BRICS INTERNATIONAL INVESTMENT
REGIME FROM THE PERSPECTIVE OF
FOREIGN INVESTMENT PROTECTION
BRICS international investment regime from the perspective of foreign
investment protection
Galina Kuzina Student no.10866108
Master International and European Law, Trade and Investment. University of
Amsterdam
Table of contents.
List of Abbreviations ... 3
Introduction ... 4
I Growth potential of BRICS as a legal entity. ... 6
1.1. Origin and objectives of BRICS nations. ... 7
1.2. Institutional standing of BRICS. ... 9
II. International and domestic legal instruments for the investment protection in BRICS countries. ... 11
2.1. Protection clauses in the model bilateral investment treaties of Brazil, Russia, India, China and South Africa. ... 11
2.2. Investment guarantees in preferential trade and investment agreements of Brazil, Russia, India, China and South Africa. ... 18
2.3. Different approaches to foreign investment protection in national policy of BRICS countries. 28 III. Dispute Settlement and Enforceability of contractual protection provisions in BRICS countries. ... 33
Conclusion. ... 40
LIST OF ABBREVIATIONS
ASEAN Association of Southeast Asian Nations BIT Bilateral Investment Treaty
BRICS Brazil Russia India China South Africa
CECA Comprehensive Economic Cooperation Agreement between India and Malaysia CIETAC China International Economic and Trade Arbitration Commission
CIFA Agreements on Cooperation and Investment Facilitation CJEU Court of Justice of the European Union
COMESA Common Market for Eastern and Southern Africa ECT Energy Charter Treaty
EEU Eurasian Economic Union EU European Union
FDI Foreign Direct Investments FTA Free Trade Agreement IBSA India, Brazil, South Africa
ICC International Chamber of Commerce
ICDR International Centre for Dispute Resolution ICJ International Court of Justice
ICSID International Centre for the Settlement of Investment Disputes/Convention on the Settlement of Investment Disputes between States and Nationals of
Other States
IIA International Investment Agreement
LCIA London Court of International Arbitration LMAA London Maritime Arbitrators Association NAFTA North American Free Trade Agreement
OECD Organization for Economic Co-operation and Development PTIA Preferential Trade and Investment Agreement
SAARC South Asian Association for regional cooperation SADC Southern African Development Community
SCC Stockholm Chamber of Commerce
UNCITRAL United Nations Commission on International Trade Law UNCTAD United Nations Conference on Trade and Development WTO World Trade Organization
INTRODUCTION
Globalization and increased influence of developed countries enables Brazil, Russia, India, China and South Africa (BRICS) as a vocal representative of the developing world to change the present allocation of international governance.1 One of the main objectives of BRICS nations is a joint improvement of the international trade and investment environment for the creation of a more equitable international economic order.2 Large emerging countries have increased their abilities to attract foreign capital and become more important in the global economy, as their abilities to attract foreign capital affect international economic law and policy.3
According to the 2014 annual United Nations Conference on Trade and Development (UNCTAD) report, transition economies experienced a significant rise in Foreign Direct Investments (FDI) inflows up to the 2013, reaching an estimated record level of US$126 billion.4 Brazil, being the main recipient of foreign investments in South America, received US$ 62,5billion in 2014 thus decreasing its last year rate to 2,3 %.5 According to the UNCTAD report, FDI to Russia in 2014 dropped by 70% to an estimated US$19 billion. The regional conflict, sanctions on Russia, and negative growth prospects deterred foreign investors from investing in the region.6 Latest UNCTAD investment trend monitor recorded a surge of FDI inflows to India, increasing by about 26% in 2014 to an estimated US$35 billion, despite macroeconomic uncertainties and financial risks.7 China was the largest FDI recipient in the world in 2014, with inflows of an estimated $128 billion – to both the financial and non-financial sectors.8 South Africa, according to UNCTAD, FDI flows to South Africa reached US$56.3b in 2013, an increase of 6.8% on the previous year. 9
BRICS play an important role in the current pattern of global investment.10 The increased ability of developing countries to attract FDI has been growing significantly over time, which makes it one of the most striking features in the global economy. Is there a sufficient legal framework for monitoring these huge inflows of foreign capital?
1 By the developed superpowers author meant seven major advanced economies (G7) as reported by the
International Monetary Fund: Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States.
2 Joint Statement of the BRIC Countries’ Leaders Yekaterinburg, Russia, June 16, 2009. Para. 5. Available at:
http://www.brics.utoronto.ca/docs/090616-leaders.html.
3 UNCTAD (2014) World Investment report.
4 UNCTAD (2014) Global investment trends monitor No. 15.
5 UNCTAD (2014) Regional factsheets: Latin America and Caribbean. 6 UNCTAD (2015) Global investment trends monitor No. 18.
7 UNCTAD (2015) Global investment trends monitor No. 18. 8
UNCTAD (2015) Global investment trends monitor No. 18.
9 UNCTAD (2015) Global investment trends monitor No. 18.
On the issue of investor protection and investment arbitration, China is the only BRICS country that is member of the International Centre for Settlement of Investment Disputes (ICSID). The international institution under the protection of the World Bank, whose primary purpose is to provide facilities for conciliation and arbitration of international investment disputes. China signed the ICSID convention in 1990 and the agreement entered into force in 1993. Russia signed the ICSID convention in June 16, 1992, but had not complete the ratification process. Other members of BRICS have not signed the ICSID convention, and subsequently cannot refer to the ICSID convention or use its dispute settlement mechanism.11 Regarding the investment guarantees incorporated in the model bilateral agreements, India along with South Africa presently review their existing bilateral investment treaties and question the rationale of such agreements. Brazil, inspite of its abortive attempts to ratify the Bilateral Investment Treaty (BIT) 1990,12 recently signed and ratified new generation BITs with four developing countries.13 Russia is a party to 73 BITs, most of which contain a dispute resolution clause, limiting jurisdiction of arbitral tribunals to hear disputes over the fact of expropriation.14 Another country with a large number of bilateral investment agreements is China. The Asian BRICS member has signed 145 BITs to promote the internationalization of investment regimes. Adversely, it maintains a strict national protection policy and reluctantance to include MFN provision in its investment treaties.
Ministers of external relations at the 6th BRICS Summit agreed to build a common approach for further improvements to international investment agreements including their dispute settlement mechanisms.15 Moreover, according to the Ufa declaration of the 7th BRICS Summit, members have adopted economic partnership strategies that would be the key guideline for expanding trade and investment, manufacturing and minerals processing, energy, agricultural cooperation, science, technology and innovation among the countries.16
11 Malik M., The ICSID club: list of Members and non-members. Biicl Investment treaty forum 2007. 12
Between 1994-1999 Brazil signed, but not ratified BITs with: Portugal (9 February, 1994), Chile (22 March, 1994), United Kingdom (19 July, 1994), Switzerland (11 November, 1994), France (21 March, 1994), Germany (21 September, 1995). The following BITs were signed but not sent to the National Congress: Finland (28 March, 1995), Italy (3 April, 1995), Denmark (4 May, 1995), Venezuela (4 July, 1995), the Republic of Korea (1 September, 1995), Cuba (26 June, 1997), the Netherlands (25 November, 1998), Belgium and Luxembourg (6 January, 1999). In addition, at the regional level, the Protocol of Colonia (17 January, 1994) and the Protocol of Buenos Aires (5 August, 1994).
13 Brazil- Angola CIFA (2015); Brazil –Malawi CIFA(2015); Brazil- Mexico CIFA ( 2015); Brazil- Angola CIFA
(2015); Brazil- Mozambique CIFA (2015).
14 Information is available at: http://investmentpolicyhub.unctad.org/IIA/CountryBits/175
15 Ministerial declaration at the VI Summit, Fortaleza, 2014 is available at:
http://brics6.itamaraty.gov.br/category-english/21-documents/227-brics-perspective-on-international-investment-agreements
16
Ufa Declaration, 9 July 2015 is available at:
This research objects to make an evaluative and comparative study of the legal treatment of FDI in Brazil, China, Russia, India and South Africa by answering the following research question: Is a common approach in investment protection regime feasible for BRICS?
Such an inquiry has important implications for understanding the BRICS’ common investment policy and requires the research of international legal instruments as well as the national investment policy of each country. This study focused extensively on the evolution of the national investment policy and international bilateral and multilateral agreements of BRICS countries. Furthermore, I refer to the evaluative analysis of investor-state dispute settlement mechanisms, relying on relevant cases of Russia, India, China and South Africa.
These conceptions will be investigated in turn. The first chapter of this paper will scrutinize initial origins of BRICS, its objectives and institutional standing. The second chapter of this paper will address investment guarantees included in model BITs; analyze the conceptual difference of protective provisions incorporated in Preferential Trade and Investment Agreements (PTIAs), signed by BRICS members. The third subsection of the second chapter will focus on the divergent approaches in national investment policy of BRICS members.
The third chapter of the thesis will examine practical applications of the investment protection provisions based on the case studies of international tribunals and the efficiency of enforcement regulations in BRICS states. In conclusion, this paper will attempt to indicate perspectives of a convergent investment regime within BRICS.
I GROWTH POTENTIAL OF BRICS AS A LEGAL ENTITY.
Significant growth in the economic importance of Brazil, Russia, India, China and South Africa and the expansion of their influence beyond their traditional geographical backyards makes BRICS one of the pivotal multilateral forums for international cooperation.
One of the principal features of the BRICS institutional structure is its diplomatic approach to solving and approaching established objectives. BRICS bodies play a supportive role, and members refer to them only when they have an immediate interest in solving certain issues.17 From this perspective, BRICS could be compared with South-South dialogue forum IBSA, consisting of India, Brazil, South Africa.18
17 Grant C., Russia ,China and Global Governance. London: Centre for European Reform. p. 8.
18IBSA is a dialogue forum that includes three members of BRICS. Author is of the opinion that comparison with
IBSA would be the most sufficient, but also note the importance of other dialogue forums such as GATT, OCSE, G20, G7 that have a similar institutional structure. Objectives and goals of IBSA see at:
1.1. ORIGIN AND OBJECTIVES OF BRICS NATIONS.
BRICS, unlike other international institutions was not established on the basis of multilateral agreements nor was it a product of diplomatic negotiations. The BRIC(S) acronym was firstly formulated by private analysts at Goldman Sachs a decade ago and currently has attracted considerable attention as BRICS represents the membership of the most prominent emerging and developing countries at the G20 forum.19 It is important to mention, that BRICS serves complementary, rather than a substitute role to other international organizations. BRICS is distinct from regional economic integration organizations like the North American Free Trade Agreement (NAFTA), the European Union (EU) and the Association of Southeast Asian Nations (ASEAN) and must overcome the inconvenience of geographical distance. Some scholars even suggest, it would seem more sensible to group Brazil with Argentina, Mexico, Chile, Colombia, or Venezuela; India with Pakistan and Bangladesh; and so forth.20 In that sense, it may be argued that territorial borders should serve as a decisive feature for establishing the entity.21 The distinctive feature of BRICS is its globalism that represents the largest emerging economies in each region outside the Western world. After the enlargement of the entity to South Africa, the total population of all members from different continents amounts to 3 billon people.22
I could identify BRICS as a diplomatic entity that attempts to leverage the weight of raising powers through the collective action. The other view on the interpretation of BRICS as a new political international organization with a revisionist challenge to the global order seems quite blunt.23 In any case, BRICS is a useful grouping for members to share and learn from one another’s development experiences, with impressive partnership carrying out cooperation
initiatives in more than thirty areas between members. The overall existence of BRICS
represents a new approach on international cooperation and enhanced capacity of the developing countries in international politics.24
19 Wilson D. and Purushothaman R. Dreaming with BRICs: The Path to 2050. Global Economics Paper no. 99. New
York: Goldman Sachs; O’Neill J. The World Needs Better Economic BRICs. Global Economics Paper no. 66. New York: Goldman Sachs.
20 Armijo, L, E.The BRICs countries (Brazil, Russia, India, and China) as analytical category: mirage or insight?.
Asian Perspective. p.9.
21 IBSA, though presenting with three large economies located at different continents, successfully completing its
objectives to promote the South-South dialogue and elaborate the joint positions on significant matters of international relations.
22
Sanya Declaration of The Heads of State and Government April 14, 2011 is available at: http://www.brics.utoronto.ca/docs/110414-leaders.html
23 Baru, S. BRICS in Search of Cement. Business Standard (Delhi), April 18; Matovska, M, Trajkoska, J and
Siljanovska. Z "The impact of BRICS from economic, legal and political aspect in the international community. European Scientific Journal.
From the first meeting of members during the Summit of G8 in Japan25, where the initial leaders of BRIC countries agreed to continue to coordinate their moves in the key economic issues, this format of casual interaction still remains important. At the Heads of State meeting in Sanya, the acronym BRIC transformed into BRICS and strengthens its horizons into African continent.26 Brazilian President Lula da Silva authorized the inception of the new global economic geography.27
Though BRICS includes totally different countries with separate histories, cultural heritages, political and economic systems, all the members are the biggest and the most powerful countries in their region, have a huge domestic market and consumption. These features unite BRICS countries in main areas of cooperation in finance, investments, trade, education, agriculture, health, science, technology and others. All five members have a reasonable interest in protecting their internal and external sovereign autonomy vis-à-vis western developed countries. This legitimate dissatisfaction and common features of the largest economies may be considered as starting points of BRICS unification.28 BRICS countries share the strong antipathy to external interventionism of developed world into the internal policy of developing countries and least developing countries.29 In the Joint statement of the Heads of State and government of the second summit of BRIC(S), leaders stressed the importance of the sustainable development and original paths of developing countries, independent from western influence.30
All the members have demonstrated impressive continental and global reach in terms of their diplomatic profile. BRICS countries repeatedly confirmed the efficiency of their cooperation that favors the formation of a harmonious world with economic stability. The BRICS label seems to have strengthened each country’s status as a dynamic and emerging power with a growing role in global affairs.31
Considering the declarations, agreements and action plans of BRICs and BRICS summits, as well as ministerial declarations, statements and press releases from representatives of the
countries that was issued to ensure that Russia will not be excluded from the Brisbane G20 Summit in 2014 available at: http://www.dfa.gov.za/docs/2014/brics0324.html.
25 The 34th G8 summit was held 7-9 July 2008 in Toyako, Japan. 26
Sanya Declaration of The Heads of State and Government April 14, 2011 available at:
http://www.brics.utoronto.ca/docs/110414-leaders.html; When South Africa was invited to join the group O’Neill criticized the decision. But at a conference in South Africa in 2013 he changed his mind available at:
http://finweek.com/2013/04/10/oneill- positive-about-sas outlook/.
