Karl P. Sauvant, PhD
Resident Senior Fellow

Columbia Center on Sustainable Investment*
Columbia Law School - The Earth Institute, Columbia University
435 West 116th St., Rm. JGH 825, New York, NY 10027
p(212) 854 0689 | cell: (646) 724 5600 e: [log in to unmask]
wwww.ccsi.columbia.edu | t: @CCSI_Columbia

* Formerly the Vale Columbia Center on Sustainable international Investment.

"Policy options for promoting FDI in the LDCs", “The negotiations of the United Nations Code of Conduct on Transnational Corporations: Experience and lessons learned” and Improving the International Investment Law and Policy Regime: Options for the Future are available at http://www.works.bepress.com/karl_sauvant/.

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Columbia FDI Perspectives
Perspectives on topical foreign direct investment issues
No. 163  December 21, 2015

Editor-in-Chief: Karl P. Sauvant ([log in to unmask])
Managing Editor: Maree Newson ([log in to unmask])

The economic challenges that affected the business climate in the Arab region in the post-Arab Spring era have prompted many countries to revise their investment policies and regulations. The main objective of this revision was to attain a balance between maintaining attractiveness to foreign direct investment (FDI) on the one hand, while responding to demands for sustainable development and human rights on the other.

These balancing efforts include amendments of national legal frameworks regulating FDI. Examples of Arab countries that started these efforts include Jordan, Tunisia and Egypt. While the first issued its new investment code in 2014, the second drafted a new law in 2013 that still awaits ratification. As for Egypt, it has provided crucial amendments to the legislations related to investment, companies and taxation in March 2015.

However, similar success regarding the regional legal frameworks has been missing. In this respect, two regional experiences have posed substantial challenges for Arab states, either at the inter-Arab level or at the Euro-Mediterranean level.

At the first level, an attempt to amend the Unified Agreement on the Investment of Arab Capital in Arab States (“Agreement”)
[1] has ended with the adoption of an imbalanced amended version.[2] Instead of adopting a new agreement that would reflect recent developments in international investment rulemaking, Arab countries have chosen to amend their timeworn Agreement through prioritizing investment protection over maintaining sufficient policy space for countries to regulate FDI. The primary reason behind this was a conflict of interests between a “pro-investment protection” group of capital exporting Gulf Cooperation Countries on one side, and a group of non-oil exporting Arab states that are “pro-regulatory flexibility” on the other.  

At the Euro-Mediterranean level, the Agadir countries
[3] are candidates to negotiate Deep and Comprehensive Free Trade Agreements (DCFTAs) of investment chapters with the European Union (EU). There are indications that these countries are likely to face similar challenges that could lead to additional imbalanced regional investment regulations. In particular:
  • The negative impacts of the EU's negotiation approach, which rests mainly on imbalanced bilateral negotiations with its individual partners who lack comparable bargaining power.
  • The experience of negotiating investment provisions in the Comprehensive Economic and Trade Agreement[4] between the EU and Canada.[5]
  • The fear that future negotiations will not pay sufficient attention to the findings of the Trade Sustainability Impact Assessments that raised skepticism about the alleged positive impacts of DCFTAs on sustainable development.[6]
  • The questions raised about the full implementation of the EU parliament’s resolution adopted in April 2011; it advised the Commission to create balanced future international investment agreements (IIAs) that should avoid the shortcomings of the current European IIAs to achieve sustainable development. [7]
Against this background, the Arab countries should embark on negotiations for a new pan Arab IIA
[8] that would balance the objectives of promotion and protection with the people's aspirations and the sovereign right of states to regulate investments to achieve their legitimate public policy objectives.

As for the negotiation of future DCFTAs, the Agadir countries should try to overcome the problem of bilateral negotiations through joint coordination to reach a common understanding of their objectives for trade and investment negotiations. This coordination effort could be achieved through regular regional meetings dealing with regional investment policies and regulations.

More generally, Arab governments should pursue a tridimensional approach to reform investment regulations and policies. Besides making the needed changes at the national level, they should create a regional institutional mechanism to coordinate investment policies. Also needed is an Arab regional platform to exchange experiences on IIAs and treaty-based claims. Finally, an effective regional investment dispute-settlement mechanism is required. At the international level, Arab countries should contribute to discussions on international investment policies and regulations within the concerned international organizations.

