International Investment All

Conditions for lawful expropriation

- For public purpose -Against compensation - Not discriminatory - Due process

German Model BIT, Article 2

"Each Contracting State shall in its territory in every case accord investments by investors of the other Contracting State fair and equitable treatment as well as full protection under this Treaty."

As a safeguard of the State's power to regulate - potentially limiting investors' rights

"Subject to the requirement that such measures are not applied in a manner that would constitute arbitrary or unjustifiable discrimination between investments or between investors, or a disguised restriction on international trade investment, nothing in this Agreement shall be construed to prevent a Contracting Party from adopting or enforcing measures necessary: (a) to protect human, animal or plant life or health; (b) to ensure compliance with laws and regulations that are not inconsistent with the provisions of this Agreement; or (c) for the conservation of living or non-living exhaustible natural resources".

Arbitrators duties

- Adjudicate dispute -Issue the award - Conduct the arbitration in accordance with parties' agreement -Act fairly & impartially -Avoid unnecessary delay or expense -Maintain confidentiality - No resignation without cause - Obligation to apply the law -Obligation not to delegate duties

Arbitrators Mission

- Contractual mission - Quasi-Judicial Mission - Jurisdictional Mission

Direct and indirect expropriation

- Direct Expropriation: The situation where an investment is nationalized or otherwise transferred to a state mandated beneficiary. The investor loses legal title over the investment or part thereof - Indirect expropriation: Expropriation which results form a measure or series of measures of a state that have an effect equivalent or direct expropriation without formal transfer of title or outright seizure

The 1st ICSID Award and Annulment

- Gambardella V Cote D'ivore 1977 - ICSID annullment amco v indonesia (1986)

Modern tools of investment protection

- Insurance -investment Contracts -National Investment Laws -Investment protection treaties

Reasons for foreign investment

- Market diversification -Opening to new products, services, business methods - better supply chain -Economy of scale - Lower- cost/ better-value factors of production - Attract/ retain global talents -Better serve key customers - Compete more effectively - Increase margins/ profits

Measures Affecting foreign investment

- The Liberalization of the region - The sectors exclusions and limitations

Arbitration

- The use of an arbitrator to settle a dispute - An arbitrator is an independent person or body officially appointed to settle disputes

as actionable obligations of the investor

-"Investments shall, in keeping with good practice requirements relating to the size and nature of the investment, maintain an environmental management system. Companies in areas of resource exploitation and high-risk industrial enterprises shall maintain a current certification to ISO 14001 or an equivalent environmental management standard. - 1. In accordance with the size and nature of an investment, a) Investments shall meet or exceed national and internationally accepted standards of corporate governance for the sector involved, in particular for transparency and accounting practices. - "15.1. Investors and their investments have a duty to respect human rights in the workplace and in the community and State in which they are located. Investors and their investments shall not undertake or cause to be undertaken acts that breach such human rights. Investors and their investments shall not assist in, or be complicit in, the violation of the human rights by others in the Host State, including by public authorities or during civil strife. -15.2. Investors and their investments shall act in accordance with core labour standards as required by the ILO Declaration on Fundamental Principles and Rights of Work, 1998 -15.3. Investors and their investments shall not [establish], manage or operate Investments in a manner inconsistent with international environmental, labour, and human rights obligations binding on the Host State or the Home State, whichever obligations are higher.".

Umbrella clause definition

-An umbrella clause protects investments by bringing obligations or commitments that the host state entered into in connection with a foreign investment under the protective "umbrella" of the BIT. -Umbrella clauses have usually been considered as substantive provisions that could be imported into a treaty through the effect of a most-favoured nation clause.39 Some tribunals refused to do so when this would amount to introducing a new substantive right into the treaty.

Where should you place your foreign investment

-Large domestic markets -Place with access to natural resources -Place with good production factors such as (technology, skilled workers, internet, etc) -Stable political & regulatory environment -Stable currency, financial & monetary regulation - Infrastructure -Favorable regulatory environment ( the regulations are not damaging to your investment ) - Places with government support - Reduced competition (market that is not saturated

Investment Treaty language

1. "Each Contracting Party shall promote and protect in its territory Investments of investors of the other Contracting Party and accept such investments in accordance with its laws and regulations and accord them fair and equitable treatment and protection." (Gambia - Qatar BIT 2002, Albania - Bulgaria BIT 1994 2. Investments of nationals or companies of each Contracting Party shall at all times be accorded fair and equitable treatment and shall enjoy full protection and security in the territory of the other Contracting Party. Neither Contracting Party shall in any way impair by unreasonable or discriminatory measures the management, maintenance, use, enjoyment or disposal of investments in its territory of nationals or companies of the other Contracting Party." (Kenya - UK BIT 1999) 3. "Each Party shall accord to investments of investors of another Party treatment in accordance with international law, including fair and equitable treatment and full protection and security". (NAFTA - Article 1105).

International investment law history

1. 1947 GATT - General Agreement on Tariffs and Trade - Legal agreement minimizing barriers to international trade by eliminating or reducing quotas, tariffs and subsidies while preserving significant regulations - Updated in 1994 to be WTO (world Trade Organization) 2. 1951 ECSC - Called the European Coal and steel community brought together Belgium, Germany, France, Italy, Luxembourg, Netherlands) -They organized free movement of coal and steel and to free up access to sources of production 3. 1956 first BIT 4. 1965 ICSID - ICSID convention is a treaty formulated by the executive directors of the world bank to further the bank's objective of promoting international. It is a independent, depoliticalized and effective dispute settlement institution 5. 1994 NAFTA - North American Free Trade Agreement - Was to boost trade, eliminate barriers, and reduce tariffs on imports and exports between Canada, The united States, and Mexico

Violation of National Treatment

1. A breach of the national treatment standard is established if the treatment of foreigners is less favourable than the treatment accorded to domestic or national investors. - De jure discriminatory treatment is set out in the laws and regulations of the host State specifically targeting foreigners compared to national investors. - More common, however, is de facto discrimination resulting from practices having detrimental effect on investors and their investments. 2. Various tests have been deployed by arbitral tribunals to determine a violation of the national treatment standard. These tests suggest a two-step process: (i) identification of the relevant comparator ("in like circumstances"), and (ii) comparison between the treatment accorded to the foreign investor or investment and the domestic comparator.

