c. ononaiwu - caricom agreements on investment - prospects for the investment relationship...
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CARICOM INVESTMENT AGREEMENTS CARICOM INVESTMENT AGREEMENTS WITH THE UNITED STATES: WITH THE UNITED STATES:
PROSPECTS FOR THE PROSPECTS FOR THE INVESTMENT RELATIONSHIPINVESTMENT RELATIONSHIP
O A S / C R N M / C A R I C O M W O R K S H O P O A S / C R N M / C A R I C O M W O R K S H O P O A S / C R N M / C A R I C O M W O R K S H O P O A S / C R N M / C A R I C O M W O R K S H O P O A S / C R N M / C A R I C O M W O R K S H O P O A S / C R N M / C A R I C O M W O R K S H O P O A S / C R N M / C A R I C O M W O R K S H O P O A S / C R N M / C A R I C O M W O R K S H O P “ N E G O T I A T I N G C A R I C O M I N V E S T M E N T A G R E E M E N T S : S T A T E O F P L A Y “ N E G O T I A T I N G C A R I C O M I N V E S T M E N T A G R E E M E N T S : S T A T E O F P L A Y “ N E G O T I A T I N G C A R I C O M I N V E S T M E N T A G R E E M E N T S : S T A T E O F P L A Y “ N E G O T I A T I N G C A R I C O M I N V E S T M E N T A G R E E M E N T S : S T A T E O F P L A Y “ N E G O T I A T I N G C A R I C O M I N V E S T M E N T A G R E E M E N T S : S T A T E O F P L A Y “ N E G O T I A T I N G C A R I C O M I N V E S T M E N T A G R E E M E N T S : S T A T E O F P L A Y “ N E G O T I A T I N G C A R I C O M I N V E S T M E N T A G R E E M E N T S : S T A T E O F P L A Y “ N E G O T I A T I N G C A R I C O M I N V E S T M E N T A G R E E M E N T S : S T A T E O F P L A Y
A N D W A Y F O R W A R D ”A N D W A Y F O R W A R D ”A N D W A Y F O R W A R D ”A N D W A Y F O R W A R D ”A N D W A Y F O R W A R D ”A N D W A Y F O R W A R D ”A N D W A Y F O R W A R D ”A N D W A Y F O R W A R D ”G R E N A D A R E X R E S O R T H O T E L , G R E N A D A , 2 2G R E N A D A R E X R E S O R T H O T E L , G R E N A D A , 2 2G R E N A D A R E X R E S O R T H O T E L , G R E N A D A , 2 2G R E N A D A R E X R E S O R T H O T E L , G R E N A D A , 2 2G R E N A D A R E X R E S O R T H O T E L , G R E N A D A , 2 2G R E N A D A R E X R E S O R T H O T E L , G R E N A D A , 2 2G R E N A D A R E X R E S O R T H O T E L , G R E N A D A , 2 2G R E N A D A R E X R E S O R T H O T E L , G R E N A D A , 2 2 -------- 2 5 J U N E 2 0 0 92 5 J U N E 2 0 0 92 5 J U N E 2 0 0 92 5 J U N E 2 0 0 92 5 J U N E 2 0 0 92 5 J U N E 2 0 0 92 5 J U N E 2 0 0 92 5 J U N E 2 0 0 9
INVESTMENT RELATIONSHIPINVESTMENT RELATIONSHIP
Dr Chantal OnonaiwuTrade Policy & Legal Specialist
Caribbean Regional Negotiating Machinery
OverviewOverview
� Investment agreements between individual CARICOM countries and the US
� Existing BITs with the US
� Evolving US policy on investment protection
� Investment agreements between CARICOM and the US
� Prospects for a CARICOM-US FTA
� The CARICOM-US Trade and Investment Framework Agreement (TIFA)
IIAs with Individual CARICOM Countries IIAs with Individual CARICOM Countries
� Only Haiti, Grenada, Jamaica and Trinidad & Tobago have concluded BITs with the US
� The BIT with Haiti was among the first negotiated by the US but has not been ratified by either country
� The BITs with Grenada, Trinidad & Tobago and Jamaica have been in force since 1989, 1996 and 1997 respectivelyforce since 1989, 1996 and 1997 respectively
� Any future investment treaty negotiations with the US will need to be informed by the evolving US policy on investment protection
� The 2004 US Model BIT differs in several important respects from the existing BITs between the US and CARICOM countries
� The US is reviewing its model BIT
Existing US BITs with CARICOM Countries Existing US BITs with CARICOM Countries
� The existing investment treaties are based on different US model BITs. However, they all insist on strong investor protection and share the following key features:� A broad definition of investment
� Discretion to deny treaty benefits to investments of companies without substantial business activities in the home country
� Prohibition of discrimination in both the entry and post-entry � Prohibition of discrimination in both the entry and post-entry phases of investment
� Guarantee of fair and equitable treatment, full protection and security and the treatment required by international law
� Requirement of host State to observe any obligation with regard to investment (“umbrella clause”)
� Obligation, subject to immigration and employment laws, to allow the entry of the other Party’s nationals for certain purposes related to an investment involving the commitment of a substantial amount of capital
Existing US BITs with CARICOM Countries Existing US BITs with CARICOM Countries
� Key features of existing BITs (cont’d):
� Right of investors to engage top managerial personnel of their choice
� Restrictions on the right to impose performance requirements
� Prohibition of unlawful expropriation, whether directly or indirectly through measures ‘tantamount to expropriation’indirectly through measures ‘tantamount to expropriation’
� Non-discriminatory treatment of investors who suffer losses due to war or civil disturbance
� Guarantees of free transfers relating to investments
� Access to investor-State dispute settlement
� ‘Preservation of rights’ under domestic legislation, other international legal obligations or agreements between the investor and host state
Evolving US Policy on Investment Protection Evolving US Policy on Investment Protection
� The 2004 US Model BIT features clarifications to substantive provisions and introduces procedural safeguards in relation to investor-State dispute settlement.
