Developing Countries in International Investment Arbitration

2015

The Fair and Equitable Treatment (FET) standard is the most important and, because of its flexible nature and its status as a ‘catch-all’ provision, most controversial investment protection standard in international investment treaties. The standard imposes the most far-reaching obligation of any aspect of such treaties. This thesis’ core contention is that the current investment tribunals’ interpretation of the FET standard prioritises the interests of foreign investors and neglects the perspectives of host developing countries. Therefore there is a pressing need to reconceptualise the interpretation of the FET standard. In service to depicting the perspectives of host developing countries, this thesis advances an understanding of classifications such as ‘developing’ and ‘developed’ that reflects the issues and challenges that these countries face in the investment dispute context, such as their lack of resources, administrative capacity, technology, and infrastructure, as much as ...

SSRN Electronic Journal, 2013

All errors and views expressed are within the author's own. 1 In this article, developing countries, developing world, third world countries, the South will be used interchangeably to denote the members of the international community which ascended statehood shortly after World War II, with the exception of Latin American countries who had previously attained their independence from Spain between 1810 and 1900. What these countries have in common is that their economies are relatively undeveloped as compared to that of their former colonial masters. Similarly, industrialized countries, developed countries, the Western World, and the North will be used interchangeably to denote former colonial power and modern economic powers in the international community.

Afronomicslaw, 2021

FET claims are brought more frequently against economically less well-off States and how the value of the claims poses a challenge to their economies. While reasonable, minds can differ as to the cause of this phenomenon, that is, whether this is due to any particular targeting of the developing economies or because investors felt that they were subject to the violation of their treaty or contract rights. By drawing on other scholarly works, Chapter One sets the background of the book and explains how FET claims are brought more frequently against economically less well-off States and how the value of the claims poses a challenge to their economies. While reasonable, minds can differ as to the cause of this phenomenon, that is, whether this is due to any particular targeting of the developing economies or because investors felt that they were subject to the violation of their treaty or contract rights. This is all the more so because the investments of foreign investors from developed economies are concentrated in the global South and extend to investment in other developed economies. However, that does not detract from the author’s point that these claims pose particular challenges to developing countries. The book's main thesis is that the interpretation of the FET standard by arbitrators has given primacy to the protection of the interest of foreign investors over the economic interests of developing states.

Springer, 2018

This book presents comprehensive information on a range of issues in connection with the Fair and Equitable Treatment (FET) standard, with a particular focus on arbitral awards against host developing countries, thereby contributing to the available literature in this area of international investment law. It examines in detail the interpretation of the FET standard of key arbitral awards affecting host developing countries, demonstrating the full range of interpretation approaches adopted by the current investment tribunals. At the same time, the book offers valuable practical guidance for counsels/scholars representing host developing countries in investment arbitration, where balancing the competing interests of the foreign investors and the host developing countries in investment disputes poses a complex challenge. The book puts forward the pressing need for a re-conceptualized interpretation of the FET standard in tune with the developmental issues and challenges faced by host developing countries, recognizing these countries’ particular perspectives as an important and relevant aspect of investment disputes (often ignored by the current investment tribunals), while continuing to ensure reasonable protections for foreign investors and therefore serving the needs of the system as whole. The findings presented here will greatly benefit host developing countries engaged in investment arbitration. In addition, the book offers an insightful guide for all researchers whose work involves investment law and investment arbitration issues.

2011

There is an ongoing debate about bilateral investment treaties (BITs)and investor-state arbitration, in particularbetween those who maintain that BITs encourage investment in developing countries by providing enforceable rights and protections for investors, and those who suspect that these new rights and protections have a chilling effect on regulation for public and environmental welfare and actually hinder development. For years, both-camps‖ have drawn heavily upon anecdotal evidence and observations to support their view, as no systematic, comprehensive study of empirical data on investment arbitrations had been undertaken. To fill this void, legal scholar Susan Franck has evaluated the criticisms of investment arbitration based on empirical studies of published or known disputes (Franck 2009; Franck 2007). These efforts produced helpful data and initiated a productive discussion of these issues. However, the results and conclusions that can be drawn from Franck's work are more limited and warrant more nuance than Franck and others so far have taken into account. Franck's work is now widely used to support the notion that developing countries do not disproportionately-lose‖ under the investment arbitration regime. Such a conclusion does not appear to be supported by Franck's data. This article analyzes Franck's work to show where differing conclusions emerge. We show that: 1) there is a lack of adequate sample composition and size to conduct rigorous empirical work from which an analyst could draw such bold lessons; 2) discounting the fact that developing countries are subject to a disproportionate number of claims is not to be overlooked, especially when looking at claims by the United States; and 3) relative to government budgets and in per capita terms developing countries pay significantly more in damages than developed nations do.

