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*Columbia FDI Perspectives*
Perspectives on topical foreign direct investment issues
No. 293 December 14, 2020
Editor-in-Chief: Karl P. Sauvant ([log in to unmask])
Managing Editor: Riccardo Loschi ([log in to unmask])
*From investment promotion and protection to investment regulation*
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* <#m_6213798042056891784_m_67523339354368895__edn1>
by
Crina Baltag** <#m_6213798042056891784_m_67523339354368895__edn2>
Karl P. Sauvant, in his *Perspective*
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of March 2019, reviewed the state of the international investment law and
policy regime on the occasion of the 60th anniversary of the first
bilateral investment treaty (BIT). He concluded that the regime’s
substantive provisions must be re-balanced to reflect the principle of
sustainable development, while the regime’s dispute-settlement mechanism
needs to be overhauled and governments allowed to use it for their benefit
as well.
Currently, the framework of international investment law is, indeed, shaped
by the objective to promote and protect foreign investments. Since the
first BIT referenced above—the 1959 Germany-Pakistan BIT—substantive
provisions have endorsed a balance tilted in favor of the promotion and
protection of investment. This objective reflects the history of the
vulnerability of foreign investors in host countries and the fact that BITs
are remedial instruments intended to ensure that the treatment of foreign
investment is subject to the rule of law.[1]
<#m_6213798042056891784_m_67523339354368895__edn3>
Nevertheless, and perhaps incentivized by current initiatives (such as
UNCITRAL’s Working Group III) to reform investor-state dispute resolution
(ISDS) mechanisms, there is visible, but modest, progressive reform taking
place in international investment law (including ISDS). It is meant to
rebalance the investment regime.[2]
<#m_6213798042056891784_m_67523339354368895__edn4> In fact, we are
witnessing a shift from investment protection and promotion to investment
regulation. In this context, the words of the arbitral tribunal in *Sempra
v. Argentina* are even more forceful: “the Government also had many
expectations in respect of the investment that were not met or were
otherwise frustrated. Apart from the question of investment risk, it is
alleged that there was, inter alia, the expectation that the investor would
bear any losses resulting from its activity, work diligently and in good
faith, not claim extraordinary earnings exceeding by far fair and
reasonable tariffs, resort to local courts for dispute settlement,
dutifully observe contract commitments, and respect the regulatory
framework.”[3] <#m_6213798042056891784_m_67523339354368895__edn5>
Countries appear to begin to focus not only on providing
investment-protection standards and measures to stimulate investment flows,
but increasingly on addressing the conditions for the entry of investment
into their territories, the obligations of investors and their investments
once established, as well as the regulatory powers of governments over such
investments. The new generation of treaties with investment protection,
such as the 2019 EU-Vietnam Investment Protection Agreement
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and the 2019 Australia-Uruguay BIT
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are beginning timidly to address environmental protection, corporate social
responsibility and accountability for foreign investors. Seeking a balance
between domestic and international legal frameworks regulating investment
is shaping this new direction. UNCTAD, in its recent overview of ISDS
reform, refers to the rebalancing of international investment law and ISDS
by focusing on achieving sustainable development goals (with a focus on the UN
2030 Agenda for Sustainable Development
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and emphasizes that pursuing this objective implies “changes to
international investment policymaking, including IIAs [international
investment agreements].”[4]
<#m_6213798042056891784_m_67523339354368895__edn6>
The investment regime’s adaptation to this new direction of investment
regulation is likely to take time. The issues to be harmonized are complex,
and dealing with investors’ obligations beyond the legality of their
investments might require a completely new approach. One must also properly
take into consideration the fact that, while some countries and regional
economic organizations are at the forefront of this direction, others are
mindful of the fact that investment frameworks are crafted with a view of
specific factors, including both legal and policy objectives.