27
Quoted in P. Escobar, ‘The BRIC post-Washington consensus’, Asia Times, 17 April; available at: http://www.atimes.com/atimes/Central_Asia/LD17Ag01.html
28 Stuenkel O, “The Financial Crisis, Contested Legitimacy, and the Genesis of Intra-BRICS Cooperation”, Global
Governance, 19, pp. 611-630. 29
Ibid.
30 2nd BRIC Summit of Heads of State and Government: Joint Statement Brasília, April 15, 2010 available at:
http://www.brics.utoronto.ca/docs/100415-leaders.html.
Member States,32 certain common approaches on a number of issues could be distinguished: 1) BRICS maintains a dialogue regarding international economic and financial matters, including
the reformation and principal transformation of global financial institutions.33
2) BRICS grouping aims at the enhancement of developing countries’ impact on the global international trade and investment environment, including facilitation of trade and investment regime between the BRICS countries. Forum has initiated implementation of innovative methods of non – regional cooperation by institutional and regulative improvement of national markets.34
3) Another important objective in the cooperation of BRICS countries considers issues of international humanitarian assistance, mutual coordination in reduction of natural disaster risks, poverty, famine, social inequality and fighting against terrorism.35
4) Valuable place among the cooperation objectives of BRICS members holds the extension of scientific and educational standards aiming to enlarge fundamental research and advanced technologies.36
Understanding the core objectives of BRICS is important for the evaluation of implementation mechanism and examination of institutional structure. The members of BRICS share the views on international political economy, trade and investment cooperation, educational and scientific standardization. BRICS is primarily focused on broad economic reforms and the restructuring of the global financial architecture. An Agreement establishing the New Development Bank (NDB) that was signed by head of states at the 6th BRICS Summit represents an implementation of the members’ common approach.37
1.2.INSTITUTIONAL STANDING OF BRICS.
The institutional framework of BRICS is based on the flexible model of IBSA – dialogue forum that includes three BRICS members. IBSA was established in 2003 and formalized by the Brasilia Declaration to fulfill long-lasting goals of bringing the voices of developing world together and deepen the ties in various areas of coordination.38 Just like IBSA, BRICS keeps an open and flexible structure. The grouping functions without permanent non-plenary organs and
32 BRICS official documents, available at: http://www.brics.utoronto.ca/docs/
33 BRICS Think Tanks Council came up with initiatives to form a “Framework of BRICS Closer Economic
Partnership” and a “BRICS Economic Cooperation Strategy”.
34 Cooperation Agreement on Innovation within the BRICS Interbank Cooperation Mechanism (16.07.2014). 35
eThekwini Declaration 27.03.2013 of the V BRICS Summit.
36 Cape Town Declaration of the Science, Technology and Innovation Ministerial Meeting( 10.02.2014) 37 Agreement on the New Development Bank 15.07.2014 see at:
http://brics6.itamaraty.gov.br/media2/press-releases/219-agreement-on-the-new-development-bank-fortaleza-july-15
does not have a headquarters or a permanent executive secretariat. The highest consultations are presented by annual summits of the head of the states and government, where they discuss key topics in accordance with the agenda that is introduced by the hosting state. In order to fulfill justified objectives in common policy and deepen internal cooperation between the members, there are also ministerial conferences and meetings that focus on problem issues within each ministry’s competence.39 The development of the BRICS agenda has multiplied the number of meetings of ministers, showing that co-operation is spreading to other areas besides politics, such as trade, finance, agriculture, health and culture.
The first official BRIC summit was held in Yekaterinburg (June 2009), with subsequent meetings in Brasilia, Brasil (April 2010), Sanya, China (April 2011), New Delhi, India (March 2012), Durban, South Africa (March 2013), Fortaleza, Brazil (July 2014) and Ufa, Russia (July 2015).
BRICS countries are tempting to dismiss the opinion that they are just a loose association of states with sovereign, and sometimes even divergent interests.40 The establishment of the executive permanent organs of the association, based on the conferred mandate could act on the conviction that it is in their best joint interests to restructure informal multilateral machinery to international organization with own legal personality. The Russian Foreign Minister Sergei Lavrov said in 2012 that the process of further institutionalization of BRICS is a perspective and developing step that will eventually lead to the creation of an international organization.41
The Fortaleza Agreement has laid the legal grounds for establishing independent New Development Bank that is based on sound banking principles and aimed to active mobilization of national resources in BRICS and other emerging and developing economies.42 The foundation of the independent financial institution is a response to failed attempts to increase the influence of developing countries in the International Monetary Fund (IMF) and World Bank.43 In addition, there are dynamic consultations on the creation of internal consolidating rating agency within BRICS that will offer reserve funds to help ease short-term balance-of-payments pressure. These first attempts of the relatively new international entity could be marked as a turning point for the institutional standing of BRICS, which may transfer a
39 BRICS and IBSA both have established sector cooperation with the objective of deepening the mutual knowledge
and exploring common points of interest in sector and represent South-South dialogue
40 This was highlighted in 2012 when the BRICS failed to mount a united campaign for either the Nigerian or the
Colombian candidate against the ultimately successful US nominee for president of the World Bank. Ramesh Thakur, “Wealth and Power Trump Good Governance,” Australian, 18 April 2012.
41 The interview of the Minister of Foreign Affairs of Russia S.V. Lavrov to the International Affairs journal
Russian diplomacy and challenges of the 21st century to available at:
http://www.mid.ru/bdomp/brp_4.nsf/e78a48070f128a7b43256999005bcbb3/0ba48b6d0169152644257a830046f855 !Opendocument
42
Agreement on the New Development Bank 15.07.2014 available at: http://brics6.itamaraty.gov.br/media2/press-releases/219-agreement-on-the-new-development-bank-fortaleza-july-15
countervailing economic grouping to a powerful international organization. The increasingly confident BRICS’ recent calls for institutionalization show the factual potential for fulfillment of the declared aims that, in addition with G20 cooperation, can better protect their interests.
II. INTERNATIONAL AND DOMESTIC LEGAL INSTRUMENTS FOR THE INVESTMENT PROTECTION IN BRICS COUNTRIES.
The second chapter of the research will consider certain legal and policy aspects of foreign investment protection for each of the five BRICS countries. Firstly I will discern different approaches of investment protection under the model BITs of every member of BRICS. Then I will examine investment protection clauses and Investor-State Dispute Settlement (ISDS) mechanisms provided in Preferential Trade and Investment Agreements (PTIA) of BRICS members. The last subparagraph of this chapter will present the content analysis of the heterogeneous national legal policies and their historical and economic rationale.
2.1. PROTECTION CLAUSES IN THE MODEL BILATERAL INVESTMENT TREATIES OF BRAZIL,
RUSSIA,INDIA,CHINA AND SOUTH AFRICA.
Investment protection clauses under the model BITs of every BRICS member have similarities as well as differences that have to be scrutinized and compared regarding the development and evolutionary standards of the country. Globalization and significant spread of multinational companies worldwide derive an increasing role of BITs that establish the general rules of investors and investments treatment. Countries, while concluding BITs, pursue two main purposes: to encourage and to protect foreign investments.
Noteworthy, there is no consensus among economic scholars concerning the direct impact of BITs on the inflow of foreign capital. While some authors are strongly positive about the influence of investment protection under BITs, especially between developed and developing countries,44 others conclude that BITs are only a compound of aggregated investment policy, and could not be economically estimated in isolation from the national investment regime.45
Brazil until recently was the only country that did not have any BIT in force.46( Pic 1) The
44
Salacuse, Jeswald W.Emerging Global Regime for Investment, Harvard International Law Journal.
