1.4.1 Regulatory Transparency and Predictability

Measures in this area aim to provide a full, clear, and up-to-date picture of the investment regime, including in-advance notification of proposed changes and the promotion of legislative simplification, for example, plain legal language drafting. The investment facilitation concept puts a strong focus on improving transparency. This encompasses, for example, the publication (preferably online and through a single-window mechanism) of laws, regulations, judicial decisions, and administrative rulings; the setting up of a centralized registry of laws and regulations and special enquiry points; and the provision of advance notice of proposed changes to laws and regulations. In addition, it includes proposals for setting up a requirement that interested parties be provided with an opportunity to comment on draft investment laws and regulations prior to their adoption. Regulatory transparency and predictability are the most important policy areas according to the survey of experts, allocating a weight of 23 percent of the maximum score of the total index to the 23 measures. Countries score from 7 percent (Central African Republic) to 96 percent (Korea and the United States) of the possible maximum score in the area.

According to our results, almost all countries (137 out of 142) make information and procedures on laws, regulations, and procedures affecting investment available online. Moreover, almost all countries (131) make laws and regulations available in one of the official WTO languages. Looking into what investment-related information is published by countries, we document that 131 countries publish information on their competent authorities including their contact details, 123 publish investment guidebooks, and 116 countries publish information on investment incentives, subsidies, or tax breaks. Most countries also already publish information on procedural rules for appeal and review (109); lists or catalogues indicating which sectors are allowed, restricted, or prohibited for foreign investment (107); and information on fees and charges (104).

Fewer countries publish international agreements pertaining to foreign direct investment (85), make information available on the purpose and rationale of laws and regulations (81), or publish the time frames required to process applications related to any specific investment decision (66), and only twelve countriesFootnote ³³ actually publish judicial decisions on investment-related matters, which is the least adopted measure in this policy area.

Additional to the mere publication of information, this policy area also contains a measure related to the establishment of enquiry points, which has been done by 135 countries and is often represented by a similar website to that for investment promotion and operated under the responsibility of domestic investment promotion agencies. Other important measures include the protection of personal information, where we document adequate regulations for 104 countries; the publication of draft investment regulations and the ability of interested parties to comment on them, which is made possible by ninety-one countries; and the adequacy of time periods between the publication of fees and charges or relevant investment-related laws and regulations and their entry into force, which is the case for only forty-one and twenty-four countries, respectively.Footnote ³⁴

The last set of measures concern notifications to the WTO, which are also prominently featured among the least adopted measures in this area, as they will only become a binding obligation in the nascent IFD Agreement. Only seventy-three countries notify the WTO on relevant information such as their competent authorities, only sixty-eight do notify about a website where relevant information is made publicly available, only sixty-one notify about relevant laws and regulations, and only sixteen notify on their enquiry, focal, or contact points.

1.4.2 Electronic Governance

The area of electronic governance entails measures related to the use of information and communication technology (ICT) and the establishment of single-window mechanisms that enable to submit all investment-related documents in one place. The use of new technologies to improve information, application, approval processes, and the establishment of a single window are other core concepts of investment facilitation. This area is second most important, according to the expert survey, and the fourteen measures contained make up 18.7 percent of the maximum IFI score of a country. Countries or regions in our sample score between 0 percent (Central African Republic) and 100 percent (the United States, India, Israel, Sri Lanka, Finland, Luxembourg, Mauritius, Mexico, Chinese Taipei, Thailand, and Oman) of the possible maximum score.

The IFI documents that almost all countries (137 out of 142) in the sample have a national investment website,Footnote ³⁵ albeit only 105 countries use the website to publish a minimal set of relevant information (licensing requirements, fees, charges, screening, and approval), and competent authorities across our sample (133) make use of electronic tools for exchanging information with investors.

Looking into which electronic tools and means of ICT are already employed, we find that 122 countries have laws and regulations that provide an electronic signature with the legal validity equivalent to handwritten signatures and 104 countries accept copies of documents, although the originals may need to be presented upon request. Moreover, 101 countries make available an online business registration system and eighty-six countries make an online tax registration and declaration available to nonresident foreign investors. However, only seventy-five countries have established electronic payment systems for investors in order to pay all fees, charges, and taxes associated with the admission, establishment, maintenance, acquisition, and expansion of investment, and with a similar low adoption, another seventy-five countries in the sample provide investors with the ability to track the status of their application online.

Besides the general usage of ICT means, the area electronic governance also measures which features of a single-window mechanism a given country has in place. The one-stop shop or single-window system that uses ICT as a means to support investors is often considered as the best solution to reduce the time and effort required in obtaining regulatory clearances and licenses from governmental agencies in a host country. Such systems enable foreign investors to seek information from and submit all regulatory documents to a single office. This institutional arrangement also deals with the processing of applications and keeps the investor informed about legal and regulatory matters.

The least adopted measures in this area revolve around the establishment of a single window and its functionalities. Eighty-six countries in our sample have established the most basic function of a single window, as the website provides phone or online contacts for complaints related to mandatory registrations. Another eighty-three countries also make it possible to receive the business registration certificates online (e.g., certificate number or PDF). However, only sixty-two countries make online applications possible via their single window. More precisely, only thirty-eight of these sixty-two countries are fully supported by information technology, and both accept and process applications online/in an electronic form, while the remaining twenty-four single-window mechanisms refer to the relevant authorities for the processing of submissions. We also observe that only fifty-one countries allow to submit all mandatory registrations simultaneously (e.g., business registry, tax identification number, social security, and pension schemes). Another set of fifty-one countries grants the possibility of paying all fees corresponding to the mandatory registrations through the single window. Interestingly, we could document only for fifty-four countries that they update the information on the single-window website on a regular basis.

1.4.3 Focal Point and Review

The area focal point and review aims at providing mechanisms to improve relations or facilitate contacts between host governments and relevant stakeholders, receiving complaints from investors, and/or helping them to solve difficulties or to carry out policy advocacy. It also contains measures to identify and address problems encountered by investors. This area thereby measures the extent to which a country engages in information sharing with investors and other relevant stakeholders and has mechanisms in place to feed back the insights of such exchange into policy formulation. This policy area consists of twenty-three measures, making up 18 percent of the total possible score, and countries are scored from 0 percent (Chad) to 89 percent (Korea).

Notably, there is a small number of measures that are adopted by almost all countries: the availability of independent or higher-level administrative and/or judicial appeal procedures, adopted across the sample by 135 (out of 142) countries;Footnote ³⁶ the opportunity to support or defend respective positions in judicial review, adopted by 128 countries; and the foundation of judicial review decision on evidence and arguments, adopted by 127 countries. These three measures exhibit the highest adoption rates among all measures in this area. We also document that 102 countries have mechanisms in place to avoid undue delays of appeal decisions and 100 countries make available adequate time for studying a contested decision and preparing an appeal.

However, only eighty-one countries establish and publish a time limit for deciding upon judicial appeals, and only forty-seven countries in our sample have domestic institutional arrangements in place that enhance communication and coordination among relevant authorities at different levels of government. The latter provision relates to one of the main obstacles of investment facilitation reforms in many low-income countries, as for the establishment of many facilitating measures, a whole of government approach is key.Footnote ³⁷

The bulk of measures featuring low adoption rates is completely made up of the measures revolving around the establishment of a focal point and its functions, which is one of the key instruments to support foreign investors. In particular, such mechanisms are expected to improve the communication between investors and governments. Their functions can include the clarification of doubts on investment policies and other regulatory issues, addressing complaints by investors, assisting investors in resolving government-related difficulties, and taking timely action to prevent, manage, and resolve disputes. According to our results, most countries in the database lack a fully functioning focal point or ombudsperson-type mechanism dedicated to investment-related issues. Among the covered countries, forty-two allow for the possibility to provide feedback to the focal point, while only forty countries have established a focal point that provides guidance concerning investment-related legislation, institutions, and processes. Only thirty-four countries established an ombudsperson-type mechanism for coordination and handling of foreign investment complaints, and among those with such a mechanism, only twenty-two provide alternative forms of dispute resolution. Furthermore, only twelve countries have established focal points that recommend to the competent authorities measures to improve the investment environment, only nine make corrective recommendations and expression of opinions regarding illegal and unfair administrative measures, and only six countries let their focal point operate through their single window.

Another measure featuring a similar low adoption rate evaluates whether a country has a dispute prevention mechanism in place that can help to manage grievances of investors about governmental conduct and thus reduce the risk of escalation of grievances into actual disputes, which is only the case for eleven countries. Across our sample, dispute prevention mechanisms are scarce and often not easily accessible. Some information can be found in administrative codes but almost never in a dedicated website. The scarcity of publicly available data for some countries points to the need for considerable improvements in this area.