Bahirdar University Law Journal , 2019

There are growing concerns among developing countries on the arbitration proceeding of the International Center for Settlement of Investment Dispute (ICSID). The worries range from the transparency of arbitral proceedings; high arbitral costs; exclusion of national courts to the unsatisfactory nature of annulment proceedings. Investors' mounting claims against developing state, the link of ICSID to the World Bank, and their lack of resources to bear costs of defending against well-resourced investors make developing states to believe that they are at a comparative disadvantage compared with developed states and their investors. Although Ethiopia is not a party to the convention, many of its Bilateral Investment Treaties (BITs) accept ICSID jurisdiction. Thus, the main purpose of this paper is to examine the cost and benefit of ICSID in the context of developing countries. Besides, relevant BITs of Ethiopia that recognize jurisdiction of the Center are analyzed to explore the potential consequences in the event that it ratifies the ICSID. Relying on the doctrinal research methodology, the article examined the ICSID convention, scholarly research findings and the literature in the field. After due analysis, the author concluded that introducing the appellate system, ensuring transparency of the arbitration process and the publication of awards would address the concerns of developing countries. The article also argues that many of Ethiopia's BITs are inconsistent and vague with regards to submission to the jurisdiction of the Center, which implicates the need to have a model BIT.

The decolonization period was characterized by the adoption of investment protection agreements with the objective of serving the purposes of both transnational corporations and newly decolonized States. These agreements are primarily meant to protect private international investments and, incidentally, they have been presented as instruments of development: protecting international investments to foster development. Many newly decolonized States signed and ratified such treaties with the aim of attracting foreign investors – but also to maintain existing ones; what was expected in return was a contribution to their development. This article studies the legal relationship which consequently exists between international investment law and development, but at the same time, it highlights the flagrant misuse of the concept of development in practice. In this law field, both the Global North and the Global South tend to envision development in a way which is deprived of all technical and scientific grounds. The paper firstly explains how the objective of development, rooted in such investment agreements, acquired a legal function. Bilateral investment agreements were a means to forge newly decolonized States' expectations and belief concerning the paramount necessity to protect foreign investments so as to benefit in terms of development. In the international investment legal practice, the contribution to the host State's development by the foreign investor has been frequently used as a criterion to identify an investment: to be protected by an investment agreement any activity must necessarily be identified as an investment. As the latter knows no definition some tribunals have considered that one of the criteria to identify an investment is a contribution to the development of the host State by the potential investor. Theoretically, this seems to consider the interests of developing States in their relationship with transnational corporations. However, and this is the second point, development has itself never really been defined – and still is not in this law field. It is hence used and applied as an undefined concept. Development is in fact referred to as an image, as a symbol, but never in its technical aspects. Accordingly, such reference made to the concept of development in international investment law is far from convincing and forges skepticism on its intrinsic necessity and use. In this vein, it raises the thorny question of the jurist’s technical competence to assess what development is and how it can – technically – be used in law.

Forthcoming in Handbook of International Investment Law and Policy, edited by Julien Chaisse, Leïla Choukroune and Sufian Jusoh (to be published by Springer in late August 2019)., 2019

Application of the Most-Favoured-Nation (MFN) clauses by investor-state arbitral tribunals has given rise to various controversies. This Chapter discusses the experience of developing countries in this regard. While application of MFN to the substantive and procedural standards in International Investment Agreements (IIAs) has overly benefited investors from the developed countries, such application has not been favourable to the developing host-states. Accordingly, some developing countries have undertaken significant MFN reforms in their recent IIAs. This Chapter illustrates such reforms with reference to the specific reforms undertaken by Argentina, India and the Southern African Development Community. The Chapter argues that while restraining the scope of MFN clauses may help the developing countries to preserve greater regulatory power in their hands, complete omission of MFN from IIAs may be discouraging for the foreign investors. Therefore, the developing countries should aim to maintain a balance in reforming MFN in the future.

This paper seeks to correlate low FDI inflows in many developing countries and their prejudice against international arbitration. Many developing countries lack the capital needed to finance their many projects. This has impacted heavily upon the ability of these countries to realize their economic goals, highlighting the need for FDI. Foreign investors will often undertake the financing of these projects in return for a share of the proceeds. One condition for providing finance, however, is often the need for a stable investment climate. Sources reveal that one essential feature is a legal system, which is conducive to enforceable and neutral dispute settlement. International arbitration is currently the only viable option. Nonetheless, many developing countries are intolerant of this dispute settlement mechanism. This paper contains five chapters. It identifies the main usage of international arbitration in the South, concluding that it is mainly used to settle investment disputes. It considers why countries dislike arbitration, highlighting that notwithstanding past malice; embracing it will lead them to realize their full commercial potential. It highlights that a legal system or one or more of its components, which is not conducive to international arbitration, has been known to create problems in promoting this dispute settlement mechanism. Thus the paper argues that a country's legal system must be conducive to international arbitration, if the latter is to be effectively utilized in the developing world. There are many benefits associated with the acceptance of international arbitration. Foremost is the ability to attract greater levels of FDI, which will contribute to the economic development plan of the host country; but the fear of bias has to be displaced if any benefits are to be realized. Thus, this dissertation concludes that, bias against international arbitration can indeed hinder the ability of the South to effectively participate in the global economy 4