Investment Treaties

Policy Brief 101, September 2021

The Investment Facilitation Framework & Most Favoured Nation (MFN) Treatment

 By Peter Lunenborg

The issue of Investment Facilitation (IF) is one of the ‘Joint Statement Initiatives’ which has been under negotiation for a number of years between certain World Trade Organization (WTO) Members. It has not been without controversy as there is no multilateral mandate at the WTO for these negotiations. Questions have been raised about how the outcomes of these IF negotiations can be brought into the WTO framework. Despite these uncertainties, there is a draft Investment Facilitation Framework (IFF) text. This Policy Brief discusses the Most Favoured Nation (MFN) treatment as contained in Article 2 of the Investment Facilitation Framework (IFF), also referred to as the Investment Facilitation for Development Agreement (IFDA).  This brief highlights the potential implications of the proposed text and proposes some options.

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South Centre Report, August 2021

Virtual Consultation in support of the UN Working Group’s 2021 Report to the UN General Assembly on Human Rights-Compatible International Investment Agreements

South Centre, 23 June 2021

Foreign direct investment (FDI) should support States’ efforts to “bring the SDGs and goals of the Paris Agreement to life for all people, everywhere.” However, achievement of these objectives is slowed down in the current situation where investor-State dispute settlement (ISDS) mechanisms are included in international investment agreements (IIAs). These mechanisms have increased the exposure of States to claims from foreign investors against regulatory measures taken to protect and guarantee a clean and safe environment, public health, human rights, social inclusion, and poverty reduction.

In the current scenario marked by the impact of the COVID-19 pandemic, FDI can be a valuable source of financing a better and fairer recovery, including investment needed to achieve the full realisation of all human rights. But to achieve this potential, there is a need to reshape the international investment regime, including through the reform of its substantive rules and standards, as well as of the ISDS mechanisms embedded in existing IIAs.

The South Centre and the United Nations Working Group on human rights and transnational corporations and other business enterprises convened a virtual consultation to identify and assess the different challenges developing countries face while negotiating or reforming IIAs in line with their international human rights obligations. The virtual consultation aimed at highlighting and discussing some of the most common concerns and challenges those developing countries face in the promotion of responsible investment practices, including an exploratory discussion about balancing the rights and obligations of investors in IIAs and safeguarding the sovereign right of States to regulate in the public interest for building back better and fairer in face of the COVID-19 pandemic. It also discussed possible reforms of the ISDS mechanism.

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Investment Policy Brief 23, July 2021

UNCITRAL Working Group III: Moving forward towards consensus or loosing balance?

By Daniel Uribe and Danish

This policy brief considers some concerns arising from the ongoing discussions on procedural reform of investor-State Dispute Settlement (ISDS) in the United Nations Commission on International Trade Law (UNCITRAL) Working Group III. It highlights the need to allocate sufficient time to deliberate upon the important issues being raised by developing countries. It further discusses some structural reform options that have been identified by the Working Group and reflects on some concerns arising from a possible ‘single undertaking’ approach being implemented through a future possible multilateral agreement on ISDS.

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Investment Policy Brief 22, June 2021

Investment Policy Options for Facing COVID-19 Related ISDS Claims

By Daniel Uribe and Danish

Developing and least developed countries have undertaken a number of measures to fight against the multidimensional impacts of the COVID-19 pandemic. Such measures and those that may be adopted in the context of the recovery efforts are, however, susceptible to challenges by foreign investors using investor-State dispute settlement mechanisms.

This policy brief first considers the kinds of measures States have adopted to limit the spread of COVID-19, protect their strategic sectors and promote economic recovery, including through foreign investment aftercare and retention. It then addresses how the investor-State dispute settlement system (ISDS) has been used by investors in times of crises, based on the analysis of the awards in several cases brought against both developed and developing countries.

Against this backdrop, the brief elaborates on the different options and initiatives States can take for preventing ISDS claims at the national, bilateral, regional and multilateral levels. It concludes with some policy advice for developing and least developed countries to face possible COVID-19 related ISDS claims in the future.

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Investment Policy Brief 21, April 2021

Could COVID-19 trigger ‘localizing’ of international investment arbitration?

By Danish

In light of the challenges and travel restrictions due to the COVID-19 pandemic, many developing countries have been unable to effectively participate in international investment arbitration proceedings, traditionally held in locations like Washington D.C. and The Hague. To ease the heavy burdens currently being placed on States and ensuring investor confidence, this Policy Brief argues for the ‘localization’ of investor-State dispute settlement (ISDS) proceedings in host States and regions where the investment is actually located. It highlights the various advantages that localizing ISDS can bring, and the different regional initiatives already working towards this purpose. The brief also considers relevant legal and policy aspects, and seeks to provide concrete suggestions for the localization of ISDS as a small step towards the holistic reform of international investment arbitration.

