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Domestic Investment Laws, International Economic Law, and Economic Development

Published online by Cambridge University Press:  13 January 2023

Kehinde Folake Olaoye  and
Muthucumaraswamy Sornarajah
Kehinde Folake Olaoye*
Affiliation:
School of Law, City University Hong Kong, Hong Kong SAR
Muthucumaraswamy Sornarajah
Affiliation:
National University of Singapore, Singapore
*
*Corresponding author: Kehinde Folake Olaoye, Email: kfolaoye@cityu.edu.hk
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Abstract

‘Development’ is a legal concept which has been central to the practice of international economic law (IEL). This Article examines how ‘development’ continues to be at the heart of struggles between domestic investment laws (DILs) and international economic law. By examining over 3000 international investment agreements (IIAs) and DILs signed in the last seven decades, this Article identifies the ways in which the concept of development has evolved in tandem with the growth of international economic law by dividing the history of international investment law into six main phases. It traces the emergence of ‘development’ in DIL to the decolonization era arguing that post 1990, the proliferation of international investment treaties and growth of investment treaty arbitration have been used as tools of liberalization on the weak premise that this would lead to economic development. In this context, this Article examines closely the interpretation of ‘investment’ by ICSID tribunals, promotion of international arbitration for economic development, attempts to internationalize economic development contracts, continued relevance of the New International Economic Order, and shift to sustainable development in IEL discourse.

Keywords

international investment lawinvestment arbitrationdevelopmentnew international economic order
Type
Original Article
Information
World Trade Review , Volume 22 , Special Issue 1: Domestic Investment Laws and International Economic Law in the Liberal International Order , February 2023 , pp. 109 - 132
Copyright
Copyright © The Author(s), 2023. Published by Cambridge University Press

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48 Ibid.

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55 ‘United Nations: Economic Commission for Africa Report on African Investment Legislation’ (1964) 3 ILM 179, 183.

56 ‘Philippines Investment Incentives and Guarantees Act’ (1967) 6 ILM 1174, s 2.

57 ‘Ghana: Capital Investments Act’ (1963) 2 ILM 666, art. 5; ‘Saudi Arabia: Investment Code’ (1964) 3 ILM 561, art. 2.

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60 M. Sornarajah (1994) ‘ICSID Involvement in Asian Foreign Investment Disputes: The AMCO and AAPL Cases’, Asian Yearbook of International Law 4 69.

61 Amco Asia Corporation and others v. Republic of Indonesia, ICSID Case No. ARB/81/, Decision on Jurisdiction (25 September 1983), para. 25.

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63 I.F.I. Shihata (2010) ‘Regulation of Foreign Investment’, in M. Maniruzzaman, A. Schwabach, A.J. Cockfield, A.D. Tarlock, J.C. Dernbach, and G.M. Kutting (eds.), International Sustainable Development Law Volume II. EOLSS Publications, 195.

64 ‘Organisation for Economic Cooperation and Development: Draft Convention on the Protection of Foreign Property’ (1963) 2 ILM 241, preamble.

65 G. Schwarzenberger (1960) ‘The Abs–Shawcross Draft Convention on Investments Abroad: A Critical Commentary’, Journal of Public Law 9, 147.

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67 ‘Switzerland: Commercial Agreements with Senegal, Niger, Guinea, and Ivory Coast’ (1963) 2 ILM 144, art. 1.

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69 Denmark–Indonesia BIT (1968).

70 Agreement on Economic Cooperation between Netherlands and Indonesia (with protocol and exchanges of letters signed 17 June 1968), art. 19.

71 See Rafat Ali Rizvi v. Republic of Indonesia, ICSID Case No. ARB/11/13, Award (16 July 2013).

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76 For documents, see ‘United Nations General Assembly Sixth Special Session’ (1974) 13 ILM 715.

77 ‘Egypt: Foreign Investment Law, As Amended’ (1977) 16 ILM 1476.

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85 ‘Malagasy: The Investment Code’ (1973) 12 ILM 1506; Djibouti 1984, art. 6.

