UNCTAD Virtual Institute

Document Sample
UNCTAD Virtual Institute Powered By Docstoc
					      Investment Protection
        Provisions & their
                    An Introduction

                               UNCTAD Workshop Natural Resources &
   Fui S. Tsikata              Economic Development
Reindorf Chambers              Dar Es Salaam
       Accra                   12-16 July 2010
        Legal Instruments for
       Investment Protection
 Host State Laws
   Company/Government Agreements
       Mining lease
       Investment/development agreement
 Government assurances in Project loan
 Treaties
       Bilateral
       Multilateral
    Institutional responsibilities
  For different instruments
 Or different parts of instruments
 Investment Promotion Agency
 Ministry of Mines
 Ministry of Finance/Central Bank
 Ministry of Foreign Affairs
 Ministry of Justice
          Host State Laws
 Constitutionalprovisions and expressions
 Regulation of discretionary power
 Mining and environmental laws on
  duration suspension and termination of
  rights and operations
Key Provisions in Company/State

 No  expropriation or nationalization
 Stability of fiscal regime
 Undertakings regarding exercise of
  Governmental powers (also in project loan
 International arbitration
 Waiver of sovereign immunities
    Key provisions in Treaties

 No   expropriation or nationalization

 National   treatment

 Most   favoured nation treatment

 Fair   and equitable treatment

 Indirect   expropriation/ regulatory takings

 Compensation      measure
                Fiscal stability

 How  does it work when there are higher
  than expected returns

 Stabilizing   for how long
Undertakings regarding exercise
   of Governmental Power
 WhichGovernment institutions are
 bound by them?

 When do they constrain conscientious
 exercise of discretion at time all facts
 are known?
          International Arbitration
   Institutions/Rules
       Ad hoc vs. institutional
       Institutions
        • ICSID
        • PCA
        • UNCITRAL Rules
   On what matters?
   Expense
   Who is familiar with its procedures and
   Confidentiality/non-transparency criticism
   Significance of place of arbitration
   Potential for clashes with national courts
 Waiver of sovereign immunity

 Diplomatic   premises & funds

 Other   state funds
     Treaty Provisions & National
      Development Programmes

 Measures     to redress historic inequalities
 Preferential   treatment to encourage
 Imposing   local content obligations
 Improving    environmental standards
 Additional   non-discriminatory tax measures
        Who Is Protected?
 Incorporation   to expand investment

 Compare   Incorporating to limit risk and
Examples: (I) Waiver of Immunity
   To the extent that the government may in any
    jurisdiction claim for itself for its assets or
    revenues immunity from suit execution,
    attachment (whether in aid of execution, before
    judgment or otherwise) or other legal process
    and to the extent that in any such jurisdiction
    there may be attributed to government or its
    assets or revenues such immunity (whether or
    not claimed) government agrees not to claim
    and irrevocably waives such immunity to the full
    extent permitted by the laws of such jurisdiction
Examples: (II) Governing Law
   This Agreement and the rights, obligations and duties of
    the Parties hereunder shall be construed and interpreted
    in accordance with Law (i.e. the laws of the country) and
    by such rules and principles of generally accepted
    international law as may be applicable, particularly with
    regard to an investment by nationals of one country in
    another country. Notwithstanding the foregoing, in the
    event of a conflict between this Agreement or the rights,
    obligations and duties of a Party under this Agreement,
    and any other Law, including administrative rules and
    procedures and matters relating to procedure, and
    applicable international law, then this Agreement shall
    govern the rights, obligations and duties of the Parties.
    Examples: (III) Stabilisation of
        Fiscal & other terms
   The State, its departments and agencies shall support this
    Agreement and shall take no action which prevents or
    impedes the due exercise and performance of rights and
    obligations of the Parties hereunder. As of the Effective Date
    of this Agreement and throughout its Term, the State
    guarantees Contractor the stability of the terms and conditions
    of this Agreement as well as the fiscal and contractual
    framework hereof. This Agreement and the rights and
    obligations specified herein may not be modified, amended,
    altered or supplemented except upon the execution and
    delivery of a written agreement executed by the Parties. Any
    legislative or administrative act of the State of any of its
    agencies or subdivisions which purports to vary any such right
    or obligation shall, to the extent sought to be applied to this
    Agreement, constitute a breach of the Agreement by the
    Examples: (IV) Most Favorable
   In the event that Government enacts any Law or
    adopts any practice or policy that permits more
    favorable treatment of any other person
    engaged in exploration for or mining of [specify
    mineral] than that accorded to X by this
    Agreement, then Government shall grant the
    same more favorable treatment to X with effect
    from the date of its application to such other
    person or of its entry into force, as the case may
            Examples: (V) Indirect
   (a) The determination of whether an action or series of actions
    by a Party, in a specific fact situation, constitutes and indirect
    expropriation, requires a case-by-case, fact-based inquiry that
    considers, among other factors: (i) the economic impact of the
    government action, although the fact of an action or series of
    actions by a Party has an adverse effect on the economic
    value of an investment, standing alone, does not establish
    that an indirect expropriation has occurred; (ii) the extent to
    which the government action interferes with distinct,
    reasonable investment-backed expectations; and (iii) the
    character of the government action.
   (b) Except in rare circumstances, non-discriminatory
    regulatory actions by a Party that are designed and applied to
    protect legitimate public welfare objectives, such as public
    health, safety, and the environment, do not constitute indirect
                         (Annex B, Article 4, 2004 US Model Treaty)
        Examples: (VI) Renegotiation
   Where a Party considers that a significant change in the
    circumstances prevailing at the time the Agreement was
    entered into, has occurred affecting the economic balance
    of the Agreement, the Party affected hereby shall notify the
    other Parties in writing of the claimed change with a
    statement of how the claimed change has affected the
    relations between the Parties. The other Parties shall
    indicate in writing their reaction to such representation
    within a period of … Months of receipt of such notification
    and if such significant changes are established by the
    Parties to have occurred, the Parties shall meet to engage
    in negotiations and shall effect such changes in, or
    rectification of, these provisions as they may agree are
    necessary to restore the relative economic position of the
    Parties at the date of this Agreement.
         Suggested Readings (I)
   Howard Mann, International Investment Agreements, Business &
    Human Rights: Key Issues & Opportunities (2008) (43 Pages)

   Luke Petersen & Ross Garland, Bilateral Investment Treaties & Land
    Reform in Southern Africa (June 2010)
    (17 Pages)

   Luke Petersen, Bilateral Investment Treaties - Implications for
    Sustainable Development & Options for Regulation (2007) (8

   Luke Petersen, South Africa's Bilateral Investment Treaties:
    Implications for Development & Human Rights (2006) (44 Pages)
        Suggested Readings (II)
   Republic of South Africa, Bilateral Investment Treaty Policy Framework
    Review (June 2009) ( 59 Pages)

   UNCTAD, International Investment Rule-Making: Stocktaking
    Challenges & The Way Forward (2008) (125 Pages)

   UNCTAD, Key Terms & Concepts in IIAs: A Glossary (2004) (231 pages)

   UNCTAD, International Investment Agreements: Key Issues, Vol. 1
    (2004) (415 Pages)

   UNCTAD, Taking of Property (2000) (78 pages)

Watch Those Words !

Shared By: