*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]
| w: | t: @CCSI_Columbia

"Can host countries have legitimate expectations?", "The Next Step in
Governance: The Need for Global Micro-regulatory Frameworks", "How
International Investment Agreements can Protect Free Media", "China, the
G20 and the International Investment Regime", "The Evolving International
Investment Law and Policy Regime: Ways Forward", "China's Outward FDI and
International Investment Law", and  "Policy Options for Promoting FDI in
the LDCs" *are* available at and

View this email in your browser

*Columbia FDI Perspectives*
Perspectives on topical foreign direct investment issues
No. 185  October 24, 2016
Editor-in-Chief: Karl P. Sauvant ([log in to unmask])
Managing Editor: Daniel Allman ([log in to unmask])
*Investment treaties are about justice*
Frank J. Garcia* * <#m_6681524145426198584__edn1>*

Controversy over investor-state dispute settlement (ISDS) and the social
impact of international investment agreements (IIAs) surrounds the
Trans-Pacific Partnership agreement and negotiations for a Transatlantic
Trade and Investment Partnership. Such controversy illustrates why
investment law can no longer be managed as if it were merely a system of
private ordering setting out the protected rights of capital owners.
Instead, IIAs are increasingly recognized as instruments of economic
governance, and by nature subject to principles of procedural and
distributive justice, as with any system that allocates social resources.

The international investment regime certainly involves private actors with
valid and important interests, but it is not solely about private actor
rights—it is also about state responsibilities to the larger society. IIAs
are part of a governance system meant to ensure justice and the rule of law
for everyone in the allocation of investment capital. Yet, as a system of
governance, investment law today is seriously deficient. Structural and
normative aspects of IIAs—their asymmetric focus on investor rights and how
those rights are interpreted by arbitral panels—leave large segments of the
affected public in host countries, meaning most people, without effective

This represents a governance crisis, and an opportunity. Thomas Franck
reminds us that, in domestic economies, capital operates within political
systems wherein the expectations of capitalists are not usually the sole or
last word.[1] <#m_6681524145426198584__edn2> Yet the domestic equivalent to
the political economy of the IIA regime would be the reinstatement of
property requirements as a condition of voting rights: only those with
capital would have a voice. Such an approach to investment law, in which
capital’s needs and interests are privileged in the political process, is
no longer sustainable. Investment touches so many core social issues and
host country responsibilities that it simply cannot be managed from the
perspective of capital alone. To continue doing so would be to ignore
investment rules’ public nature and their allocative effects on legal
rights and economic resources.

Instead, investment law should be subject to principles of justice (norms
of procedural and substantive fairness), as with any framework for
allocating social resources. Investment law allocates social resources in
at least three ways:

   - IIAs allocate rights, privileges and burdens *between* investors and
   host countries regarding, for example, the establishment and operation of a
   foreign investment, minimum standards of treatment, the right to regulate,
   and dispute settlement.
   - IIAs impact the allocation of rights, privileges and burdens among a
   range of stakeholders *within* host countries, including government,
   domestic capital, foreign capital, producers, consumers, and citizens.
   - Finally, IIAs influence the global allocation of investment capital, a
   socially produced resource.

Such allocative effects render investment law a matter of justice. This is
not new—allocative effects subject many other areas of law (e.g., banking,
taxation, trade) to principles of justice—but it is under-acknowledged in
investment law. Recognizing allocative effects makes it clear that
investment law does not operate outside the bounds of justice. Rather,
managing capital for the benefit of capital owners and the larger society
is *inherently* about justice, for all affected stakeholders and not
investors alone.[2] <#m_6681524145426198584__edn3>

Recognizing that investment law is a matter of justice is a paradigm shift
with profound implications for investment law and policy. Essentially, it
requires that we examine the investment law regime in terms of the fairness
norms we would apply to any system of governance allocating economic rights
and resources across a range of settings.[3] <#m_6681524145426198584__edn4>
Ensuring a secure return on investment *is* fair, but this does not
necessarily exhaust what fairness requires of investment law. Discovering
what fairness means in investment law is what contemporary policy debates
and treaty negotiations are about. Properly understood, many current
investment reform proposals—such as appellate review of the sort agreed by
Canada and the EU,[4] <#m_6681524145426198584__edn5> enhanced transparency
provisions and balanced social clauses effectively (not aspirationally)
protecting the right to regulate—cannot be rejected as unwelcome
“intrusions” into a private ordering system. Instead, they are efforts to
make investment law more *just *by ensuring it embodies essential civil and
political values, such as procedural fairness, equality before the law, the
rule of law, and the right to political voice for all affected parties.[5]
<#m_6681524145426198584__edn6> We should expect nothing less from today’s
economic governance systems.

