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

 "The Rise of Self-judging Essential Security Interest Clauses in IIAs", 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 http://papers.ssrn.com/sol3/results.cfm and http://www.works.bepress.com/karl_sauvant/.

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Columbia FDI Perspectives

Perspectives on topical foreign direct investment issues
No. 190  January 2, 2017

Editor-in-Chief: Karl P. Sauvant ([log in to unmask])
Managing Editor: Daniel Allman ([log in to unmask])
During China’s Presidency of the Group of Twenty (G20), culminating in the G20 Hangzhou Summit in September 2016, important decisions were taken that could shape the future of international investment law and policy. China was the driver, given its fear of FDI protectionism and of discriminatory treatment toward its outward investors.
First, the Summit endorsed[1] nine “Guiding Principles for Global Investment Policymaking,”  agreed in July 2016 by the G20 Trade Ministers,[2] and prepared by their Trade and Investment Working Group to provide overall guidance to investment policy making: avoidance of FDI protectionism; openness, non-discrimination, transparency, and predictability; investment protection, including dispute settlement; transparency in investment rule-making, involving all stakeholders; coherence in rule-making, consistent with sustainable development; the right to regulate; investment promotion and facilitation; responsible business conduct; and international cooperation.
Reaching agreement was a challenge, with G20 members having to compromise in a short period in the face of disparate views on key issues. The Principles, therefore, were formulated in general language, and certain issues such as specific protections could not be agreed. Other notions could not be clarified, such as that investment promotion and facilitation should include maximizing benefits for host countries; that investment, best to contribute to sustainable development, should exhibit certain sustainability characteristics; and that “responsible business conduct” should include obligations, in such areas as those addressed, for instance, in the OECD Guidelines for Multinational Enterprises. More generally, the G20 Principles remain focused on the obligations of host countries, with only modest references to investor obligations and no mention at all of home country obligations.
China, with help from Canada as Working Group co-Chair, brought about a compromise, aided by its links to other members of the BRICS group and supported by the Secretariats of UNCTAD, the OECD, the WTO, and the World Bank. Agreement was possible because the Principles are general in nature, are non-binding and keep the focus on host country obligations. Overall, they are a desirable step toward outlining a comprehensive international investment framework and preparing the ground for an eventual plurilateral or multilateral investment regime.
Going forward, it is important for governments to build on the Principles. For example, a review (e.g., a gap analysis) could be undertaken of the extent to which international investment agreements already reflect the Principles and the ways in which new agreements take them into account. Another possibility would be for international organizations to monitor future treaty practice in light of the Principles and periodically to report on the results of such monitoring, or to invite countries to report on implementation of the Principles in their own policies. Finally, the Principles could be elaborated through the addition of annotations. The key is for governments actually to work with the Principles. As a first step, then, the Principles need to be widely disseminated.
Second, China’s Presidency has laid the groundwork for something concrete, relatively non-controversial and in the interest of all countries, namely, the facilitation of higher FDI flows to developing countries, and especially the least developed among them. The Trade Ministers “encourage[d] UNCTAD, the World Bank, the OECD and the WTO to advance this work within their respective mandates and work programmes.”[3] Various international organizations have initiated such work.
Encouraging, too, is India’s proposal for an “Agreement on Trade Facilitation in Services” at the WTO,[4] explicitly covering Mode 3 (i.e., commercial presence) of the General Agreement on Trade in Services. FDI (akin to “commercial presence”) in services accounts for roughly two-thirds of total FDI. Such an Agreement could become a stepping-stone for a broader international support program for sustainable investment facilitation.[5] In the near/medium term, one way to make progress would be to prepare G20 “Guiding Principles for Global Investment Facilitation,” drawing on the precedent of the “Guiding Principles for Global Investment Policymaking.”
Finally, the G20 decided to maintain its Trade and Investment Working Group. This Group could remain a valuable additional platform for intergovernmental discussion regarding governance of international investment in a non-rule-making setting, and can serve as an incubator for related ideas.
Germany, holding the G20 Presidency in 2017 and co-chairing the Working Group, can move the G20’s investment policy work forward. However, given the controversies surrounding some investment issues, and given Germany’s federal elections set to take place in the fall of 2017, that country’s focus is likely to be on investment facilitation. Argentina, holding the G20 Presidency after Germany and having an interest in FDI facilitation, could build on whatever work has been done to achieve additional concrete results.
Considering the difficulty of the investment issue and the shortness of time, the agreements reached by the G20 represent important accomplishments. The challenge, now, is to build on them.
* Karl P. Sauvant ([log in to unmask]) is Resident Senior Fellow, Columbia Center on Sustainable Investment, a joint center of Columbia Law School and the Earth Institute, Columbia University. The author is grateful to Jonathan Fried for his helpful comments and to Julien Chaisse, Mark Feldman and Wenhua Shan for their helpful peer reviews. 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 series.  
[2] “G20 Trade Ministers Meeting Statement,” available at https://www.wto.org/english/news_e/news16_e/dgra_09jul16_e.pdf.
[3] Ibid., para. 18.
[4] See WTO Working Party on Domestic Regulation, “Concept Note for an Initiative on Trade Facilitation in Services,” Doc. S/WPDR/W/55, Sept. 27, 2016.
[5] See Karl P. Sauvant, “We need an international support programme for sustainable investment facilitation,” Columbia FDI Perspectives, No. 151, Jul. 6, 2015.
The material in this Perspective may be reprinted if accompanied by the following acknowledgment: “Karl P. Sauvant, ‘China moves the G20 on international investment,’ Columbia FDI Perspectives, No. 190, January 2, 2017. 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, Matthew Schroth, [log in to unmask].
  • No. 189, Robbie Schwieder, “Broadening the Global Compact agenda,” December 19, 2016.
  • No. 188, Karl P. Sauvant, Mevelyn Ong, Katherine Lama, and Thor Petersen, “The rise of self-judging essential security interest clauses in international investment agreements,” December 5, 2016.
  • No. 187, Jan Knoerich, “Why some advanced economy firms prefer to be taken over by Chinese acquirers,” November 21, 2016.
All previous FDI Perspectives are available at http://ccsi.columbia.edu/publications/columbia-fdi-perspectives/