Indirect Expropriation

1. A measure or series of measures of a Party that have an effect equivalent to direct expropriation without formal transfer of title or outright seizure. 2. The investor's legal title to its investment often remains unaffected and it may have physical control of its property, but the investment will still be deprived of its economic use.

What is arbitration

1. A private 2. Dispute resolution method 3. Whereby one or more neutral third parties 4. Agreed to by disputing parties and 5. Deriving their powers from the parties consent 6. Resolve disputes 7. Through final and binding decisions

States Actions that are challenged to be expropriation

1. Alleged takeover or nationalization of investment 2. Termination, non-renewal or alleged interference with contracts or concessions 3. Alleged harassment by state authorities improper criminal prosecution 4. Placement under administration and other actions allegedly resulting in bankruptcy and liquidation 5. Revocation or denial of licences or permits 6. Legislative reforms in the renewable energy sector 7. Alleged failure to address civil strikes and local community protests

IBA Disclosure Waiver

1. An arbitrator must disclose as soon as possible any facts or circumstances that my in the eyes of the parties give rise to doubts as to the arbitrators independence or impartiality (in case of doubt disclose) 2. Red List non waivable -Identity between party and arbitrator - Significant personal or financial interest in the outcome -Arbitrator regularly advises the appointing party/ affiliate & derives substantial income therefrom 3. Red list waivable - Full knowledge and express consent of all parties/ arbitrators/ arbitral institution A. Previous involvement in the case B. Close family member with significant financial interest in outcome C. Currently represents/ Counsel a party in unrelated matter

2004 IBA Guidelines Declining of appointments

1. An arbitrator shall refuse appointment or shall discontinue acting as arbitrator if any time the arbitrator has doubts as to his or her ability to be independent and impartial 2. An arbitrator shall refuse appointment or shall discontinue acting as arbitrator if a reasonable third person would have justified doubts as the arbitrators independence and impartiality

Bilateral Investment Treaty

1. An international agreement concluded between two stats setting out the protection offered for investment by nationals and companies of one state in the territory of the other state 2. BIT grant investments made by an investor of one state in the territory of the other a number of qurantees and set up a dispute resolution mechanism (investor- State arbitration)

Second Pillar Corporate Responsibility to respect

1. Avoid action that may negatively affect human rights. If human rights violation is identified they should take positive action to repair the effect 2. Duty to prevent and address harm which may or has been caused by corporate partners 3. Focus on due diligence on actual or potential human rights and on the effectiveness of the response - This implies assessing impacts of corporations activity - Acting on the findings - Tracking the responses - communicating the impacts - Taking all necessary precautions to prevent harm

International Economic Law regarding investment

1. BIT Bilateral Investment Treaty - The international agreements establishing the terms and conditions for private investment by nationals and companies of one state in another state 2. ICSID International Centre for Settlement of Investment Disputes - Established in 1966 for legal dispute regulation between international investors and states. Its part of and funded by the world bank located in the US

Awards Characteristics

1. Background for award - Procedural - Factual - Parties claims and contentions 2. Reasonings for Awards - Due to deliberation -Parties free to agree that no reason shall be provided - NY convention does not require reasons for awards 3. Dispositive Part - Decisions on claims and counterclaims - Relief/ remedy - Interest -Costs

International Economic Law regarding Sales

1. CISG -Contract for the International sale of goods also known as the vienna convention states the terms of sale should be stated in a contract. Created in 1980 signed by over 80 countries 2. The new york convention - Made it that arbitration awards would be recognized by parties in the convention 168 countries are in

Historical background for investments

1. Colonial period: investments made in the context of colonial expansion protected by the colonial legal & military system 2 Post-colonial period: after the dissolution of colonial empire the need for a system of foreign investment protection emerges - Anti-colonialism: drastic nationalisations of foreign property -New International Economic Order: permit greater participation by and benefits to developing countries -Pragmatism of the 1990s: more open policies on foreign investment & competition between developing states for FDI flows -Economic crisis in the 2000s: rethinking of economic liberalism, rise of multinationals in developing states, former developed countries become capital-importing economies

Cost

1. Cost of the arbitration - Tribunal fees and expenses -Institutional administrative expenses - Fees and expenses of tribunal appointment experts 2. Cost of the parties - Counsels fees and expenses -Fees and expenses of party appointed experts -Fees and expenses of fact witnesses -Expenses related to case prep 3. Tribunal discretion to assess & allocate costs

Types of ways Disputes can be settled

1. Court 2. ADR (alternative dispute Resolution) - Which are a variety of ways to settle a dispute without having to go to court - Can be through Mediation -Can be through good offices -Can be through conciliation 3. Arbitration - 1958 New York convention recognized and enforced a foreign arbitral awards with 157 state parties - 1965 ICSID convention to discuss the settlement of investment disputes with 153 state parties

When were these guidelines created

1. Created in 1970 and adopted in 1976 with multiple revisions to reflect the Un Guiding Principles on business and human rights latest revision was in 2011

From the customary law Minimum Standard of Treatment to Fair and Equitable Treatment

1. Customary law : State is responsible if the treatment of an alien is below a minimum standard of treatment. 2.

COMPENSATION FOR EXPROPRIATIONFAIR MARKET VALUE

1. Defined as the price at which a hypothetical sale transaction between willing and well-informed parties acting at arm's length in an open and unrestricted market would occur. 2. The fair-market-value measure does not impose a specific valuation method. 3. Depending on the circumstances of the case, tribunals may adopt income-, market-, or asset-based approaches to determine Fair Market Value.

