Reconciling International Investment Law of Foreign Investors’ Protection and

Public Policy:

Ethiopia’s Perspective in Focus

by: Chanie A. Yeshiwas

A Term Paper Submitted to Investment Dispute Resolution course for the

LLM in Investment Law and Governance

Debre Markos University

Debre Markos, Ethiopia, September, 2022

Abstract

Conclusively foreign investment is enormously advantageous in foreign capital inflows,

employment opportunities, and technology and managerial skill transfers, mainly to developing
countries, like Ethiopia. To this end, the international investment policy and/or law, commonly of
International Investment Agreements (IIAs), as well as countries’ national investment laws
usually favours protecting and promoting foreign investment, but provides less room for the
emerging concerns related to foreign investment. These emerging concerns, basically, are
corruption, human rights, labour and environment, and similar other social issues, which
simultaneously often times are labeld as “public policy” issues.

However, alongside with protecting and promoting foreign investment, this paper argues that
due consideration need to be given to such emerging concerns, through tangible and enforceable
reconciling methods. Hence, this paper proposes, among others, invoking the application of
customary international law principle i.e. the principle of Sovereignty of States in respect of
regulating internal affairs. It’s to allow Ethiopia to invoke and employ its sovereign power/right
over the regulation of the process and the manner of foreign investment within its territory so as
to protect and promote human rights, the environment, and other public issues, justifiably and
unequivocally. Such an invoking for sure serves as a counter-defence to a the potential claims
based on ‘deviation or violation of substantive treaty obligation', by foreign investors, which
themselves are obliged by international customary law to respect the sovereign power of
Ethiopia. Furthermore, as the emerging prolific features of new generations of IIAs, and hence,
are the developing trend, though few, in the treaty-practice of co-other countries, Ethiopia too
need to invoke and allow the inclusions of human rights, environmental and Sustainable
Development (SD) clauses in her, at least, future foreign investment treaties alongside with
dealing the to attract and protect foreign investment.

Keywords: Foreign investment, international investment law, foreign investor, public policy,
human rights, environment, international investment agreements, Ethiopia

I
Acronyms
BITs- Bilateral Treaties
EU- European Union
FDI- Foreign Direct Investment
FDRE- Federal Democratic Republic of Ethiopia
IIAs- International Investment Agreements
ISDS- Investor-State Dispute Settlement
MFN- Most-Favoured-Nations-Treatment
MITs- Multilateral Treaties
NT- National Treatment
SD- Sustainable Development
UN- United nations
UNCTAD- United Nations Conference on Trade and Development

II
Contents Page
Acronyms
Introduction ……………………………………………………………………..1
Part I
1. The International Investment Law on the Protection of Foreign Investment……3
1.1 Rationales …………………………………………………………………….3
1.2 Common Standards and Protections …………………………………………..4
1.3 New Concerns as Public Policy Issues ………………………………………...7
Part II
2. Reconciling Mechanisms ……………………………………………………….8
2.1 Applying the General Principle of Customary International Law …………….8
2.2 Allowing Human Rights and Environmental Clause in IIAs …………………9
2.3 Incorporating SD in IIAs …………………………………………………..12
Concluding Remarks …………………………………………………………….13

III
Introduction

Globalization, the ongoing process of integration and interconnection of states, markets,

technologies, and firms, is an economic reality of the 21st century.1 Therefore, it is difficult to
imagine economic, social and environmental development without investment. Foreign Direct
Investment (FDI) is a major source of international development capital, mainly, for both
developed and developing countries, providing for much-needed infrastructure development,
technology transfers, capacity building and more. Indeed, due to the benefits that can low from
foreign investment, all countries—developing and developed—wish to attract investment into
their countries.2

Hence, FDI flows to emerging market economies have increased dramatically over the past 15
years, despite the financial market setbacks in many countries.3 In fact, multinational firms
provide the largest proportion of worldwide FDI monies and are the single largest source of
emerging markets’ net capital inflows.4 FDI net inflows serve as a reflection of the confidence
that foreign investors have in the local economy and their expectations of growth, economic
success and company profits on an aggregate level.5

International investment agreements (IIAs)—treaties between countries on cross-border

investment—are one tool with which countries hope to attract investment from abroad. By
providing safeguards on the treatment given to investments, it is argued that IIAs encourage
foreign investors to venture abroad.6 Nevertheless, many countries have concluded IIAs in their
attempts to lure foreign capital. Since the first ILA signed between Germany and Pakistan in
1959,7 today, there are roughly 3,000 IIAs binding countries throughout the World.8 Yet there is