Other relevant CCSI news and announcements
  • CCSI is pleased to announce a call for papers for Part Two of the Yearbook on International Investment Law and Policy published by Oxford University Press (OUP). The Yearbook monitors current developments in international investment law and policy. Part One focuses on trends in foreign direct investment, international investment agreements, and investment disputes. Part Two looks at central issues in the contemporary discussions on international investment law and policy. The chapters in Part Two may be detailed analyses or short think-pieces. All papers must be original texts and are subject to double-blind peer review. Original contributions to be considered for publication in the Yearbook are accepted on a rolling basis until January 15, 2017; please send submissions to [log in to unmask]. Please include an abstract; a table of contents is also recommended. Footnotes should conform to guidelines available here.
  • June - August 2017: We are accepting applications for our three upcoming executive trainings: on Extractive Industries and Sustainable Development (June 5-16, 2017), Sustainable Investments in Agriculture (July 12-21, 2017), and Investment Arbitration for Government Officials (July 31-August 10, 2017). Each program is designed to equip participants with the necessary skills, analytical tools, and frameworks to address relevant challenges and opportunities, and to encourage a rich dialogue about best practices from around the globe. More information about each training, including brochures and applications, is available at the links above. Applications are accepted on a rolling basis. Participants will receive a Statement of Attendance from Columbia University.
  • The Brexit referendum has raised questions about the future terms of the United Kingdom’s engagement with the world economy. While a debate over the UK’s future approach to trade deals has already begun, a similar discussion has yet to develop on the treaties that govern foreign investment. As this briefing note by Lorenzo Cotula of the International Institute for Environment and Development, and Lise Johnson of CCSI highlights, the stakes are high: ill-designed treaties could leave the UK excessively exposed to legal claims by foreign companies and could fail to address relevant economic, social and environmental challenges. While meaningful negotiations are unlikely to start until the new relationship between the UK and the EU has been clarified, now would be a good time for a policy review to define a new approach. The government, parliament and public have an important role to play in positioning the UK as a global innovator in investment treaty policy.
Karl P. Sauvant, Ph.D.
Resident Senior Fellow
Columbia Center on Sustainable Investment
Columbia Law School - Earth Institute
(212) 854-0689
Fax: (212) 854-7946
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