Substantive Provisions in IIAs and Future Treaty-Making: Addressing Three Challenges
There are three key challenges with regard to the substantive provisions of international investment agreements—limited object, broad investment protection, and legal uncertainty. The several mega-regional international investment agreement (IIA) negotiations currently under way provide what could be a “once-in-a-lifetime” opportunity to address these challenges.
There is a growing realisation that IIAs should go beyond a concept of development that only focuses on economic growth. Development should be seen as a broader process involving economic, social, political, and legal considerations. Consensus is growing that IIAs should be perceived as instruments to achieve “sustainable development.” Accordingly, the think-piece puts forward three sets of options for policymakers to address the above mentioned three key challenges. While the three sets can be pursued independent of one another, it is suggested here that a combination of all of them would be the best approach.
In terms of addressing legal uncertainty of IIAs substantive provisions, the paper suggests focusing on clarifying the content and scope of the traditional investment protection standards of IIAs, particularly MFN, FET, expropriation, and available remedies.
In terms of addressing the breadth of investment protection guarantees, the paper suggests the following recalibration: IIAs should (a) focus on substantive provisions that require host states to behave in a “non-discriminatory” and “reasonable” manner; (b) omit those provisions that guarantee “contractual and regulatory stability” (“umbrella clauses” and “stabilisation clauses”); and (c) limit the duty to compensate in case of expropriation to cases of “direct expropriation” only.
In terms of addressing the limited object of IIAs, the paper suggests considering extending them to cover a few key economic regulation issues, such as market access, corporate governance and responsibility, taxation, anticompetitive conduct, and investment contracts. In the long term, a few key social issues such as human rights, employment, environment, and corruption could also be included.
Tag: Competition Policy, Compliance and Transparency, Deliberations, International Investment Agreement, Investment Incentives, Investment Policy, Investment Protection, Monitoring, Private Standards, Regulation, System Legitimacy