Integrating Sustainable Development into International Investment Agreements

557 Pages·2012·3.79 MB·English

Integrating Sustainable Development into International
Investment Agreements:
A Guide for Developing Countries

Prepared for the Commonwealth Secretariat by

J Anthony VanDuzer, Penelope Simons and Graham Mayeda*

August 2012

Commonwealth Secretariat

* Tony VanDuzer, Penelope Simons and Graham Mayeda are professors at the Faculty
of Law, Common Law Section, University of Ottawa, Ottawa, Canada. This Guide was
prepared for the Commonwealth Secretariat. The opinions provided in it are those of the
authors and do not necessarily represent the views of the Commonwealth Secretariat or
its member governments.
Contacts:

International Trade and Regional Co-operation Section
Economic Affairs Division
Commonwealth Secretariat
Marlborough House
Pall Mall
London SW1Y 5HX

Fax: [phone]
Acknowledgements

The Commonwealth Secretariat and the authors gratefully acknowledge the assistance
provided by the following reviewers:

Dr Aradhna Aggarwal, Senior Fellow, National Council of Applied Economic Research,
New Delhi, India
Mr Ahmed Aslam, Permanent Mission of Pakistan to the WTO, Geneva, Switzerland
Professor Yaw Benneh, Legon Centre for International Affairs, Faculty of Law,
University of Ghana, Legon, Ghana
Ms Nathalie Bernasconi-Osterwalder, International Institute for Sustainable
Development, Geneva, Switzerland
Professor David Collins, The City Law School, City University London, London, UK
Dr Daniel Franks, Senior Research Fellow, Centre for Social Responsibility in Mining,
Sustainable Minerals Institute, University of Queensland, Brisbane, Australia
Mr Edwin Laurent, former Head of Section and Adviser, Economic Affairs Division,
Commonweath Secretariat, London, UK
Professor Andrew Newcombe, Faculty of Law, University of Victoria, Victoria, Canada
Professor Ruth Okediji, William L. Prosser Professor of Law, University of Minnesota
Law School, Minneapolis, USA
Dr Chantal Ononaiwu, Trade Policy & Legal Specialist, Office of Trade Negotiations,
CARICOM Secretariat, Bridgetown, Barbados
Dr Federico Ortino, Reader in International Economic Law, The Dickson Poon School
of Law, King’s College, London, UK
Mr Lincoln Price, Private Sector Liaison, Office of Trade Negotiation, CARICOM
Secretariat, Bridgetown, Barbados
Ms Veniana Qalo, Economic Adviser, Economic Affairs Division, Commonwealth
Secretariat, London, UK
Mr Sergey Ripinsky, Investment Specialist, UNCTAD, Geneva, Switzerland
Mr Teddy Soobramanien, Economic Adviser, Economic Affairs Division,
Commonwealth Secretariat, London UK
Professor M Sornarajah, C.J. Koh Professor of Law, Faculty of Law, National
University of Singapore, Singapore
Professor Gus van Harten, Osgoode Hall Law School, York University, Toronto,
Canada

The authors would also like to thank the students who provided their research assistance
in connection with the Guide: Michelle Bloodworth, Carolyn Burkholder-James, Will
Boyer, Carolyn Cornford, Gregg Erauw, Jonathan Khan, Jessica Luscombe, Devanne
O’Brien and Dee Pham.

Any errors or omissions remain the responsibility of the authors.