1.4.4 Application Process

The policy area application process measures how well a country does establish clear criteria and transparent procedures for administrative decisions, including investment approval mechanisms and the reduction of the number and complexity of fees and charges. The area includes twenty-five measures that account for 17.6 percent of the total maximum score and countries are scored from 12 percent (Central African Republic, Guyana and Niger) to 92 percent (Korea) within the area.

We document that 125 (out of 142) countries do not request fees or charges for answering enquiries or providing forms and documents. Moreover, the notion of proportionality between fees and rendered services is quite clear in legislative texts, and the fees that sixty-one countries charge are commensurate with the administrative cost of services. Moreover, fifty-four countries do periodically review their fees and charges related to application processes. However, only nineteen out of those adapt them to changed circumstances.

Moreover, 114 countries do inform the applicant about their decision concerning an application, and 104 countries’ competent authorities accept applications at any time throughout the year. Another ninety countries publish time frames associated with the processing of applications, while seventy-three countries provide the applicant with information concerning the status of the application.

However, only sixty-one countries inform the applicant in case the application is incomplete, only fifty-one of those provide an explanation why the application is considered incomplete, only thirty-one countries grant the opportunity to submit the information required to complete an application in that case, and only twenty-eight countries provide the opportunity to resubmit an application that was previously rejected. Lastly, forty-four countries undertake periodic reviews of investment regulations and documentation requirements.

Other highly adopted measures relate to the facilitation of the entry and sojourn of investment personnel. Our results suggest that 129 countries publish information on current requirements for temporary entry of business people and 125 countries in our sample issue multiple-entry visa for business people. Noteworthy, seventy-three countries process visa applications in electronic format, and sixty-eight countries provide possibilities for renewal or extension of the authorization for temporary stay. Moreover, on average, it takes ten days, requires eight documents, and costs US$97 to obtain a business visa among the countries in the sample.

The least adopted measure in this area evaluates the adoption of a silent “yes” approach for administrative approvals, meaning that the country has regulations or legislations in place that automatically lead to approval of applications in case the respective application is not answered or rejected within a given time period. Only five countries in our sample have such a mechanism in place, which are Albania, Austria, Denmark, Mexico, and Myanmar.

1.4.5 Cooperation

The area of cooperation measures how well a country makes use of international and regional initiatives aimed at building investment expertise, including information sharing. Furthermore, it measures whether a country provides an institutionalized mechanism to support domestic interagency coordination. This area comprises eleven measures, with a contribution to the total maximum score of 10.5 percent. Scores range from 0 (Djibouti, Sierra Leone, and Solomon Islands) to 95 percent (the United Kingdom). It features the highest divergence between low- and high-income countries, as the former, on average, only achieve 23 percent of the score of the high-income countries (see Figure 1.4).

The majority of the countries (129 out of 142) in the IFI are involved in cooperation with neighboring and third countries through accession to multilateral or regional agreements that feature investment promotion and facilitation provisions such as the USMCA, CPTPP, or the Regional Comprehensive Economic Partnership (RCEP). Additionally, 100 countries in the sample have regular programs to organize business–government networking events with partner countries.

However, despite the high number of countries accessing multilateral and/or regional conventions and initiatives on investment facilitation, many countries do not have any programs to exchange staff with partner countries (19) or to share best practices and information on investment facilitation (30). Furthermore, only thirty countries have already harmonized data requirements and documentary controls with neighboring countries, while seven have regulations underway in order to adopt such harmonization.

Furthermore, eighty-two countries’ national legislation allows for cooperation, coordination, and exchange of information and mutual assistance with investment authorities, and of these, fifty-three actually have an explicit coordination strategy, led at a high political level, or the concerned countries belong to a customs union.

Only nineteen countries provide an institutional mechanism to support domestic interagency coordination, which is especially important since many governmental actors are involved in investment facilitation matters. The lack of such mechanism across our sample highlights that besides the potential for international cooperation, as outlined in the previous paragraph, there is also significant room for improving domestic cooperation.

Moreover, forty-seven countries have established, to some extent, a domestic supplier database, albeit only twenty-eight of those feature all relevant functions, such as free and public availability as well as the ability to filter, for example, sectors or other criteria. Such databases are among the most anticipated investment facilitation measures regarding the proposed development impact, as an accessible and searchable domestic supplier database has the potential to help integrate domestic suppliers into regional and global value chains.

1.4.6 Responsible Business Conduct and Anti-Corruption

Finally, the area responsible business conduct and anti-corruption measures to which degree a country has ratified international conventions on labor and human rights and adopted corresponding measures related to fighting corruption and combating bribery of foreign public officials in international business transactions. Specifically, it also incorporates how many of the ILO’s fundamental conventions concerning freedom of association, forced labor, discrimination, and child labor a country has ratified.

This area contains five measures, and countries or regions are scored between 20 percent (Brunei, Chinese Taipei, and Tanzania) and 100 percent (by twenty-two countries of the sample) of the possible maximum score. Although this area features, on average, high adoption levels, it is also worthwhile to note that the lowest scores across countries in this area appear in the regions of South Asia, East Asia, and SSA.

Among the five measures contained in the area, 139 countriesFootnote ³⁸ have ratified at least three and 123 countries have ratified at least seven of the eight fundamental ILO conventions concerning freedom of association, forced labor, discrimination, and child labor, while another 139Footnote ³⁹ have adopted measures to prevent and fight corruption in accordance to the United Nations Convention against Corruption.

Moreover, eighty-three countries have adopted double taxation treaty measures similar to the OECD multilateral convention to implement tax treaty-related measures to prevent base erosion and profit shifting, forty-four countries have adopted measures to prevent and fight corruption in accordance to combating bribery of foreign public officials in international business transactions, and thirty countries have a national action plan to implement the UN Guiding Principles on Business and Human Rights.

2.3.1 Improving the Investment Climate

The World Bank defines the investment climate as a ‘set of location-specific factors shaping the opportunities and incentives for firms to invest productively, create jobs, and expand’.Footnote ⁵⁷

When featured in IIAs, these provisions are usually of general scope and limited by domestic law.Footnote ⁵⁸ They include commitments to facilitate investment conditions, like openness and competitivity,Footnote ⁵⁹ stability,Footnote ⁶⁰ transparency, and a predictable investment regime.Footnote ⁶¹

However, some agreements are more explicit in defining what is needed to establish a favorable climate for private investment, primarily through better investment protection conditions, capital transfer, and information exchange on investment opportunities.Footnote ⁶² In addition, certain IIAs also include forward-looking provisions, like the periodical review of the treaty, creating a more open investment environment,Footnote ⁶³ or strengthening databases on all forms of investment policy formulations.Footnote ⁶⁴

The new EU–Organisation of African, Caribbean and Pacific States (OACPS) Partnership Agreement that will replace the Cotonou Agreement includes provisions on investment climate. The Parties undertake to mobilize sustainable and responsible investment to enhance inclusive and sustainable economic growth and development. To that end, they shall establish a conducive investment climate, which attracts domestic and foreign investment and maintains the right to regulate through transparent, predictable, and efficient regulatory, administrative, and policy frameworks. Furthermore, the Parties agree on the importance of providing legal certainty and adequate protection to established investments, the treatment of which shall be nondiscriminatory in nature and shall include effective dispute prevention and resolution mechanisms, in line with their respective strategies. In that regard, they reaffirm the importance of concluding international investment agreements that fully preserve their sovereign right to regulate investment for legitimate public policy purposes.Footnote ⁶⁵

According to the Africa Regional Protocol of the same agreement, regulatory frameworks for investment shall be open, transparent, and clear, with protection for property rights, land rights, and intellectual property rights.Footnote ⁶⁶

2.3.2 Simplifying and Speeding up Investment-Related Administrative Procedures

Some IIAs include specific commitments on the removal of bureaucratic impediments to investment.Footnote ⁶⁷ The OECD calls these provisions ‘policy advocacy’, identifying bottlenecks in the investment climate and providing government recommendations.Footnote ⁶⁸

A couple of Brazilian ACFIs have provisions on the right of administrative review or appeal of decisions.Footnote ⁶⁹ In one of them, this process must be according to the level of development and available resources at the Parties’ disposal.Footnote ⁷⁰ Some treaties also contemplate simplifying procedures for investment applications and approvals.Footnote ⁷¹ Certain agreements further establish clear and uniform standards and procedures for examining and approving investment applications, including a reasonable time frame, making available information that has been omitted from an incomplete application, and providing an opportunity for correction.Footnote ⁷² Finally, some add the principles of keeping administrative costs at the lowest.Footnote ⁷³

