International economic law (investment)

Question 1

Historic Background

Answer 1

• (post) Colonial time: Foreign investors consider local law inferior amd want to be protected by their national law -> no expropriation/nationalization
• Decolonization brings up state sovereignty: State ownership of natural resources
• • from 1917 Russian Revolution
• • from 1910 - 1920 Mexican agrarian revolution
    Idea of international minimum standards for foreign investors to protect human right of private property
• • 2 ideas
• • ->Calvo docrine: VS international minimum standard, same treatment for national and foreigners: equality of treatment + disputes to national courts
• • -> Hull formula: preferential treatment for foreign companies to incentivize investments + no expropriation without compensation (it is confiscation). In practive foreign control over national natural resources
• After WWII: UN and GA tackle the issue
• • Resolution on Permanent sovereignty of states over their natural resources
• • • it is costum (arbitration texaco vs Libya)
• • • expropriation only if publi reason + comprensation
• • ICSID from World Bank
• • BITs
• • NIEO
• • Failed attempts to multilateral agreements

Question 2

ITL governs

Answer 2

• foreign investors and investment receiving states (host states)
• Investor states and host states

Question 3

Why investment law

Answer 3

Countries can have resources but lack technical know-how. Foreign investments can
- make profits from natural resources
- bring knowledge
BUT
- negative externalities
- - on the environment
- - litigation terrorism
- some countries lack political/judicial safeness -> need of treaties

Question 4

Sources of ITL

Answer 4

• Treaties
• • BITs
• • Free Trade Agreements (es NAFTA, US-Chile, EU-Ukraine)
• • no single comprehensive one
• Custom -> from diplomatic exchanges
• Judicial decisions -> a lot of case law
• Soft law -> OECD Guidelines

Question 5

UN efforts to regulate foreign investment

Answer 5

• GA Resolution on Permanent sovereignty of states over their natural resources
• • PSNR for national development and ppl well-being
• • Rules for use of resources agreed by locals
• • Foreign capital governed by national and international law + profits shared with recipient state
• • Nationalization/Expropriation/Requisitioning on grounds of public security/utility/national interest always with compensation. Settlement of disputes if agreed by state can be through international arbitration/adjudication
• New International Economic Order (NIEO) -> preferential investment conditions for developing countries
• UN draft code of conduct for transnational corporations

Question 6

Key principles in BITs

Answer 6

• defintion of property and investment
• Conditions for expropriation
• • Definition = Property subject to legal restrictions/thougher regulation impacting economic benefits/diminishing value (ownership can remain to investor)
    N.B.: can be indirect from Starrett hoursing corporation VS Iran
• • must be
• • • in accordance with the law
• • • non discriminatory (MFN + NT)
• • • public purpose
• • • Fair and equitable comprensation
• How compensation must be
• • Fair market value
• • Freely treansferable
• • Interest rate
• • no unreasonable delay
• • realizable
• Various levels of protection
• • Minimum standards
• • non discriminatory
• • MFN treatment
• • NT
• • Fair and equitable treatment = proportionality + no unreasonable/arbitraty measures + legitimate expectations
• International Dispute resolution mechanism

Question 7

BITs characteristics

Answer 7

• 10 y duration + automatic renewal
• no state can unilaterally change it
• protection non commercial risks

Question 8

Dispute Settlement

Answer 8

• BITs and FTAs include ISDS (Investor state dispute settlement)
• Through arbitration
• • VS Courts: no judges, arbitrators chosen by parties, most known is ICSID
• • Why: assurance vs political risks, national judiciary can be corrupt - slow - non independent
• Consequences
• • Regulatory chill
• • Lack of accountability

Question 9

Regulatory chill definition

Answer 9

Avoidance to take measures in the public interest from states because fear of being sued by investors

Question 10

Problems of dispute settlement now

Answer 10

• limiting police powers
• treaty shopping risk (mailbox companies)
  Reform of investment arbitration process
• investor accountability
• code of conduct fro judges
• more inter party equity
• Standing court
• • PRO: consistency
• • CONs: Slower, parties cannot choose
• Appeal mechanism

Question 11

How to use CETA

Answer 11

Chapter 8
- scope
- is it a violation of
- - MFN
- - NT
- - Market acess
- does it match an exception?