Asia’s Changing International Investment Regime: Sustainability, Regionalization, and Arbitration

262 Pages·2017·4.48 MB·English

by  Julien Chaisse

International Law and the Global South
Perspectives from the Rest of the World
Julien Chaisse
Tomoko Ishikawa
Sufian Jusoh Editors
Asia’s Changing
International
Investment
Regime
Sustainability, Regionalization, and
Arbitration
Foreword by Shamshad Akhtar
International Law and the Global South
Perspectives from the Rest of the World
Series Editor
AssociateProf.Dr.LeïlaChoukroune,DirectoroftheCentreforSocialSciences
and Humanities (CSH - a French CNRS Research Unit), New Delhi, India;
Maastricht University Law Faculty, The Netherlands
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Prof.Dr.BalveerArora,FormerrectorandPro-viceChancellor,JawaharlalNehru
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Hon. Justice Prof. Eros Roberto Grau, Former Minister, Brazilian Supreme
Court; and Emeritus Professor, Faculty of Law, University of Sao Paulo, Brazil
Associate Prof. Dr. Denise Prévost, Maastricht University Law Faculty,
The Netherlands
Prof. Dr. Carlos Miguel Herrera, Director of the Centre for Legal and Political
Philosophy, University of Cergy-Pontoise, France
Hon. Justice Robert Ribeiro, Permanent Judge, Hong Kong Court of Final
Appeal, Hong Kong, SAR China
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Julien Chaisse Tomoko Ishikawa
(cid:129)
fi
Su an Jusoh
Editors
’
Asia s Changing
International Investment
Regime
Sustainability, Regionalization,
and Arbitration
123
Editors
Julien Chaisse SufianJusoh
Schoolof Law Institute of Malaysian andInternational
ChineseUniversity ofHong Kong Studies(IKMAS)
Hong Kong National University ofMalaysia
Hong Kong Bangi
Malaysia
TomokoIshikawa
Graduate Schoolof International
Development
Nagoya University
Nagoya
Japan
ISSN 2510-1420 ISSN 2510-1439 (electronic)
International Lawandthe GlobalSouth
Perspectives from the Rest of the World
ISBN978-981-10-5881-3 ISBN978-981-10-5882-0 (eBook)
DOI 10.1007/978-981-10-5882-0
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Foreword
The UnitedNation’s 2030 Agenda for Sustainable Development, theAddisAbaba
Action Agenda and the Paris Climate Agreement require bold action to improve
people’s well-being while protecting the environment. Measures to generate
investment to tackle a range of economic, social and environmental challenges are
central to this global agenda. A stable investment environment, supported by a
strong, coherent legal framework governing international investments, is essential
toitssuccess.InAsiaandthePacific,reformsstillneedtobecompletedtodeliver
simpler, more transparent and equitable rules-based investment regimes.
This is important, because foreign direct investment (FDI) makes a vital con-
tributiontogrowthanddevelopmentintheAsiaandthePacific.Inrecentyears,the
region has received up to half of annual total global inflows. It continues to out-
perform the global average, and although starting from a low base, FDI to the
region’sleastdevelopedcountrieshastrebledsince2005.Asia-Pacificcountriesare
alsobecominganimportantsourceofcapitalforfinancingoutboundinvestmentsto
ourregionandbeyond.OutflowsfromdevelopingAsianeconomieshaveincreased
significantly, compared with a decline in outflows from regional developed
economies.
Regulatory frameworks need to keep up with the changing dynamics of the
investment flows. Supporting investment has traditionally been the preserve of
domestic policy. This has led countries to introduce different incentives and con-
cessions which overtime have distorted tax regimes and lowered government rev-
enues. At their worst, these distortions have led to unproductive investments,
undermining sustainable growth. A multilateral response could support long-term
sustainable investments and provide investors a clear framework in which to
resolvecommercialdisputes,inparticularinthecontextofInternationalInvestment
Agreements (IIAs).
To support sustainable development, IIAs need to reflect economic, environ-
mental and social concerns. Their increased number has done much to imbue
investment policy with an international dimension. Their interaction with existing
v
vi Foreword
domestic policies and with each other needs to be actively managed to avoid
duplication and inconsistency. Many now include provisions on investment pro-
motionandcooperationaswellasrequirementstoharmoniseinvestmentrulesand
regulations.TheASEANComprehensiveInvestmentAgreement(ACIA)isagood
example. Wider regional trade or economic partnership agreements could be even
more far-reaching.
Asweworktosupportfreetradeasapositiveforceforcompetition,growthand
development, the design of Investor-State Dispute Settlement (ISDS) mechanisms
iscritical.Well-designedIIAsmechanismsareintegraltoimprovingthemultilateral
governance of international investment regimes. Yet the increase of treaty-based
ISDS cases, 40%ofwhichare against developedeconomies, iswell known.It has
highlightedtheneedforadelicatebalancetobestruckbetweentheinvestors’right