Under the new EU–OACPS Partnership Agreement, the Parties agree to facilitate investment through legislation, regulations, and policies to reduce regulatory and administrative barriers and avoid harmful competition for investment. They also agree that such measures shall be developed transparently and made publicly available to encourage public–private dialogue and provide the opportunity for all stakeholders to participate.Footnote ⁷⁴ Furthermore, according to the Africa Regional Protocol of the same agreement, the Parties shall improve national and regional regulatory frameworks, simplify business regulations and processes, reduce and streamline administrative formalities, reinforce cooperation, and build capacities to implement effective competition policies.Footnote ⁷⁵

There is disagreement regarding whether this type of facilitation is desirable. For some, streamlining and simplifying procedures for investment applications and approvals could help increase investment in countries with duplicative and burdensome regulatory requirements for starting or operating a company. For others, these requirements may be crucial for ensuring the development of projects with input from interested and affected communities.Footnote ⁷⁶

2.3.3 Facilitation of Investment Permits

In several IIAs, when a Contracting Party admits an investment of an investor of another Contracting Party in its territory, the former shall grant the necessary permits to realize such an investment.Footnote ⁷⁷

However, the facilitation of investment permits does not always mean the same. In some agreements, a mandatory obligation (‘shall grant’) is ‘appropriate’, ‘necessary’,Footnote ⁷⁸ or pursuant to its legislation.Footnote ⁷⁹ In others, it is only a ‘best efforts’ commitment (‘shall endeavor to grant’).Footnote ⁸⁰

It is important to recall that this provision has been the subject of disputes between the investor and the host state. For example, in MTD v. Chile, the tribunal decided that to the extent that an application for a permit meets the law’s requirements, the state should grant such permits to the investor. Such provisions ‘do not entitle an investor to a change of the normative framework of the country where it invests. All that an investor may expect is that the law be applied’.Footnote ⁸¹

2.3.4 Movement of Business Persons (MBP)

EDIT has identified 1,244 IIAs with provisions on entry and sojourn of personnel, including 1,076 BITs, usually subject to domestic laws (see Figure 2.2).Footnote ⁸²

Figure 2.2 Entry and sojourn provisions in IIAs.

Source: Author, based on Electronic Database of Investment Treaties, see W. Alschner, M. Elsig, and R. Polanco, ‘Introducing the Electronic Database of Investment Treaties (EDIT): The Genesis of a New Database and Its Use’ (2021) 20 World Trade Review 73–94.

Several IIAs include provisions facilitating the required permits for the activities of senior personnel, consultants, or other qualified experts engaged by investors of the other Contracting Party, either in general terms or concerning entry, residence, work, and travel permits.Footnote ⁸³ These provisions are sometimes mandatory,Footnote ⁸⁴ usually with qualifiers such as ‘necessary’,Footnote ⁸⁵ ‘where appropriate’,Footnote ⁸⁶ ‘as required’,Footnote ⁸⁷ and ‘in conformity with domestic laws’.Footnote ⁸⁸ Another standard qualifier is that such employees are ‘key personnel’ (e.g., management, specialists, and intra-corporate transferee) and employed exclusively by foreign companies or their branches.Footnote ⁸⁹

Often, this type of provision is only a best efforts commitment, where parties endeavor, whenever necessary, to grant the permits required in connection with the activities of consultants or experts engaged by investors of the other party.Footnote ⁹⁰ For example, early Brazilian ACFIs include programs on visa proceedings as part of their bilateral facilitation agendas.Footnote ⁹¹ In the FTA with Chile, parties commit to expeditious processing of complete applications for migratory formalities. Within a reasonable time frame, notify the request’s status and its outcome.Footnote ⁹²

2.3.5 Transparency of Investment Measures

Transparency measures are not new in investment treaties. Several IIAs include transparency commitments that can be considered part of investment facilitation activities.Footnote ⁹³ EDIT has identified at least 580 IIAs with such provisions, mainly obligations directed at States to publish laws and regulations (‘regulatory transparency’),Footnote ⁹⁴ including 380 BITs. In addition, according to the DESTA database, over 111 PTAs have horizontal chapters on transparency,Footnote ⁹⁵ and an increasing number include chapters on regulatory convergence.Footnote ⁹⁶ As a result, the number of treaties, including transparency commitments, has increased over the years (see Figure 2.3).

Figure 2.3 Transparency provisions in IIAs.

Source: Author, based on Electronic Database of Investment Treaties, see W. Alschner, M. Elsig, and R. Polanco, ‘Introducing the Electronic Database of Investment Treaties (EDIT): The Genesis of a New Database and Its Use’ (2021) 20 World Trade Review 73–94

Traditionally, IIAs with transparency provisions consider ‘horizontal obligations’, like the publication of regulations concerning or affecting foreign investment, exchange of investment information, including investment laws,Footnote ⁹⁷ regulations, policies and procedures,Footnote ⁹⁸ and eventually administrative rulings/practices.Footnote ⁹⁹ In some agreements, these commitments extend to existing or future special formalities connected to investments.Footnote ¹⁰⁰ In addition, these agreements usually exclude from transparency commitments the disclosure of confidential or proprietary information or allow access to any data, which would impede law enforcement, be contrary to the legislation on public access to documents, or prejudice the legitimate commercial interests of particular investors.Footnote ¹⁰¹

Certain agreements include a more detailed exchange of information commitments on topics such as statistical information on the market for goods and services, governmental procurement and public concessions, social and labor requirements, data on specific economic sectors or segments, regional projects and understandings on investment, and information on public–private partnerships.Footnote ¹⁰² However, only some IIAs provide that the exchange of information shall regularly occur between the relevant state agencies based on reciprocity and that nonconfidential information may be published periodically.Footnote ¹⁰³

Some agreements provide for the exchange of information on the effects that laws and other legal acts may have on investmentsFootnote ¹⁰⁴ (extended in some cases to decisions, administrative practices, procedures, and politics)Footnote ¹⁰⁵ or experiences in the design and implementation of sectoral legislation.Footnote ¹⁰⁶

2.3.6 Capacity Building on Investment Issues

Few IIAs include investment facilitation provisions focused on general measures of investment capacity buildingFootnote ¹⁰⁷ or specifically for domestic investment promotion agencies. For example, these activities may facilitate technology transfer in cross-border investment.Footnote ¹⁰⁸

In some agreements, capacity building focuses on one specific topic: the negotiation and conclusion of agreements for promoting and protecting investment.Footnote ¹⁰⁹ The Cotonou Agreement between the EU and the African, Caribbean and Pacific Group of States (ACP) even provided an overview of the content of such a model agreement, including provisions on fair and equitable treatment, most-favored-nation treatment, protection against expropriation, transfer of capitals and profits, and ISDS.Footnote ¹¹⁰ In other agreements, technical assistance aimed to facilitate negotiations and implement an investment chapter with the EU.Footnote ¹¹¹

According to the new EU–OACPS Partnership Agreement, the Parties agree to support the necessary economic and institutional reforms and policies that are grounded in a country’s overall development strategy and that are coherent and synergistic at the national, regional, and international levels, with a view to creating a conducive environment for sustainable investment and facilitating the development of a dynamic, viable, and competitive private sector.Footnote ¹¹² Although it is not explicitly mentioned, one can understand that the support is likely to be from the EU to ACP countries.

2.3.7 Investment Financing

Very few IIAs include provisions on investment facilitation through direct financing of investment projects. One of them is the Cotonou Agreement, which implemented its investment financing commitments in 2003, through an Investment Facility. The European Investment Bank (EIB) has managed the Investment Facility in the ACP region since it began in 2003 with a broad range of flexible risk-bearing instruments.Footnote ¹¹³

The ACP Investment Facility aimed to reduce poverty by creating jobs and sustainable growth. In addition to senior and intermediate loans, the EIB carries out equity and quasi-equity investments, junior and subordinated loans, providing guarantees, interest rate subsidies, and technical assistance. Since the revolving fund began operating in 2003, over 80 percent of the allocations have gone to the private sector.Footnote ¹¹⁴ To support the preparation and implementation of the projects it finances, the EIB also provides grants, interest rate subsidies, and technical assistance to its borrowers and final beneficiaries.Footnote ¹¹⁵ The Investment Facility’s average budget reached €95 million for 2014–2020 compared with just over €40 million for the previous period (2003–2013).Footnote ¹¹⁶ The most benefited sectors from the Investment Facility are energy, water sewage, transport, financial services, and telecommunications.