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95 Examples include Gabon–Morocco BIT (1979) and Malaysia–Sri Lanka BIT (1982).

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106 This reflected in the 2004 and 2012 US Model Investment Treaties which contain significant deviations from the 1994 model.

107 Described as the ‘roaring nineties’, it was the period in which market economics triumphed. See J.E. Stiglitz (2004) The Roaring Nineties: A New History of the World's Most Prosperous Decade. WW Norton & Company.

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109 K.J. Vandevelde (1998), ‘Investment Liberalization and Economic Development: The Role of Bilateral Investment Treaties’, Columbia Journal of Transnational Law 36, 501, 502.

110 Ibid.

111 ‘General Agreement on Tariffs and Trade – Multilateral Trade Negotiations (The Uruguay Round): Agreements on Trade in Goods’ (1993) 33 ILM 29.

112 Asian Agricultural Products Ltd v. Republic of Sri Lanka, ICSID Case No. ARB/87/3, Award (27 June 1990).

113 J. Paulsson (1995) ‘Arbitration without Privity’, International Centre for Settlement of Investment Disputes Review 10, 232.

114 M. Sornarajah (2021) The International Law on Foreign Investment, 5th edn. Cambridge University Press, 4.

115 Code of Investments (1990) Benin, art. 15; Tanzania: National Investment (Promotion and Protection) Act 1990’ (1991) 30 ILM 890, preamble.

116 Investment Charter Cameroon 2002, art. 2.

117 ‘Cuba: Foreign Investment Act of 1995’ (1996) 35 ILM 331.

118 Thailand Foreign Business Act 1999, s 5; Afghanistan Investment Law (2005), art. 1.

119 Finland–Nicaragua BIT (2003), preamble; Panama–Taiwan Province of China FTA (2003), preamble.

120 Republic of South Africa, Broad-based Black Economic Empowerment Act 52 of 2003 as Amended by Act 46 of 2013. Section 2 (e) provides that: ‘The objectives of this Act are to facilitate broad-based black economic empowerment by— promoting investment programmes that lead to broad-based and meaningful participation in the economy by black people in order to achieve sustainable development and general prosperity.’

121 For example, the annex to Thailand's 1999 DIL reserved certain sectors of the economy for Thai nationals.

122 The US, Canada, and Australia were the first countries to establish detailed investment screening review mechanisms for national security.

123 US Model BIT (2004), art. 12.

124 Sornarajah, supra n. 12, 66.

125 See P.L Hsieh, ‘New Investment Rulemaking in Asia: Between Regionalism and Domestication’, this special issue; argues that the Asian financial crisis prompted paradigm shifts.

126 Methanex Corporation v. United States of America, UNCITRAL, Award (3 August 2005).

127 Ethiopia–Finland BIT (2006); Azerbaijan–Latvia BIT (2005).

128 Cuba Foreign Investment Act (2014), preamble; Timor-Leste – Private Investment Law (2011), preamble.

129 Mongolia Investment Law (2013), art. 16(3). For a discussion of investment incentives in international economic law, see A. Gourgourinis, ‘Domestic Investment Incentives in International Trade Law’, this special issue.

130 Indonesia Investment Law 2007, art. 3(2) (c).

131 G. Dimitropoulos (2020) ‘The Conditions for Reform: A Typology of “Backlash” and Lessons for Reform in International Investment Law and Arbitration’, The Law & Practice of International Courts and Tribunals 18, 416.

132 Vandevelde, supra n. 108, 526.

133 A. Dimopoulos (2010) ‘Shifting the Emphasis from Investment Protection to Liberalization and Development: The EU as a New Global Factor in the Field of Foreign Investment’, Journal of World Investment & Trade 11, 5, 15.

134 South Africa, Protection of Investment Act 22 of 2015.

135 Sornarajah, supra n. 12, 156.

136 Singapore–Indonesia BIT (2018), art. 11.

137 U. Kriebaum, C. Schreuer, and R. Dolzer (2022) Principles of International Investment Law, 3rd edn, Oxford University Press, ) 14.