Please note: The Guide is not intended as legal advice and neither the Commonwealth
Secretariat nor the authors are responsible for actions taken on the basis of information
provided by the Guide.
Contents

Acknowledgements

Abbreviations

1. Introduction ............................................................................................................. 7

1.1 The rationale for a guide to international investment agreement provisions
for developing countries based on sustainable development ......................... 7

1.2 What is in the Guide? ..................................................................................... 9

1.3 What is not in the Guide? ............................................................................. 11

2. The Context for IIA Negotiations .......................................................................... 12

2.1 Existing IIA practice .................................................................................... 12

2.2 Links between signing IIAs and attracting increased foreign investment ... 19

2.3 Links between foreign investment and sustainable development ................ 24

2.4 Making choices: sustainable development in the sample provisions in the
Guide ............................................................................................................ 29

3. Using the Guide ..................................................................................................... 36

3.1 Introduction ..................................................................................................... 36

3.1.1 General purpose of the Guide ...................................................................... 36
3.1.2 Using the Guide in IIA negotiations ............................................................ 36
3.1.3 Using the Guide to better understand the relationship between IIA
Obligations and domestic law and other international obligations .............. 37
3.1.4 Using the Guide to better understand existing IIA obligations .................... 37

3.2 IIAs and domestic investment policy .............................................................. 37

3.2.1 General considerations ................................................................................. 37
3.2.2 Specific examples of the interaction between IIA commitments and domestic
investment policy ......................................................................................... 38
3.3 IIAs and other international obligations .......................................................... 40

4. Survey of IIA Provisions and Commentary .......................................................... 45

4.1 Introduction ..................................................................................................... 45

4.2 Provisions defining the scope of application and other preliminary matters... 45

4.2.1 Preamble ....................................................................................................... 45
4.2.2 Definitions .................................................................................................... 51
4.2.3 Statement of objectives................................................................................. 94
4.2.4 Scope of application ..................................................................................... 97

4.3 Substantive obligations of host states regarding investor protection ............ 104

4.3.1 Introduction ................................................................................................ 104
4.3.2 Right of establishment ................................................................................ 106
4.3.3 National treatment ...................................................................................... 111
4.3.4 Most favoured nation .................................................................................. 126
4.3.5 Fair and equitable treatment and the minimum standard of treatment ....... 139
4.3.6 Limitations on expropriation and nationalisation ....................................... 153
4.3.7 Compensation for losses ............................................................................. 177
4.3.8 Free transfer of funds.................................................................................. 183
4.3.9 Performance requirements .......................................................................... 194
4.3.10 Transparency ........................................................................................... 204
4.3.11 Entry and sojourn of foreign nationals and restrictions on nationality
requirements for senior management ......................................................... 217
4.3.12 Reservations and exceptions..................................................................... 223

4.4 New provisions addressing sustainable development ................................... 251

4.4.1 Sustainability assessments .......................................................................... 265
4.4.2 General obligations of investors ................................................................. 287
4.4.2.1 Investor obligation to comply with the laws of the host state ................. 287
4.4.2.2 Investor obligation to respect internationally recognised human rights and
undertake human rights due diligence ....................................................... 290
4.4.2.3 Investor obligations to refrain from the commission of, or complicity in,
grave violations of human rights ................................................................ 312
4.4.2.4 Investor obligation to comply with core labour standards ...................... 317
4.4.2.5 Investor obligation to refrain from acts or complicity in bribery and
corruption ................................................................................................... 333
4.4.3 Other rights and obligations of the state parties ......................................... 340
4.4.3.1 Party state obligations relating to minimum standards of human rights,
labour rights, indigenous peoples’ rights, and environmental protection and
standards to address corruption .................................................................. 341
4.4.4 Enforcement of investor obligations .......................................................... 364
4.4.4.1 Criminal sanctions ................................................................................... 366
4.4.4.2 Grievance procedure and other measures to enforce the management plan
.................................................................................................................... 374
4.4.4.3 Civil liability of investors ........................................................................ 379
4.4.4.4 Counterclaims by states in investor-state arbitrations ............................. 393

4.5 Dispute settlement ......................................................................................... 398
4.5.1 Investor-state dispute settlement ................................................................ 398
4.5.2 State-to-state dispute settlement ................................................................. 475

4.6 Investment promotion and technical assistance ........................................... 486

4.6.1 Investment promotion ................................................................................. 486
4.6.2 Technical assistance.................................................................................... 493