A separate section of the Investment Facility under the name of ‘Impact Financing Envelope’ was used for higher-impact projects with more significant risks and higher returns, reaching private sector operations beyond the traditional risk levels but having a sizeable developmental impact.Footnote ¹¹⁷

The EU and the ACP States signed the Cotonou Agreement in 2000 for a twenty-year duration. It was initially due to expire in February 2020 but postponed until the end of 2020, as negotiations on a future replacement agreement were still underway.Footnote ¹¹⁸ Annex II of the new EU–OACPS Partnership Agreement does not retain the Investment Facility explicitly. However, it states that the EIB and ‘any subsidiary of the EIB’ may pursue financing activities using loans, bonds, guarantees, equity, quasi-equity, or any other financing instruments and provide financing technical assistance.Footnote ¹¹⁹ According to the EIB Annual Report, the ACP Investment Facility was extended to provide a bridge to the next financing mandate.Footnote ¹²⁰

In any case, under the same agreement, the Parties shall cooperate to establish sound financial systems to mobilize investment for sustainable projects. Furthermore, they shall take measures to support investment by increasing access to financing through technical assistance, grants, guarantees, and innovative financial instruments to mitigate risk, boost investor confidence, and leverage private and public sources of finance.Footnote ¹²¹

Some have argued that it would seem pertinent to preserve the Investment Facility and Impact Financing Envelope’s innovative mechanisms unless they are replaced by even more effective instruments and are further developed.Footnote ¹²²

2.3.8 Insurance Programs

Most OECD countries have national agencies that provide domestic companies with export credit and political risk insurance, which started in the late 1950s. At that time, Germany, Japan, and the United States began offering insurance programs to foreign investors against noncommercial risks.Footnote ¹²³ The largest among these agencies include United States’ Development Finance Corporation (DFC), Japanese Nippon Export Investment Insurance (NEXI), China Export & Credit Insurance Corporation (SINOSURE), Belgian Export Credit Agency (CREDENDO), Export Development Canada (EDC), United Kingdom’s Export Credits Guarantee Department (ECGD), Compagnie Française d’Assurance pour le Commerce Extérieur (COFACE), and Export Finance Australia.Footnote ¹²⁴ Other countries have delegated their investment guarantee scheme management to private companies. For example, Germany has mandated PricewaterhouseCoopers (PwC) for that purpose.Footnote ¹²⁵

These insurance schemes can include requirements to ensure that the guaranteed FDI fulfils the host country’s sustainable and developmental objectives.Footnote ¹²⁶ However, the possibility of facilitating investment using these insurance tools is primarily absent from IIAs, with some notable exceptions, such as the Economic Community of West African States (ECOWAS) Supplementary Act on Investment and the Nigeria-Morocco BIT.Footnote ¹²⁷ Some Brazilian ACFIs mention that wherever possible, each party shall promote their respective public and private financial agents responsible for the technical assessment of risk and the adoption of loans, credits, guarantees, and insurance related to investments in the other party’s territory.Footnote ¹²⁸

2.3.9 Pre-establishment Investor Services

Certain IIAs include provisions to support prospective investors to facilitate their establishment. For example, some ASEAN agreements provide for one-stop investment centers or investment advisory services in host countries to provide assistance and advisory services to the other member states’ business communities.Footnote ¹²⁹

According to the new EU–OACPS Partnership Agreement, the Parties shall support measures that bridge gaps in foreign investors’ knowledge of local investment conditions, promote business contacts and information networks, and facilitate joint investments and joint ventures.Footnote ¹³⁰

On occasions, IIAs complement these services with the home state’s obligations, which shall inform host states about the form and extent of available assistance given to their outward investors, depending on the size and type of different investments.Footnote ¹³¹

Some authors have questioned the benefits of having a single-window system for investors. Singh points out that unlike trade facilitation, where few agencies dealing with cross-border trade and customs compliance are involved, investment facilitation requires cooperation from many agencies at all government levels, raising critical challenges in the implementation process. ‘One-stop shops may not be effective in countries where setting up a business requires approvals from national, regional and local authorities that may not cooperate in implementing binding commitments under a multilateral agreement’.Footnote ¹³²

2.3.10 Post-Establishment Investor Aftercare

Some IIAs include ‘aftercare’ provisions, meaning measures aimed to retain established companies and encourage reinvestment by assisting investors in the challenges they face after establishing in the host country. The OECD suggests that these aftercare measures should focus on investors with a high developmental impact and strong records of responsible business conduct.Footnote ¹³³

Aftercare measures are diverse and include several mechanisms that promote institutional investment governance. They may consist of parties’ direct exchange of views or consultations to settle problems relating to investment,Footnote ¹³⁴ the establishment of a focal point or ‘ombudsperson’, acting as a facilitator between the government and the private sector, or a forum or technical channels to communicate, prevent, and manage disputes with specific agencies.Footnote ¹³⁵ For example, in all Brazilian ACFIs, focal points shall prevent disputes and facilitate their resolution in coordination and cooperation with relevant government authorities and private entities.Footnote ¹³⁶

2.3.11 Relations with Investors and the Private Sector

Certain IIAs include facilitation activities to establish a more specific relationship with investors and the private sector, in general, which are considered to be relevant stakeholders.

These activities include, among others, the consultation with the business community on investment matters,Footnote ¹³⁷ the support for joint business councils between home and host states,Footnote ¹³⁸ and the organization of symposiums, seminars, and other activities beneficial to investments,Footnote ¹³⁹ as well as fostering common investment promotion activities or technical cooperation in mutually agreed sectors.Footnote ¹⁴⁰ Recognizing its critical role in investment, almost all Brazilian ACFIs – with the notable exception of India’s treaty – include a provision on the interaction with the private sector, with commitments to disseminate general information on investment, regulatory frameworks, and business opportunities.Footnote ¹⁴¹

According to the Africa Regional Protocol of the OACPS Partnership Agreement, Parties shall encourage public–private dialogues and provide all stakeholders with the opportunity to participate, ensuring that private sector perspectives are taken into account to reduce investment risks and address obstacles to sustainable investment while prioritizing investment-climate reform agendas.Footnote ¹⁴²

Another angle of the relation with the private sector are corporate social responsibility (CSR) practices and responsible business conduct (RBC) provisions.Footnote ¹⁴³

Several IIAs include CSR and RBC provisions. According to EDIT, at least 118 IIAs have CSR provisions (including 45 BITs) and 27 IIAs have RBC provisions (including 12 BITs). But except for the Brazilian IIAs, those agreements do not explicitly link CSR or RBC and investment facilitation. In the new EU–OACPS Partnership Agreement, the Parties recognize the importance of responsible investment by the relevant actors as a means to achieving long-term sustainable economic, social, and environmental value. Therefore, Parties should promote CSR practices and RBC, including internationally recognized implementation guidelines, standards, and applicable instruments that guide investors, governments, and other actors to implement them as a complement to national laws and other applicable legislation.Footnote ¹⁴⁴

Some NGOs have criticized investment facilitation activities for strengthening stakeholder cooperation and consultation. In practice, they could become investors and home states’ opportunities to pressure host countries, for example, with unlimited information requests.Footnote ¹⁴⁵

2.3.12 Institutional Arrangements

IIAs, including investment facilitation provisions, regularly consider carrying out investment facilitation activities through direct consultation or cooperation between the contracting parties.Footnote ¹⁴⁶ Some agreements give investment facility tasks to treaty bodies, primarily created in the agreement. For example, the Japan–Malaysia FTA (2005), established as one of the Sub-Committees on Investment functions, discusses investment facilitation-related issues.Footnote ¹⁴⁷ ECOWAS calls for creating regional structures to implement the Community rules in promoting and facilitating investments.Footnote ¹⁴⁸ In the Canada–Peru FTA (2008), the Committee on Investment shall encourage cooperation and facilitate joint initiatives, addressing investment facilitation issues.Footnote ¹⁴⁹ These treaties consider implementing investment facilitation activities in general terms, without specific commitments.

In contrast, under Brazilian ACFIs, the agreement shall be operated by the parties’ national institutions and a Joint Committee. Joint Committees have the duty and responsibility to coordinate the implementation of cooperative and mutually agreed facilitation agendas.Footnote ¹⁵⁰ ACFIs with Mozambique, Angola, Mexico, and Malawi define specific topics for agendas such as payments and transfers (facilitation of remittances and foreign capital exchange between the parties); visas (facilitation of the temporary entry and stay of managers, executives, and skilled employees of economic operators, entities, firms, and investors of the other party); environmental legislation and technical regulations (facilitation of the issuance of documents and certificates, licenses relating to the investment of the other party); and cooperation in sectoral legislation and institutional exchanges.Footnote ¹⁵¹ Colombia’s ACFI adds topics on logistics and transportation, promoting strategic alliances and production linkages between private enterprises, favoring micro, small, and medium enterprises (MSMEs).Footnote ¹⁵² There are no previously determined agenda topics in ACFIs with Chile, Peru, MERCOSUR, Ethiopia, and Suriname.