138 J. Chaisse and G. Dimitropoulos (2021), ‘Special Economic Zones in International Economic Law: Towards Unilateral Economic Law’, Journal of International Economic Law 24, 229.

139 Investment Proclamation No. 1180/2020 Ethiopia, preamble.

140 Indonesia–Russian Federation BIT (2007); Indonesia–Iran, Islamic Republic of BIT (2005).

141 South Africa Foreign Investment Act (2015), s 4(b).

142 Albania Law on Strategic Investment (2016), art. 3.

143 Fiji Investment Act (2021), art. 3(c); Sudan, The Investment (Encouragement) Act 2021, art. 4.

144 Egypt Investment Code 2017, art. 2.

145 Hungary–Kyrgyz Republic BIT (2020), preamble; EU–Viet Nam Investment Protection Agreement (2019), preamble.

146 Indonesia–Republic of Korea CEPA (2020), art. 7(17); Israel–United Arab Emirates BIT (2020), preamble.

147 Morocco–Nigeria BIT (2016), art. 1; India–Kyrgyzstan BIT (2019), art. 1(4).

148 Brazil–India BIT (2020), art. 12(1).

149 L. Cotula (2021) ‘EU–China Comprehensive Agreement on Investment: An Appraisal of its Sustainable Development Section’, Business and Human Rights Journal 6, 1.

150 EU–China CIA (2021), art. 1(1).

151 EU–China CIA (2021), s IV, art. 1 (2).

152 Also see, EU–ESA EPA (April 2021 update) Discussions focused on the right to regulate and levels of protection, labour standards, environmental standards, biodiversity, forest management, marine resource management, institutional transparency and dispute settlement provisions.

153 EU–Angola Negotiations on a Sustainable Investment Facilitation Agreement, Report II (13 December 2012) https://trade.ec.europa.eu/doclib/docs/2021/december/tradoc_159996.pdf (accessed 10 January 2022).

154 Kriebaum, Schreuer, and Dolzer, supra n. 136, 83.

155 J.D. Mortenson (2010) ‘The Meaning of Investment: ICSID's Travaux and the Domain of International Investment Law’, Harvard International Law Journal 51, 257.

156 M. Sattorova (2018) The Impact of Investment Treaty Law on Host States: Enabling Good Governance? Bloomsbury Publishing, 18.

157 M. Waibel (2021) ‘Subject Matter Jurisdiction: The Notion of Investment’, International Centre for Settlement of Investment Disputes Reports 19, 25, 26.

158 International Centre for Settlement of Investment Disputes, Volume II History of ICSID (1964) 149.

159 (DS)2, SA, Peter de Sutter and Kristof De Sutter v. Republic of Madagascar, ICSID Case No. ARB/17/18, Award (17 April 2020), para. 231; Hope Services LLC v. Republic of Cameroon ICSID Case No. ARB/20/223, Award (23 December 2021), para. 160.

160 Croatian Courier Coöperatief U A v. Republic of Croatia, ICSID Case No. ARB/15/5, Award (5 April 2019), para. 587.

161 Sornarajah, supra n. 12, 2.

162 Christian Doutremepuich and Antoine Doutremepuich v. Republic of Mauritius, PCA Case No. 2018–37, Award (23 August 2019), para. 119–120.

163 Salini Costruttori S p A and Italstrade S p A v. Kingdom of Morocco, Decision on Jurisdiction (31 July 2001), para. 52.

164 Société Ouest Africaine des Bétons Industriels v. Senegal, ICSID Case No. ARB/82/1, Dissenting Opinion of Kéba Mbaye (25 February 1988).

165 Salini v. Morocco, supra n. 16, para. 52.

166 Raymond Charles Eyre and Montrose Developments (Private) Limited v. Democratic Socialist Republic of Sri Lanka, ICSID Case No. ARB/16/25, Award (5 March 2020), para. 113.

167 Croatian Courier Coöperatief U A v. Republic of Croatia, supra n. 159, para. 604.

168 Tidewater Inc, Tidewater Investment SRL, Tidewater Caribe, CA, et al v. The Bolivarian Republic of Venezuela, ICSID Case No. ARB/10/5, Decision on Jurisdiction (8 February 2013).

169 Infinito Gold Ltd v. Costa Rica, ICSID Case No. ARB/14/5, Decision on Jurisdiction (4 December 2017), para. 369.

170 Hope Services LLC v. Republic of Cameroon, supra n.159, para. 202.

171 Standard Chartered Bank (Hong Kong) Limited v. United Republic of Tanzania, ICSID Case No. ARB/15/41, Award (11 October 2019), para. 246.

172 Cortec Mining Kenya Limited, Cortec (Pty) Limited and Stirling Capital Limited v. Republic of Kenya, ICSID Case No. ARB/15/29, Award (22 October 2018), para. 301.

173 Marco Gavazzi and Stefano Gavazzi v. Romania, ICSID Case No. ARB/12/25, Decision on Jurisdiction (21 April 2015), para. 114.

174 MNSS BV. and Recupero Credito Acciaio N V v. Montenegro, ICSID Case No. ARB(AF)/12/8, Award (4 May 2016), para. 211.

175 Bay View Group LLC and The Spalena Company LLC v. Republic of Rwanda, ICSID Case No. ARB/18/21, Award (30 March 2022), para. 208.

176 Waibel, supra n. 157, 56.

177 Antoine Abou Lahoud and Leila Bounafeh-Abou Lahoud v. Democratic Republic of the Congo, ICSID Case No. ARB/10/4, Award (7 February 2014), para. 325.

178 UNCTAD Investment Policy Hub, International Investment Agreements Navigator, Congo, Democratic Republic of the, https://investmentpolicy.unctad.org/international-investment-agreements/countries/56/congo-democratic-republic-of-the (accessed 12 January 2022).

179 P.H Mitchell and R.M. Gittleman (1987) ‘The 1986 Zairian Investment Code: Analysis and Commentary’, ICSID Review 2, 122.

180 DRC Investment Code 2002, art. 2 (b).

181 Lahoud v. Democratic Republic of the Congo, supra n. 176, para. 319.

182 Burkina Faso–Turkey BIT (2019), art. 1(1).

183 Croatian Courier Coöperatief U A v. Croatia, supra n. 159, para. 589.

184 PNG Sustainable Development Program Ltd v. Independent State of Papua New Guinea, ICSID Case No. ARB/13/33, Award (5 May 2015), para. 264–265.

185 J. Ho (2018) State Responsibility for Breaches of Investment Contracts. Cambridge University Press, 1.

186 Sornarajah, supra n. 12, 182.

187 T.W. Waelde and G. Ndi (1996) ‘Stabilizing International Investment Commitments: International Law versus Contract Interpretation’, Texas International Law Journal 31, 215.

188 Asante, supra n. 39.

189 Fatouros, supra n. 101.

190 Ibid. 134.

191 R. Geiger (1974) ‘The Unilateral Change of Economic Development Agreements’, International & Comparative Law Quarterly 23, 73, 73.

192 ‘Dahomey: Investment Code’ (1968) 7 ILM 334, art. 28.

193 ‘Chile: Decree-Law Containing the Foreign Investment Statute’ (n), art. 1.

194 ‘Cuba: Legislative Decree on Economic Association between Cuban and Foreign Entities’ (1982) 21 ILM 1106, art. 1.

195 S.I. Pogany (1992) ‘Economic Development Agreements’, International Centre for Settlement of Investment Disputes Review 7, 1.

196 J. Hepburn, ‘The Past, Present and Future of Domestic Investment Laws and International Economic Law’, this special issue.

197 T.L. Berge and T. St John (2021) ‘Asymmetric Diffusion: World Bank ‘Best Practice’ and the Spread of Arbitration in National Investment Laws’, Review of International Political Economy 28, 584.

198 Sornarajah, supra n.12.

199 Bankswitch Ghana Ltd v. The Republic of Ghana, PCA Case No. 2011–10, Award (4 March 2014), para. 11. 63.

200 Ghana Constitution 1992, art. 181(5).

201 W. Friedmann (1964) ‘Half a Century of International Law’, Virginia Law Review 50, 1333.

202 I.F.I. Shihata (1986) ‘Towards a Greater Depoliticization of Investment Disputes: The Roles of ICSID and MIGA’, Foreign Investment Law Journal 1, 1, 4.

203 M. Sornarajah (2016) ‘International Investment Law as Development Law: The Obsolescence of a Fraudulent System’, European Yearbook of International Economic Law 209, 216.

204 International Centre for Settlement of Investment Disputes, supra n. 157, 247.

205 E.A. Schwartz (2009) ‘The Role of International Arbitration in Economic Development’, International Trade and Business Law Review 12, 127.

206 J. Bonnitcha, L.N.S. Poulsen and M. Waibel (2017) The Political Economy of the Investment Treaty Regime. Oxford University Press, 28.

207 Sornarajah, supra n. 12, 107.

208 Revere Copper & Brass Inc v. Overseas Private Investment Corporation, Award (24 August 1978), para. 38.

209 G.R. Delaume (1981) ‘State Contracts and Transnational Arbitration’, American Journal of International Law 75, 784, 786.

210 See also Qatar's No. 12 of 2020 regulating the operation of public–private partnerships (PPPs) which requires the approval of the Prime Minister for dispute settlement in other forums other than Qatari courts.

211 CEMEX Caracas Investments BV and CEMEX Caracas II Investments BV v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/08/15, Decision on Jurisdiction (30 December 2010), para. 117.

212 Sornarajah, supra n. 113, 576.

213 G. Dimitropoulos (2020) ‘National Sovereignty and International Investment Law: Sovereignty Reassertion and Prospects of Reform’, Journal of World Investment & Trade 21, 71, 73.

214 Sornarajah, supra n. 12, 197.

215 S.P. Subedi (2020) International Investment Law: Reconciling Policy and Principle. Bloomsbury Publishing, 10. On screening mechanisms, see J. Chaisse, ‘“The Black Pit”: Power and Pitfalls of Digital FDI and Cross-Border Data Flows’, this special issue.

216 M. Sornarajah (2021), ‘Consent to Arbitration in Foreign Investment Arbitration’, in C L Lim (ed), The Cambridge Companion to International Arbitration. Cambridge University Press, 204, 211.

217 K.A.N. Duggal and L.H. van de Ven (2019) ‘The 2019 Netherlands Model BIT: Riding the New Investment Treaty Waves’, Arbitration International 35, 347.

218 Tanzania, Natural Wealth and Resources (Permanent Sovereignty) Act, 2017 (No. 5 of 2017), art. 2 (c); African Union, Pan African Investment Code (2016), art. 42.

219 See S. Espinosa (2021) ‘The Evolution of the System of Foreign Investment Protection in Ecuador’, in J. Chaisse, L. Choukroune and S. Jusoh (eds.), Handbook of International Investment Law and Policy. Springer, 2645.

220 N. Schrijver (2020) ‘The Rise of Sustainable Development in International Investment Law’, AIIB Yearbook of International Law 297; E.-U. Petersmann (2022) Transforming World Trade and Investment Law for Sustainable Development. Oxford University Press.

221 Schrijver, supra n. 220, 300; See also UN Draft Convention on the Right to Development (2020).

222 O. Fairfield (1948) Our Plundered Planet (Little Brown).

223 J.E. Viñuales (2021) ‘Sustainable Development’, in L. Rajamani and J. Peel (eds.), The Oxford Handbook of International Environmental Law, 2nd edn. Oxford University Press, 286.

224 Brundtland Report UN Report of the World Commission on Environment and Development: Our Common Future (1987) 64.

225 Ibid., para. 48.

226 S.E. Rolland (2012) Development at the WTO. Oxford University Press, 241.

227 D. Alessandrini (2010) Developing Countries and the Multilateral Trade Regime: The Failure and Promise of the WTO's Development Mission. Bloomsbury Publishing.