to protection and states’ sovereign right to regulate their markets. The United
Nations has been active in supporting policy development in this area with this in
mind.
The United Nations Commission on International Trade Law laid out Rules on
Transparency in Treaty-based Investor-States Arbitration. These provide for open
hearings for arbitrations brought under IIAs concluded after April 2014 when the
rules came into force. The United Nations General Assembly adopted the
ConventiononTransparencyinTreaty-BasedInvestor-StateArbitrationtoprovide
amechanismforthosecountrieswantingtoadopttheserulesforagreementssigned
prior to this date. The United Nations Conference on Trade and Development
provides policy guidance in negotiating IIAs under its Investment Policy
Framework for Sustainable Development.
Reform of IIAs could make a major contribution to improving international
investment regimes. Tight definitions of the scope of investment investor are vital,
andthescopeandprincipleoffairandequitabletreatmentshouldbeclearlysetout.
We need to consider limiting the Full Protection and Security provision to
“physical”securityandprotection,andmake thelevelofprotectioncommensurate
with the country’s level of development. Precise definitions of the application and
scope of expropriation should be formulated and the notion of indirect expropria-
tionclarified.AdequatepolicyadviceisneededtoensurecountriesinreceiptofFDI
are able to effectively adjust their domestic regulatory and governance regimes.
And provisions for sustainable development, responsible investment and business
practices, and social and environmental protection need to be mainstreamed.
The scope of consent given to ISDS needs to be qualified up front in IIAs,
procedures made more transparent and arbitral tribunals made to take into account
standards of investor behaviour when settling investor-state disputes. Where pos-
sible, the role of domestic judicial systems needs to be increased. Overall, IIAs
should be flexible enough to be adapted when necessary.
Thesearesomeoftheareasofreformwhichdeserveseriousconsiderationaswe
work to deliver on the 2030 Agenda for Sustainable Development. This book
Foreword vii
provides some of the detail and solid analysis we need to inform work to reform
internationalinvestmentregimes.Ihopewecanbuildonittodeliverresultsaswe
work to deepen economic cooperation and integration across Asia and the Pacific.
June 2017 Dr. Shamshad Akhtar
Under-Secretary-General of the United Nations
Executive Secretary of the Economic
and Social Commission for Asia and the Pacific
United Nations Sherpa for the G20
Bangkok, Thailand
Contents
Introduction... .... .... .... ..... .... .... .... .... .... ..... .... 1
Julien Chaisse, Tomoko Ishikawa and Sufian Jusoh
Part I Setting the Scene: Regional Trends in an Evolving Global
Scenario
The Changing Patterns of Investment Rule-Making Issues
and Actors.... .... .... .... ..... .... .... .... .... .... ..... .... 13
Julien Chaisse, Tomoko Ishikawa and Sufian Jusoh
Shaping Globalization: Recent Trends in Asia-Pacific Foreign Direct
Investment.... .... .... .... ..... .... .... .... .... .... ..... .... 25
Bekzod Abdullaev and Douglas H. Brooks
Reforming the International Investment Regime: Two Challenges. .... 41
Karl P. Sauvant
InvestmentProtectionandHostState’sRighttoRegulateintheIndian
Model Bilateral Investment Treaty: Lessons for Asian Countries.. .... 47
Prabhash Ranjan
China’s Regulation of Foreign Direct Investment.. .... .... ..... .... 67
Leon E. Trakman
Part II The Regionalization of Investment Law and Policy in
Asia-Pacific
Ten as One? Explaining ASEAN Regulation on Foreign Investment ...... 99
Sufian Jusoh and Julien Chaisse
China-Japan-Korea Trilateral Investment Treaty: Implications for
Future Investment Negotiations in Asia.. .... .... .... .... ..... .... 121
Shintaro Hamanaka
ix
x Contents
A Baseline Study for RCEP’s Investment Chapter:
Picking the Right Protection Standards.. .... .... .... .... ..... .... 141
Junianto James Losari
‘One Belt, One Road’: China’s New Strategy and Its
Impact on FDI. .... .... .... ..... .... .... .... .... .... ..... .... 163
Jun He
The Role of Pacific Rim FTAs in the Harmonization
of International Investment Law: Towards a Free Trade
Area of the Asia-Pacific . .... ..... .... .... .... .... .... ..... .... 177
Mark Feldman, Rodrigo Monardes Vignolo and Cristian Rodriguez
Chiffelle
Part III Towards a Greater Practice of Investment Arbitration
in Asia-Pacific?
The Future of Investor-State Arbitration: Revising the Rules?.... .... 209
Rahul Donde and Julien Chaisse
Investor-State Dispute Settlement (ISDS) Cases in the Asia-Pacific
Region—The Record.... .... ..... .... .... .... .... .... ..... .... 229
Martina Francesca Ferracane
Breaking the Market Dominance of ICSID? An Assessment
of the Likelihood of Institutional Competition, Especially from
Asia, in the Near Future. .... ..... .... .... .... .... .... ..... .... 243
Andrea K. Bjorklund and Bryan H. Druzin