Joint Committees may include other topics in these agendas to be discussed between the Parties’ competent governmental authorities. For example, Joint Committee discussions may conclude in common understandings, additional protocols to the agreement, or specific legal instruments.Footnote ¹⁵³

Some Brazilian ACFIs consider specific cooperation between bodies entrusted with the promotion of investment (like IPAs) to facilitate investment in the other party’s territoryFootnote ¹⁵⁴

2.4.1 Provisions Included in the IFD Agreement

2.4.2 Provisions Not Included in the IFD Agreement

It was reported that the Informal Consolidated Text from April 2020 contained provisions on improving the investment climate for incoming FDI through a range of administrative reforms.Footnote ¹⁶² However, there was no further mention of such provisions in the summary of the discussions made publicly available. In the leaked revised version of the Easter Text, creating a better investment climate was part of the objectives of the agreement.Footnote ¹⁶³ The final IFD Agreement includes enhancing the transparency, efficiency, and predictability of the ‘investment regulatory environment’, as part of the preamble. Additionally, investors may recommend measures to improve the investment environment to the agreements focal points (Art. 22.3)

Provisions on the facilitation of investment permits seem to have been absent from the discussions and negotiations on investment facilitation. It was reported that Art. 1 of the Informal Consolidated Text considered that the IFD Agreement would apply to measures facilitating FDI ‘across the whole investment cycle’, potentially covering post-establishment activities that require authorization, such as applying for permits. Such wording was seemingly too broad for some WTO members and was later abandoned.Footnote ¹⁶⁴

Similarly, in the IFD Agreement, there is little consideration for pre-establishment investor services. According to Art. 16, Parties are encouraged to utilize a single entry point for investment applications to the extent practicable and in accordance with its legal system. In contrast, Art. 9 of the Brazilian proposal considered an electronic window as a single entry point for submitting ‘all documents required by the agencies or regulatory bodies involved in the admission, establishment, acquisition, and expansion of investments’. Any governmental entity shall not subsequently require documents uploaded there unless their authenticity is not established.Footnote ¹⁶⁵

An earlier leaked version of the Easter Text included a bracketed Section IV bis recognizing the important role of home states in facilitating foreign investment for sustainable development. It encouraged several measures in this regard, such as investment guarantees, investment insurance, technical assistance, investor support services, as well as financial and fiscal measures. Although mostly couched in hortatory language, the final text did not include a specific section on home state obligations. However, some provisions, although not all directly apply to home states, if interpreted broadly, could include most of the information commitments contained in the Easter Text, like the publication of measures of general application to facilitate outward FDI (Art. 6.5), exchange of information on investors (Art. 26.2(b)), and investment facilitation (Art. 26.2(a)), as well as provision on technical assistance (Art. 35). In addition, Section VI deals specifically with sustainable investment, including provisions to promote responsible business conduct and ensure anti-corruption measures.

Finally, other provisions on investment facilitation found in IIAs examined in the preceding section, like investment financing, insurance programs, and relations with investors and the private sector, are absent from the IFD Agreement.

2.4.3 Novel Provisions

The IFD Agreement provisions are not novel per se. Several are found in IIAs and the TFA. What is new is the plurilateral setting and the scope of these commitments. Several of these provisions are found in prior IIAs, but not all at once.

The agreement includes provisions not found in the typology of investment facilitation clauses described before. Some of them are not directly linked to investment facilitation per se but are seen as a way of ensuring the quality of the investment that will be facilitated. In this line, we find, for example, measures against corruption (Art. 38). Another novelty is the inclusion of general and security exceptions (Art. 41) as well as financial exceptions (Art. 42), which are not always common in investment treaties.Footnote ¹⁶⁶

But notably, the IFD Agreement includes novel provisions on special and differential treatment for developing and LDC Parties (Section V), which is a key pillar of the treaty. Parties shall bear in mind the special difficulties experienced by such countries in implementing the Agreement’s provision and provide them with assistance and support for capacity building. Implementation of the provisions concerned will not be required until capacity has been acquired. LDCs are only required to undertake commitments to the extent consistent with their individual development, financial needs, or administrative and institutional capabilities (Art. 27).

Using an approach similar to the TFA, the IFD Agreement allows countries to self-designate provisions for extended implementation time, using three different categories, which have different time frames for notification: within a year after entry into force of the IFD Agreement (Category A); after a transitional period following the entry into force (Category B); and after a transitional period but also requiring the acquisition of implementation capacity through assistance and support for capacity building (Category C). Categories B and C also have an early warning mechanism for extending implementation dates, establishing an expert group to support its implementation, and the possibility of shifting between categories. IFD negotiations also included a ‘Needs Assessment’ with the purpose of assisting developing and LDC Parties in identifying their implementation needs as well as related technical assistance and capacity-building support.Footnote ¹⁶⁷ The WTO Secretariat and seven partner international organizations developed an Investment Facilitation Self-Assessment Guide based on the extensive experience of the TFA Self-Assessment Guide.Footnote ¹⁶⁸

3.2.1 TBT Agreement

The WTO members have the right to adopt and maintain technical regulations and standards, including packaging, marking, and labeling requirements to achieve legitimate policy objectives, such as the protection of human, animal, or plant life or health, of the environment, or to prevent deceptive practices. However, technical regulations and standards could create trade barriers if products from other countries that do not meet these regulations and standards cannot be imported. The TBT Agreement ensures that technical regulations and standards do not create unnecessary obstacles to international trade and that they are prepared, adopted, and applied in a transparent manner.Footnote ¹⁰

The scope of the TBT Agreement is clarified by Art. 1.3, which provides that “All products, including industrial and agricultural products, shall be subject to the provisions of this Agreement,” except measures that are subject to the Agreement on Government Procurement (GPA)Footnote ¹¹ and the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS).Footnote ¹² Moreover, Annex 1 of the TBT Agreement defines a technical regulation and a standard that are, respectively, addressed by the substantive and procedural rules of the TBT Agreement. For example, para. 1 of the Annex 1 defines a technical regulation as a “Document which lays down product characteristics or their related processes and production methods, including the applicable administrative provisions, with which compliance is mandatory.” A measure that falls within the definition is subject to the rules under Arts. 2 and 3 of the TBT Agreement concerning technical regulations.

Measures falling within the definition of a technical regulation or a standard can have a harmful impact on foreign investment in the manufacturing sector because both imported products and products produced domestically by foreign investors have to comply with applicable technical regulations and standards. Thus, technical regulations and standards have aspects of both trade measures and investment measures and may be simultaneously subject to the TBT Agreement and international instruments concerning investment, including the IFD Agreement.

The potential overlap of the scope of the TBT Agreement with the scope of the IFD Agreement is illustrated by disputes involving Australia’s tobacco plain packaging.Footnote ¹³ Complaints were brought against the plain packaging in the WTO dispute settlement system pursuant to the TBT Agreement and the TRIPS Agreement, while, at the same time, complaints against the same measure were brought to investment arbitration under an IIA. Although violations were not found in any of these disputes,Footnote ¹⁴ they show the possibility that the TBT and the IFD Agreement may apply simultaneously to certain technical regulations and standards.

Moreover, since the definitions of a technical regulation and a standard do not mention any relation to trade in goods, even a measure that does not have any impact on trade but may harm foreign investment could fall within the definition of a technical regulation or a standard and be subject to rules under the TBT Agreement. For example, suppose that an investor of a WTO member invests in a factory within the territory of another WTO member and that the investor sells products produced from the factory only domestically. A document from the latter WTO member laying down product characteristics or their related processes and production methods, with which the investor’s products are required to comply with, would fall within the definition of a technical regulation and be subject to rules under Arts. 2 and 3 of the TBT Agreement. Thus, the scope of the TBT Agreement potentially extends to a broad range of non-trade measures related to investment in the manufacturing sector.