228 S. Schacherer (2021) Sustainable Development in EU Foreign Investment Law. Brill.

229 The manner in which Statements of sustainable development are hedged in by reference to existing international obligations raises concerns. See J. Linarelli, M.E Salomon, and M. Sornarajah (2018) The Misery of International Law: Confrontations with Injustice in the Global Economy. Oxford University Press, 60.

230 G.M. Zagel (2021) ‘Achieving Sustainable Development Objectives in International Investment Law’, in J. Chaisse, L. Choukroune and S. Jusoh (eds.), Handbook of International Investment Law and Policy. Springer, 1944.

231 Draft EU–Angola Sustainable Investment Facilitation Agreement (23 September 2021) Chapter V https://trade.ec.europa.eu/doclib/docs/2021/june/tradoc_159654.pdf (accessed 10 January 2022).

232 The Colombo Port City Economic Commission Act (2021), art. 5(i).

233 Egypt Model Contract Exploration License (2021).

234 UNCTAD, ‘Investment Policy Framework for Sustainable Development’ (2015); T.G. Berge and O.K. Fauchald, ‘The International Sources of National Legislation: International Organizations and Domestic Investment Laws’, this special issue.

235 UNCTAD, ‘Investment Policy Framework for Sustainable Development’ (2015), 60.

236 Ibid 85.

237 For example, the DRC–Rwanda BIT (2021) can be compared with Rwanda's 2021 Investment Promotion and Facilitation Law.

238 Sornarajah, supra n. 113, 576.

239 J.E. Viñuales (2019) ‘Foreign Investment and Environment’, in K. Miles (ed.), International Law: Current Trends in Research Handbook on Environment and Investment Law. Edward Elgar Publishing, 12, 37.

240 Schrijver, supra n. 219, 307.

241 IISD, ‘International Investment Law and Sustainable Development: Key Cases from the 2010s’ (2018).

242 PNG Sustainable Development Program Ltd v. Independent State of Papua New Guinea, ICSID Case No.ARB/13/33Decision on Respondent's Objections under Rule 41(5) (28 October 2014), para. 85.

243 Eco Oro Minerals Corp v. Republic of Colombia, ICSID Case No. ARB/16/41 Decision on Jurisdiction, Liability and Directions on Quantum (9 September 2021). For a background to the dispute, see Anna Sands, ‘Regulatory Chill and Domestic Law: Mining in the Santurbán Páramo’, this special issue.

244 Ibid, para. 698.

245 Canada–Colombia FTA (2008), art. 1801.

246 Ibid art. 815.

247 Ibid art. 832.

248 F. Marisi (2020) Environmental Interests in Investment Arbitration: Challenges and Directions. Kluwer Law International.

249 Bear Creek Mining Corporation v. Republic of Peru, ICSID Case No. ARB/14/21, Partial Dissenting Opinion of Philippe Sands (30 November 2017), para. 7; W. Alschner (2022) Investment Arbitration and State-Driven Reform: New Treaties, Old Outcomes. Oxford University Press, 6

250 L.B. de Chazournes and J. Lee (2022) ‘The European Union–Korea Free Trade Agreement Sustainable Development Proceeding: Reflections on a Ground-Breaking Dispute’, Journal of World Investment & Trade 23, 329.

251 Panel of Experts Proceeding Constituted Under Article 13.15 of the EU–Korea Free Trade Agreement, ‘Report of the Panel of Experts’ (20 January 2021), para. 293.

252 WTO Ministerial Conference Twelfth Session Geneva, Outcome Document (adopted 17 June 2022).

253 UNCTAD, ‘Investment Policy Responses to the Covid-19 Pandemic’ (May 2020). Examples include Spain's May 2020 Royal Decree which has suspended the liberalization law for foreign direct investment and the African Union's Ministerial Declaration on the Risks of Investor–State Arbitration for COVID-19 Measures.