The once and future foreign investment regime

Looking to the Future: Essays on International Law in Honor of W. Michael Reisman

Volumn , Issue , 2010, Pages 607-648

  Alvarez, José E ^a  

^a NEW YORK UNIVERSITY SCHOOL OF LAW   (United States)

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EID: 84882639419     PISSN: None     EISSN: None     Source Type: Book    
DOI: 10.1163/ej.9789004173613.i-1100     Document Type: Chapter

References (61)

1. See Myres S. McDougal & Harold D. Lasswell, Th e Identifi cation and Appraisal of Diverse Systems of Public Order, 53 Am. J. Int'l L. 1 (1959).
2. See, e.g., Lung-chu Chen, An Introduction to Contemporary International Law 1-14 (1989).
3. See Andrew Moravcsik, Liberal International Relations Th eory: A Scientifi c Assessment, in Progress in International Relations Theory: Appraising the Field 159 (Colin Elman & Miriam Fendius Elman eds., 2003).
4. Myres S. McDougal, Harold D. Lasswell & W. Michael Reisman, Th eories About International Law: Prologue to a Confi gurative Jurisprudence, 8 Va. J. Int'l L. 188, 191 (1968).
5. I am using the term "regime" here in the loose sense deployed by many political scientists, in lieu of more normatively laden alternatives such as "system" or "framework." See, e.g., Robert O. Keohane, After Hegemony 57 (1984) (defi ning "international regimes as 'sets of implicit or explicit principles, norms, rules and decision-making procedures around which actors' expectations converge in a given area of international relations'" (quoting Stephen D. Krasner, Structural Causes and Regime Consequences, in International Regimes 1, 2 (Stephen D. Krasner ed., 1983))).
6. Kenneth J. Vandevelde, A Brief History of International Investment Agreements, in The Effect of Treaties on Foreign Direct Investment: Bilateral Investment Treaties, Double Taxation Treaties, and Investment Flows 3, 28 (Karl P. Sauvant & Lisa E. Sachs eds., 2009) [hereinafter Effect of Treaties on Foreign Direct Investment] (citing UNCTAD's fi gures).10 See generally Andreas F. Lowenfeld, International Economic Law 94-97, 102-07, 115-30, 456-61 (2002).
7. For descriptions of these rights, see R. Doak Bishop, James Crawford & W. Michael Reisman, Foreign Investment Disputes: Cases, Materials and Commentary 1007-169 (2005).
8. See, for example, the annual "Doing Business" Reports issued by the International Finance Corporation.
9. See, e.g., Daniel Kalderimis, IMF Conditionality as Investment Regulation: A Th eoretical Analysis, 13 Soc. & Legal Stud. 103 (2004).
10. Th us, for example, OECD studies on the role of incentives to promote investment and performance requirements have led to warnings to states to avoid such actions as subsidies to local industries.
11. See, e.g., OECD, Competition Policy in Subsidies and State Aid 2001, available at http://www.oecd.org/dataoecd/31/1/2731940.pdf. Not incidentally, most investment agreements fail to include investment promotion measures and some also discourage or prohibit certain performance requirements.
12. See, e.g., 2004 U.S. Model BIT, available at http://www.state.gov/documents/organization/38710.pdf (which contains no promotion measures and which prohibits certain performance requirements under Article 8).
13. See, e.g., Paul Kuruk, Renegotiating Transnational Investment Agreements: Lessons for Developing Countries from the Ghana-Valco Experience, 13 Mich. J. Int'l L. 43 (1991) (case history of one government's rejection of, among other things, stabilization clauses negotiated in investment contracts by a prior regime)
14. Louis T. Wells & Rafiq Ahmed, Making Foreign Investment Safe (2007) (case histories of investor/host-state tensions, particularly with respect to promises made in investment contracts).
15. Permanent Sovereignty over Natural Resources, G.A. Res. 3171 (XXVIII), U.N. Doc. A/9030 (Dec. 17, 1973).
16. Charter of the Economic Rights and Duties of States (CERDS), G.A. Res. 3281 (XXIX), U.N. Doc. A/9631 (Dec. 12, 1974) (adopted by a vote of 120-6 with ten abstentions).
17. For popular accounts both in favor and against, see, for example, Thomas L. Friedman, The Lexus and the Olive Tree (2000) (praising LDC's turn to the "Golden Straightjacket")
18. Joseph E. Stiglitz, Globalization and its Discontents (2002) (criticizing the promulgation of the "Washington Consensus").