45 Hallward-Driemeier, M.. Do bilateral investment treaties attract foreign direct investment? Only a bit and they
could bite. Only a Bit And They Could Bite. World Bank Policy Research Working Paper 3121 (2003).
46
Between 1994-1999 Brazil signed, but not ratified BITs with: Portugal (9 February, 1994), Chile (22 March, 1994), United Kingdom (19 July, 1994), Switzerland (11 November, 1994), France (21 March, 1994), Germany (21 September, 1995). The following BITs were signed but not sent to the National Congress: Finland (28 March,
raise of liberalization policy towards foreign capital in Latin America caused a surge of BITs in the beginning of 1990. Brazil had followed the lead and established a national agency for formatting the framework for a model BIT, signaling the rest of the world of its new more favorable and receptive approach to the international investments.
Under non-ratified treaty between Finland and Brazil foreign investors were guaranteed standard investment protection clauses, such as fair and equitable treatment, protection from unlawful expropriation, national treatment, most favorable nation treatment, freedom to transfer means and funds and even included umbrella
clause and a post-entry protection of the investments that have been already made in the territory of one of the contracting party.47 Despite of the model BIT flexibility and perceptiveness towards foreign investments, all
the promulgated treaties with European countries, Venezuela, South Korea, Cuba and Chile were blocked in the Congress of Brazil as they might have had a negative impact on the state and its national sovereignty.48 Since then, the largest economy in South America refrained from seeking bilateral initiatives. However, an
increasing level of awareness regarding investment protection and demands of the Brazilian investment exporters encouraged Brazilian government to start a promotion of new bilateral investment policy, signing Agreements on Cooperation and Investment
Facilitation (CIFA) with Angola, Malawi, Mexico and Mozambique.49 (Pic 2)
Though these new generation BITs have not yet been ratified by Brazilian Congress, there is a strong presumption to believe that the process will not take long.50 Concerning the substance of investment protection in the new BITs, there are noticeable differences with the first model
1995), Italy (3 April, 1995), Denmark (4 May, 1995), Venezuela (4 July, 1995), the Republic of Korea (1 September, 1995), Cuba (26 June, 1997), the Netherlands (25 November, 1998), Belgium and Luxembourg (6 January, 1999). In addition, at the regional level, the Protocol of Colonia (17 January, 1994) and the Protocol of Buenos Aires (5 August, 1994). In 2015 Brazil signed 2 Cooperation Agreement and Investment Facilitation with Angola and Mozambique.
47 Art. 3, 4, 5, 6, 7 of Brazil - Finland BIT (1995) is available at:
http://investmentpolicyhub.unctad.org/Download/TreatyFile/508
48 Wei, D. Bilateral investment treaties: an empirical analysis of the practices of Brazil and China. European journal
of Law and Economics. p.670-672
49 Information from the Brazilian Ministry of Foreign Affairs is available at:
http://www.itamaraty.gov.br/index.php?option=com_tags&view=tag&id=644-acordo-de-cooperacao-e-facilitacao-de-investimentos&lang=pt-BR#acord-invest
50 Based on the introductory statements of Ministry of Foreign Affairs that accompany BITs with Angola (2015) and
Mozambique (2015).
Pic 1. Brazil non-ratified 1990 BITs
BIT regime. Under the new regime, foreign investors are not guaranteed fair and equitable treatment and they are not protected from the government restrictive measures. Also, there are numerous exceptions regarding the MFN and national treatment clauses.51
Regarding the dispute settlement mechanisms, newly concluded BITs prescribe parties to refer to the Joint committee that consists of government representatives from both parties in order to resolve the dispute by peaceful means.52 If the committee would not be able to resolve the case, parties may resort to arbitration mechanisms that would be chosen by the Joint committee.53 Bilateral investment negotiating policy in Brazil is strategically delineated for developing countries, with weaker economies, which are unlikely to adversely or negatively affect the Latin American state. According to the official information of the Brazil Ministry of Foreign Affairs, in the nearest future CIFA would be signed with South Africa, Algeria, Morocco, and Tunisia.54
Russia, in contrast, has concluded, in total 73 bilateral investment agreements, of which 54 are currently in force.55 (Pic. 3) These include BITs signed by the Soviet Union (USSR), of which Russia is the legal successor.56 Russia has ratified BITs with all other members of BRICS, except for Brazil.57
Regarding the difference in investment policy approaches of Russia and its predecessor, it is worth to notice that Russia has used miscellaneous models of BITs as templates for negotiations with third countries. In 1987, the USSR had adopted a model BIT,58 on the basis of which, seven BITs are presently in
force.59 This model agreement includes standard investment protection clauses that apply to maritime zone: fair and equitable treatment, full protection and security guarantees, MFN and national treatment,
51
Art. 11.1; 11.6 of the Brazil- Mozambique BIT; Art. 11.5; 14.2 of the Angola BIT.
52 Art. 15.2 of the Brazil- Mozambique BIT. 53 Art. 15.6 of the Brazil- Mozambique BIT.
5454 Information from the Brazilian Ministry of Foreign Affairs available at:
http://www.itamaraty.gov.br/index.php?option=com_tags&view=tag&id=644-acordo-de-cooperacao-e-facilitacao-de-investimentos&lang=pt-BR#acord-invest
55 BITs selection by jurisdiction available at:
http://www.kluwerarbitration.com/CommonUI/BITs.aspx?country=Russian%20Federation
56 See for example: BIT Austria (1990/1991), Belgium- Luxemburg EU (1991), Canada (1991), Finland (1991),
France (1991), Germany (1991), United Kingdom (1991).
57 BITs with China (2009), India (1996), South Africa (2000).
58 Resolution of the Council of Ministers of the USSR of 27 November 1987, No 1353, ‘On Conclusion between the
Government of the USSR and Governments of Foreign States of Agreements on Reciprocal Protection of
Investments’, available at: <http://jurbase.ru/2006_archive_federal_laws_of_russia/texts/sector173/tez73651.htm>
59 See footnote 47.
with exception to the parties of custom union, free trade or double taxation agreements.60 Moreover, under the Soviet Union’s model BIT investors are granted the protection under the umbrella clause, and secured from unlawful, arbitrary and discriminatory expropriation.61 All guarantees and protections cover the investments that have been made in the territory of one of the contracting party on or after the 1 January 1950.62
The first model BIT of the newly established sovereign state63 included a broader range of exceptions to national treatment and guarantees protection of the investments that have been already made in the territory of one of the contracting party after the 1 January 1977.64 A new model BIT 65 with subsequent amendments in 2002 66 and 2010 67 represents present international investment policy of BRICS’ member. Investment protection provisions of the BIT could be analyzed by example of a newly replaced investment treaty with China.68 This treaty guarantees broad range of protection provisions including fair and equitable treatment, full protection and security, MFN and national treatment, non-discrimination towards foreign investors and others.69
Disputes between the Contracting parties and an investor limited only to those, related to broadly defined investments and may be submitted either to national courts; ICSID tribunal under the Additional facility rules or to ad hoc tribunals under UNCITRAL rules.70 Also, parties have to exhaust local remedies within a limited period prior they would have opportunity to refer to international tribunals.71
60 Art. 3 of Russia (USSR) – France BIT (1989). 61 Art. 4(3) of Russia (USSR) – France BIT ( 1989).
62 See for example Russia (USSR) - Canada BIT ( 1989/1991) available at:
http://investmentpolicyhub.unctad.org/Download/TreatyFile/632
63
Government Resolution of 11 June 1992, No 395, ‘On Conclusion between the Government of the Russian Federation and Governments of Foreign States of Agreements on Promotion and Reciprocal Protection of Investments’, available at <http://giod.consultant.ru/page.aspx?1;1224939> The consolidated version (with the amendments of 1995) available at <http://base.consultant.ru/cons/cgi/online.cgi?req=doc;base=LAW;n=10276>
64 See for example BIT Denmark( 993/1996) available at:
http://investmentpolicyhub.unctad.org/Download/TreatyFile/1028
65 Government Resolution of 9 June 2001, No 456, ‘On Conclusion between the Government of the Russian
Federation and Governments of Foreign States of Agreements on Promotion and Reciprocal
Protection of Investments‘, available at <http://www.referent.ru/1/44991> (accessed 9 July 2013). The consolidated version (with the amendments of 2002 and 2010) available at:
<http://docs.pravo.ru/document/view/6535/10477908/> .