It is true, however, that the TBT Agreement is one of the WTO Annex IA Multilateral Agreements on Trade in Goods and is carefully drafted in line with its objective of ensuring that technical regulations and standards do not “create unnecessary obstacles to international trade” (emphasis added).Footnote ¹⁵ In fact, most of the rules under the TBT Agreement apply to measures that have some effect on trade. For example, Art. 2.1 of the TBT Agreement requires WTO members to ensure, in respect of technical regulations, imported products be accorded treatment no less favorable than that accorded to products of national origin and products originating in any other country. According to the Appellate Body, this provision prohibits detrimental impact on competitive opportunities for imports unless it stems exclusively from legitimate regulatory distinctions.Footnote ¹⁶ Similarly, Art. 2.2 of the TBT Agreement provides that technical regulations shall not be more trade-restrictive than necessary to fulfill a legitimate objective, taking account of the risks nonfulfillment would create. In Australia – Tobacco Plain Packaging, the panel and the Appellate Body found that in order to demonstrate the trade restrictiveness of the measures at issue within the meaning of Art. 2.2, it must be established that the measures have a “limiting effect on international trade” (emphasis added).Footnote ¹⁷

The existence of an effect on trade is also key in the transparency requirements under many provisions of the TBT Agreement. For example, obligations under Art. 2.9 of the TBT Agreement to publish and notify certain technical regulations apply “if the technical regulation may have a significant effect on trade of other Members” (emphasis added).

However, some of the publication requirements apply to technical regulations, regardless of their impact on trade. According to Art. 2.11, WTO members shall ensure that all technical regulations that have been adopted are published promptly or otherwise made available in such a manner as to enable interested parties in other members to become acquainted with them. Article 2.12 further provides that, except in certain urgent circumstances, “a reasonable interval” shall be allowed “between the publication of technical regulations and their entry into force in order to allow time for producers in exporting members, and particularly in developing country members, to adapt their products or methods of production to the requirements of the importing Member.” The term “reasonable interval” has been clarified by the Ministerial Decision of 14 November 2001, which decided that the term “shall be understood to mean normally a period of not less than six months, except when this would be ineffective in fulfilling the legitimate objectives pursued.”Footnote ¹⁸ Having noted that this decision constitutes a subsequent agreement between the parties within the meaning of Art. 31(3)(a) of the Vienna Convention,Footnote ¹⁹ the Appellate Body found that Art. 2.12 imposes an “obligation” to provide a “‘reasonable interval’ of not less than six months between the publication and entry into force of a technical regulation” unless such interval “would be ineffective to fulfil the legitimate objectives pursued” by the technical regulation.Footnote ²⁰

In short, while substantive rules of the TBT Agreement address trade-restrictive effects of technical regulations and standards, certain publication requirements apply to measures related to investment, regardless of their impact on trade. More specifically, the TBT Agreement, as interpreted by the Appellate Body, requires that technical regulations, including those related to foreign investment, be published no less than six months before their entry into force, except in certain circumstances.

3.2.2 SCM Agreement

Subsidies are an essential policy tool for WTO members to pursue legitimate economic and noneconomic policy objectives. However, they can modify the competitive relationship between domestic producers, on the one hand, and exporters and foreign producers, on the other hand, to the detriment of the latter, thereby adversely affecting international trade. The SCM Agreement does not deny the right of the WTO members to grant subsidies but provides rules to avoid trade-distorting effects of subsidies.

The scope of the SCM Agreement is determined by the definition of a subsidy. In this regard, Art. 1.1 of the SCM Agreement provides that for the purpose of the Agreement, “a subsidy shall be deemed to exist if” “a financial contribution by a government or any public body within the territory of a Member” or “any form of income or price support in the sense of Article XVI of GATT 1994” confers a benefit. The subparagraphs of Art. 1.1(a)(1) clarify the meaning of the “financial contribution.” Article 1.2 further provides that a subsidy so defined shall be subject to the provisions of Part II, III, or V of the SCM Agreement “only if such a subsidy is specific.” Article 2 provides principles to determine if a subsidy is “specific to an enterprise or industry or group of enterprises or industries … within the jurisdiction of the granting authority” in the sense of Art. 1.2.

The definition of a subsidy is one of the most controversial issues in the WTO rules, and discussing it in detail goes beyond the scope of this chapter.Footnote ²¹ It suffices to note that a subsidy may be found to exist in the sense of the SCM Agreement, regardless of its impact on trade. Thus, the SCM Agreement may apply to a subsidy that is granted by a WTO member to a foreign investor engaging in manufacturing within the territory of that member. Similar to the TBT Agreement, rules under the SCM Agreement may also overlap with rules under the IFD Agreement.

That said, the substantive rules provided under Parts II, III, and V of the SCM Agreement principally provide rules concerning subsidies with trade-distorting effects. For example, Part II of the SCM Agreement prohibits export subsidies and import substitution subsidies because they are regarded as aiming at distorting trade. Parts III and V provide rules to deal with subsidies that cause “adverse effects to the interests of other Members.”Footnote ²² The term “adverse effects” has been interpreted to mean trade-distorting impacts of a subsidy on the importing country market or the third country market.Footnote ²³

Despite the limited scope of the substantive rules, the transparency obligations provided in Part VII of the SCM Agreement may apply to subsidies in general, regardless of their impact on trade.

For example, Arts. 25.1 and 25.2 of the SCM Agreement require WTO members to annually notify specific subsidies, as defined in Arts. 1.1 and 1.2 of the Agreement, granted or maintained within their territories. Moreover, Art. 25.8 allows any WTO member to “make a written request for information on the nature and extent of any subsidy granted or maintained by another Member,” and according to Art. 25.9, “Members so requested shall provide such information as quickly as possible and in a comprehensive manner, and shall be ready, upon request, to provide additional information to the requesting Member.” Article 25.10 further provides that any member which considers that a subsidy has not been properly notified “may itself bring the alleged subsidy in question to the notice of the Committee.” These periodic notification requirements and counter-notification procedures do not limit their scope to subsidies with trade-distorting effects. It can be assumed that subsidies granted to foreign investors in the manufacturing sector are subject to these requirements and procedures.

Some caveats need to be noted. First, one of the proposals in the IFD negotiation proposes to exclude “subsidies or grants provided by a Member, including government supported loans, guarantees, and insurance.”Footnote ²⁴ While this proposal would not prevent the application of the transparency requirements under the SCM Agreement to investment-related subsidies, it would exclude subsidies from the scope of additional transparency requirements, if any, under the IFD Agreement.

Second, while trade disputes involving subsidies often arise out of trade-distorting impacts on trade caused by subsidies, investment disputes involving subsidies often arise when subsidies that foreign investors are expected to receive are reduced or not granted at all. In the context of investment, transparency may be needed not only as to subsidies granted or maintained but also to changes made to these subsidies.

Third, WTO members have been long concerned that the notification requirements under Art. 25 of the SCM Agreement are not rigorously implemented by WTO members.Footnote ²⁵ For example, in January 2020, Japan, the United States, and the European Union issued a joint statement, expressing a concern that “the state-of-play of subsidies notifications is dismal” and stating that “a new strong incentive to notify subsidies properly should be added to Art. 25 [of the SCM Agreement], rendering prohibited any non-notified subsidies that were counter-notified by another Member, unless the subsidizing Member provides the required information in writing within set timeframes.”Footnote ²⁶ Though the robust notification requirements under the SCM Agreement can potentially contribute to the improved transparency of investment-related subsidies, their success depends on the implementation of these requirements.Footnote ²⁷

3.2.3 GATT and TRIMs Agreement

The TRIMs Agreement does not create new rights or obligations concerning investment, but it confirms that certain obligations of WTO members under the GATT apply to investment measures in the “recognition that certain investment measures can cause trade-restrictive and distorting effects.”

What is relevant for the purpose of this chapter is Art. 6.1 of the TRIMs Agreement, which reaffirms the WTO members’ commitments to obligations on transparency and notification in Art. X of the GATT with respect to TRIMs. Thus, the transparency requirements under Art. X apply to investment measures, as discussed later.

This chapter takes up two obligations under Art. X. First, para. 1 of Art. X requires publication of

While the publication requirements under Art. X:1 of the GATT primarily seek to ensure transparency of domestic laws, regulations, judicial decisions, and administrative rulings for the interest of imported products, they may also contribute to the transparency of measures related to foreign investment. In fact, the text of the provision suggests that it applies to measures “affecting [the] sale, distribution, transportation, insurance, warehousing inspection, exhibition, processing, mixing or other use” of products produced by both domestic and foreign investors. The breadth of the scope of the provision has been implied by past WTO dispute settlement findings. For example, in Dominican Republic – Import and Sale of Cigarettes, the panel found that average-price surveys of cigarettes conducted by the Dominican Republic to establish the tax base for cigarettes constitute “administrative rulings of general application” within the meaning of Art. X:1 and are subject to the publication requirements thereof.Footnote ²⁸ Evidently, the measures at issue in this case affect not only imported cigarettes but also domestic cigarettes produced by foreign investors within the territory of the respondent.