� These changes integrate lessons from implementation of NAFTA’s investment chapter and result from the US’ NAFTA’s investment chapter and result from the US’ interest in striking a better balance between protection of investment and the ability of governments to regulate in the public interest.
� However, strong investment protection remains high on the agenda.
Evolving US Policy on Investment Protection Evolving US Policy on Investment Protection
� The 2004 Model BIT clarified a number of substantive provisions:� The definition of investment
� To qualify, an asset must have the “characteristics of an investment”, which include the “commitment of capital, the expectation of gain or profit, or the assumption of risk”.expectation of gain or profit, or the assumption of risk”.
� Minimum standard of treatment
� Guarantee of the MST in accordance with “customary international law”, which includes fair and equitable treatment and full protection and security.
� Clarification of the shared understanding of “customary international law”.
Evolving US Policy on Investment Protection Evolving US Policy on Investment Protection
� The 2004 Model BIT also clarified the provision concerning:
� Expropriation
� Indirect expropriation occurs through “measures equivalent to expropriation”.expropriation”.
� Expropriation requires interference with a property right or interest.
� Certain factors must be considered in the determination of indirect expropriation.
� Only in “rare circumstances” do non-discriminatory regulations designed and applied to protect public health, safety and the environment constitute indirect expropriation.
Evolving US Policy on Investment Protection Evolving US Policy on Investment Protection
� The 2004 Model BIT also introduced procedural safeguards:
� Adding of preliminary procedures
� Tribunals must decide as a preliminary question a respondent’s objection that the claim is frivolous. If the tribunal finds that the claim is frivolous, it may award costs and fees.claim is frivolous, it may award costs and fees.
� Greater transparency and openness of arbitral proceedings
� The main documents of proceedings must be released to the public and hearings must be open to the public except to prevent the disclosure of confidential information.
� A tribunal may accept and consider amicus submissions.
� Anticipation of an appellate body to review awards rendered
Evolving US Policy on Investment Protection Evolving US Policy on Investment Protection
� A sub-committee to the Advisory Committee on International Economic Policy is reviewing the US model BIT.
� In the current review, a central issue will be striking a balance between investor protection and the government’s right to regulate in the public interest.right to regulate in the public interest.
CARICOMCARICOM--US Investment AgreementUS Investment Agreement
� There is no consensus among CARICOM countries as to the desirability of negotiating a free trade agreement with the US.
� While some consider that an FTA would, inter alia, improve prospects for attracting US investment to improve prospects for attracting US investment to CARICOM, others would prefer to focus on extension and expansion of unilateral preferences.
� CARICOM has deferred making a decision on negotiating an FTA with the US until the completion of a trade and development agreement with Canada.
CARICOMCARICOM--US Investment AgreementUS Investment Agreement
� A Trade and Investment Council (TIC) was established in 1991 as a forum for dialogue on trade and investment issues between CARICOM and the US.
� The Council met on two occasions but ceased to function after 1999.after 1999.
� In 2006, CARICOM and the US have agreed to conclude a Trade and Investment Framework Agreement (TIFA) in order to reconstitute the TIC to consider a wide range of trade and investment-related issues.
� Earlier this year, CARICOM submitted its second proposal for the TIFA.
CARICOMCARICOM--US Investment AgreementUS Investment Agreement
� Among the key elements of CARICOM’s revised text of the TIFA are that the TIC:
� shall meet annually
� shall encourage progressive liberalization of trade and investment between the Parties
� may, at the request of the Parties, consult on trade and investment � may, at the request of the Parties, consult on trade and investment matters
� shall address the “Immediate Action Agenda” of trade and investment issues, including
� collaboration on matters relating to bilateral investment arrangements between CARICOM and the US
� promotion of investment opportunities
� Review of investment aspects of tax treaties
Concluding ThoughtsConcluding Thoughts
� Although the US remains one of the largest investors in CARICOM, the stock of FDI is concentrated in a few countries.
� Investment agreements, whether concluded by individual countries or CARICOM, may present individual countries or CARICOM, may present important prospects for developing the investment relationship with the US.
� CARICOM countries must track the evolving US policy on investment countries and craft an appropriate strategy for realizing their development objectives.