International Economic Law regarding Tax

1. Double Taxation Avoidance Agreement - a treaty signed between two or more countries to help taxpayers avoid paying double the taxes on the same income

Obligations for multinational Enterprises

1. Due diligence on environmental impact of activities 2. Not offer, or demand or promise bribes 3. Adopt internal controls regarding corruption and hire oversight agent 4. Make sure that products meet standards of consumer health and safety and provides accurate information on products 5. Allow transfer of technology and know how on reasonable terms 6. Cooperate with competition authorities 7. Pay taxes in a timely manner

OECD implementation for Businesses

1. Embed responsible business conduct into policies and management systems 2. Identify and assess adverse impacts in operations, supply chain and business relationships 3. Cease, prevent or mitigate adverse impacts 4. Track implementation and results 5. Communicate how impacts are addressed 6. If needed provide for or cooperate in mediation when appropriate

Host state International Investment Agreement Obligations

1. Encourage enterprises doing business in its territory or subject to its jurisdiction to voluntarily include OECD standards, guidelines, and principles - Such as statements of principle that have been endorsed or are supported by the host country, these principles address issues such as labor, the environment, human rights, community relations and anti corruption

Terms used

1. Expropriations of entire industries or sectors of the economy are called nationalizations. 2. Expropriations of property during wartime or national emergency are often called requisitions. 3. Confiscation is used to describe compulsory acquisitions of property where the acquisition is not accompanied by compensation, for example in the case of forfeiture of property acquired by crime

Expropriation History

1. FCN Friendship, commerce and navigation simply provided that expropriation should be accompanied with compensation later on they presented more requirements for an expropriation to be lawful 2. Available options for foreign investors - National courts -Diplomatic protection - International arbitration between investor and host state, if the investor had a concession contract with a state entity which provided for it

Direct Expropriation

1. Forced transfer of property from the investor to the state, or a state-mandated beneficiary. 2.It involves the investor being deprived of property and a corresponding appropriation by the state, or state-mandated beneficiary, of specific property rights.

What makes someone independent

1. Free from outside control, not subject another authority 2. Capable of thinking and acting for oneself 3. not influenced by others; impartial

Typology of stabilization clauses

1. Freezing clauses -Stricto sensu freezing clauses -Non-opposability clauses 2. Economic Equilibrium clauses

International Economic Law regarding trade

1. GAAT - The General agreement on Tariffs and Trade signed in 1947 went to effect in 1948 - Was intended to boost economic recovery after WWII. To minimize barriers to international trade by reducing quotas, tariffs and subsidies while preserving significant regulations 2. Marrakesh agreement - What established the world trade organization in 1994 - Agreement defines the scope, functions and structure of the WTO 3. Fair Trade Agreement - A pact between two or more nations to reduce barriers to imports and exports among eachother

Un Guiding Principles overview

1. Guidelines for states and companies to prevent, address and remedy human rights abuse committed in business operations 2. Culmination of work of untied nation since 1970 3. 31 principles based on three pillars ( protect, respect, remedy)

The scope of the protection

1. Historically, the obligation concerns the physical protection and security of the investor or covered investments. This scope remains undisputed to date. - The host State is under an obligation to provide some measure of protection against forcible interference by private persons such as employees, business partners or demonstrators - The protection is also directed against forcible interference by State organs such as police and the armed forces. 2. There is also authority indicating that the principle of full protection and security reaches beyond safeguard from physical violence and requires legal protection for the investor. Under this interpretation the host State is under an obligation to provide a legal framework that enables the investor to take effective steps to protect its investment - Certain treaties contain wording to this effect (see BLEU-Philippines) - But then what about BITs which simply provide for full protection and security?

COMPENSATION FOR EXPROPRIATIONFAIR MARKET VALUE APPROACHES

1. Income based approach - The appropriateness of DCF often turns on whether the available data allow for reasonably reliable projections of expected future cash flows, and tribunals have embraced the discounted-cash flow method to value even early-stage investments with no operating record—in particular, but not exclusively, in the extractive industries 2. Market Based Approach - Market-based methods value the investment in question relative to comparable assets or transactions. Despite the apparent simplicity of market-based methods, identifying suitable comparable assets can be challenging, and that limitation may often render their use impractical. Adequate comparables may in some cases include past transactions involving the same assets, although such transactions may be of little use in other cases. Tribunals sometimes look to market valuations to check the reasonableness of the discounted cash flow method. 3. Asset-Based Approach - Tribunals typically disfavour asset-based valuation methods for income-producing investments. Tribunals may nevertheless resort to these backward-looking measures where the expropriated enterprise is not profitable or an award of lost profits is otherwise deemed too speculative, choosing instead to award compensation on a reliance basis (e.g., sunk costs

SO, WHAT CONSITUTES AN EXPROPRIATION?

1. International arbitration awards have focused on several criteria when considering whether an action of a State organ constitutes expropriation - Loss of control / use / enjoyment of the investment - Substantial deprivation - Abusive / discriminatory measures - Importance of investor's expectations. 2. But keep in mind that a lot will depend on the facts of each case and good lawyers

MFN Defined Most Favored Nation

1. It is a treaty-based requirement. MFN treatment is not required under customary law. 2. MFN clauses will typically require that States party to the investment treaty not subject investors and their investments to treatment less favourable than that which they accord to the investors and/or investments of other States.