* <#m_6681524145426198584__ednref1> Frank J. Garcia ([log in to unmask]) is
Professor of Law and Dean’s Global Fund Scholar, Boston College Law School.
This* Perspective* is based on Frank J. Garcia, Lindita V. Ciko Torza,
Apurv Gaurav, and Kirrin Hough, “Reforming the international investment
regime: lessons from international trade law,” *Oxford Journal of
International Economic Law, *vol. 18 (2015) pp. 861-892. The author is
grateful to Rudolph Dolzer, Andrew Newcombe, Ted Posner, W. Michael
Reisman, and Americo Zampetti for their helpful peer reviews, and to Julie
Maupin, Federico Ortino, Joost Pauwelyn, and Lisa Toohey for their
comments. *The views expressed by the author of this Perspective do not
necessarily reflect the opinions of Columbia University or its partners and
supporters. Columbia FDI Perspectives (ISSN 2158-3579) is a peer-reviewed
[1] <#m_6681524145426198584__ednref2> Thomas Franck, *Fairness in
International Law and Institutions* (Oxford: Clarendon, 1998), pp. 438-439.
[2] <#m_6681524145426198584__ednref3> Rudolf Dolzer, although connecting
investment law to justice, confines this to “outcomes generally considered *by
the investment community* to be just”: “Fair and equitable treatment:
today's contours,” *Santa Clara Journal of International Law*, vol. 12
(2014), p. 33 (emphasis added).
[3] <#m_6681524145426198584__ednref4> *See*, *e.g.*, Franck, supra n. 1;
Frank J. Garcia, “Justice, the Bretton Woods institutions, and the problem
of inequality,” in John Jackson and William J. Davey (eds.), *The Future of
International Economic Law *(Oxford: OUP, 2008), pp. 23-44.
[4] <#m_6681524145426198584__ednref5> “CETA: EU and Canada agree on new
approach on investment in trade agreement” (Feb. 29, 2016), available at
[5] <#m_6681524145426198584__ednref6> *See*, *e.g.*, Benedict Kingsbury and
Stephan Schill, “Investor-state arbitration as governance: fair and
equitable treatment, proportionality and the emerging global administrative
law,” *IILJ Working Paper* (Global Administrative Law Series, 2009).
*The material in this Perspective may be reprinted if accompanied by the
following acknowledgment: “Frank J. Garcia, ‘**Investment treaties are
about justice**,’ **Columbia FDI Perspectives, No. 185, October 24, 2016.
Reprinted with permission from the Columbia Center on Sustainable
Investment (
A copy should kindly be sent to the Columbia Center on Sustainable
Investment at [log in to unmask] <[log in to unmask]>. *

For further information, including information regarding submission to the
*Perspectives*, please contact: Columbia Center on Sustainable Investment,
Daniel Allman, [log in to unmask]

   - No. 184, Lukas Linsi, “Less compelling than it seems: rethinking the
   relationship between aggregate FDI inflows and national competitiveness,”
   October 10, 2016.
   - No. 183, Karl P. Sauvant and Güneş Ünüvar, “Can host countries have
   legitimate expectations?,” September 26, 2016.
   - No. 182, Tania Voon and Andrew D. Mitchell, “Philip Morris vs. tobacco
   control: two wins for public health, but uncertainty remains,” September
   12, 2016.

*All previous FDI Perspectives are available at *
*. *

*Other relevant CCSI news and announcements*

   - *On October 31, 2016*, CCSI's* Fall 2016 International Investment Law
   and Policy Speaker Series *continues with *Allan Rosas* (Judge, European
   Court of Justice). The remaining speaker in the series will be Mark Wu. The
   series, co-sponsored by Crowell & Moring LLP, Baker & McKenzie LLP and
   Investment Claims, will be moderated by Ian Laird, Grant Hanessian and
   Kabir Duggal. This talk is also co-sponsored by the European Legal Studies
   Center and is part of our week-long event, “EU Judges Visit Columbia Law
   School.” All talks will take place at Columbia Law School, Jerome Greene
   Hall. Select presentations will be webcast; *please see our website
   the schedule and more details*. No registration is required.
   - *From October 31 - November 3, 2016*, join us for "EU Judges Visit
   Columbia Law School." CCSI and the European Legal Studies Center will host
   two distinguished Judges– *Allan Rosas*, Court of Justice of the
EU, and *Savvas
   Papasavvas*, General Court of the EU– for a week of discussions on
   matters of investment, trade, legal challenges in the EU, and other timely
   developments in EU and International Law. *For details on the lunchtime
   and evening talks throughout the week, please click here

Columbia Center on Sustainable Investment
Columbia Law School - Earth Institute
Columbia University
*Copyright © 2016 Columbia Center on Sustainable Investment (CCSI), All
rights reserved.*
[log in to unmask]

*Our mailing address is:*
Columbia Center on Sustainable Investment (CCSI)
Columbia Law School - Earth Institute, Columbia University
435 West 116th Street
New York, NY 10027

Add us to your address book

unsubscribe from this list
update subscription preferences

[image: Email Marketing Powered by MailChimp]

AIB-L is brought to you by the Academy of International Business.
For information:
To post message: [log in to unmask]
For assistance:  [log in to unmask]
AIB-L is a moderated list.