* Moataz Hussein ([log in to unmask]) is Senior International Investment Agreements Specialist at the General Authority for Investment (GAFI) in Egypt. The author is grateful to Rainer Geiger, Hamed El Kady and Mina Wasseem for their helpful peer reviews. The views expressed by the author of this Perspective do not necessarily reflect the opinions of GAFI, Columbia University or its partners and supporters. Columbia FDI Perspectives (ISSN 2158-3579) is a peer-reviewed series.
[1] The original Agreement was signed in 1980, while the amended version was adopted in January 2013 and is still under ratification.
[2] See Hamed El-Kady, “The amendments to the 1980 Arab League investment agreement: implications on the right to regulate investment in Arab countries,” Transnational Dispute Management, vol. 3 (2014).
[3] Members of the Arab-Mediterranean FTA “Agadir Agreement” include Egypt, Jordan, Morocco, and Tunisia.
[4] See European Commission, “Investment provisions in the EU-Canada free trade agreement (CETA),” September 26, 2014, available at http://trade.ec.europa.eu/doclib/docs/2013/november/tradoc_151918.pdf.
[5] The CETA draft shows the EU's intention to expand the scope of investment liberalization to broad categories of European investments and investors, despite its recognition of the right to regulate. In our perspective, Agadir countries could not count on CETA’s experience in evaluating its prospected draft DCFTAs since the EU’s IIA Model is still under development.
[6] See Trade Sustainability Impact Assessments in support of negotiations of DCFTAs between the EU and its partners available at http://ec.europa.eu/trade/policy/policy-making/analysis/sustainability-impact- assessments/assessments/.
[7] See “European parliament resolution of 6 April 2011 on the future European international investment policy,” 2010/2203(INI), April 6, 2011.
[8] Such a new agreement should avoid duplication with the current Arab IIAs and the sub-regional agreements concluded under the auspices of the Council of Arab Economic Unity.

The material in this Perspective may be reprinted if accompanied by the following acknowledgment: “Moataz Hussein, ‘Toward balanced Arab regional investment regulations,’ Columbia FDI Perspectives, No. 163, December 21, 2015. Reprinted with permission from the Columbia Center on Sustainable Investment (www.ccsi.columbia.edu).” A copy should kindly be sent to the Columbia Center on Sustainable Investment at [log in to unmask].  

For further information, including information regarding submission to the Perspectives, please contact: Columbia Center on Sustainable Investment, Maree Newson, [log in to unmask].
  • No. 162, Robert Basedow, “Preferential investment liberalization under bilateral investment treaties: How to ensure compliance with WTO law?” December 7, 2015.
  • No. 161, Wenhua Shan, “The case for a multilateral or plurilateral framework on investment,” November 23, 2015.
  • No. 160, Mélida Hodgson, “The Trans-Pacific Partnership investment chapter sets a new worldwide standard,” November 9, 2015.
All previous FDI Perspectives are available at http://ccsi.columbia.edu/publications/columbia-fdi-perspectives/.

Other relevant CCSI news and announcements
  • Pleased note there has been a change of date for CCSI's Executive Training on Investment Arbitration for Government Officials in New York City, which will now take place August 1-5, 2016. Through an intensive week-long course, government officials involved in managing investment treaty disputes or negotiating investment treaties will increase their knowledge of crucial procedural and substantive aspects of investment law. Sessions will be taught by leading academics and practitioners and will be tailored to uniquely address issues relevant to governments. For more information about the program, including application materials, please visit our website. Applications will be accepted on a rolling basis until March 21, 2016.
  • On January 19, 2016 from 6:30-8:30pm, CCSI and the Sabin Center for Climate Change Law will host a panel discussion at Columbia Law School on “What Effect Will the Transpacific Partnership Have on Domestic and International Climate Change Action?” Panelists include Ben Beachey, Senior Policy Advisor, Responsible Trade Program, Sierra Club and Claire E. Reade, Senior Counsel, Arnold & Porter LLP. The event will be moderated by Lise Johnson, Head, Investment Law and Policy, Columbia Center on Sustainable Investment. For more information, please visit our website.
  • On January 29, 2016, the CCSI/Global Economic Governance Programme at Oxford University online forum on New Thinking on Investment Treaties continues with a talk by Lauge Poulsen on “The Politics of Investment Treaties in Developing Countries.” For more information and for the schedule of speakers, please visit our website here. All presentations will be posted here. Please subscribe to the channel and visit our website for updates.

Karl P. Sauvant, Ph.D.
Resident Senior Fellow
Columbia Center on Sustainable Investment
Columbia Law School - Earth Institute
(212) 854-0689
(212) 854-7946

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