Why does international Investment Law gain Legitimacy

1. It is democratically approved the countries recognize it to be fair 2. Textual density of agreements, the agreements are written 3. Predictability of application w

What does the State have to do?

1. It is undisputed that the full protection and security standard does not impose strict liability on the host State but a due-diligence obligation - In this context, "due diligence" means that the host State is not required "to prevent each and every injury" but must exercise reasonable care and take reasonable actions within its power to prevent injury of the investor. Once injuries have already happened, the State is expected to sanction them.

BIT Vocab

1. MFN - Most Favored Nation -Agreement that a supplier agrees to treat a particular customer no worse than all other customers 2. FET - Fair and Equitable treatment for foreign investors 3. FPS - Full Protection and Security - the host country is under obligation to take active measures to protect the investment from harmful effects. Demonstrators, Employees, or business partners or even from action of the host state and its organs

Most Favored Nation Function 2

1. MFN Clauses may also be used to import treatment extended to a third party by means of a different International Investment Treaty - The scope of such importation is not unlimited: The ejusdem generis principle provides that only matters of the same kind are covered by MFN treatment. This principle ensures that only "matters belonging to the same subject matter or the same category of subject" to which the MFN clause relates can be "imported" through MFN treatment. - Contrasting jurisprudence on whether MFN treatment applies to investor-state arbitration provisions. A. To a certain extent, differences can be explained by variations in the drafting of the clauses. B. However, certain tribunals have operated from a presumption that the MFN clause applies to dispute settlement unless the IIA expressly excludes its application, whereas others have applied the opposite presumption.

Most Favored Nation Function 1

1. MFN clauses ensure equality and non-discrimination in the treatment of protected investors vis-à-vis other foreign investors in the host State. 2. Prohibit host states from discriminating amongst foreigners or foreign investment of different nationalities. - The International Court of Justice (ICJ) stated that the purpose of the MFN clauses was "to establish and to maintain at all times fundamental equality without discrimination among all of the countries concerned".

International investment Trend Restrictive measures

1. Mainly in developed countries are restrictive measures being put in place - They are already developed so they can be picky about investments 2. National Security concerns -Want to reduce foreign ownership in certain industries (for instance you might not want a Chinese company in charge of your energy sector) -Obligation to employ local worker (like china does) -Restriction on acquisition of residential property

free transfers Definition and Purpose

1. Many investment treaties require that the host State permit investors to transfer freely out of the host State's territory assets and capital in connection with an investment. 2. Transfers can be made in a convertible currency and at the exchange rate prevailing at the date of transfer. 3. It seeks to prevent a situation whereby an investor is unable to realize its profits, or recover its sunk costs from an investment through repatriating them. 4. Not absolute standard. Does not protect investors against any and all currency controls introduced by a host State. 5. In some instances, the free transfer obligation also prohibits restrictions on the admission of assets and capital into a given host State.

International expropriation law

1. Mediates between two general principles - States permanent sovereignty over their territories and natural resources and states right to implement general (regulation in the public interest (public health, national defense, workers rights) - States duty to respect the acquired rights of foreigners

Remedies

1. Monetary 2. Depending on the arbitrator - Specific Performance - Restitution -Punitive Damages -Correction/ gap filling of contract -Injunctions -Declaratory relief -Interest -Cost

US Bit Model

1. Neither Party may expropriate or nationalize a covered investment either directly or indirectly through measures equivalent to expropriation or nationalization ("expropriation"), except a. For public purpose b. in a non discriminatory manner c. on payment of prompt, adequate and effective compensation d. in accordance with due process of law (minimum standard of treatment) 2. The compensation referred to in paragraph 1(c) shall a. be paid without delay b. be equivalent to the fair market value of the expropriated investment immediately before the expropriation took place (date of the expropriation) c. not reflect any change in value occurring because the intended expropriation had become known earlier d. be fully realizable and freely transferable

Typology: Non-discrimination and extended clauses

1. Non-discrimination war clauses - Do not establish a stand-alone obligation to compensate for damage to property owing to an armed conflict. Once the host state decides to compensate its own nationals or those of a third state, compensation must be extended to the investor under the same terms - If compensation is awarded to nobody else, there is also no obligation to compensate the protected investor. A. Restricted scope: the losses covered must arise from the military action or war itself ('owing' to the conflict - a typical formulation), but B.

2004 IBA Orange and Green list

1. Orange list - Duty of disclosure and if no objection within 30 days Automatic waiver A. Counsel for a party within 3 years on unrelated matter and No ongoing relationship B. Within last 3 year received more than 3 appointments by the same party/ Counsel/ Law firm 2. Green list - no Duty to disclose A. Arbitrator previously published a general opinion concerning an issue which arises in the arbitration - Arbitrator previously served as a co-arbitrator or co-counsel with counsel for a party - Arbitrator & counsel belong to the = professional/ social organizations

Types of Award

1. Partial award - Finally dispose of part, but not all, of a party's claims 2. Interim Award - Finally decide an issue relevant to disposing of a claim, but do not finally dispose the claim - Can save time and expenses by resolving key issues -But provide opportunity to delay proceedings 2. Final award - Decisions that conclude they dispute -tribunal jurisdiction ceases to exist 3. Consent Award - Several arbitrations settle before a final award - Upon settlement parties can terminate arbitration or jointly seek a consent award 4. Default Award - Award in absentia

Qualifications for International Arbitration

1. Parties of different nationalities 2. Place of arbitration differs from parties domiciles 3. Applicable substantive law differs from the law of the place of arbitration

