Conference report
Investment protection
20th Anniversary Annual Meeting of the Institute of World Business Law
28
March, 2000
On 28 March, 2000, the Institute
of World Business Law held its 20th Anniversary Annual Meeting on the topic
of Investment protection. Serge Lazareff, the Chairman of the Institute of World
Business Law, welcomed the participants to this timely exchange on the issues
surrounding investment protection. Then, Maria Livanos Cattaui, the Secretary
General of the ICC, commented on the progress the international community has
made in the protection of investment, evidenced by increased FDI flows to developing
countries, and traced the ICC's contribution over the years on the protection
of investment and the strengthening of business concerns.
The morning session was
chaired by Bernardo Cremades (Senior Partner, B. Cremades & Associates,
Spain), and was dedicated to discussions on the investment protection provision
in treati
es, the expectations of foreign investors, broad definitions of crucial
terms, standards, and appropriate compensation for changed circumstances. Mr.
Cremades presented important questions in treaties, including the definition
of investment, protections offered by treaties, and the roles of certain guarantee
organizations, such as COFACE and MIGA, and commented that treaties provided
a 'private international law' binding the citizens of the state.
Responding to the concept
of a 'private international law', Jan Paulsson (Lawyer, Freshfields, Paris),
warned against inefficiency in creating investment protection mechanisms (BITs),
and urged the audience to 'keep concentration' on the treaties, citing unintended
results from treaties signed too quickly with political agendas trumping the
due diligence process.
Professor Giorgio Sacerdoti
(Attorney, Professor, Bocconi University, Milan), stated with regard to Mr.
Paulsson's remarks, that the sheer number of BITs (about 1,200 separate treaties)
makes it also important to look at the treaties as a network rather than as
individual text. He discussed the general components of the treaties, including
general standards and specific rights granted to foreign investors with regard
to monetary transfer, recruitment of staff, expropriation and compensation,
and due process under the law.
Then, David Andrews, the
Legal Advisor to the United States, focused upon the specific concerns of investors
investing in developing countries from a US perspective. He opened by stating
that the US is responsible for 1 trillion dollars of investment abroad, and
with such huge investments, the effective protection of investment is crucial
to economic security. He noted that in addition to usual concerns of market-oriented
policies, investment protection measures, international legal standards, and
export provisions, protection of intellectual property rights is a great concern
for assessment of risk in investing in developing countries.
Mark Koulen, Counsellor
in the Trade and Finance Division of the WTO Secretariat, provided an overview
of existing WTO rules relevant to foreign investment, and described the controversy
among WTO Members as to whether or not negotiations should be launched in the
WTO to establish a multilateral framework of rules on foreign investment. In
the latter regard, he noted that while the European Union strongly favors the
launching of such negotiations, the United States remains skeptical. He also
identified a number of themes that could usefully be addressed in further discussions
on possible investment negotiations in the WTO. Thus, one question warranting
further analysis was to what extent a multilateral set of investment rules in
the WTO could be based on provisions typically contained in existing bilateral
and regional investment arrangements.
Then, Pierre Coste (Sous-directeur
des Affaires Financieres Internationales, Ministere francais des affaires etrangeres),
set forth the role of a diplomat in investment protection treaties. He first
noted that France has signed 84 investment protection agreements, has enforced
65 agreements, and is working on 22 additional agreements. He stated that the
Ministry of Foreign Affairs aids with all stages of the treaty making process,
from the negotiation of investment protection treaties to the application of
such treaties in case of a dispute.
The Afternoon session centered
on investment agreements between states and investors, and was chaired by Piero
Bernardini (Professor, Rome University; Counsel, Ughi
& Nunziante, Italy).
Professor Bernardini opened the afternoon session outlining the basic components
of a private investment agreement, including confirmation that the agreement
qualifies under the BIT, expropriation clauses, assessment of compensation,
transfer of payments, stability of legal/tax conditions, and state waivers as
to local court jurisdiction. Professor Bernardini emphasized that most importantly,
private investment agreements are used to ensure choice of applicable law and
international arbitration in a forum of the parties' mutual choice (ICC/ICSID/UNCITRAL,
etc).
