing subnational actor or enterprise is committed by way of contract to arbitration, then treaty-based and contract-based arbitration are not co-ordinated. Modern treaties have not been able to resolve satisfactorily the relation between normally wide-ranging contractual and the mechanism of treaty-based arbitration against national governments allowed only on very specific grounds.
191. An exception is Art. 7 of the ECT, which provides for a semi-binding conciliation procedure for transit disputes, see R. Liesen (1999) 17 J. Energy & Natural Resources Law 59.
192. One could envisage the right of tribunals dealing with matters of international public interest, i.e. not exclusively set up with a focus on a commercial inter partes dispute, to accommodate requests by NGOs to submit briefs in an amicus curiae function. This is not so far from current practice as WTO trade disputes are frequently initiated and supported by interested groups and perhaps sometimes also NGOs. The governments - the only admitted participant in the process - can (and do) incorporate non-governmental specialists into their litigation team. There is no reason why a defendant government in an investment arbitration cannot include NGO specialists, and the same can apply to companies supported by, for example, a business association. For such NGO criticism, see Juli Abouchar (1999) Environmental Laws as Expropriation under NAFTA, 8 Recueil 209-215; also, G. Shafter, 2000, op. cit.
193. One could envisage the right of tribunals dealing with matters of international public interest, i.e. not exclusively set up with a focus on a commercial inter partes dispute, to accommodate requests by NGOs to submit briefs in an amicus curiae function. This is not so far from current practice as WTO trade disputes are frequently initiated and supported by interested groups and perhaps sometimes also NGOs. The governments - the only admitted participant in the process - can (and do) incorporate non-governmental specialists into their litigation team. There is no reason why a defendant government in an investment arbitration cannot include NGO specialists, and the same can apply to companies supported by, for example, a business association. For such NGO criticism, see Juli Abouchar (1999) Environmental Laws as Expropriation under NAFTA, 8 Recueil 209-215; also, G. Shafter, 2000, op. cit.
194. On the other hand, one has to realise that even the WTO dispute settlement process is to a significant extent carried by private companies which encourage, support, fund and often lead litigation behind the veil of government-only procedure.
195. This criticism applies mainly to ad hoc arbitration. ICC and ICSID arbitration rules include quality control mechanisms.
196. The ECT, for example, highlights the required respect for contractual commitment (Art. 10(1)), while in another Article (Art. 18(1)), it recognises national sovereignty - a legal code word relied upon to overrride contractual commitments.
197. Norwegian exception in Annex ID and IA of the ECT from Art. 26 investor-State arbitration.
198. A.G. Toth (1986) The legal status of the declarations annexed to the single European Act, 23 CMLR 803-812; Frank Horn (1988) Reservations and Interpretative Declarations to Multilateral Treaties (North-Holland); and Richard Gardiner (1997) Treaties and Treaty Materials: Role, Relevance and Accessibility, 46 ICQL 643.
199. A.G. Toth (1986) The legal status of the declarations annexed to the single European Act, 23 CMLR 803-812; Frank Horn (1988) Reservations and Interpretative Declarations to Multilateral Treaties (North-Holland); and Richard Gardiner (1997) Treaties and Treaty Materials: Role, Relevance and Accessibility, 46 ICQL 643.
200. A.G. Toth (1986) The legal status of the declarations annexed to the single European Act, 23 CMLR 803-812; Frank Horn (1988) Reservations and Interpretative Declarations to Multilateral Treaties (North-Holland); and Richard Gardiner (1997) Treaties and Treaty Materials: Role, Relevance and Accessibility, 46 ICQL 643.
201. Horn, as note 129, above; Kenneth Vandevelde (1988) Treaty Interpretation from a Negotiator's Perspective, 21 Vanderbilt Journal of Transnational Law 281-311; and Detlev Vagts (1993) Treaty Interpretation and the New American Ways of Law Reading, 4 European J. Int'l Law 472-505.
202. Horn, as note 129, above; Kenneth Vandevelde (1988) Treaty Interpretation from a Negotiator's Perspective, 21 Vanderbilt Journal of Transnational Law 281-311; and Detlev Vagts (1993) Treaty Interpretation and the New American Ways of Law Reading, 4 European J. Int'l Law 472-505.
203. This finding is based on the market response to CEPMLP training seminars, where commercial law subjects heavily outweigh interest in international investment law subjects. It may be that this is subject to change as a growing market in investment arbitration provides more expanded business opportunities for international law firms - as is the view from the ICSID Secretariat.