66 Government Resolution of 11 April 2002, No 229, ‘On the Insertion of Additions and Changes to the Model
Agreement adopted by Resolution of the Government of the Russian Federation of 9 June 2001, No 456’, available at <http://base.consultant.ru/cons/cgi/online.cgi?req=doc;base=LAW;n=36258>
67 Government Resolution of 17 December 2010, No 1037, ‘On the Insertion of Changes to the Resolution of the
Government of the Russian Federation of 9 June 2001, No 456’, available at <http://base.consultant.ru/cons/cgi/online.cgi?req=doc;base=LAW;n=108228>
68 BIT China (2006/2009) available at: http://investmentpolicyhub.unctad.org/Download/TreatyFile/774 69 Article 3(4) of China- Russia BIT notices the analogy between WTO Member States commitments to the
Agreement and their obligation to Members of Custom Unions, Free trade areas. available at: http://investmentpolicyhub.unctad.org/Download/TreatyFile/774
70 Art. 9(2) of China- Russia BIT. 71 Ibid.
India presently reviews its existing bilateral investment treaties and questions the rationale of these agreements that are neither necessary nor sufficient for attracting foreign investments.72 Presently India has signed 86 BITs, of which 72 are in force.73(Pic. 4) India has concluded BITs with Australia, Belgium, Cyprus, China, France, Germany, Indonesia, Italy, Korea, Kuwait, Malaysia, Mauritius, Netherlands, Qatar, Russia, Sweden, Switzerland, and the United Kingdom. Indian 1993 Model BIT was based on the OECD Draft Convention for the Protection of Foreign Property.74 The renegotiation of model BIT 1993 was launched in 2012 due to mass investors’ claims of alleged violation of India’s BITs.75 The apparent purpose of the renegotiations is to create a neutral treaty keeping in mind investors’ rights while preserving the right to regulate. Indian Ministry of Finance has prepared and circulated a revised text of model investment treaty for comments within official circles.76 The new model BIT is still in the process of edition, however there are some novel provisions incorporated in provisional version of the model treaty.77 The treaty, among standard model investment treaty provisions, includes mutual obligations against corruption,78financial disclosures and taxation.79
Claims that arise from investments have to be firstly submitted before the relevant domestic courts or administrative bodies of the Host State for the purpose of pursuing domestic remedies. If, after the exhaustion of domestic remedies, no resolution has been reached, an
investor may transmit a notice of dispute to respondent. In the event a dispute cannot be settled amicably and exhausted all domestic remedies, an investor may submit a claim to arbitration.80 Model Treaty does not list arbitration forums, which allows investors to choose from unlimited options for dispute settlement.
China has been an enthusiastic signatory of investment agreements and has 145 BITs in
72 Ajay Kr. Sharma, A Critique of the Indian FDI Law and Policy: Problems & Solutions, 2(1) NLUJ Law Review
30 (2013)
73 See at: http://investmentpolicyhub.unctad.org/IIA/CountryBits/96
74
OECD Convention on the Protection of Foreign Property In 1962 the OECD ... OECD in 1967 (1967 Draft OECD Convention).
75 "Vodafone Treaty Claim on Backburner," Global Arbitration Review, Aug. 23, 2013. 76 Draft Indian Model Bilateral Treaty is available at:
https://mygov.in/sites/default/files/master_image/Model%20Text%20for%20the%20Indian%20Bilateral%20Invest ment%20Treaty.pdf
77 OAE- India BIT( 2013) was signed on 12.12.2013 despite the official statement of Mr. Meena to postpone all
ongoing BIT negotiations till the review process is complete.
78
Art. 9 of Model Text for the Indian Bilateral Investment Treaty.
79 Art. 10 of Model Text for the Indian Bilateral Investment Treaty. 80 Art. 14. 4 of Model Text for the Indian Bilateral Investment Treaty.
force.81 (Pic. 5) The majority of these agreements have been negotiated with developing countries, reflecting China’s interest in strengthening diplomatic ties with those countries. China has a bilateral agreement with Russia (2009), India (2007) and South Africa (1998). Also, China negotiated a trilateral investment agreement with Japan and Korea in 2012.82
Throughout the 1980s, China adopted a restrictive BIT policy that expelled national treatment provision and was quite reluctant to grant any preferentiality to foreign investors. However, there are a number of BITs from this period that include a qualified national treatment provision and currently remain in force.83 The first model BIT also provides for qualified MFN treatment, fair and equitable treatment, prohibition of unlawful expropriation and a free transfer of funds.84 Fairly restrictive policy of the investment regime changed into liberal pro-investor policy in the 1990s. China initiated a gradual shift towards stronger provisions for substantive and procedural guarantees for foreign investors. Chinese model BIT of the second phase has broadened the scope of national treatment to developing countries and enhanced MFN treatment to dispute
settlement.85 These changes in international investment regime took place with simultaneous administrative liberal reforms that simplified the investment admission process.
After the accession of the WTO, Chinese approach towards international investment-treaty-making has been progressed and a third generation of Chinese BITs has come to the fore. With this new phase of model BIT development, China gradually introduced a number of liberal treaty innovations. Among such innovations is an obligation to comply with WTO commitments.86 Although, the enhanced MFN treatment extends to other international agreements concluded between the parties before and after the conclusion of the treaty.87
The analysis of individual standard provisions of Chinese BITs reveals a gradual yet decisive policy change towards stronger and more comprehensive substantive and procedural investment protection. This shows that China enhances the level of legal protection in accordance with international standards. However, China still attempts to protect its domestic
81
According to: http://investmentpolicyhub.unctad.org/IIA/CountryBits/42?type=c#iiaInnerMenu
82 China-Japan-Korea trilateral investment agreement. (2014).
83 China-Austria(1986), China-Denmark (1985), China- Italy(1987), China- Norway (1985), China- Sweden( 1982),
China –UK (1986).
84
Art. 2(1),(2), 3 (1), 4 China- Sweden BIT (1982).
85 China-Botswana (2000), China-Iran (2000), China-Jordan (2001), China-Trinidad (2002), China-
Côte d’Ivoire (2002), China-Guyana (2003), China-Djibouti (2003), China-Benin (2004), China-Uganda (2004), China-Russia (2006), and China-Mexico (2008).