Choosing Arbitrators

1. Party appointed arbitrators - Affinity with chairperson - Power to persuade 2. Chair - Managerial abilities

Arbitration Proceedings

1. Request for Arbitration 2. Answer [w/ counterclaim?] / Default Proceedings 3.[Reply to counterclaim?] 4. Appointment of the Arbitral Tribunal 5. Procedural Meeting 6. Bifurcation - Jurisdiction -Liability -Qauntum 7. Document Production 8. Pre-hearing written phrase 9 Hearing - Opening statements - Written Testimony - Expert Testimony -Closing Statement 10. Post hearing written phrase 11. Award

First Pillar

1. State should protect individuals within their jurisdiction against hum rights abuses committed by non-state actors, including business actors 2. Regulations should be clear that the businesses will have to respect human rights, and should encourage/ require human rights due diligence 3. States should provide effective guidance to businesses on how to respect human rights

Protection of the Investor's legitimate expectations

1. States are entitled to a "policy space" in exercising their regulatory powers, requiring a certain deference to government decisions relating to taxation, banking, protection of health and environment, and similar areas of public interest. 2. Concept of 'reasonable' or 'legitimate' expectations in assessing whether a state has acted unfairly. - Representation (by State official, addressed or not directly to the investor) - "Legitimate" Expectation (in light of all circumstances) -Detrimental Reliance A. the investor acted upon the expectations, B. the State's acting against the representation was to the detriment of the Investor

Un guiding principles 3 Pillars

1. States duty to protect - States need to protect against human rights abuses through appropriate policies, regulation, adjudication 2. Business responsibility to respect human rights - Must act with due diligence to avoid violations - Address adverse impacts that are linked to their activities 3. Victims have effective remedy - If human rights abuse, both by state and non state actors, judicial and non judicial remedies possible

3rd Pillar

1. States must ensure effective remedies to human rights abuses in their territory, following a fair and impartial trial process, protected from corruption and influence 2. Remedies can be apologies, restitution, compensation, rehabilitation, punitive sanctions 3. State need to take action to remove legal barriers that prevent access to remedy - Corporate structures which facilitates avoidance of accountability - Cost of bringing claims ( if it will cost too much to bring a claim then there are less claims filed - Difficulty in securing legal representation 4. Corporations should put in place collaborative initiatives: code of conduct, performance standards

2004 IBA Guidelines General Standard

1. The arbitrator is to be independent and impartial from the of its appointment to the time proceeding have ended - Parties may not discuss a case with an arbitrator outside of the proceedings until they have ended

National Treatment

1. The host State is required to accord foreign investors and investments treatment no less favourable than it accords to domestic investors and their investments. 2. It is a Treaty-based standard, not part of customary law. 3. The significant majority of national treatment provisions concerns solely treatment during the post-establishment period (e.g. management, maintenance, use, enjoyment and sale or disposal of investment). Some treaties broaden the scope of the national treatment standard to cover also pre-establishment phases (establishment, acquisition or expansion).Treaties covering both pre- and post-establishment periods of investment are predominantly of recent date. 4. Some treaty formulations contain further specifications referring to "like circumstances" or "like situations", or even narrower "same" or "identical" circumstances, with further elaboration by additional criteria. Some treaties include a list of criteria elaborating on "like circumstances".

What is not taken into consideration when thinking expropriation

1. The intentions of the states - Intentions as a non-decisive element to be taken into consideration - If the state did not intend to harm that reasoning does not matter 2. Quantifiable economic loss

International investment Trend Liberation

1. The major recent liberation is in Asia as china has opened its country to investors 2 Industries - agriculture - media - mining -energy -retail trade 3. There has been a simplifying and streamlining of administrative process to investing procedure which has increased foreign investments

Investment Treaty language

1. The specific wordings differ. Some treaties refer to "full", others to "full and complete", "(most) constant" or "continuous" protection and security. "Protection" and "security" are sometimes inverted, "security" omitted. In arbitral practice, "these semantic variations do not change tribunals' interpretations of the standard. 2. "Most bilateral or multilateral treaties dealing with the protection of investments contain clauses with the same or similar wording as the full protection and security clause in Article III(1) of the BIT.293 Some omit the adjective "full", others put "security" before "protection" and some refer to "most constant protection and security", but these variations do not appear to carry any substantive significance."

How are implementation further developed

1. There are annual report on the guidelines 2. Supporting documents (such as frequently asked questions) 3. Global Forum that brings together stakeholder from business, trade, unions, civil society and academia to debate key challenges related to responsible business conduct 4. OECD due diligence guidance for responsible business conduct

Is the Fair and Equitable Treatment provision a « catch-all » clause ?

1. This provision allows foreign investors to succeed where their expropriation, non-discrimination and other claims have failed. 2. Nearly every claimant or counsel who files an investment arbitration feels tempted to argue that the treatment accorded by the host state was in violation of the standard of fair and equitable treatment. A minima, the invocation is deemed useful, to present a certain flair of an offense to basic notions of justice to the investor's cause. 3. The wording of most BITs does not offer detailed guidance on how dispute settlement bodies should interpret the BIT provision, resulting in widely differing interpretations—sometimes expansive. 4. Certain States have opted for excluding Fair and Equitable Treatment from their International Agreements, to avoid expansive interpretations of the obligation.