19. Under those imperial products, colonial powers expanded their extraterritorial jurisdiction by exempting Western merchants and investors from the local laws of the countries in which they operated. Capitulation agreements imposed the "standard of civilization" on the "uncivilized" by granting jurisdiction over Western nationals and their property to consular offi cials of Western states in lieu of local courts. Imperial powers justifi ed these treaties on the premise that some states were incapable of satisfying the standard of justice granted bycivilized nations. Today's BITs, like the old capitulation agreements, generally exempt foreign investors from having to go to local courts. According to some, BITs merely substitute international arbitral mechanisms for the former recourse to consular offi cials.
20. See, e.g., David P. Fidler, A Kinder, Gentler System of Capitulations? International Law, Structural Adjustment Policies, and the Standard of Liberal, Globalized Civilization, 35 Tex. Int'l L.J. (2000).
21. See M. Sornarajah, The International Law on Foreign Investment 207-08, 259 (2d ed. 2004).
22. For more general articulations of the "imperial" thesis for contemporary international law, see, for example, Ugo Mattei, A Th eory of Imperial Law: A Study on U.S. Hegemony and the Latin Resistance, 10 Ind. J. Global Legal Stud. 383 (2003)
23. B.S. Chimni, International Institutions Today: An Imperial Global State in the Making, 15 Eur. J. Int'l L. 1 (2004)
24. Walter Russell Mead, God and Gold: Britain, America, and the Making of the Modern World (2007). But see José E. Alvarez, Contemporary Foreign Investment Law: An "Empire of Law" or the "Law of Empire"?, 60 Ala. L. Rev. 943 (2009) (criticizing "imperial" perspectives of the contemporary international investment regime).
25. For a critique of this contention, see José E. Alvarez & Kathryn Khamsi, Th e Argentine Crisis and Foreign Investors: A Glimpse into the Heart of the Investment Regime, in Yearbook on International Investment Law & Policy 379, 473-77 (Karl P. Sauvant ed., 2009) [hereinafter International Investment Yearbook].
26. See B.E. Chattin (United States) v. United Mexican States, 4 R. Int'l Arb. Awards 282 (Gen'l Claims Comm. 1927) (MacGregor, Comm'r, dissenting).
27. Santiago Montt, What International Investment Law and Latin America Can and Should Demand from Each other, Updating the Bello/Calvo Doctrine in the BIT Generation, 3 Revista Argentina Del Régimen de la Administracion Pública 75, 80 (2007).
28. Andrew T. Guzman, Why LDCs Sign Treaties Th at Hurt Th em: Explaining the Popularity of Bilateral Investment Treaties, 38 Va. J. Int'l L. 639 (1998).
29. Th us Tillmann Rudolf Braun notes that the "fi rst generation" of BITs included only stateto-state arbitration clauses. Th e erstwhile leader of BITs, Germany, concluded its fi rst BIT with an investor-state arbitration clause only in 1979, and that clause (in the German-Rumanian BIT) extended arbitral jurisdiction only with respect to the amount of compensation. Th e fi rst German BIT with a comprehensive investor-state arbitration clause was signed only in 1986. Tillmann Rudolf Braun, Globalization: Th e Driving Force in International Investment Law, in The Backlash against Investment Arbitration, Chapter 21 (Michael Waibel et al., eds., 2010).
30. Jason Webb Yackee, Bilateral Investment Treaties, Credible Commitment, and the Rule of (International) Law: Do BITs Promote Foreign Direct Investment?, 42 Law & Soc'y Rev. 805, 815 (2008).
31. Jan Paulsson, Arbitration Without Privity, 10 ICSID Rev. 232 (1995).
32. See, e.g., Agreement for the Promotion and Reciprocal Protection of Investments, Can.-Pol., art. IX, Apr. 6, 1990 (failing to provide the states' advance consent to arbitration within the treaty).
33. For a history of the U.S. BIT Program, see Kenneth J. Vandevelde, United States Investment Treaties 29-43 (1992).
34. Th e closest example, which suggests its exceptional nature, is the Assembly's eff ort to renounce its prior Assembly equating Zionism with racism.
35. U.N. Conference on Trade & Dev. [UNCTAD], Th e Development Dimension of International Investment Agreements, 2, U.N. Doc. TD/B/C.II/MEM.3/2 (Dec. 2, 2008).
36. See, e.g., Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964).
37. La Industria Cubana, http://www.cubaindustria.cu/webs/acuerdos_protec_inver.htm.
