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Columbia FDI Perspectives
Perspectives on topical foreign direct investment issues
No. 238 November 5, 2018
Editor-in-Chief: Karl P. Sauvant ([log in to unmask])
Managing Editor: Marion A. Creach ([log in to unmask])
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Geopolitical aspirations and regional maritime claims could, if not resolved or managed properly, disincentivize or even hinder FDI in the exploration and development of offshore resources. For instance, due to maritime disputes between Vietnam and China, BP has abandoned its plans for exploration in Vietnam, where Repsol has stopped its operations.[1] In the Eastern Mediterranean—even though the countries aim to provide a stable legal environment centering on the protection of investors (e.g., through bilateral investment treaties)—country-specific regulatory limitations and geopolitical challenges do not allow them to reach their full potential. Countries in the Eastern Mediterranean have themselves acknowledged the benefits of regional cooperation in the hydrocarbon sector, which is encouraged by international oil companies (IOCs), the EU and the US. In this respect, initiatives for regional collaboration have been taken, such as trilateral energy dialogues (Cyprus-Egypt-Greece, Cyprus-Israel-Greece, Cyprus-Greece-Jordan, Cyprus-Greece-Lebanon) and cross-boundary energy infrastructure projects, such as the EastMed pipeline, labeled as a EU project of common interest.[2] Thus, despite divergent risk assessments and energy strategies, states have recognized the need and expressed the will for cooperation to attract FDI and to strengthen political ties between the participants in such initiatives.
In furtherance of these initiatives, we suggest the establishment of a “Scientific Forum,” comprised of both the countries and the IOCs operating in the region, that would encourage regional cooperation, through multilateral dialogue on all facets of the exploration and development of hydrocarbons and contribute to the gradual formation of a regional business enabling environment. The inspiration for the Forum is drawn from the Arctic Economic Council (AEC), an informal scientific policy-shaping body that enhances circumpolar business collaboration and market connection among eight Arctic countries, including the US and Russia, through scientific research and encourages sustainable development in the Arctic.[3] The establishment of the Scientific Forum could result from a declaration and not through a treaty.[4]
The Forum would function through working groups composed of government officials, IOCs’ executives, academics, economists, sociologists, and experts from the region and other regions with more industry experience. Through scientific research and economic, legal and political studies, these working groups would advise toward enhancing cooperation among the members. They would produce recommendations on specific issues, which could be tested through consultations with NGOs and, in general, the civil societies of the region’s countries, prior to them being finalized. The working groups would inquire into the possibilities for the members to share energy infrastructure, and they would identify sources of financing.[5] They would also conduct research on tailor-made best regulatory practices to enhance the countries’ regulatory attractiveness. They would furthermore advise the governments on the sustainable development of the resources and suggest strategies to promote and attract investment in renewable energy sources. They would enable data and expertise exchanges among countries and IOCs, encourage a focus on cross-border environmental damages, and thus enhance the coordination among countries in responding to environmental crises. The collaboration of stakeholders with divergent interests could lead to creative solutions to regional issues, e.g., a common set of recommendations to establish joint development zones for straddling fields in maritime areas for which boundaries have not yet been delimited between neighboring countries.
There is no reason why an institution similar to the AEC should not be established elsewhere, particularly in the Eastern Mediterranean. The key to its success rests on the fact that the region’s countries share the same goal: they all work toward attracting the IOCs and thus lowering the risk for investors. Even though the Forum would not enact legislation, this soft law approach could result in countries being more inclined to agree to recommendations that, while reflecting the lowest common denominator, would also serve as the acceptable standard for both governments and IOCs. Those recommendations would still have to become part of the relevant domestic legal systems. However, governments and oppositions would have to be mindful that the common rules acceptable to IOCs and implemented by their neighbors would make their countries less FDI-competitive should they take a different approach.
* The Columbia FDI Perspectives are a forum for public debate. The views expressed by the author(s) do not reflect the opinions of CCSI or Columbia University or our partners and supporters. Columbia FDI Perspectives (ISSN 2158-3579) is a peer-reviewed series.
** Andreas Tornaritis ([log in to unmask]) is a PhD Candidate in Political Economy at the University of Bristol and Visiting Scholar at CCSI; Evi Neophytou ([log in to unmask]) is a lawyer working in the oil and gas industry in Cyprus. The authors are grateful to Yair Aharoni, Antoine Basile and John Gaffney for their helpful comments.
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The material in this Perspective may be reprinted if accompanied by the following acknowledgment: “Andreas Tornaritis and Evi Neophytou, ‘Regional cooperation to enhance FDI in the development of offshore resources,’ Columbia FDI Perspectives, No. 238, November 5, 2018. 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].
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For further information, including information regarding submission to the Perspectives, please contact: Columbia Center on Sustainable Investment, Marion A. Creach, [log in to unmask].
Most recent Columbia FDI Perspectives
- No. 237, Alvaro Cuervo-Cazurra, “Host country concerns and policies toward state-owned MNEs,” November 5, 2018
- No. 236, Laza Kekic, “To what extent has FDI benefited the transition economies of Central and Eastern Europe?,” October 8, 2018
- No. 235, Reji K. Joseph, “Investment facilitation: new dynamism at the WTO on investment,” September 24, 2018
All previous FDI Perspectives are available at http://ccsi.columbia.edu/publications/columbia-fdi-perspectives/.
Other relevant CCSI news and announcements
- On November 7, 2018, CCSI and the Richard Paul Richman Center for Business, Law, and Public Policy, will co-host a panel discussion on “ESG and Public Funds: Risks and Opportunities in Investment Practices,” with Ronald J. Gilson (Columbia Law School) and Carol Jeppesen (UN Principles for Responsible Investment). Registration is free but required. For more information, and to register, please see our website here.
- On November 12, 2018, CCSI and the Columbia Society of International Law will co-host a talk by Jan Wouters, founding Director of the Institute for International Law and of the Leuven Centre for Global Governance Studies, on “Saving the World Trade Organization: How Realistic are the EU’s Proposals?” For more information, please see our website here.
- Applications are open for our 5th annual Executive Training on Investment Treaties and Arbitration for Government Officials, which will be held at Columbia University from June 17-27, 2019. Through an intensive course, government officials will increase their knowledge of crucial procedural and substantive aspects of investment law, better equipping them to deal with this complex and ever-evolving field with wide ranging implications for myriad areas of law and policy, and direct consequences for host-state liability. For more information about the program, including application materials and pricing, please visit our website and view our program brochure.
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Karl P. Sauvant, Ph.D.
Resident Senior Fellow
Columbia Center on Sustainable Investment
Columbia Law School - Earth Institute
Ph: (212) 854-0689
Fax: (212) 854-7946
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