204. It has been noted that this technique is not limited to international treaties, but may as well be a feature of modern legislation where exhortatory language replaces clear-cut binding obligations - to solve the dilemma between legislative action for public consumption and the social-political pressures to avoid obligation that affect organised interest groups, note the very insightful analysis of Peter Bussjaeger (1997) Wenn Recht beliebig wird, Verlust an Steuerungskraft durch blosse Appell-Normen, Neue Zuericher Zeitung, 3 December, p. 16.
205. For example, the 1992 US-Russia BIT has not been ratified; the United States (and Canada) did not even sign the ECT, while Russia signed, but did not ratify the treaty. Picciotto, Lessons of the MAI, (http:// elj.warwick.ac.uk/global/issue/199-1/lessonsmai) notes that the OECD's multilateral treaty for tax enforcement co-operation of 1988 has been ratified by only eight States.
206. Information provided from the ICSID Secretariat mentions 24 treaty-based ICSID cases, six BIT/MIT cases brought under the UNCITRAL rules and apparently about ten cases brought under the ICC or Stockholm Chamber of Commerce rules, with all ICC cases brought under one particular BIT. Only a minority - at most 20 - have involved US companies; fewer than ten have been brought under the NAFTA. On investment-related arbitral awards, see Doak Bishop, Lex Petrolea, CEPMLP Online Journal: www.cepmlp.org.
207. Antonio Parra, Provisions on the settlement of investment disputes in modern investment laws, bilateral investment treaties and multilateral instruments on investment, 12 ICSID Rev/FILJ 287 (1997); see also www.worldbank/icsid/.
208. See the few cases reported by Sacerdoti (1997), mainly the ELSI (US v. Italy) case.
209. Three before the ICSID tribunal (Metalclad, Loewen and Azinian) www.worldbank.org/icsid/; the others under UNCITRAL rules.
210. Summary reviews of ICC cases are periodically published in the Journal du Droit International/Clunet.
211. The ICSID Secretariat advises that the majority of the cases submitted to ICSID still comprise cases brought under contractual provisions. ICC cases are less well known although there is a sanitised review of such cases periodically published in the Journal du Droit International/Clunet.
212. T. Daintith and I. Gault (1977) Pacta Sunt Servanda and the Licensing and Taxation of North Sea Oil Production, 8 Cambrian L. Rev. 27.
213. Although there is more than meets the eye in the form of published records. There are arbitration procedures outside the framework of the ICSID which, due to their confidentiality (and the confidentiality contracts of the parties, arbitrators and counsel) go unreported.
214. Ruediger Wolfrum (ed.) Enforcing Environmental Standards: Economic Mechanisms as viable Means? (Springer, Berlin).
215. In several projects to review implementation of the ECT in Eastern Europe, we have observed that many, if not most, specific obligations are not observed or are only observed in a very formal sense. For example, the obligation to create transparency with respect to laws, regulations and judicial and administrative rulings and to provide specific "inquiry points" at present is not taken seriously in most countries. Financial resources are lacking and, given the relative priority, are unlikely to be made available to fulfil this obligation. Can one exclude that a substantial part of the specific obligations in most MITs has in fact the same fate? For a discussion of the underdeveloped state of modern MIT-making, as compared to the already available methods of assessing compliance and transaction cost of legislation, see T. Wälde (1998) in F. Weiss (Ed.) Economic Development with a Human Face.
216. Clement Malin (1994) Politics, Economics and Environment: Experience of the US Oil and Gas Industries, in N. Steen (ed.) Sustainable Development and the Energy Industries (RIIA, London), pp. 157-174; Valerie Fogleman (1996) Economic Impacts of Environmental Law: The US Experience and its International Relevance, pp. 81-102; The Economist, The Hidden Cost of Red Tape, 27 July 1996, p. 13; Over-regulating America.
217. Clement Malin (1994) Politics, Economics and Environment: Experience of the US Oil and Gas Industries, in N. Steen (ed.) Sustainable Development and the Energy Industries (RIIA, London), pp. 157-174; Valerie Fogleman (1996) Economic Impacts of Environmental Law: The US Experience and its International Relevance, pp. 81-102; The Economist, The Hidden Cost of Red Tape, 27 July 1996, p. 13; Over-regulating America.
218. Clement Malin (1994) Politics, Economics and Environment: Experience of the US Oil and Gas Industries, in N. Steen (ed.) Sustainable Development and the Energy Industries (RIIA, London), pp. 157-174; Valerie Fogleman (1996) Economic Impacts of Environmental Law: The US Experience and its International Relevance, pp. 81-102; The Economist, The Hidden Cost of Red Tape, 27 July 1996, p. 13; Over-regulating America.
219. Both the ICC and the ICSID procedures provide for less formal on-going and more formal post-award quality control.
220. Currently, both a protocol (on transit) and a supplementary treary (on access for investors) are under negotiation within the ECT conference.