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Investment Policy Brief 20, January 2021

Countries’ Policy Space to Implement Tobacco Packaging Measures in the Light of Their International Investment Obligations: Revisiting the Philip Morris v. Uruguay Case

By Alebe Linhares Mesquita and Vivian Daniele Rocha Gabriel 

This Policy Brief aims to provide a concise analysis of the international investment dispute involving Philip Morris subsidiaries and the Republic of Uruguay. It depicts the main legal and political background that preceded the case, analyzes the decision reached by the arbitral tribunal, and assesses the award’s major regulatory and policy implications. It intends to contribute to the discussions on how and to what extent States can adopt tobacco control measures without violating their international obligations to protect the investment and intellectual property of tobacco companies. The main lesson that can be learned from the analysis of the Philip Morris v. Uruguay case is that investors rights are not absolute and can be relativized when there is a clash between private and public interests, such as in the case of public health. As a result, claims such as indirect expropriation and fair and equitable treatment can be dismissed. Finally, one of the main consequences is the progressive change in the design of international investment treaties, containing more provisions related to the right to regulate.

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Panel discussion, 11 December 2020

Guaranteeing Access to Medicines: Reforming Trade and Investment Treaties in the COVID-19 Era

Eight months into COVID-19, what is the status of the international investment regime and access to essential medicines? The GDP Center’s Working Group on Trade and Access to Medicines will host a panel discussion on trade, the investment regime, and access to essential medicines. The event is co-sponsored by the South Centre, the intergovernmental organization of developing nations based in Switzerland.

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Statements, November 2020

South Centre Statement to the 2nd Session of the Expert Mechanism on the Right to Development

The 2030 Agenda for Sustainable Development recognizes the commitment of the international community to make the right to development (RtD) a reality for everyone, leaving no one behind, and building peaceful and inclusive societies on the basis of the respect of human rights.

The right to development becomes prominent during and in the aftermath of facing the COVID-19 pandemic. The creation of favorable conditions for international, economic, scientific and technological cooperation, including technology transfer and know-how, is part and parcel of the right to development through the promotion of the well-being of all peoples, the improvement of the economic conditions of the developing countries and bridging of the economic gap.

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Tax Cooperation Policy Brief 12, September 2020

Base Erosion and Profit Shifting in the Extractive Industries

By Danish and Daniel Uribe

Developing countries with significant natural resources have not fully utilised them for financing their development aspirations. Extractive industries and the revenue generated from their extractive activities need to constitute a larger share of domestic resource mobilisation. However, the sector remains beset with massive tax base erosion and profit shifting by large multinational companies. This policy brief therefore looks at the extractive industries, and the potential impact of their practices on the national policies and regulations in developing countries. It further also considers some current initiatives at the international level for enabling countries to obtain more revenue from natural resource extraction, and offers some observations on the policy options available to developing countries.

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South Centre Semester Report, January-June 2020

South Centre Semester Report, 1 January to 30 June 2020

This Semester Report summarizes the activities undertaken by the South Centre during the period 1st January to 30 June 2020. It is intended to provide information, organized by themes, about recent developments in the areas covered by the Centre’s Work Program, meetings organized or co-organized by the Centre to examine particular issues or provide analytical support for negotiations taking place in various international fora, and conferences and other meetings where the Centre has participated. It also informs about publications made.

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SouthViews No. 204, 11 August 2020

The Covid-19 Pandemic and Liability under Investment Treaties

By Muthucumaraswamy Sornarajah

COVID-19 can increase liability for countries under international investment treaties. Professor M. Sornarajah, Emeritus Professor at the National University of Singapore, discusses in this SouthViews the imminent challenges faced under such treaties by developing countries. The text is based on his presentation at the South Centre webinar on “Responsible Investment for Development and Human Rights: Assessing Different Mechanisms to Face Possible Investor-State Disputes from COVID-19 Related Measures” held on 30th July 2020. The recording of the webinar is available here: https://www.youtube.com/watch?v=yXPswKuywvA

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Investment Policy Brief 19, March 2020

The ISDS Reform Process: The missing development agenda

By Nicolás M. Perrone

The foreign direct investment (FDI) governance agenda is centred on the reform of international investment agreements (IIAs) and investor-state dispute settlement (ISDS). The proliferation of IIAs and ISDS has contributed to narrowing the FDI agenda. A key policy question is whether this fragmented approach remains consistent with the 2030 Sustainable Development Goals (SDGs). Current FDI discussions point at the need for a holistic approach in this policy area, quite the opposite of a regime primarily aimed to protect foreign investors through treaty standards and international arbitration. The realisation of the SDGs depends on multi-stakeholder partnerships to combat poverty and provide clean water and energy to the world population. Crucially, these partnerships will require more cooperation and coordination than IIAs and ISDS can promote and nurture.

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