Abstract
This essay aims to stress the key role of international investment law for development in times of globalisation. It does not argue that the current international investment regime is good as it is, nor that it does not require adjustments. Instead, it is argued here that regardless of how power shaped international investment law during the nineteenth and twentieth centuries, currently investment paradigms are radically shifting and development is starting to happen. For the first time in history foreign direct investment (FDI) is in fact enabling developing countries to become major exporters of goods and services of increasing value added. An economic multipolar world is emerging and not only inward but also outward FDI from developing countries have a lot to do in this process. Just when developing countries are finally learning to insert themselves into a globalised economy, and just when they are learning how to use international rule-making to promote that process, many sectors in developed countries—not used to any external regime limiting their historical discretion in national decision-making—are harshly reacting against the very law they contributed to create. Within this radically new context, to argue that a system of global governance is just a manifestation of imperialism entails the risk of saving developing countries from development.
All opinions and potential errors expressed in this note do not represent the views of the World Bank Group and are full responsibility of the author.
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Notes
- 1.
The term ‘International Investment Agreement’ (IIA) is used in this note as a term to refer to those international agreements negotiated among States to regulate their conduct with respect to cross-border investments, and thus comprises Bilateral Investment Treaties (BITs), Preferential Trade Agreements (PTAs) with investment chapters and the investment-related provisions of the Agreements of the World Trade Organization (WTO) with the caveat that the latter does not provide for investor-State dispute settlement procedures.
- 2.
All cases can be found on the ICSID webpage at www.worldbank.org/icsid/cases/cases.htm, or at http://ita.law.uvic.ca/chronological_list.htm (last accessed 29 October 2015).
- 3.
Source: UNCTAD (2015) Investor-State dispute Settlement: Review of Developments in 2014, IIA Issues Note No. 2, 2015, Geneva, United Nations.
- 4.
This point has been developed in detail in UNCTAD (2007) Investor-State Dispute Settlement and Impact on Investment Rulemaking, New York and Geneva.
- 5.
Sornarajah (2016), section 3.4.
- 6.
Source: World Bank. Data available at: https://www.worldbank.org/progress/reducing_poverty.html (last accessed 29 October 2015).
- 7.
Collier (2007).
- 8.
Sornarajah (2016), section 3.4.
- 9.
Sornarajah (2016), section 1.
- 10.
Sornarajah (2016), section 1.
- 11.
Sornarajah (2016), section 3.4.
- 12.
This point has been developed in detail in UNCTAD (2006) International Investment Arrangements: Trends and Emerging Issues, Geneva, United Nations.
- 13.
Echandi (2010).
- 14.
Echandi and Sauve (2013).
- 15.
This point is further developed in Echandi (2011) Investor-State Dispute Prevention Mechanisms: Why are they so important for developing countries and for the healthy evolution of the international investment regime? in UNCTAD (2011) Investor-State Disputes: Prevention and Alternatives to Arbitration II, Proceedings of the Washington and Lee University and UNCTAD Joint Symposium on International Investment and Alternative Dispute Resolution, held on 29 March 2010 in Lexington, Virginia, USA (New York and Geneva: United Nations).
- 16.
Clearly, the insights included in this note are coloured by the experience of my own country and region. I come from Costa Rica, a very small nation in Central America which has been quite successful in attracting foreign direct investment (FDI) and using it to foster a qualitative transformation of its economy. A little more than 20 years ago, the overwhelming majority of Costa Rican exports were concentrated on a few agricultural products, basically bananas and coffee. Today, Costa Rica exports more than five thousand products among which microchips, high-tech medical devices and exports of services rank at the top of the export supply. Clearly, international trade and investment have been critical in enabling Costa Rica to migrate from being a commodity exporter into a provider of higher value added goods and services. For more detailed information, see: Ferreira, G. (2009), From Coffee Beans to Microchips: Export Diversification and Economic Growth in Costa Rica, Louisiana State University, mimeo, http://ageconsearch.umn.edu (last accessed 29 October 2015).
- 17.
By 1991, when the wave of negotiation of IIAs was just starting, UNCTAD’s World Investment Report was already commenting the significant reforms undertaken at the domestic level by developing countries during the 1980s. “The trend towards reducing restrictions on the activities of transnational corporations in host developing countries is one of the more important policy developments of the past decade. A sample of more than 300 instances of changes in policies and regulations affecting foreign direct investment by transnational corporations covering 46 countries (20 developed market economy countries and 26 developing countries, including five newly industrializing countries) over 11 years (1977–1987) illustrates the scope and direction of the changes. More than two thirds of the changes in the sample were in the direction of reducing restrictions on the activities of transnational corporations. In the case of the newly industrializing countries, more than three fourths of the changes were in the direction of reducing restrictions on transnational corporations.” (UNCTAD (1991) World Investment Report 1991, Geneva: United Nations Conference on Trade and Development, p. 28.)