86 Art. 3(4) China-Russia BIT( 2009).
87 Art. 10 China- Russia BIT (2009); Art. 7 of BLEU- China BIT (2005)
investors, while signing and ratifying bilateral agreements, the State always reserve a right to act in accordance with rules and formalities of Chinese law.88
The inclusion of South Africa into BRICS signified an important step in the development of the grouping and contributed to its global structure with a stronger capacity to speak on behalf of the developing countries. South Africa’s BIT-program has begun in the early 1990s. In the post-apartheid period South Africa has negotiated more than 40 bilateral treaties designed to promote and protect foreign investments.89 (Pic. 6) The state has a bilateral investment agreement with two other members of BRICS – Russia (2000) and China (1998). Policy makers decided to use the broad British model investment treaty as the starting point for South African model BIT. The protection provisions contained in these agreements include duties to pay market value compensation in case of expropriation, national emergency, revolt, insurrection, riot or other similar events in the territory of the other Party.90
South Africa has launched the reviewing program in 2010 to modernize and strengthen the country’s investment regime.91 According to the South African government, all first generation BITs, which South Africa signed shortly after the democratic transition in 1994, many of which have now reached their termination date, should be reviewed with a view to termination, and possible renegotiation on the basis of a new Model BIT.92 South Africa had already given a notice of termination BITs with Germany, Switzerland, the Netherlands, with BLEU and Spain. Moreover, South Africa stated that the new model investment agreement is an issue for the discussion at BRICS ministerial conference.93 The government of South Africa decided to refrain from entering into any new BITs and suggested that domestic legislation might replace BITs in order to appropriately balance investor protection with other public interest goals. Based on its review program, South African government released the draft Promotion and Protection of Investment Bill on November
1, 2013 that will be discussed further.94 Comparing the investment protection under the model BITs of the BRICS members, there are certain conclusions that
88 Protocol to the BIT BLEU-China Ad Article 5. (2005)
89 The information is available at: http://investmentpolicyhub.unctad.org/IIA/CountryBits/195 90 Art. 4(1), 5(1), (2), 10(1) South Africa- Czech republic BIT (1998).
91 Information from South African Ministry of Trade and Industry, available at:
http://www.thedti.gov.za/editmedia.jsp?id=2504 92
Ibid.
93 Joint Communique Following Meeting of BRICS Trade Ministers in Duhan is available at:
http://english.mofcom.gov.cn/article/newsrelease/significantnews/201303/20130300070292.shtml
94
Promotion and protection of investment Bill, 2013 Invitation for the public to comment is available at: http://www.tralac.org/files/2013/11/Promotion-and-protection-of- investment-bill-2013-Invitation-for-public-comment.pdf.
should be made. The picture on BRICS and BITs shows distinct approaches on content and substance of treaties that serves as a result of different economical, social and historical perspectives of the members. Model bilateral treaties should not be formatted in the same way for all the emerging economies.
Brazil receives substantial amounts of foreign investment even though it does it have any BIT in force.95 New bilateral investment negotiating policy in Brazil is strategically delineated for non–developed countries, with weaker economies, which are unlikely to adversely or negatively affect the Latin American state. South Africa has terminated its treaties with EU countries and reviews its bilateral investment regime promoting domestic legislation that aims to protect investor rights while safeguarding domestic policy space. On the same line, India tends to preserve its national interests in certain spheres of economy and reviews BITs protective provisions that were challenged in investment tribunals. China holds a reluctant policy towards the inclusion of MFN treatment through its three model variations of investment agreements. Russia could be considered as one of the BRICS members that keeps its flexible pro-investment position through all the history of investment negotiations, broadening the scope of protection provisions whilst tempting to be more attractive for foreign capitalists.
2.2.INVESTMENT GUARANTEES IN PREFERENTIAL TRADE AND INVESTMENT AGREEMENTS OF
BRAZIL,RUSSIA,INDIA,CHINA AND SOUTH AFRICA.
Do BRICS members join the approach towards PTIAs that go beyond the investment rules found in model BITs? Some scholars argue that PTIAs provide a distinct framework for negotiating investment rules that result in the inclusion of provisions that go beyond the set of rules usually found in BITs.96 The others come to the conclusion that generally PTIAs do not improve on existing BITs with respect to protection of investment, but by adding the market access dimension and by regrouping trade and investment provisions under the same agreement signed for an indeterminate period, they offer a better package of disciplines for investors.97 According to the UNCTAD report, investment protection arrangements included in PTIAs can better respond to the needs of today’s economic realities, where international trade and investment are increasingly interconnected.98 The argument was supported by the conclusive
95
BITs with Angola, Mozambique, Mexico and Malawi have not yet been ratified.
96 Baetens, F, Preferential trade and investment agreements and the trade/investment divide : is the
whole more than the sum of its parts?, in: R. Hofmann / S. Schill / C. Tams (eds.).
97
Miroudot, S., Investment, in: J.-P. Chauffour / J.-C. Maur (eds.), Preferential trade agreement policies for development : a handbook, Washington, DC: World Bank. P. 320.
empirical study that compares BITs and PTIAs and finds more positive impact of market-access provisions in PTIAs.99
This interesting observation derives from the negotiating aspect of these two types of arrangements. BITs are usually negotiated without being subject to a larger public debate, whereas the negotiation and ratification of PTIAs tend to be highly flexible and include preferential conditions concerning the historical and economic developments of certain contracting party that go beyond model investment protection provisions. Developing countries have been actively engaged in negotiating and concluding preferential trade arrangements that has an increasing consideration to services and investment aspects.
Among BRICS countries, Brazil has been the least engaged in PTIAs, with only four agreements that contain investment provisions.100 This fact is mainly flow out from the national policy that aims to preserve Brazil’s domination on local and regional markets. Brazil is a founding member of the Southern Common Market (MERCOSUR), which is a free trade zone whose full members include Argentina, Paraguay, Uruguay, Venezuela and Brazil.
In addition, through its participation in MERCOSUR, Brazil has preferential trade agreements in force with: Bolivia, Chile, Colombia, Ecuador and Venezuela, Cuba, Egypt, India, Mexico and Peru. (Pic. 7)
The substantive provisions on investments included in PTIA are broadly specified in MERCOSUR Protocols for the Promotion and Reciprocal Protection of Investments within members and with third countries.101
For the purposes of economic integration, promotion and protection of investments, the treaties provide for fair and equitable treatment, MFN and national treatment, free transfer of funds, prohibition of unlawful direct and indirect expropriation.102 The MFN treatment extends to all future investment agreements with investors from the contracting parties.103 In addition to the above-mentioned guarantees, Buenos Aires investment protocol provides for the
towards a new generation of investment policies : annex, Geneva: United Nations. P.86.
99 Berger, A, Do trade and investment agreements lead to more FDI? : accounting for key
provisions inside the black box, in: International Economics and Economic Policy (April 2012 ).
100 Brazil- US Agreement on trade and economic cooperation (2011); MERCOSUR Colombia-Ecuador-Venezuela
complementation agreement (2004/2005); Brazil- EC Cooperation Agreement (1992/1995); Latin America integration association treaty ( 1980/1981).
101
Protocol of Colonia for the Promotion and Reciprocal Protection of Investments in the Mercosur (Colonial Protocol), 17 January 1994. Intrazone; Protocol of Buenos Aires for the Promotion and Protection of Investments Coming from Non-MERCOSUR State Parties (Buenos Aires protocol), 5 august 1994. Extrazone.
102 Art. 3(1), 3(2), 4(1), 5 Colonia Protocol and Art. 2(B),(C),(D),(E) of Buenos Aires Protocol. 103 Art. 7 of Colonia Protocol.
recognition of the investment substitution in a host state.104 In the Annex to Colonia Protocol, MERCOSUR members made some reservations to the national treatment obligation. Brazil has made exceptions to the following areas: exploration and mining of minerals; development of hydraulic energy; health care; radio and television broadcasting and other telecommunication services; leasing of rural property; participation in the system of financial, insurance, social security and capitalization intermediation; construction, ownership and coastal and interior shipping and government procurement.
