Hostname: page-component-7bb8b95d7b-qxsvm Total loading time: 0 Render date: 2024-09-07T01:36:21.171Z Has data issue: false hasContentIssue false
  • English
  • Français

The Limitation on Sovereign Regulatory Autonomy and Internationalization of Investment Protection by Treaty: An African Perspective

Published online by Cambridge University Press:  29 October 2015

Dominic N Dagbanja
Get access Rights & Permissions [Opens in a new window]

Abstract

This article contextualizes the debate about the implications of the investment treaty regime for regulatory autonomy. It points out that, to understand why the investment treaty regime limits sovereign powers and to be able to reconstruct a regime to make it responsive to the needs of both foreign investors and host countries, it is necessary to revisit the history of investment protection by treaty and assess the terms of investment treaties in relation to that history. The article argues that investment protection by treaty was primarily aimed at protecting the private business interests of investors from the developed world who invested abroad. This overarching historical objective influenced the terms of investment treaties. This is manifested in the terms of classical investment treaties which provide for absolute rights for foreign investors. The article calls for the reconstruction of investment treaties to make room for public interest regulation.

Type
Research Article
Information
Journal of African Law , Volume 60 , Issue 1 , February 2016 , pp. 56 - 82
Check for updates
Copyright
Copyright © SOAS, University of London 2015 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

1 S Montt State Liability in Investment Treaty Arbitration: Global Constitutional and Administrative Law in the BIT Generation (2009, Hart Publishing) at 31. “BIT” refers to bilateral investment treaty.

2 Mueller, GOW “The public law of wrongs: Its concepts in the world of reality” (1961) 10 Journal of Public Law 203 at 203–04Google Scholar.

3 Examples include: GV Harten Investment Treaty Arbitration and Public Law (2007, Oxford University Press); CA Rogers and RP Alford (eds) The Future of Investment Arbitration (2009, Oxford University Press); C Brown and K Miles Evolution in Investment Treaty Law and Arbitration (2011, Cambridge University Press); JE Alvarez et al (eds) The Evolving International Investment Regime: Expectations, Realities, Options (2011, Oxford University Press).

4 The concepts of “policy space” and “regulatory autonomy” are used here to refer to the freedom of action and administrative, policy or regulatory flexibility and discretion that states need to be able to initiate and make policies and laws, and to implement them and regulate the way individuals and businesses should conduct themselves in society.

5 Montt State Liability, above at note 1 at 31.

6 In 1938, Mexico nationalized its petroleum industry that was then dominated by UK and US companies: CF Dugan et al Investor-State Arbitration (2008, Oxford University Press) at 11.

7 Vandevelde, KJ “A brief history of international investment agreements” (2005–06) 12 University of California Davis Journal of International Law and Policy 157Google Scholar; and Sutherland, PF “The World Bank Convention on the Settlement of Investment Disputes” (1979) 28 International and Comparative Law Quarterly 367CrossRefGoogle Scholar.

8 Mueller “The public law of wrongs”, above at note 2 at 204.

9 Yelpaala, K “Fundamentalism in public health and safety in bilateral investment treaties [Part I]” (2008) 3/1Asian Journal of WTO and International Health Law and Policy 242 at 242Google Scholar; the author rightly states (at 242) that: “The apparent imbalance that exists in many BITs between their restraints on the policy choices of sovereign states in the areas of health and safety and the protection of foreign profiteers has historical roots in the political economy of colonialism and the geopolitical conditions surrounding BITs.”

10 Ibid.

11 Harten Investment Treaty Arbitration, above at note 3.

12 Ibid.

13 Kaushal, A “Revisiting history: How the past matters for the present backlash against the foreign investment regime” (2009) 50 Harvard International Law Journal 491 at 492Google Scholar. See also Miles, K “International investment law: Origins, imperialism and conceptualizing the environment” (2010) 21 Colorado Journal of International Environmental Law and Policy 1Google Scholar.

14 UN Conference of Trade and Development (UNCTAD) International Investment Rule-Making: Stocktaking, Challenges and the Way Forward (UN, 2008) at 9.

15 Cass, DZ “The constitutionalization of international trade law: Judicial norm-generation as the engine of constitutional development in international trade” (2001) 12(1) European Journal of International Law 39 at 74CrossRefGoogle Scholar.

16 D Schneiderman Constitutionalizing Economic Globalization: Investment Rules and Democracy's Promise (2008, Cambridge University Press) at 114.

17 Cass “The constitutionalization of international trade law”, above at note 15 at 74.

18 Id at 73 (emphasis added).

19 Afilalo, A “Constitutionalization through the back door: A European perspective on NAFTA's investment chapter” (2001) 34 New York University Journal of International Law and Policy 1Google Scholar.

20 GV Harten “Investment treaty arbitration and its policy implications for capital-importing states” in D Sánchez-Ancochea and KC Shadlen (eds) The Political Economy of Hemispheric Integration: Responding to Globalization in the Americas (2008, Palgrave Macmillan) 83 at 102.

21 Ibid.

22 Behrens, P “Towards constitutionalization of international investment protection” (2007) 45 Archiv des Völkerrechts 154CrossRefGoogle Scholar.

23 See for example Barr, MS and Miller, GP “Global administrative law: The view from Basel” (2006) 17 European Journal of International Law 15CrossRefGoogle Scholar; Harlow, C “Global administrative law: The quest for principles and values” (2006) 17 European Journal of International Law 187CrossRefGoogle Scholar; and Krisch, N and Kingsbury, B “Introduction: Global governance and global administrative law in the international legal order” (2006) 17 European Journal of International Law 1CrossRefGoogle Scholar.

24 Harten Investment Treaty Arbitration, above at note 3 at 10.

25 Ibid.

26 Kelsey, J “Global economic policy-making: A new constitutionalism?” (1999–2000) 9 Otago Law Review 535 at 537Google Scholar.

27 Id at 545.

28 Schneiderman Constitutionalizing Economic Globalization, above at note 16 at 72.

29 Spears, SA “The quest for policy space in a new generation of international investment agreements” (2010) 13/4Journal of International Economic Law 1037 at 1043–44CrossRefGoogle Scholar.

30 Entered into force on 14 October 1966.

31 Spears “The quest for policy space”, above at note 29 at 1043–44.

32 Treatment of Polish Nationals and Other Persons of Polish Origin or Speech in the Danzig Territory: Advisory Opinion PCIJ Ser AB No 44 (1932) at 28.

33 Nicholson, FJ “The protection of foreign property under customary international law” (1965) 6/3Boston College Law Review 399Google Scholar.

34 PCIJ Ser A No 17 (1926).

35 Id at 22.

36 Nicholson “The protection of foreign property”, above at note 33 at 400.

37 JW Salacuse The Law of Investment Treaties (2010, Oxford University Press) at 76. See also Sutherland “The World Bank Convention”, above at note 7 at 367–73.

38 Salacuse, ibid.

39 Ibid.

40 Ibid.

41 Id at 78.

42 Id at 78–79 (emphasis added).

43 Id at 81–83 (emphasis added).

44 Dugan et al Investor-State Arbitration, above at note 6 at 13.

45 Ibid.

46 Id at 14.

47 Id at 15.

48 Ibid.

49 Id at 16.

50 Id at 19–23.

51 Id at 26–34.

52 Id at 45.

53 See the background to the Declaration on the Establishment of a New Economic Order, GA res 3201 (S-VI) UN doc A/Res/3201 (S-VI) (1 May 1974), which was intended to retain regulatory autonomy within states and create binding obligations on investors; also UNCTAD International Investment Rule-Making, above at note 14 at 9–10 showing that, while developed countries “contended that customary international law established an international minimum standard of treatment to which foreign investors were entitled in the territory of the host country”, developing and socialist countries denied that claim and argued instead that foreign investment was entitled to, at most, only the treatment afforded by a host-country government to investments made by its own nationals.

54 Kaushal “Revisiting history”, above at note 13 at 499; A Anghie Imperialism, Sovereignty and the Making of International Law (2005, Cambridge University Press) at 224; and Salacuse The Law of Investment Treaties, above at note 37 at 78–108.

55 Salacuse, id at 84 and Vandevelde “A brief history”, above at note 7 at 158.

56 Salacuse, id at 84–85.

57 JE Alvarez “The once and future foreign investment regime” in M Arsanjani et al (eds) Looking to the Future: Essays on International Law in Honor of W Michael Reisman (2010, Martinus Nijhoff) 607 at 615 onwards.

58 Salacuse The Law of Investment Treaties, above at note 37 at 87–88.

59 M Sornarajah The International Law on Foreign Investment (3rd ed, 2010, Cambridge University Press) at 19–20. See also Salacuse, id at 83.

60 Anghie Imperialism, Sovereignty, above at note 54 at 224.

61 Salacuse The Law of Investment Treaties, above at note 37 at 94.

62 K Nkrumah Neo-Colonialism: The Last Stage of Imperialism (1970, Panaf Books) at x.

63 Ibid. Vandevelde “A brief history”, above at note 7 at 166.

64 Kaushal “Revisiting history”, above at note 13 at 499.

65 Sornarajah The International Law, above at note 59 at 21.

66 Salacuse The Law of Investment Treaties, above at note 37 at 91–92.

67 Anghie Imperialism, Sovereignty, above at note 54 at 225.

68 Kaushal “Revisiting history”, above at note 13 at 500.

69 Anghie Imperialism, Sovereignty, above at note 54 at 225. Also see Kaushal, id at 501–07, discussing why bilateral investment treaties began to be concluded around the same time that developing countries asserted their refusal to comply with the terms of foreign investment protection proposed by developed countries; and Guzman, AT “Why LDCs sign treaties that hurt them: Explaining the popularity of bilateral investment treaties” (1998) 38 Virginia Journal of International Law 639Google Scholar. Particularly because funding from international financing institutions and official sources declined in the 1980s, foreign investment became the only readily available source of capital for developing countries. See UNCTAD International Investment Rule-Making, above at note 14 at 14–15.