It has to be noted, however, that the publication requirements under Art. X:1 of the GATT are general in nature and do not precisely stipulate specific steps to be taken. For example, Art. X:1 requires “prompt[]” publication “in such a manner as to enable governments and traders to become acquainted with them,” but does not specify when and in what manner the publication should be made. The jurisprudence in the WTO dispute settlement sheds little light on this issue.Footnote ²⁹ Moreover, the provision does not require notification of relevant measures to the WTO. These vague requirements may be complemented by more robust transparency requirements under other WTO Agreements, such as the TBT Agreement and the SCM Agreement, if measures subject to Art. X:1 of the GATT also fall within the scope of application of these agreements. However, if not, the transparency of investment measures ensured by Art. X:1 of the GATT remains limited.

Another important obligation under Art. X of the GATT is set forth in para. 3(a), which provides that each WTO member “shall administer in a uniform, impartial and reasonable manner all its laws, regulations, decisions and rulings of the kind described in” Art. X:1. Similar to Art. X:1 of the GATT, Art. X:3(a) is expected to apply both trade measures and investment measures and to contribute to streamlining administrative procedures and requirements relating to investment. The applicability of Art. X:3(a) to investment is implied by past WTO panel findings. For example, the panel in EU – Energy Package found that certain measures related to natural gas infrastructure fall within the scope of the provision.Footnote ³⁰

Despite the breadth of Art. X:3(a) of the GATT, its obligation is general in nature and does not explicitly specify what the “uniform, impartial and reasonable” administration means. Past panel findings on the provision have clarified its meaning to some extent, but many ambiguities remain unclear. Moreover, panels and the Appellate Body have been very cautious in finding violations of this provision. For example, the Appellate Body stated that allegations that “the conduct of a WTO Member is biased or unreasonable are serious under any circumstances” and that “Such allegations should not be brought lightly, or in a subsidiary fashion.”Footnote ³¹ It further insisted that “A claim under Art. X:3(a) of the GATT 1994 must be supported by solid evidence; the nature and the scope of the claim, and the evidence adduced by the complainant in support of it, should reflect the gravity of the accusations inherent in claims under Art. X:3(a) of the GATT 1994.”Footnote ³² In fact, the Appellate Body rarely finds a violation of Art. X:3(a).Footnote ³³

In short, while the scope of Art. X is broader than that of other WTO Agreements, such as the TBT Agreement and the SCM Agreement, and applicable to measures related to investment, its obligations concerning transparency and the streamlining of administrative procedures and requirements are significantly limited.

3.2.4 TRIPS Agreement

Despite a reference to “trade-related aspects” in its title, the TRIPS Agreement incorporates relevant rules under intellectual property conventions and provides comprehensive rules on various aspects of intellectual property rights. The substantive rules as well as the transparency requirements under the TRIPS Agreement apply to intellectual property rights often, regardless of their impacts on trade.Footnote ³⁴

In terms of transparency, Art. 63.1 of the TRIPS Agreement provides that

In addition, Art. 63.2 requires members to notify the laws and regulations referred to Art. 63.1 “to the Council for TRIPS in order to assist that Council in its review of the operation of this Agreement.” Article 63.3 provides “Each Member shall be prepared to supply, in response to a written request from another Member, information of the sort referred to in paragraph 1.” It also allows “A Member, having reason to believe that a specific judicial decision or administrative ruling or bilateral agreement in the area of intellectual property rights affects its rights under this Agreement” to “request in writing to be given access to or be informed in sufficient detail of such specific judicial decisions or administrative rulings or bilateral agreements.”

The TRIPS Agreement does not contain a provision equivalent to Art. X:3(a) of the GATT. However, Art. 41.2 provides that “Procedures concerning the enforcement of intellectual property rights shall be fair and equitable” and “shall not be unnecessarily complicated or costly, or entail unreasonable time-limits or unwarranted delays.” Moreover, Art. 62.4 requires that “Procedures concerning the acquisition or maintenance of intellectual property rights and, where a Member’s law provides for such procedures, administrative revocation and inter partes procedures such as opposition, revocation and cancellation, shall be governed by the general principles set out in” Art. 41.2.

Given the comprehensive nature of the TRIPS Agreement and the robust requirements concerning transparency as well as streamlining relevant procedures, what would be added by the IFD Agreement in terms of intellectual property rights is likely to be minimal. It should also be noted that significant work is being done by the World Intellectual Property Organization to enhance the transparency of laws and regulations regarding intellectual property rights.Footnote ³⁵ It is prudent to exclude intellectual property rights from the scope of the IFD Agreement.

3.3.1 Section I

Section I has two provisions: Art. 1 on the scope and Art. 2 on the most-favored-nation treatment. This chapter focuses on the former. Examining the scope of the IFD Agreement is essential to properly assess how it complements and overlaps with the existing rules under the WTO Agreements.

Article 1.1 of the informal Consolidated Text provides that the IFD Agreement applies to “measures adopted or maintained by Members for facilitating foreign direct investments [ ] across the whole investment life-cycle [including the admission, establishment, acquisition and expansion of investments] in services and non-services sectors.”Footnote ⁴¹ Article 1.4 further provides that the IFD Agreement applies to measures adopted or maintained by not only “central, regional or local governments and authorities” but also “nongovernmental bodies in the exercise of powers delegated by central, regional or local governments or authorities.”Footnote ⁴²

This chapter identifies two interpretative questions that may arise regarding the scope of the IFD Agreement defined by these provisions. First, the definition of investment is one of the most controversial issues in investment arbitration, and the same controversy might arise in the context of the IFD Agreement. While the informal Consolidated Text clarifies that the IFD Agreement applies to foreign direct investment rather than investment in general and does not apply to portfolio investment,Footnote ⁴³ it does not define the term “investment.” Although there have been proposals to define the term in the IFD negotiations,Footnote ⁴⁴ any attempt at doing so is likely to be unsuccessful, given the broad and diverse nature of investment.

In any event, the definition of investment may not be as crucial as in IIAs and investment arbitration because it does not affect the jurisdiction of WTO dispute settlement. While the jurisdiction of investment arbitration is often limited to disputes arising directly out of an investment and the existence of investment is critical to establish the jurisdiction of investment arbitration,Footnote ⁴⁵ the jurisdiction of WTO dispute settlement extends to any disputes in which a complaining member “considers that any benefits accruing to it directly or indirectly under the covered agreements are being impaired” (emphasis added).Footnote ⁴⁶ As long as a complaining member claims in good faith that a responding member violates WTO Agreements and its benefits protected under the agreements are impaired, it is entitled to a ruling by a panel and the Appellate Body.Footnote ⁴⁷ In fact, panels and the Appellate Body have never denied jurisdiction over the disputes brought before them.

It should also be noted that neither trade in goods nor trade in services is defined in the WTO Agreements. Panels and the Appellate Body have taken a flexible approach in deciding what constitutes trade in goods and what constitutes trade in services. For example, in Canada – Periodicals, the Appellate Body agreed with the panel’s statement that “obligations under GATT 1994 and GATS can co-exist and that one does not override the other.”Footnote ⁴⁸ Moreover, in EC – Bananas, the Appellate Body acknowledged that there are “measures that involve a service relating to a particular good or a service supplied in conjunction with a particular good” and that these measures could fall within the scope of both the GATT and the GATS, although “specific aspects of that measure examined under each agreement could be different.”Footnote ⁴⁹ Similarly, in Australia – Tobacco Plain Packaging, the panel stated that “the mere fact that a measure, or a certain aspect of a measure, is covered by a specific provision of the TRIPS Agreement is not, in itself, an obstacle to its potentially also falling within the scope of relevant provisions of the TBT Agreement.”Footnote ⁵⁰ These findings suggest a blurry distinction between trade in goods, trade in services, and intellectual property rights, as well as potential overlaps among them. They also imply that investment covered by the IFD Agreement may simultaneously be covered by some of the rules under the existing WTO Agreements, which are discussed in the preceding section.

The second interpretative question concerns the meaning of the measures “facilitating” foreign direct investments. Despite the broad and flexible approach to the definition of investment, the scope of the IFD Agreement may be limited because it applies to the measures “facilitating” foreign direct investment.