Professor Rudolph Dolzer
(Professor, University of Bonn), followed Professor Bernardini, beginning his
presentation with a comment on the continuing difficulty in setting up a corporation
in a foreign and less developed country, despite international strides in investment
protection. He stated what is crucial in encouraging investment is a stable
and formalized legal system, and noted that the tendency now, after analyzing
an investment was to accept local law to govern the agreement. Professor Dolzer
noted the trends in international investment agreements of globalization of
law, increased contract specificity, decreased emphasis in stabilization clauses
and other like clauses, and acceptance of the corrective function of international
law.
Armond Holle (Senior Legal
Adviser to Shell International B.V. and Director of Shell Exploration), brought
the discussion to a practical level, brought the discussion to a practical level.
He provided the
characteristics of investments in the oil and gas-sector and of Shell in particular,
demonstrating the importance of investment protection. Subsequently, he explained
and gave some examples of how the investment risks are mitigated in practice,
including: (i) agreeing adequate contractual terms and specific provisions such
as 'stability' and 'governing law' clauses, (ii) involving various types of
stakeholders and (iii) invoking relevant treaties, such as BIT's, tax treaties
and intergovernmental treaties for cross-border pipeline projects.
Furthering practical discussions,
Jacques Daubas (Director, Export Financing Asia, BNP/Paribas Bank, France),
presented a banker's perspective of investment agreements and international
investment. Mr. Daubas commented upon the importance of FDI for emerging countries,
the concentration of FDI in certain areas, including China, Brazil and Mexico,
and the fierce competition amongst countries to attract such investment for
infrastructure concerns. He noted that 'FDI is getting more difficult and dangerous'
and urged caution, while 'globalization is making the whole process easier,
we are facing a need for deeper reflection and a better dialogue'.
Then, to give the perspective
of a guaranty organization, Michel Scialom (Director of Risks and Guarantees,
COFACE, France), described the COFACE, and emphasized the changing landscape
of investment protection. He remarked that for the most part, the risks have
shifted from expropriation to unstable or changing tax or visa policies, and
instead of only insuring the largest corporations and banks, COFACE now insures
small and medium sized firms as well as individual investors.
Then, turning to dispute
settlement measures for international investment contracts, Professor Ibrahim
Fadlahlah (Agrege des facultes de droit, Professor, University of Paris), pointed
out that security of an investment cannot be separated from settlement of disputes,
whether by treaty or by contract. He described the workings of several systems
of dispute resolution, notably
ICSID, and emphasized that inclusion of a specific
arbitration clause covering this is crucial.
Then, Horacio Grigera Naon,
the Secretary General of the ICC International Court of Arbitration, Paris,
expanded upon the ICC Court of Arbitration dispute settlement mechanism, concentrating
upon its elements of neutrality and independence of the arbitrators. He pointed
out that the ICC Court is neither a governmental nor non-governmental body,
so it is not subject to political pressures. He recounted some real cases, and
noted that states do not always vie for arbitration determined under national
law, and have sometimes strategically changed position to wanting a dispute
decided under a foreign law.
Finally, Judge Florentino
Feliciano (Chairman of the Appellate Body, World Trade Organization, Geneva),
finished the day with a discussion of the WTO dispute settlement system which
settles disputes related to trade of goods and services. He emphasized that
the WTO system is not a stand-alone system as it lies 'within a matrix of the
comprehensive network of specific treaty rights and obligations administered
by the WTO', and stated that with respect to the implementation and enforcement
of dispute resolution decisions, the System applies 'controlled reciprocity'.
Although private investors do not have direct and formal access to the WTO System,
some components of that System may be usefully considered in designing an appropriate
dispute settlement system covering investment agreements.
Institute
of World Business Law