In the event a dispute arises between an investor from a third state and a MERCOSUR member state, friendly consultations are required at the outset of any dispute. If the dispute would not be settled within a reasonable time, at the request of investor the dispute may be submitted to one of the two alternatives: to competent courts of the member state in whose territory the investment was made or to international ad hoc arbitration.105 Noteworthy, the two Protocols for the Promotion and Reciprocal Protection of Investments that have been negotiated and signed by MECOSUR members, have not been ratified by Brazil. One of the main objections to ratification was the investor-state arbitration mechanism provided in these two protocols.106
Brazil, as a global but relatively small member of international inward investments, has opted for giving priority to the multilateral track through its membership in MERCOSUR, rather then preferential trade and investment agreements with separate partners. Latest preferential agreement has been signed with Egypt in 2010 after three rounds of negotiations,107 whereas the negotiations about PTIA with EU are still pending.108
104 Art. 2( F) of Buenos Aires Protocol. 105
Art. 2 G(1) of the Buenos Aires Protocol.
106 Jean Kalicki, Suzana Medeiros Investment Arbitration in Brazil Revisiting Brazil’s Traditional Reluctance
Towards ICSID, BITs and Investor-State Arbitration, Volume 24, Issue 3.
107
The Free Trade Agreement between MERCOSUR and the Arab Republic of Egypt is available at: http://en.reingex.com/MERCOSUR-Egypt-FTA.shtml
Russia is a party to several regional and multilateral instruments relating to the regulation of investment mostly with strategically important partners.109(Pic. 8) In 1994, Russia has signed, but never formally ratified the ECT, a multilateral agreement covering energy-related trade and investment.110 According to the preamble of the
treaty, it ensures the protection of foreign energy investments based on the principle of non-discrimination. By accepting the Treaty, a state takes on the obligation to extend national treatment, MFN treatment to nationals and legal
entities of other signatory states that have invested in its energy sector. The ECT promotes FDI in the energy sector by protecting foreign investors against discrimination, expropriation, losses resulting from strife, transfer restrictions, and the breach of individual investment contracts. It also contains an efficient mechanism for dispute resolution that includes investor-state arbitration and state-state arbitration.111
On 20 August 2009, Russia officially notified the ECT Depositary that it did not intend to become a Contracting Party and cancelled its observer status.112 In accordance with Article 45(3)(b) of the ECT charter, such notification results in Russia’s termination of its provisional application of the ECT, however investments, which have been made in the period of provisional application (1994-2009), continue to be protected under the ECT until October 18, 2029.113
Except for being the signatory of the ECT charter, Russia is a member of newly formed Eurasian Economic Union (EEU), which provides the freedom of goods, freedom of services, capital and labor force, establishment and implementation of investment activities and coherent currency market.114 The EEU Treaty is the result of a codification of the existing regulatory-legal framework Eurasian integration consisting of over a hundred international treaties signed between 1995 and 2012.115
From the investor protection perspective, Protocol 16 of the EEU Agreement includes
109 Treaty on Eurasian Economic Union (2014); Belarus-Kazahstan0Russia Agreement on Services and Investment
(2012); Eurasian Investment Agreement (2008); EC-Russia PCA (1997).
110 The Energy Charter Treaty (ECT) and the Protocol on Energy Efficiency and Related Environmental Aspects
(PEEREA) were both signed on 17 December 1994.
111 Art. 10(1); 12; 13(1);16 of ECT.
112 The information is available at: http://www.encharter.org/index.php?id=414
113 Yukos Universal Ltd. v. Russian Federation, Interim Award on Jurisdiction and Admissibility, PCA Case No.
AA 227, 30 November 2009.
114 Treaty on the Eurasian Economic Union (2014) is available at:
https://docs.eaeunion.org/ru- ru/Pages/DisplayDocument.aspx?s=bef9c798-3978-42f3-9ef2-d0fb3d53b75f&w=632c7868-4ee2-4b21-bc64-1995328e6ef3&l=540294ae-c3c9-4511-9bf8-aaf5d6e0d169&EntityID=3610
115 The first treaty that laid down the basis of economic integration between Commonwealth Independent Countries
was the Agreement on the Customs Union between Russia and Belarus. (January 6, 1995). Pic. 8 Russia PTIA
certain investor protection provisions, as well as provisions governing the settlement of any investment disputes that may arise in the EEU. These provisions are broadly similar to the provisions found in Russian model BIT.116 The EEU Agreement stipulates that its provisions apply to all investments made by the investors of the member states on or after 16 December 1991.117 The EEU Agreement generally provides that investors from the Contracting states and their investments should receive fair and equitable treatment, MFN and national treatment while operating in another EEU member state.118 However, the EEU Agreement reserves a right of the host state to limit the investment activity of investors on its territory in accordance with its national legislation.119 Under the EEU Agreement, investors should be compensated for losses caused by civil disturbance, national emergence situation or any other similar circumstances occurring in the territory of the host member state.120 The agreement prohibits unlawful direct or indirect expropriation, nationalization or any other measure having a similar effect.121
It is noteworthy that, unlike the Russian model BIT,122 the expropriation clause of the EEU Agreement explicitly prohibits both direct and indirect expropriation, which means that investors should also be protected against measures taken by member states that, while not expressly expropriatory in nature, have an equivalent impact on investors and their investments. Where an expropriation (direct or indirect) does occur, the EEU Agreement details how compensation should be made to the affected investor. In addition to the economic integration between the signatory parties of EEU, it aims to increase the investment policy cooperation with non-members. In the joint statement of MERCOSUR summit held in Argentine in 2014, the members declared that they intent to develop cooperation with the EEU and perceive the EEU as an important partner.123 This intention may lead to further integration, particularly in the investment protection policy.
EEU agreement also includes provisions governing investor-state dispute settlement. According to the Additional investment protocol to the EEU Treaty, all disputes arising from investments need to be solved by means of negotiation within six month.124 If the dispute could not be solved within this period, an investor may choose to submit a claim to competent
116 Investor’s protection provisions of Russian Model BIT 2001 were analyzed at pp.9-10. 117 Par. 65 of the Annex №16 to the Agreement of EEU.
118 Par.. 68-70 of the Annex №16 to the Agreement of EEU. 119
Par. 73 of the Annex №16 to the Agreement of EEU.
In the fair and equitable treatment provision is more limited that the one in the Russian model BIT, which provides for a “full protection and security” standard.
120 Par. 77-78 of the Annex №16 to the Agreement of EEU. 121
Par. 79 of the Annex №16 to the Agreement of EEU.
