sergey ripinsky
DESCRIPTION
INTERNATIONAL INVESTMENT AGREEMENTS AND INVESTOR-STATE ARBITRATION LECTURE 1. IIAs: types, features and trends. Sergey Ripinsky. International Investment Agreements Section. Division on Investment and Enterprise. Geneva, 4 May 2012. Plan for the course. - PowerPoint PPT PresentationTRANSCRIPT
INTERNATIONAL INVESTMENT AGREEMENTS AND INVESTOR-STATE ARBITRATION
LECTURE 1. IIAs: types, features and trends
Sergey Ripinsky
International Investment Agreements Section
Division on Investment and Enterprise
Geneva, 4 May 2012
Plan for the course
I. IIAs – notion, types, features and trendsII. Investor-State dispute settlement (ISDS)III. IIAs and sustainable developments
Background: recent FDI statistics
• 2011: global FDI inflows rose by 17% to US$1.5 trillion.• Developing and transition economies accounted for half of
global FDI in 2011 (US$755 billion).
1 472
1 969 1 744
1 180 1 290 1 509
0
740
1 480
pre-crisisaverage
2005-2007
2007 2008 2009 2010* 2011**
32
FDI inflows, global and by group of economies, 1980–2010(Billions of dollars)
Figure I.3, WIR11, p. 3.
FDI flows over time
Investors and governments: examples of problems
1. 40-year oil concession with a stabilization clause. After 10 years, new government proposes to renegotiate the contract. Investor refuses. Government terminates the concession.
2. Pesticide-producing business. New scientific evidence – government bans production and marketing of that pesticide.
3. Tax authority imposes multiple fines and sanctions for tax avoidance. Investor says that this is a revenge for its refusal to pay bribes to tax officials.
4. New requirement that all enterprises employ 90% of locals and that they source 90% of their inputs locally. Foreign investors complain that this makes their products less competitive.
IIA – an international treaty that promotes and protects investments from one Contracting Party in the territory of another • Preamble• Definitions of terms (esp. investment / investor)• Admission and establishment of investments• Core standards of protection:
– Non-discrimination (National Treatment / MFN)– Fair and equitable treatment– Full protection and security– Expropriation– Compensation for losses due to armed conflict / civil riots– Free transfer of funds– “Umbrella clause” (obligation to observe specific
undertakings)• Dispute settlement (investor-State arbitration)
Why do countries conclude IIAs?
• Home countries – to protect their investors abroad.
• Host countries – to attract FDI.
• Complicating factor: Many countries are now both importers and exporters of capital.
Main FDI determinants
• Market size • Availability of natural resources• Quality of infrastructure• Qualification and productivity of the workforce• Flexibility of labour legislation and exchange
laws• Transparency and stability of the legal and
political systems, security of property and contract rights
• Tax incentives
Sources of investment risk (political risk)
• nationalization / expropriation• contract repudiation• crime, terrorism and kidnapping• civil unrest• constraints on repatriation of dividends/profits• ineffective legal and regulatory systems• red tape, bureaucracy and weak institutions• corruption/bribery
Types of IIAs
1) BITs, and2) “other IIAs”, which include:
– Free trade agreements / economic partnership agreements with investment provisions (FTAs/EPAs)
– Regional integration agreements (EU, CARICOM, MERCOSUR, COMESA, Arab investment agreement, ASEAN)
– Multilateral agreements focusing on a specific sector (Energy Charter Treaty)
– Multilateral agreements touching upon investment issues (GATS, TRIMs)
11
Trends of BITs and other IIAs 1980–2011
0
50
100
150
200
250
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Annu
al n
umbe
r of I
IAs
0
500
1000
1500
2000
2500
3000
3500
Cum
ulat
ive
num
ber o
f IIA
s
Other IIAs BITs All IIAs cumulative
The IIA regime
Top ten signatories of BITs
0 20 40 60 80 100 120 140 160
Korea, Republic of
Italy
Belgium and Luxembourg
Netherlands
Egypt
France
United Kingdom
Switzerland
China
Germany
Number of BITs
14
Protection offered by the IIA regime
15
IIA content trends• Pre- and post-establishment IIAs• Different formulations of the same “core”
disciplines - different interpretation by arbitral tribunals.
• Treaty text is paramount – need to understand its implications and possible future interpretation.
• Increased sophistication and level of detail – learning lessons from ISDS proceedings.
• New types of disciplines included (performance requirements, transparency, etc.).