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*Columbia FDI Perspectives*
Perspectives on topical foreign direct investment issues
No. 286  September 7, 2020
Editor-in-Chief: Karl P. Sauvant ([log in to unmask])
Managing Editor: Riccardo Loschi ([log in to unmask])
*Insulating a WTO Investment Facilitation Framework from ISDS*
<https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=c6af321a35&e=5eb397be70>
* <#m_-2080039215029770919__edn1>
by
George A. Bermann, N. Jansen Calamita, Manjiao Chi, and Karl P. Sauvant**
<#m_-2080039215029770919__edn2>

Over 100 WTO members are engaged in Structured Discussions aimed at a
multilateral framework on investment facilitation for development
(Framework). The Framework (meant to be a WTO agreement) seeks to
facilitate investment flows by creating legal obligations for states
regarding (among other things) enhanced transparency and predictability of
investment-facilitation measures and regulations, improved efficiency and
speed of administrative procedures, and the establishment of related
ombudsperson-type mechanisms.

It is our understanding that, in negotiating this agreement, negotiators
intend to create binding disciplines for states, but not to confer
enforceable rights on private parties. This raises the issue of the
Framework’s potential interaction with obligations contained in
international investment agreements (IIAs), especially in the context of
investor-state dispute settlement (ISDS). In particular, could ISDS
litigants and arbitrators rely on the Framework’s disciplines to add
elements to the fair-and-equitable-treatment (FET) standard, claim breaches
of umbrella clauses, or directly incorporate the Framework’s disciplines
via most-favored-nation (MFN) clauses? How can the risk be reduced that the
Framework’s obligations will be invoked by private parties in
investment-treaty disputes?

A future Framework can be expected—and needs to state expressly—that it
does not cover “market access, the treatment and protection of investment
or investors, and ISDS.”[1] <#m_-2080039215029770919__edn3>

But more needs to be done to ensure that Framework and IIA obligations
remain insulated from one another. Specifically, negotiators should
consider several treaty-interface clauses:

First, an explicit limitation of the scope of the Framework’s obligations,
to prevent a breach of the Framework from being treated also as a breach of
IIA provisions:

“A determination that there has been a breach of this Framework shall not
establish the breach of any rules on investment protection or
investor-state dispute settlement.”[2] <#m_-2080039215029770919__edn4>

Second, a limitation on MFN treatment, stating that MFN obligations only
extend to actual “treatment”, and that the Framework’s obligations do not
in themselves constitute “treatment”:

“For greater certainty, obligations arising from other treaties do not in
themselves constitute ‘treatment’ and thus are excluded for the purpose of
assessing a breach of this Article. Conversely, only measures adopted by a
Member pursuant to those obligations shall be considered ‘treatment’.
Furthermore, the obligations in this Framework shall not constitute
‘treatment’ under any other treaty.”[3] <#m_-2080039215029770919__edn5>

Third, a provision addressing the Framework’s use as a tool of
interpretation, expressly stating its inapplicability to the interpretation
of IIAs:

“This Framework cannot and shall not serve as a means to interpret any
rules on investment protection or investor-state dispute settlement.”

As these provisions would be binding among the parties to the Framework,
their effectiveness would be assured in IIA-based disputes in which
investors’ and respondents’ states are both parties to the Framework. With
more than 100 WTO members in the Structured Discussions (and more members
joining), the overlap between Framework parties and IIA parties could be
sizeable, depending upon how many members decide to adhere (and how
quickly).

What about ISDS disputes brought by investors from non-adhering WTO members
against adhering WTO members? To the extent that litigants may seek to use
MFN clauses to import Framework obligations into IIAs, most IIAs exempt
economic integration agreements (such as regional free trade agreements)
from the MFN obligation. Depending upon the exact wording of the MFN
clause, it is possible, though not without doubt, that arbitral tribunals
might find that the Framework is excluded on this basis.

In other cases in this situation, however, in which MFN clauses are broader
or investors attempt to use the Framework to supplement an umbrella or
open-ended FET clause, members can add the language below to make clear
that the Framework does not create rights for third states or their
investors:

“The Framework does not create rights for states that are not parties to it
or for investors and investments originating from such states (or having
the nationality of such states).”