221. However, there may be a possibility of operating through subsidiaries incorporated and operating within Mercosur members.
222. See M. Pinto (1995) Democratisation of International Relations, in N. Al-Nauimi (ed.) International Legal Issues Arising under the Un Decade of International Law (Nijhoff), pp. 1209-1248 and his contribution to Friedl Weiss (ed.) Economic Development with a Human Face, 1998.
223. See M. Pinto (1995) Democratisation of International Relations, in N. Al-Nauimi (ed.) International Legal Issues Arising under the Un Decade of International Law (Nijhoff), pp. 1209-1248 and his contribution to Friedl Weiss (ed.) Economic Development with a Human Face, 1998.
224. T. Wälde (1999) The role of contract and law in international business, CEPMLP Online Journal, vol. IV; there is a short version as a comment in Special Issue of Constitutional Economics, 1999 (FN infra).
225. On reputation in international business, see Tanja Ripperger (1998). See also T. Ripperger (1999) in EJ. Schmidtchen (ed.) Special Issue of Constitutional Economics.
226. The information, intelligence and analysis available through the Financial Times, the Economist, the Wallstreet Journal and major countries' commercial newspapers and other commercial and industry-specific magazines (Far East Economic Review and Jeune Afrique) is as a rule very rapid, very extensive and much more directly truthful than the linguistic coding of treaty-conference discussion of asserted non-compliance.
227. T. Wälde (1998) Role of law and contract, CEPMLP Online Journal, www.cepmlp.org.
228. For example, Libya was subject to market sanctions after arbitral awards were issued against it for nationalisations and not complied with. After Libya paid up, markets re-adjusted their perception and their sanctions. A country that is seen as breaching contracts by the markets will be penalised. The government of Kazakhstan is known to have undermined its tenders, breached contracts and allowed a large entry to corruption and patronage into contracting, see, Foreigners feel the pain. Financial Times, 1 July 1999.
229. Note the emphasis in market reporting on investment arbitral awards: Hotel group wins Egypt dispute over arbitration. Financial Times, 13 July 1999. For a discussion of arbitral awards against Turkmenistan, see Enough is Enough, Russian Petroleum Investor, May 1996, 54.
230. Note the emphasis in market reporting on investment arbitral awards: Hotel group wins Egypt dispute over arbitration. Financial Times, 13 July 1999. For a discussion of arbitral awards against Turkmenistan, see Enough is Enough, Russian Petroleum Investor, May 1996, 54.
231. Thomas Carbonneau (1998) Lex Mercatoria and Arbitration, A Discussion of the New Law Merchant, Revised Edition (Kluwer, London); and Ursula Stein (1995) Lex Mercatoria, Realitet und Theorie (Vittorio Klostermann, Frankfurt). International standards (e.g. ISO 14001 for environmental management) have become significant and reportedly effective ways of obtaining compliance; they also have implications for civil liability and regulatory compliance - see the discussion of a new book by W. Rosenbaum at http://www.aqapress.com/p141w.html.
232. Thomas Carbonneau (1998) Lex Mercatoria and Arbitration, A Discussion of the New Law Merchant, Revised Edition (Kluwer, London); and Ursula Stein (1995) Lex Mercatoria, Realitet und Theorie (Vittorio Klostermann, Frankfurt). International standards (e.g. ISO 14001 for environmental management) have become significant and reportedly effective ways of obtaining compliance; they also have implications for civil liability and regulatory compliance - see the discussion of a new book by W. Rosenbaum at http://www.aqapress.com/p141w.html.
233. See the contributions by Cheryl Richer, Alington and James, worldbank.org./riskconference
234. Naomi Roht-Arriaza (1995) Shifting the point of regulation: The international organisation for standardisation and global lawmaking on trade and the environment, in 22 Ecology Law Quarterly 480; the Internet forum/list server moderated by Kernaghan Webb provides continuous information and discussion on the effect of voluntary codes on rule compliance (mainly in the environmental sector): webb.kernaghan@ic.gc.ca; see also Canada, Voluntary Codes, 1998.
235. This can be done by the juxtaposition of disciplines on both governments and investors/financiers in one document, but also by incorporation, reference and other forms of linkages to treaties and non-treaty instruments, see Picciotto (1998) supra.
236. I am grateful to Professor Dieter Schmidtchen of the Research Centre for Economic Analysis of Law, University of Saarbrücken, for this observation made as a comment on an earlier version of this article. He suggests that the global institutions base their existence on the fact that they intervene and thereby rather undermine the spontaneous forces of global markets. Instead, in case of doubt, they will support the regulatory power of governments and thereby weaken the forces of the market mechanism.