70 Harten Investment Treaty Arbitration, above at note 3 at 15–16.

71 This is also evidenced by the fact that the UN Draft Code of Conduct on Transnational Corporations, which was intended to provide guidelines for transnational corporations “in order to contribute to the development goals and objectives of the countries in which they operated”, failed. It failed because development was not a priority of the investment system, which meant that countries “could not agree as to whether, and to what extent, foreign investors should be subject to multilateral obligations, and what should be their nature”: UNCTAD International Investment Rule-Making, above at note 14 at 14.

72 WS Dodge “Investment treaties between developed states: The dilemma of dispute resolution” in Rogers and Alford (eds) The Future of Investment Arbitration, above at note 3, 165 at 167.

73 Anghie Imperialism, Sovereignty, above at note 54 at 223–45.

74 GA res 824 UN GAOR, 9th sess (1954).

75 Dugan et al Investor-State Arbitration, above at note 6 at 45.

76 Ibid.

77 Progress report by the Secretary-General, ESC, 29th sess UN doc E /3325 (1960) at 170–73.

78 Report by the Secretary-General, ESC 32nd sess, UN doc E/3492 (1961).

79 Id, para 278.

80 Id, para 281.

81 Ibid.

82 Ibid.

83 Mattoo, A and Subramanian, A “Regulatory autonomy and the multilateral disciplines: The dilemma and a possible solution” (1998) 1 Journal of International Economic Law 303CrossRefGoogle Scholar.

84 Case no ARB (AF)/00/2, award of 29 May 2003.

85 Id, para 154.

86 UNCTAD “Bilateral investment treaties 1959–1999” (UN doc UNCTAD/ITE/IIA/2, 2000) at 1.

87 Ibid.

88 Id at 4 and 5.

89 Id at 1.

90 Ibid.

91 Agreement between the People's Republic of China and the Government of the Republic of Ghana Concerning the Encouragement and Reciprocal Protection of Investments, entered into force on 22 November 1991.

92 Agreement between the Government of the Republic of Ghana and the Government of Malaysia for the Promotion and Protection of Investments, entered into force 18 April 1997.

93 Agreement between the Kingdom of Denmark and the Government of the Republic of Ghana Concerning the Promotion and Protection of Investments, entered into force 6 January 95.

94 Agreement on Encouragement and Reciprocal Protection of Investments between the Kingdom of the Netherlands and the Republic of Ghana, entered into force 1 July 1991.

95 Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Ghana for the Promotion and Protection of Investments, entered into force 25 October 1991.

96 Yelpaala “Fundamentalism in public health”, above at note 9 stating (at 251) that “developing countries suffer from unequal bargaining power in their dealings with developed countries”.

97 Vienna Convention on the Law of Treaties, entered into force 27 January 1980, art 31(1).

98 Id, art 32.

99 For example, Vandevelde “A brief history”, above at note 7, stated (at 160): “As an alternative to diplomacy, nations sometimes utilized military force to protect foreign investments. The Roosevelt Corollary to the Monroe Doctrine, for example, explicitly authorized the use of force by American troops in the Western Hemisphere to collect debts owed to American citizens. And, in fact, the United States intervened in Latin America on repeated occasions during the first third of the Twentieth Century, until the Good Neighbor Policy of the Roosevelt Administration ended the practice.” In fact the United States “even threatened capital-importing states with withdrawal of aid unless certain requirements were admitted”: Sutherland “The World Bank Convention”, above at note 7 at 369. Vandevelde also notes that investment treaties of the post-colonial era were “drafted by the developed country and offered to the developing country for signature, with the final agreement reflecting only minor changes from the original draft”: id at 170. See also Borchard, EM “Limitations on coercive protection” (1927) 21 American Journal of International Law 303CrossRefGoogle Scholar.

100 A Mills “The public-private dualities of international investment law and arbitration” in Brown and Miles Evolution in Investment Treaty Law, above at note 3, 97 at 112.

101 Ibid.

102 Ibid.

103 Yelpaala “Fundamentalism in public health”, above at note 9 at 249.

104 Yelpaala, K “Fundamentalism in public health and safety in bilateral investment treaties [Part II]” (2008) 3/2Asian Journal of WTO & International Health Law and Policy 465 at 469–70Google Scholar.

105 See for example Tecnicas Medioambientales Tecmed, above at note 84, para 154.

106 UNCTD “World investment report 2012” at 108.