- 18.
This point is further developed in Echandi (2011).
- 19.
This point is further developed in Cable (1981).
- 20.
For instance, see Schneiderman (2007).
- 21.
However, as the current situation in some Latin American countries evidences, the problem is that political and economic liberalism are not enough per se to generate sustainable development in many countries that for centuries have had quasi-feudal social structures. Effective policies leading to greater social investment and poverty alleviation are also required. When governments fail to provide these services, it is easy for societies to fall prey of authoritarian populist leaders promising the masses what they want to hear.
- 22.
This is the case of Costa Rica, where the Constitutional system has actively incorporated international law within the domestic legal order. See, Echandi (1997).
- 23.
A clear example of this trend is article 19 of the 2004 Canadian Model BIT (Canadian Foreign Investment Promotion and Protection Agreements, at: Agreement Between Canada and […] for the Promotion and Protection of Investments, http://www.italaw.com/documents/Canadian2004-FIPA-model-en.pdf (last accessed 29 October 2015), which states:
“1. Each Party shall, to the extent possible, ensure that its laws, regulations, procedures, and administrative rulings of general application respecting any matter covered by this Agreement are promptly published or otherwise made available in such as manner as to enable interested persons and the other Party to become acquainted by them.
2. To the extent possible, each Party shall: (a) publish in advance any such measure that it proposes to adopt; and (b) provide interested persons and the other Party a reasonable opportunity to comment on such proposed measures.
3. Upon request by a Party, information shall be exchanged on the measures of the other Party that may have an impact on covered investments.” (emphasis added).
- 24.
For example Article 18.5 of the DR-CAFTA (The Dominican Republic-Central America-United States Free Trade Agreement, United States, Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua, 28 May 2004) which states:
“1. Each Party shall establish or maintain judicial, quasi-judicial, or administrative tribunals or procedures for the purpose of the prompt review and, where warranted, correction of final administrative actions regarding matters covered by this Agreement. Such tribunals shall be impartial and independent of the office or authority entrusted with administrative enforcement and shall not have any substantial interest in the outcome of the matter.
2. Each Party shall ensure that, in any such tribunals or procedures, the parties to the proceeding are provided with the right to:
(a) a reasonable opportunity to support or defend their respective positions; and
(b) a decision based on the evidence and submissions of record or, where required by domestic law, the record compiled by the administrative authority.
3. Each Party shall ensure, subject to appeal or further review as provided in its domestic law, that such decisions shall be implemented by, and shall govern the practice of, the office or authority with respect to the administrative action at issue.”
- 25.
Cottier T, et al. (2012) The principle of proportionality in International Law, Working Paper No 2012/38 Swiss National Centre of Competence in Research, http://www.wti.org/fileadmin/user_upload/nccr-trade.ch/wp3/publications (last accessed 29 October 2015).
- 26.
See for instance Kingsbury B, Schill, SW (2009) Investor-State as Governance: Fair and Equitable Treatment, Proportionality and the Emergence of a Global Administrative Law, New York University School of Law, Public Law and Legal Theory Research Paper Series, Working Paper No. 09–46, http://ssrn.com/abstract=1466980 (last accessed 29 October 2015).
- 27.
See World Investment and Political Risk Reports 2013–2009, Multilateral Investment Guarantee Agency (MIGA) Word Bank Group, http://www.miga.org/resources/index.cfm?stid=1866 (last accessed 29 October 2015).
- 28.
- 29.
These three key ideas are the main conceptual pillars for the new investment policy framework designed by the investment policy and promotion team of the Trade and Competitiveness Global Practice of the World Bank. For a full explanation on such framework please visit Investment Policy and Promotion site at: https://www.wbginvestmentclimate.org/advisory-services/international-trade/investment-policy/ (last accessed 29 October 2015).
- 30.
In this regard, please see UNCTAD’s 2015 World Investment Report data on the direction on regulatory changes on investment regimes in host countries.
- 31.
This point is developed in Echandi (2010).
- 32.
This point is further developed in Echandi R (2014) Investor-State Conflict Management: A preliminary sketch, Transnational Dispute Management Vol. 1 Issue 1, January 2014, www.transnational-dispute-management.com (last accessed 29 October 2015).
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Echandi, R. (2016). Be Careful with What You Wish: Saving Developing Countries from Development and the Risk of Overlooking the Importance of a Multilateral Rule-Based System on Investment in the Twenty-First Century. In: Bungenberg, M., Herrmann, C., Krajewski, M., Terhechte, J. (eds) European Yearbook of International Economic Law 2016. European Yearbook of International Economic Law, vol 7. Springer, Cham. https://doi.org/10.1007/978-3-319-29215-1_11
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