That many of the WTO rules are to apply to measures “affecting” trade should be considered. For example, Art. I:1 of the GATS provides that the GATS “applies to measures by Members affecting trade in services” (emphasis added). Similarly, Art. III:4 of the GATT requires that imported products be accorded treatment no less favorable than that accorded to like domestic products “in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use” (emphasis added). As noted by the Appellate Body, the term “affecting” has been interpreted to mean “having an effect,” which indicates a broad scope of application.Footnote ⁵¹ For example, the panel in US – FSC (Article 21.5 – EC) found that the term “affecting” in Art. III:4 of the GATT covers “not only laws and regulations which directly govern the conditions of sale or purchase but also any laws or regulations which might adversely modify the conditions of competition between domestic and imported products” (emphasis added).Footnote ⁵²

That said, the broad interpretation of the term “affecting” does not mean that the term “affecting” does not serve any purpose to define the scope of application. Rather, the Appellate Body pointed out that the term “affecting” under Art. III:4 of the GATT “operates as a link between identified types of government action (‘laws, regulations and requirements’) and specific transactions, activities, and uses relating to products in the marketplace (‘internal sale, offering for sale, purchase, transportation, distribution or use’)” (emphasis added) and that not simply any “laws, regulations and requirements” but only those that “affect” the specific transactions, activities, and uses are covered by the provision.Footnote ⁵³ This finding suggests that the term “facilitating” in the informal Consolidated Text would also operate as a link between measures and investment and that only measures that “facilitate” investment can fall within the scope of the IFD Agreement.

The question then arises as to what the term “facilitating” means. The ordinary meaning of “facilitating” is to make something easy or easier or to promote something,Footnote ⁵⁴ which implies a narrower scope of application than the term “affecting.” In other words, a measure having some effect on investment is not sufficient for the measure to fall within the scope of the IFD Agreement; it has to have an effect that makes investment easier. Under this interpretation, the scope of the IFD Agreement may not be as broad as it may look.

The scope of the IFD Agreement may be further limited by Art. 1.3 of the informal Consolidated Text, which provides that the IFD Agreement “shall not cover” investment protection rules and investor–state dispute settlement.Footnote ⁵⁵ The provision is meant to insulate the IFD Agreement from IIAs and investment arbitration, but some of the measures that facilitate investment may also have an effect of protecting it. It would be extremely difficult to draw the line between investment protection rules and investment facilitation rules, which leaves significant uncertainty about the scope of the IFD Agreement. In addition, Art. 1.2 of the informal Consolidated Text excludes government procurement, public concessions (under certain conditions), market access, and the right to establish from the scope of the IFD Agreement.Footnote ⁵⁶ Members may also be allowed to exclude specific sectors or activities from the scope.Footnote ⁵⁷

In sum, the IFD and the WTO Agreements on trade in goods and intellectual property rights potentially overlap and apply in parallel to the same measure because the measure can be related simultaneously to investment, trade in goods, and intellectual property rights. However, the scope of the IFD Agreement may be significantly limited because the informal Consolidated Text provides that the IFD Agreement applies only to measures “facilitating” foreign direct investment.

3.3.2 Section II

Section II has four provisions concerning transparency: Art. 3 on publication, Art. 4 on notification, Art. 5 on enquiry points, and Art. 6 on specific exceptions to transparency requirements. This chapter discusses rules under Arts. 3 and 4.

As to the publication requirements, one version of the proposed Art. 3.1 requires publication of “laws, regulations, procedures, judicial decision and administrative rulings of general application that pertain to or affect the operation of” the IFD Agreement.Footnote ⁵⁸ The informal Consolidated Text also requires members to leave a “reasonable period of time” between the publication and entry into force of a measure, providing an explanation of the rationale/objective of the law, requiring the publication in an official publication/online source, and requiring no imposition of a fee.Footnote ⁵⁹ In addition, the publication of information required for an investment authorization such as “contact information, requirements and procedures, forms and documents, fees and charges, taxes, procedures for appeal or review of decisions concerning application, procedures for monitoring or enforcing compliance with the terms of conditions or licenses, opportunities for public involvement, time frame for processing an application” is required.Footnote ⁶⁰

As to the notification requirement, Art. 4 of the informal Consolidated Text requires notification of major changes to existing “regulations of general application” to the Committee on Investment Facilitation.Footnote ⁶¹ Members are also required to specify where the measure has been published.Footnote ⁶²

These provisions concerning transparency are at a very early stage of negotiations, but they would be expected to provide more robust transparency requirements than those under the GATT. Nevertheless, the scope of the transparency requirements under the IFD Agreement may be limited for two reasons.

First, the scope of the publication and notification requirements would correspond to that of the IFD Agreement itself, which is discussed in the preceding subsection. If the scope of application of the IFD Agreement were significantly limited as indicated earlier, the scope of the publication and notification requirements would also be limited accordingly. Second, it is also notable that the publication and notification requirements under the informal Consolidated Text are expected to apply to measures of “general application.” The term “measures of general application” is also used in provisions concerning transparency under the GATT and the GATS. For example, Art. X:1 of the GATT provides that “Laws, regulations, judicial decisions and administrative rulings of general application” related to trade in goods “shall be published promptly in such a manner as to enable governments and traders to become acquainted with them” (emphasis added). Similarly, Art. III:1 of the GATS provides that “Each Member shall publish promptly and, except in emergency situations, at the latest by the time of their entry into force, all relevant measures of general application which pertain to or affect the operation of” the GATS (emphasis added).

The meaning of “measures of general application” has been clarified by panels and the Appellate Body to refer to laws and regulations that apply in a general manner and not specific application of such laws and regulations.Footnote ⁶³ For example, in EC – Poultry, the Appellate Body sided with the panel’s finding that an application of the licensing system to a specific company or shipment “cannot be considered to be a measure ‘of general application’ within the meaning of Article X” (footnote omitted).Footnote ⁶⁴ In US – Anti-Dumping Methodologies (China), the Appellate Body stated that “a rule or norm has ‘general application’ to the extent that it affects an unidentified number of economic operators.”Footnote ⁶⁵ Assuming that the same interpretation applies to the IFD Agreement, the publication and notification requirements under the IFD Agreement apply only in relation to laws and regulations as such and not specific applications thereof.

This is in contrast to the publication requirements under the TFA, Art. 1.1 of which provides that not only certain laws, regulations, and administrative rulings of general application but also “applied rates of duties and taxes of any kind imposed on or in connection with importation or exportation” as well as “fees and charges imposed by or for governmental agencies on or in connection with importation, exportation or transit” shall be published. It appears that this provision requires the publication of information concerning specific application of certain laws and regulations. Moreover, WTO Agreements on trade remedies also provide extensive transparency obligations. For example, the Agreement on Implementation of Art. VI of the General Agreement on Tariffs and Trade 1994 (Anti-Dumping Agreement) requires notifications not only of “any changes in its laws and regulations relevant to [the] Agreement and in the administration of such laws and regulations”Footnote ⁶⁶ but also of individual investigations, determinations, and actions taken pursuant to the Agreement.Footnote ⁶⁷

The preceding section notes that the publication requirements under Art. X:1 of the GATT apply to broad measures related to trade and investment. While the transparency requirements under the IFD Agreement would be more robust than those under Art. X of the GATT, the scope of these requirements may substantially overlap.

3.3.3 Section III

Section III has eleven provisions concerning the streamlining of administrative procedures and requirements. While it is premature to discuss what rules would be provided under these provisions, it is certain that they are the core of the IFD Agreement.

Section III would begin with Art. 7, para. 1 of which requires that “each Member shall ensure that all measures of general application [covered by this framework] are administered in a reasonable, objective and impartial manner.”Footnote ⁶⁸ In addition, Art. 7.2 of the informal Consolidated Text reportedly provides for “specific obligations related to proceedings that directly affect investors of another Member.”Footnote ⁶⁹

Article 7.1 basically mirrors Art. X:3(a) of the GATT as well as Art. VI:1 of the GATS, which provides that “In sectors where specific commitments are undertaken, each Member shall ensure that all measures of general application affecting trade in services are administered in a reasonable, objective and impartial manner.” The previous section identifies the ambiguous nature of the obligation under Art. X:3(a) and notes that past panel findings have clarified its meaning to some extent. The expectation is that Section III of the IFD Agreement would provide detailed rules based on jurisprudence concerning Art. X:3(a) of the GATT. In this regard, it is noteworthy that the TFA has detailed rules that expand the obligations under Art. X:3(a) of the GATT. In fact, the preamble to the TFA states that “Desiring to clarify and improve relevant aspects of Arts. V, VIII, and X of the GATT 1994 with a view to further expediting the movement, release and clearance of goods, including goods in transit.”

As already suggested, the scope of Art. X of the GATT and Section III of IFD Agreement may substantially overlap. Nevertheless, the latter could significantly complement the ambiguous obligations in the former if it provides sufficiently detailed rules building, in part, on the past jurisprudence.