Full protection and security Definition and Purpose

1. This standard creates an obligation for the host State: - not to directly harm investors/investments through acts attributable to the State and - to protect investors and investments against actions of private parties

COMPENSATION FOR EXPROPRIATION

1. Treaty-based compensation: Applies to lawful expropriation -Modern treaty practice is, by and large, concordant in establishing "prompt, adequate and effective" compensation as the standard - Treaties and other authorities also refer, among other concepts, to "actual value," "full value," "market value," "just price," "real value," "genuine value," or "real economic value". - These concepts are treated as being equivalent in practice to the more prevalent measure of fair market value. 2. Customary international law standard of full reparation: Applies to unlawful expropriation and other treaty breaches - Articulated by the PCIJ in the Factory at Chorzów case -.is that reparation must, as far as possible, wipe out all the consequences of the illegal act and re-establish the situation which would, in all probability, have existed if that act had not been committed

war clause

1. War clauses establish a particular regime in respect of compensation for losses in times of armed conflict. 2. Such clauses can be useful for investors since, by creating a lex specialis regime for obligations in times of war and civil disturbance, they override customary law rules on the fate of treaty obligations in turbulent situations, such as the rules of necessity and force majeure that can preclude wrongfulness

International Economic Law regarding Finance

1. World Bank - Established in 1944 to rebuild Eurpose after WWII. - Now functions as an international organization to that gives loans for infrastructure amongst many other things 2. IMF International Monetary Fund - Created in 1944 along with the world bank - Member states pay into the IMF according to the size of the economy when member countries run into trouble they seek help from the IMF 190 countries are in the IMF

International Economic Law regarding Intellectual Property

1. World Intellectual Property Organization (WIPO) - Promotes the protection of intellectual property worldwide and ensure administrative cooperation among the intellectual property unions established

New york convention arbitration qualifications

1. arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought 2. arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought

Types of Arbitration

1. institutional - An institution oversees proceedings in accordance with own rules 2. Administered - An institution oversees proceedings 3. Non-Administered - No institution oversees the proceedings 4. Ad hoc - The rules entirely determined by the parties

Consequences of distinction between Lawful / unlawful expropriation

1. lawful expropriation - Only direct loss compensated in lawful expropriation 2. Unlawful Expropriation - Direct and consequential loss is compensated

An Arbitration is international if

1. the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their places of business in different States 2. one of the following places is situated outside the State in which the parties have their places of business - the place of arbitration if determined in, or pursuant to, the arbitration agreement -any place where a substantial part of the obligations of the commercial relationship is to be performed or the place with which the subject-matter of the dispute is most closely connected 3. the parties have expressly agreed that the subject-matter of the arbitration agreement relates to more than one country

First BIT

1959 Germany Pakistan 1968 Netherlands Indonesia BIT first BIT to offer investor- State arbitration

OECD Due diligence overview

Adopted in may of 2018 overseen by the OECD working party on responsible business conduct - It involved a multi-stakeholder process (OECD and non-OECD countries and representatives from business, trade and civil society - A plain language explanation of due diligence recommendation of OECD Guidelines

Chapter 3

Chapter 3

Chapter 4

Chapter 4

Chapter 5

Chapter 5

Chapter 6

Chapter 6

Who has the most BIT

China - Brazil does not participates

States with extensive limitations for investors

China, Russia, India

Arbitration definition

Device whereby the settlement of a question, which is of interest for two or more persons, is entrusted to one or more other persons (the arbitrator or arbitrators) who derive their powers from a private agreement, not from the authorities of a State, and who proceed and decide the case on the basis of such an agreement.

Energy Charter Treaty 1998

ECT - Investments of Investors of a Contracting Party in the Area of any other Contracting Party shall not be nationalized, expropriated or subjected to a measure or measures having effect equivalent to nationalization or expropriation (hereinafter referred to as 'Expropriation') except where such Expropriation 1. For a purpose which is in the public interest 2. Not discriminatory 3. Carried out under due process of law 4. Accompanied by the payment of prompt, adequate and effective compensation

States Exercising forms of control

France, US, Australia, Denmark, Italy - they are already developed so they can impose rules - It is the developed countries that try to impose their rules on foreign investment

Investment Structuring

Goal = maximize legal protection available •«Treaty planning» v. «Treaty shopping» •Structure investment flows via SPVs in third countries ADVISE EDF how to maximize legal protection for its investment in Hinkley Point C in the UK?

EXPROPRIATION vs. STATE'S RIGHT TO REGULATETaxation

In the absence of a commitment of the State, foreign investors do not have any legitimate expectation that a tax regime will not change: only in an extreme case will taxation be determined to amount to an expropriation

German BIT model

Investments by investors of either Contracting State may not directly or indirectly be expropriated, nationalized or subjected to any other measure the effects of which would be tantamount to expropriation or nationalization in the territory of the other Contracting State except for the public benefit and against compensation. Such compensation must be equivalent to the value of the expropriated investment immediately before the date on which the actual or threatened expropriation, nationalization or other measure became publicly known. The compensation must be paid without delay and shall carry the usual bank interest until the time of payment; it must be effectively realizable and freely transferable. Provision must have been made in an appropriate manner at or prior to the time of expropriation, nationalization or other measure for the determination and payment of such compensation. The legality of any such expropriation, nationalization or other measure and the amount of compensation must be subject to review by due process of law

What International Investment Law offers

It offers guarantees for your investment and substantive protections -it has the mechanism to effectively protect those guarantees. And you know which procedures will be taken

Award by Tribunal

Judgement by court - Final Decision on substantive issues in case

Expropriation and State's Right to Regulate

No State is prepared to surrender its power to regulate, or to undertake an obligation to compensate investors each time that their rights are negatively affected by regulation. At the same time, to the owner of an investment, and ordinary regulation may have the same consequences as a seizure of an investment by the State Hence the conceptual problem: distinguish between the regulatory acts that should be treated as expropriation of the investment, and these acts that should not give right to compensation for foreign investors

International Business

Performance of activities that have an economic value, purpose, or rationale, between two different sovereign states