38. Agreement Concerning the Promotion and Protection of Investments, Cambodia-Cuba, art. I(1), May 28, 2001 [hereinafter Cambodia-Cuba BIT] (defi nition of "investment").
39. Sabbatino, 376 U.S. at 398.
40. See, e.g., Mark E. Plotkin & David N. Fagan, Th e Revised National Security Review Process for FDI in the US, 2 Colum. FDI Persps. (2009), available at http://www.vcc.columbia.edu/pubs/documents/Perspective2-PlotkinandFagan.pdf.
41. For the text of Canada's latest model treaty for investment promotion and protection, see http://www.international.gc.ca/trade-agreements-accords-commerciaux/assets/ pdfs/2004-FIPA-model-en.pdf.
42. See, e.g., Methanex Corp. v. United States, 44 I.L.M. 1345 (2005)
43. Loewen Group, Inc. v. United States, 42 I.L.M. 811 (ICSID 2003).
44. See, e.g., Stephen M. Schwebel, Th e United States 2004 Model Bilateral Investment Treaty: An Exercise in the Regressive Development of International Law, 3 Transnat'l Disp. Mgmt. 1 (2006).
45. Of course, even during the colonial era, the metropole did not remain unaff ected by developments, including legal developments, resulting from their engagements withthe periphery.
46. See generally Antony Anghie, Imperialism, Sovereignty, and the Making of International Law (2005).
47. See John Rawls, A Theory of Justice (1971).
48. See Bilateral Investment Treaty, P.R.C.-Mex., art. 5, July 11, 2008.
49. See Bilateral Investment Treaty, P.R.C.-India, Nov. 21, 2006, (in the Protocol, qualifying the meaning of "takings" for purposes of article 5).
50. See Free Trade Agreement, P.R.C.-N.Z., arts. 153-54, 156-57, Oct. 1, 2008.
51. See Memorandum of Understanding on Labour Cooperation and Environment Cooperation Agreement, both of which are integral parts of the China-New Zealand Free Trade Agreement.
52. See U.N. Conference on Trade & Dev. [UNCTAD], IIA Monitor No. 2, Recent Developments in International Investment Agreements, 1, U.N. Doc. UNCTAD/WEB/ITE/ IIT/2005/1 (Aug. 30, 2005) (noting the "increasingly complicated framework of multilayered and multi-faceted investment rules").
53. See, in particular, the preamble of Norway's 2007 Model BIT, available at http://www. regjeringen.no/upload/NHD/Vedlegg/hoeringer/Utkast?20til?20modellavtale2.doc.
54. For a description of the interaction between investment treaties and customary law, see José E. Alvarez, A BIT on Custom, 42 N.Y.U. J. Int'l L. & Pol. 17 (2009).
55. For proposals along these lines, see, for example, Karl Sauvant, José E. Alvarez & Kamil Gerard Ahmed, The Evolving International Investment Regime (forthcoming 2010).
56. But see Gus Van Harten, Investment Treaty Arbitration and Public Law (2007) (contending that investor-state dispute settlement is biased in favor of the investor).
57. See, e.g., Howard Mann et al., IISD Model International Agreement on Investment for Sustainable Development (2005), available at http://www.iisd.org/pdf/2005/investment_model_int_agreement.pdf.
58. See, e.g., Emily Morris, Cuba and Venezuela (Feb. 6, 2008), available at http://www.londonmet.ac.uk/londonmet/library/q11223_4.ppt.
59. See, e.g., Karl P. Sauvant, Th e FDI Recession Has Begun, 1 Colum. FDI Persps. (2008), available at http://www.vcc.columbia.edu/pubs/documents/KPSPerspective-FDIrecessionhasbegun_ 001.pdf.
60. See, e.g., Anne Van Aaken & Jürgen Kurtz, Th e Global Financial Crisis: Will State Emergency Measures Trigger International Investment Disputes?, 3 Colum. FDI Persps. (2009), available at http://www.vcc.columbia.edu/documents/Perspectives3-vanAakenandKurtz-FINAL.pdf. Treaty claims resulting from emergency measures taken in the wake of the current economic crisis are not entirely farfetched even with respect to the United States, which except for claims under the NAFTA, is generally not exposed to BIT claims from major capital exporters into the United States. Some foreign car makers located in the United States might want to challenge some of the actions being taken by the United States that are principally intended to benefi t U.S. automakers. While the United States does not have BITs with Japan and Germany, it does have FCNs with those states. Under relevant U.S. Supreme Court precedent, such FCNs are considered "self-executing" and could ground a cause of action in U.S. courts based on violation of national treatment.
61. See, e.g., Asakura v. City of Seattle, 265 U.S. 332 (1924) (successful challenge to discriminatory provision in municipal law by Japanese pawnbroker based on U.S.-Japan FCN).