122 See art. 4 of Russia- China BIT (2006).
123 Interview of Argentine Ambassador to Russia Pablo Anselmo Tettamanti is available at:
http://asbarez.com/131589/iran-seeks-trade-agreement-with-eurasian-union/
124
courts of a host state, to the International Court under the Chamber of Commerce of agreed State, to the international ad hoc tribunal established under UNCITRAL rules or to the ICSID tribunal under the Additional Facility rules. On May 29, 2015 EEU has signed its first Free Trade Agreement (FTA) with Vietnam that covers most fields of commerce and investment, including e-commerce, environmental protection, finance and banking.125
India has signed 13 PTIAs with Malaysia (2013); Chili (2005), Thailand (2003); framework agreements with: Gulf Cooperation Council, 126 ASEAN, 127 BIMSTEC, 128 MERCOSUR,; comprehensive Economic Partnership agreements with Korea (2010), Japan (2011), Singapore (2005). Also, India, along
with Sri Lanka, Bangladesh, Bhutan, Maldives, Nepal and Pakistan are the initial members of SAARC grouping that aims to economic, social and technical cooperation among the members.129(Pic. 9)
Investment protection provisions are explicitly specified in recently signed Agreement on Investment under the FTA between ASEAN and India.130The ASEAN Investment Agreement provides that investors from the Contracting states and their investments should receive a national treatment from the national regional and local governments only if they are in a ‘like circumstances’.131 Moreover, Article 3 of the Agreement includes a list of reservations to national treatment with a provisional right to make further restrictions.132 The Agreement also establishes that the concepts of fair and equitable treatment and full protection and security have to be in accordance with the minimum standards of customary international law.133 Noteworthy, the model Indian BIT does not refer to any standards of equitable treatment.134
The ASEAN investment Agreement serves to strengthen cooperation in investment, improve
125 Free Trade Agreement Between the Eurasian Economic Union and Its Member States of the One Part and the
Socialist Republic of Viet Nam of the Other Part. May 29, 2015.
126 The Cooperation Council for the Arab States (1981): United Arab Emirates, Bahrain, Saudi Arabia, Kuwait,
Qatar, and Oman.
127 Association of Southeast Asian Nations is an major Asian alliance (1967) comprising of Brunei, Cambodia,
Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.
128 Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (1997) comprising of
Bangladesh, Bhutan, India, Myanmar, Nepal, Sri Lanka, Thailand.
129 Recitals of the SAARC charter (1985).
130 Agreement on Investment under the Framework Agreement on Comprehensive Economic Cooperation between
the Association of Southeast Asian Nations and the Republic of India (2014).
131 Art. 3(4) of the Agreement on Investment under the Framework Agreement on Comprehensive Economic
Cooperation between the Association of Southeast Asian Nations and the Republic of India (2014).
132
Art. 4 of the Agreement on Investment under the Framework Agreement on Comprehensive Economic Cooperation between the Association of Southeast Asian Nations and the Republic of India (2014).
133 Art. 7 of the Agreement on Investment under the Framework Agreement on Comprehensive Economic
Cooperation between the Association of Southeast Asian Nations and the Republic of India (2014).
134 Art. 3(2) of Model Indian BIT is available at:
http://finmin.nic.in/the_ministry/dept_eco_affairs/icsection/Indian%20Model%20Text%20BIPA.asp?pageid=2 Pic. 9 India PTIAs
transparency of investment rules and regulations, and provide for the protection of investments that are much broader and more specified than the guarantees included in the model Indian BIT. This conclusion flows from the provisions of the Agreement that regulates activities for promotion and facilitation of bilateral investments,135special and differential treatment to the
newer ASEAN Member States under this Agreement.136
ASEAN Agreement specifies that any dispute arising out of an alleged breach of any rights conferred by the Agreement with respect to investments shall, as far as possible, be settled by parties amicably. However, the Agreement does not cover disputes that have already been settled by judicial or administrative institutions or where the investor holds the same as disputing party nationality.137 If an investment dispute has not been resolved within 180 days of the request for consultations and negotiations, the disputing investor may submit a claim to alternative forums. The investor may choose between arbitration in accordance with ICSID Additional Facility rules, international ad hoc arbitral tribunal established under UNCITRAL rules, proceedings in the courts or administrative tribunals of the disputing party or another arbitral institutions agreed between parties. The European Union and India has launched negotiations PTIA in June 2007. However, no further progress regarding the Treaty has been achieved since then.138
China, has started quite actively negotiated PTAs after its accession to the WTO.139 To this day, China has signed PTA with Australia (2015), Switzerland (2014), Iceland (2014), Peru (2010), New Zealand (2008), Singapore (2009), Pakistan (2007), Chili (2006); framework agreements with Taiwan (2010), Australia (2003) and ASEAN (2003); Partnership Agreements with Macao (2004) and Hong Kong (2003); Trade and Cooperation Agreement with EU (1985) and Investment Agreements with Japan and Korea (2014) and ASEAN (2010). With respect to investment rules, China has been flexible and responsive to the model texts proposed by the respective partner countries, with the only restriction to foreign investment admission areas. Only 7 out of 17 PTAs include comprehensive and genuine investment rules.140 (Pic.10)
135 Art. 17-18 of the Agreement on Investment under the Framework Agreement on Comprehensive Economic
Cooperation between the Association of Southeast Asian Nations and the Republic of India (2014).
136
Art. 16 of the Agreement on Investment under the Framework Agreement on Comprehensive Economic Cooperation between the Association of Southeast Asian Nations and the Republic of India (2014).
137 Art. 20 of the Agreement on Investment under the Framework Agreement on Comprehensive Economic
Cooperation between the Association of Southeast Asian Nations and the Republic of India (2014).
138 Official information form Indian Ministry of Commerce and Industry website is available at:
http://commerce.nic.in/trade/international_ta_current_details.asp
139
China acceded WTO 11 December 2001.
140 PTIAs with Pakistan (2006), New Zealand (2008), Peru (2009),ASEAN (2009),APTA (2009) and Trilateral
PTIA with Pakistan provides higher level of legal protection than China-Pakistan BIT.141 However, compared to present China’s model BIT, the Pakistan PTIA offered nothing that go beyond its guarantees, therefore this PTA could not be considered as a BIT plus agreement, but more as a politicized arrangement of economic cooperation enhancement.
The investment provisions of China-New Zealand PTIA includes a number of innovations in terms of legal language, which was absent from most of China’s second generation BITs. China-New Zealand PTA was a starting point of China’s new international investment policy-making. In terms of investment liberalization, the New Zealand PTIA includes one innovative feature that has not been included in any BIT as of yet, namely the freedom of transfers relating to the pre-establishment phase of an investment BIT. Also, it specifies a qualified fair and equitable treatment clause with a reference to commonly accepted rules of international law,142 procedure-limited MFN clause143 and special exceptions for preservation security and public interests of the contracting parties.144 In case a dispute arises, investor may fill a request for consultations
and negotiations in order to settle the dispute amicably. If the dispute cannot be settled within 6 months, it may be submitted by the choice of investor to arbitration or conciliation under ICSID or arbitration under UNCITRAL.145
Ratification of China-ASEAN investment agreement on 15 August 2009 was the last step in the process of constituting ASEAN- China Free Trade Area (ACFTA). The China-ASEAN investment agreement provides comprehensive rules for investment protection and facilitation, but add nothing to the existing third generation model BIT regime. For ASEAN countries, the main rationale of having a comprehensive investment agreement – in addition to the existing 10 BITs they had signed with China –is to open up the Chinese market for investments.146 Apart from the sensitive issue of market-access provisions, the text of the China-ASEAN PTA is a proof of China’s flexible approach to PTIA negotiations.
Disputes between an investor and the Contracting State are limited to State’s breach of national treatment, MFN treatment, expropriation, compensation and repatriation of profits that
141 China-Pakistan BIT (1989) . 142
Art. 143(1) of China- New Zealand PTA (2008).
143 Art. 139(2) of China-New Zealand PTA (2008). 144 Chapter 17 of China-New Zealand PTA (2008). 145
Art. 153 of China-New Zealand PTA (2008).
146 Brunei(2000 signed, not in force), Cambodia(2000), Viet Nam (1993), Lao (1993), Malaysia (1990), Indonesia
(1995), Myanmar (2002), Philippines (1995), Singapore (1986), Thailand( 1985).