The Hague Rules on Business and Human Rights Arbitration

Set of rules developed for arbitration of disputes involving the impact on human rights of business activities. §High transparency of the proceedings (Articles 38, 39, 40, 41, 42) §Resolution by arbitrators with relevant expertise §Possible need of special rules forgathering of evidence and protection of witnesses (eg Article 18(5)) §Participation of 3rd parties in the proceedings (NGOs, representatives of local communities, etc) §Focus on tribunal-appointed experts (Article 34)

Expropriation

The taking by a government of a privately owned property, for which compensation is required

International Investment

acquisition, with capital from state A, of (partial) ownership or control of assets in state B -When you take control of factors of production like capital, natural resources, infrastructure, tech

International trade

acquisition, with capital from state A, of goods and/ or services available in state b. Or use or resale elsewhere

Concession Agreements for investment contracts

o A long term right to use all utility assets conferred on the concessionaire, including responsibility for operations and some investment o Asset ownership remains with the authority and assets revert to the authority at the end of the concession period o The concessionaire typically obtains most of its revenues directly from the consumer o A concession covers an entire infrastructure system (so may include the concessionaire taking over existing assets as well as building and operating new assets) o The concessionaire will pay a concession fee to the authority which will usually be ring-fenced and put towards asset replacement and expansion

International Energy Charter (2015)

o Declaration of political intention aiming at strengthening energy cooperation between the signatory states o No legally binding obligation or financial commitment o Reflects some of the most topical energy challenges of the 21st century (eg. energy security; 'trilemma' between energy security, economic development and environmental protection; the role of enhanced energy trade for sustainable development; diversification of energy sources, etc.)

Energy Charter Conference

o Inter-governmental organisation: governing and decision-making body for the Energy Charter process, established by the Energy Charter Treaty o Meets on a regular basis to discuss issues affecting energy cooperation among the Treaty's signatories

Investment Contracts

o Protection of foreign investment directly guaranteed by the state in a contract concluded with the investor o Strong protection, possibility of action in damages for breach of contract o Not available for every type investment (sector, size, etc) o Important clauses: •Applicable law (national law v. international law?) •Dispute settlement (national jurisdictions v. international ICC arbitration or ICSID?)

Investment Laws

o Protection of foreign investment guaranteed by the national law of the host state o Authorization and protection of foreign investments o General Laws on Foreign Investment and / or Investment in Specific Sectors o Importance of applicable law and dispute resolution o Risk of abrogation by the host state

Political Risk Insurance

o Protects against the risk that a government will take some action that causes the insured to experience large financial losses o Covered risks: expropriation, non-convertibility of currency, political violence o Insurers run by national governments (e.g. OPIC), or private insurers (e.g. AIG) World Bank - MIGA

Legal risks against which BITs provide protection:

o Revocation of licenses (e.g. mining, telecommunications) o Alleged breaches of investment contracts o Alleged irregularities in public tenders o Changes to domestic regulatory frameworks (e.g. gas, nuclear, "green" energy) o Withdrawal of previously granted subsidies o Direct expropriation o Tax measures o War and social unrest

Parallel Proceedings

proceedings brought against the host State under more than one legal basis (e.g. contract and treaty, or different treaties) for the same/related dispute Advantage •Pressure on host State •Higher chances that investor will succeed in front of one tribunal Disadvantage •Not always possible Cost •Procedural fairness? •Conflicting/inconsistent decisions

Energy Charter Treaty (1998)

§ International agreement establishing a multilateral framework for cross-border cooperations in the energy industry (trade, transit, investments and energy efficiency) § 54 signatories § Establishes protection standards/guarantees for foreign investment § Art. 26 ECT: investor - State arbitration § Over 100 investment disputes

NAFTA (1994)

§ North American Free Trade Agreement creating a trilateral trade bloc in North America (USA, Canada, Mexico) §Establishes protection standards/guarantees for foreign investment

Purpose of stabilization clauses

§60s - 70s: reaction to nationalization of oil and mining resources. Clauses protecting investors from nationalization of their investments and changes in the law §Today: stabilization clauses as risk mitigation tool in long-term contracts requiring significant upfront investment Historically, stabilization clauses were included in the 1960s and 1970s, in the decolonialization era, as a reaction to the nationalizations of oil and mining resources. Today stabilization clauses are perceived by investors as a risk mitigation tool. Investments in the energy and mining industry often require significant upfront investments for the exploration of an oil field construction of the mine, and at that stage there is a certain uncertainty as to the return of the investment. The oil reserves in the particular block of the oil field may be v poor. Investors are happy to take the risk, in the expectation of significant returns if the exploration is followed by a successful production phase. Stabilization clauses are intended to prevent States from regulating in an "abusive" way, and take measures which change the terms of the game. From a lender's perspective, stabilization clauses are viewed as an essential element of the bankability of an investment project, particularly in emerging markets, and the lender may insist that at least the fiscal terms applicable to the investment be stabilized

How CSR instruments contribute in setting investors' obligations?

§Incorporation in domestic law §Incorporation in BITs and MITs §Part of « Principles of international law » §Incorporation of relevant standards in IIAs §Application of relevant standards as "principles of international law" / evolutive interpretation of IIAs

Current trends: Investors' waivers

§Instances of investors' waiver of rights under stabilization clauses under political pressure -Baku-Tbilisi-Ceyhan pipeline company 2003 "BTC Human Rights Undertaking" not to seek compensation under the economic equilibrium clause of the agreements with the host States, in a way to preclude any action or inaction that is reasonably required to fulfill any obligation of the host government under any international treaty on human rights. - In 2008, contracts concluded by OECD countries did not include freezing stabilization clauses.