While there are already certain measures being implemented at national or
regional
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levels addressing foreign investment regulation, the key issue is how to
advance a comprehensive and feasible international framework that promotes
the interests of both investors and countries, with a view toward
developing a proper investment regulatory framework, addressing both
substance and procedure. Further, such framework, if adopting a balanced
approach, would likely address the impact of international investment law
(including ISDS) on societal interests at large, currently limitedly
addressed by way of *amici curiae *participation in ISDS. The OECD
Guidelines for Multinational Enterprises
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are a sound starting point for developing such a framework—but one could
perhaps consider as well developing this in the UNCITRAL Working Group,
perhaps based on the model of the Mauritius Convention. A congruent and
inclusive approach will likely ensure an effective outcome.
------------------------------
* <#m_6213798042056891784_m_67523339354368895__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_6213798042056891784_m_67523339354368895__ednref2> Crina Baltag (crina
[log in to unmask]) is Senior Lecturer in International Arbitration at
Stockholm University and arbitrator. The author wishes to thank Kabir
Duggal, Jan Kleinheisterkamp and Katia Yannaca-Small for their helpful peer
reviews.
[1] <#m_6213798042056891784_m_67523339354368895__ednref3> Kenneth J.
Vandevelde, *Bilateral Investment Treaties. History, Policy, and
Interpretation* (Oxford: OUP, 2010), 1–2.
[2] <#m_6213798042056891784_m_67523339354368895__ednref4> See also this
author reflecting upon a possible re-balancing of the system in Crina
Baltag, “Reforming the ISDS system: In search of a balanced
approach?,” *Contemporary
Asia *A*rbitration Journal*, vol. 12 (2019), pp. 279–312.
[3] <#m_6213798042056891784_m_67523339354368895__ednref5> *Sempra v.
Argentina*, ICSID Case No. ARB 02/16, para. 289
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.
[4] <#m_6213798042056891784_m_67523339354368895__ednref6> UNCTAD,
“Reforming investment dispute settlement: A stocktaking,”* IIA Issues Note*,
Mar. 2019, p. 4
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.
*The material in this Perspective may be reprinted if accompanied by the
following acknowledgment: “Crina Baltag, ‘From investment promotion and
protection to investment regulation,’ Columbia FDI Perspectives, No. 293,
December 14, 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=a50a2f63e2&e=d0b2feb81a>*).”
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. 292, Khalil Hamdani, ‘The development dimension of an investment
facilitation framework,’ November 30, 2020
- No. 291, Rudolf Adlung, Pierre Sauvé and Sherry Stephenson,
‘Investment facilitation and the GATS: Do overlaps matter?,’ November 16,
2020
- No. 290, Roberto Echandi, ‘The blind side of international investment
law and policy: The need for investor-state conflict-management mechanisms
fostering investment retention and expansion,’ November 2, 2020
*All previous FDI Perspectives are available at *
*http://ccsi.columbia.edu/publications/columbia-fdi-perspectives/*
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*. *
*Other relevant CCSI news and announcements*
- *Videos now available!* Watch CCSI's International Investment Law and
Policy Speaker Series here
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.* Dec 1: Chantal Ononaiwu*, Trade Policy & Legal Specialist, Office of
Trade Negotiations (OTN), CARICOM Secretariat; *Dec 4: Heidi Hautala*,
MEP and Vice-President of the European Parliament; and* Dec 7: H.E.
Ambassador Albert Muchanga*, Commissioner, Department of Trade and
Industry, African Union Commission.
- CCSI announces a *call for papers* for the 2020 edition of
the Yearbook on International Investment Law and Policy. Original
contributions to be considered for publication in the Yearbook will be
accepted on a rolling basis until *February 28, 2021.* More information
can be found here
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.
- *CCSI is accepting applications until March 31, 2021* for its
Executive Training on Sustainable Investments in Agriculture, which will
take place online June 15-25, 2021. Please visit our website
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for more information, including on how to apply.
- *CCSI is accepting applications until February 28, 2021* for
its Executive Training on Extractive Industries and Sustainable Development,
which will take place online June 7-18, 2021. Please visit our website
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for more information, including on how to apply.
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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*Columbia Center on Sustainable Investment*
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