4.7 Final provisions: commission and entry into force and termination ............. 501

4.7.1 Introduction ................................................................................................ 501
4.7.2 Commission ............................................................................................... 501
4.7.3 Termination of IIAs .................................................................................... 503

Appendix 1. Review of Evidence of the Effects of IIAs on Investment Flows ....... .507

Appendix 2. Overview of the General Agreement on Trade in Services ................... 515

End Notes ................................................................................................................... 525

Glossary ........................................................................................................................ G-1
List of Abbreviations

AALC Asia-Africa Legal Consultative Committee
ADB Asian Development Bank
ADR Alternative dispute resolution
APPI Agreement on the Promotion and Protection of
Investments
ASEAN Association of Southeast Asian Nations
BIPPA Bilateral Investment Promotion and Protection Agreement
BIT Bilateral investment treaty
CARICOM Caribbean Community
CARIFORUM The Forum of the Caribbean Group of African, Caribbean
and Pacific (ACP) states
CAT Convention against Torture and Other Cruel, Inhuman or
Degrading Treatment
CECA Comprehensive Economic Cooperation Agreement
CEDAW Convention on the Elimination of All Forms of
Discrimination Against Women
CERD Convention on the Elimination of all Forms of Racial
Discrimination
COMESA Common Market for Eastern and Southern Africa
CRC Convention on the Rights of the Child
CSR Corporate social responsibility
DSU WTO Dispute Settlement Understanding
EBRD European Bank for Reconstruction and Development
ECE Evaluation committee of experts
EIA Environmental impact assessment
EPA Economic partnership agreement
EU European Union
FDI Foreign direct investment
FET Fair and equitable treatment
FIPA Foreign Investment Protection Agreement
FTA Free trade agreement
GATS WTO General Agreement on Trade in Services
GATT General Agreement on Tariffs and Trade
GMOs Genetically modified organisms
Guiding Principles Guiding Principles on Business and Human Rights
developed by the United Nations Special Representative
of the Secretary-General on the Issue of Human Rights
and Transnational Corporations and Other Business
Enterprises
HRIA Human rights impact assessment
ICCPR International Covenant on Civil and Political Rights
IBA International Bar Association
CPED Convention for the Protection of All Persons from
Enforced Disappearance
ICERD International Convention on the Elimination of All Forms
of Racial Discrimination
ICESCR International Covenant on Economic, Social and Cultural
Rights
ICRMW International Convention on the Protection of the Rights
of Migrant Workers and Their Families
CRPD Convention on the Rights of Persons with Disabilities
ICSID International Centre for Settlement of Investment
Disputes
IFC International Finance Corporation
IIA International investment agreement
IISD International Institute for Sustainable Development
ILO International Labour Organization
IMF International Monetary Fund
IP Intellectual property
ISO International Organization for Standardization
MFN Most favoured nation
MIGA Multilateral Investment Guarantee Agency of the World
Bank
MNE Multi-national enterprise
NAAEC North American Agreement on Environmental
Cooperation
NAALC North American Agreement on Labor Cooperation
NAFTA North American Free Trade Agreement
NAO National administrative office
New York Convention United Nations Convention on the Recognition and
Enforcement of Foreign Arbitral Awards
OECD Organisation for Economic Co-operation and
Development
PTIA Preferential trade and investment agreement
SA Sustainability assessment
SOE State-owned enterprise
SRSG Special Representative of the Secretary-General on the
Issue of Human Rights and Transnational Corporations
and Other Business Enterprises
TNC
Transnational Corporation
TRIMs Agreement
WTO Agreement on Trade-Related Investment Measures
TRIPS Agreement WTO Agreement on Trade-Related Aspects of Intellectual
Property Rights
UNCITRAL United Nations Commission on International Trade Law
UNCTAD United Nations Conference on Trade and Development
UNDRIP United Nations Declaration on the Rights of Indigenous
Peoples
Vienna Convention Vienna Convention on the Law of Treaties
WTO World Trade Organisation