Violation of the obligation as ground for a State counterclaim requirements

§Investor's consent -the IIA explicitly refers to counterclaims -the IIA implicitly allows counterclaims - the applicable procedural rules specifically provide for counterclaims -the parties agree on the tribunal's jurisdiction over counterclaims Link between the claim and the counterclaim -Legal basis in the relevant BIT -Factual nexus with the main claim Under specific circumstances, States have the possibility to file counterclaims in the arbitration proceedings for breaches of investors obligations. STRICT conditions apply: 1.Investor's consent. The investor gives its consent by initiating a claim under the BIT, under the conditions of the BIT. So Consent to counterclaims is found if the BIT allows for it, explicitly or implicitly. -explicit provision on consent in the text of the BIT (COMESA, OIC Conference Treaty) -implicit provision allowing counterclaims (not reffering to a claim BY AN INVESTOR) -No consensus if the BIT provides for arbitration under institution rules which do so. BIT provides application of procedural rules which allow counterclaims (ICSID Convention (Art. 46) and UNCITRAL Rules (Art. 21(3)) Professor Michael Riesman disagreed with the majority of the Roussalis tribunal that denied jurisdiction over Romania's counterclaim, finding that "the consent component of Article 46 of the [ICSID Convention] is ipso facto imported into any ICSID arbitration which an investor then elects to pursue". Goetz v. Burundi echoed this reasoning. 2. Link between the claim and the counterclaim •Factual nexus with the main claim: Counterclaim must be directly linked to the subject-matter of the claim •Or legal basis on the BIT. • So if a BIT refers to specific obligations of investors, having incorporated relevant standards from the instruments we discussed in the first part of the presentation, States can file counterclaims on the basis of the violations of such standards

Criticism against stabilization clauses

§Preventing States from regulating in the public interest, including regulating to conform with international obligations for the protection of human rights -2009 Report of the Special Representative of the UN Secretary-General on the issue of human rights and transnational corporations and other business enterprises, John Ruggie

What is the effect of a violation of an investor's obligations on the international protection of its investment?

§Violation of an obligation as bar to jurisdiction or admissibility §Violation of an obligation as ground for counterclaims §Violation of an obligation taken into account in the calculation of damages

Focus of the ICSID Convention

·Considering the need for international cooperation for economic development, and the role of private international investment therein; ·Bearing in mind the possibility that from time to time disputes may arise in connection with such investment between Contracting States and nationals of other Contracting States; ·Recognizing that while such disputes would usually be subject to national legal processes, international methods of settlement may be appropriate in certain cases; ·Attaching particular importance to the availability of facilities for international conciliation or arbitration to which Contracting States and nationals of other Contracting States may submit such disputes if they so desire; ·Desiring to establish such facilities under the auspices of the International Bank for Reconstruction and Development; ·Recognizing that mutual consent by the parties to submit such disputes to conciliation or to arbitration through such facilities constitutes a binding agreement which requires in particular that due consideration be given to any recommendation of conciliators, and that any arbitral award be complied with; and ·Declaring that no Contracting State shall by the mere fact of its ratification, acceptance or approval of this Convention and without its consent be deemed to be under any obligation to submit any particular dispute to conciliation or arbitration, Have agreed as follows

The example of stabilisation clauses

•1. The UN Guiding Principles on Business and Human Rights provided that States and multinationals should make sure that State contracts do not prevent States from regulating in order to protect human rights •2. OECD Guidelines for Multinational enterprises: invite enterprises to refrain from seeking the freezing of regulations in the areas of human rights, environment, health safety, labour, taxation, financial incentives or other issues.

Bilateral Investment Treaties

•An international agreement concluded between two States establishing the terms and conditions for private investment by nationals and companies of one State in the territory of the other State •BITs grant investments made by an investor of one State in the territory of the other a number of guarantees and set up a dispute resolution mechanism (investor - State arbitration) •1959 Germany - Pakistan BIT: very first BIT •1968 Netherlands - Indonesia BIT: first BIT to offer investor - State arbitration

Why is the protection of international investments important?

•Companies make investments throughout the world •In doing so, interaction with the host state or state authorities is usually required: o to obtain permits, licenses, authorizations; o when the state acts as a business partner; o through the regulatory environment & the judicial system. •In case of any problems, in many countries the use of local remedies may not be satisfactory or effective •Additional tools to protect investments, enforce rights & resolve investment disputes become important

Bilateral investment treaties are what

•Definition of eligible "investor" & "investment" •Substantive protection standards (FET, prohibition of unlawful expropriation, full protection and security, etc.) •Investment arbitration

Why is the protection of international investments important?

•Encourage investors to invest abroad (in developing economies) •Reduce legal risk in making investments abroad •Reduce cost of making investments abroad •Contribute to global growth and development, job creation and innovation •Depoliticise investment disputes •Reduce risk of war

Modernisation of the Energy Charter Treaty"

•Launched in 2017 •Negotiation in several rounds 2020-2021 •List of topics for modernisation (e.g. definition of "investor", definition of "investment", States' right to regulate, FET, third party funding, transparency, valuation of damages, CSR, etc.)

Not any non-compliance is sanctioned

•Proportionality determination: Kim v. Uzbekistan (2017) •A fundamental breach: Tokios Tokeles v. Ukraine •A good faith mistake is tolerated: Desert Line v. Yemen •Timing of the breach is relevant (at the procurement of the investment or during its lifetime): Hamester v. Ghana

Multilateral Investment Treaties

•Regional: e.g. NAFTA àUSMCA •Sectoral: Energy Charter Treaty

International Investment Treaties

•Several failed attempts to conclude a general multilateral treaty: o 1959 Abs-Shawcross Draft Convention on Investment Abroad - failed o 1967 OECD Draft Convention on the Protection of Foreign Property - failed o 1995 OECD Multilateral Agreement on Investment - failed o 2017 WTO Multilateral Framework on Investment Facilitation - ? •Bilateral investment treaties •Sector-specific or regional multilateral investment treaties