Finally, to address the potential use of the Framework in IIA-based cases,
whether as a predicate to a claim or as interpretive support for one,
members can clarify that the jurisdiction to interpret and apply the
Framework is specifically limited, stating that:

 “The Dispute Settlement Body shall have exclusive jurisdiction to
interpret and apply the Framework.”[4] <#m_-2080039215029770919__edn6>

Unintended and unwanted interaction between a Framework and IIAs is
possible. WTO negotiators should therefore seriously consider including
provisions along these lines in a Framework to insulate it from being
imported into investor-state disputes.

------------------------------
* <#m_-2080039215029770919__ednref1> *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.*
** <#m_-2080039215029770919__ednref2> George A. Bermann (
[log in to unmask]) is Professor of Law and Director, Center for
International Commercial and Investment Arbitration, Columbia Law School;
N. Jansen Calamita ([log in to unmask]) is Head, Investment Law &
Policy, Centre for International Law, and Research Associate Professor
(CIL), Faculty of Law, National University of Singapore; Manjiao Chi (
[log in to unmask]) is Professor and Founding Director of the Center
for International Economic Law and Policy/CIEPL, Law School, University of
International Business and Economics/UIBE; 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. This *Perspective *benefitted from
discussions in the ITC/DIE Expert Network on a Multilateral Framework on
Investment Facilitation for Development. The authors are grateful to Evan
Gabor for his research assistance and to Makane Moïse Mbengue, Stefan
Schill and Christoph Schreuer for their helpful peer reviews.
[1] <#m_-2080039215029770919__ednref3> A similar statement is provided by
the Joint Ministerial Statement on Investment Facilitation for Development
<https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=f8366f5e4f&e=5eb397be70>,
para. 4.
[2] <#m_-2080039215029770919__ednref4> Comprehensive and Progressive
Trans-Pacific Partnership
<https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=e6e1afa530&e=5eb397be70>
(2019), art. 9.3.
[3] <#m_-2080039215029770919__ednref5> EU-Viet Nam Investment Protection
Agreement
<https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=fdad347e88&e=5eb397be70>
(2020), art. 2.4(5).
[4] <#m_-2080039215029770919__ednref6> Similar language has been proposed
by the EU.
*The material in this Perspective may be reprinted if accompanied by the
following acknowledgment: “George A. Bermann, N. Jansen Calamita, Manjiao
Chi, and Karl P. Sauvant, ‘Insulating a WTO Investment Facilitation
Framework from ISDS,’ Columbia FDI Perspectives, No. 286, September 7,
2020. Reprinted with permission from the Columbia Center on Sustainable
Investment (**www.ccsi.columbia.edu*
<https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=b3015ba34f&e=5eb397be70>*).”
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,
Riccardo Loschi, [log in to unmask]

*Most recent Columbia FDI Perspectives*
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   - No. 285, Sarah Atkinson and Jessica Hanson, ‘Corporate inversions and
   FDI in the United States,’ August 24, 2020
   - No. 284, Jens Velten, ‘FDI screening regulation and the recent EU
   guidance: What options do member states have?,’ August 10, 2020
   - No. 283, Hetal Doshi and Sankalp Udgata, ‘India’s blueprint for
   tackling opportunistic acquisitions during COVID-19, with Chinese firms in
   mind,’ July 27, 2020

*All previous FDI Perspectives are available at *
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*Other relevant CCSI news and announcements*

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   for Investors during the third annual conference of the Global Research
   Alliance for Sustainable Finance and Investment
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   - CCSI and partners call for ISDS moratorium during COVID-19 crisis and
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Karl P. Sauvant, Ph.D.
Resident Senior Fellow
Columbia Center on Sustainable Investment
Columbia Law School - Earth Institute
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Fax: (212) 854-7946
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*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
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"Insulating a WTO Investment Facilitation Framework from ISDS", "A G20
Facility to Rekindle FDI Flows", "Enabling the Full Participation of
Developing Countries in Negotiating a WTO Investment Facilitation
Framework", "Concrete Measures for a Framework on Investment Facilitation
for Development", "Making FDI more Sustainable", "Facilitating Sustainable
FDI by...", "An International Framework to Discipline Outward FDI
Incentives?", "The Case for an Advisory Centre on International Investment
Law", "An Advisory Centre on International Investment Law: Key Features",
 "Incentivizing Sustainable FDI: The Authorized Sustainable Investor", "The
Potential Value-added of a Multilateral Framework on Investment
Facilitation for Development",  "International Investment Facilitation: By
Whom and for What?", "Towards an Investment Facilitation Framework: Why?
What? When?" are available at https://ssrn.com/author=2461782 .

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