1
Candance A. M., Gayle A., “Foreign Direct Investment and Social Policy: The Link in Developing Countries”, (The journal of Business in
Developing Country, Vol. 11, 2008-09), p. 77.
2
International Institute for Sustainable Development, (Nathalie B., Lise J. (eds.)), International Investment Land Sustainable Development: Key
Cases From 2000-2010, p. 1.
3
Supra note. 1. P. 86.
4
International Monetary Fund, 2003.
5
Supra note 1.
6
Supra note 2.
7
Kenneth J. V., “A Brief History of International Investment Agreements”, (Davis Journal of International Law and Policy, University of California,
Vol. 12, No. 157, 2005), p. 169.
8
UNCTAD, International Investment Agreements Navigator, 2022. at; https://investmentpolicy.unctad.org/international-investment-
agreements>accessed September 11, 2022

1
no convincing evidence showing that these instruments lead to an increase in foreign investment,
much less investment that promotes sustainable development.9

Whatever the effect of these treaties on FDI, the uncontested fact is that many developing
countries signed them with developed as well as other developing countries. Ethiopia is no
exception. In an effort to attract foreign investment, the government of Ethiopia has signed BITs
with developed, as well as developing countries. By the end of 2012, the country had signed 29
BITs.10 Accordingly, Ethiopia has signed BITs with eight, namely Turkey, India, the Netherlands,
United Kingdom, Sudan, China, Germany and Italy. The remaining two countries, the United
States (US) and Qatar, are among the main sources of FDI even if they have not signed BITs
with Ethiopia.11

Being it is one of the most dynamic fields of international economic law, international
investment law, however, is subject to continuous policy debate from such important objectives
as social inclusion, environmental protection, human rights, and even corruption, which all are
labled as “public/social policy dimensions.”12 This comes as no surprise considering the growing
importance being given to protecting the flow of international investment and how deeply its
contents are inserted in domestic policy making processes. The system is also influenced by the
dynamics of globalization and global governance, and by various economic reforms resulting in
investment disputes. In effect, the rules and principles of the regime are a flux. Treaty practice
and jurisprudence in the area constantly develop and global standards are always in the making.

Therefore, this paper deals with reconciling mechanisms of the international investment policy
on the protection of foreign investment abroad vis-à-vis the public policy issues from the
Ethiopian perspective. Preceding by this introductory part, the paper is comprises two basic parts;
of which, part I discusses the policy rationales of the international investment law, common
standards and protections granted to foreign investment abroad, as well as emerging concerns—
which often times are labeled as “public polices”-- of foreign investment. While, part II focuses

9
Vandevelde K., The Economics of Bilateral investment Treaties, Harvard International Law Journal, Vol. 41, No. 2, Harvard, Chicago, 2000, pp.
473-476.
10
UNCTAD, 2013.
11
Id.
12
Supra note 1.

2
on ways to reconcile international investment law protection of foreign investment and public
policy from the Ethiopian aspect. The paper ends with concluding remarks on points needed to
be emphasized.

Part I

1. The International Investment Law on the Protection of Foreign Investment

1.1 Rationales/Justifications

Considering the crucial significances of foreign investment to the overall growth and
development of the global community, as a whole, the central aim of international investment
law is the creation of international standards for the treatment and protection of foreign
investments and investors, as well as the creation of effective remedies for their enforcement.13

Because, foreign investors are normally exposed to different and less known environment of the
host country with its different culture and traditions, ideology, bureaucracy, legal system and
political infrastructures, as well as a specific vulnerability to interference by the host state.14 In
order to mitigate the susceptibility of the foreign investor from the challenges that can be
encountered in an unknown and unfamiliar system, certain mechanisms have been introduced
through time. These mechanisms include diplomatic protection by the home state of the investor,
the obligation under customary international law of host states to respect foreign investment,
observation of the legal restrictions regarding procedures and compensation upon expropriation,
arbitration of investment disputes as provided in multilateral and bilateral investment treaties, in
national investment laws, and in the investment agreement of parties as well as enforcement
procedures before state courts.15 Investment contracts that are signed between the investor and an
entity of the host state also extend protection to the foreign investor.

Regarding the level of acceptability of some of these measures by the foreign investors, using
host states’ courts is not acceptable to many investors as relying on host country law alone will
13
Christoph S., Investment Protection: Original Purpose and Features, in THE FUTURE OF INVESTMENT TREATY ARBITRATION IN THE EU: INTRA-
EU BITS, THE ENERGY CHARTER TREATY, AND THE MULTILATERAL INVESTMENT 1, 5 (Crina Baltag & Ana Stanic eds., 2020), p. 5)
14
Norbert Horn (2004), Arbitration and the Protection of Foreign Investment: Concepts and Means, in Norbert Horn and Stefan Kroll, (eds),
Arbitrating Foreign Investment Disputes, (Kluwer Law International, The Netherlands), p 7.
15
Id.

3
subject foreign investment capital to various risks. One risk is the danger that Host countries may
easily change the law after an investment is made, and host government officials responsible for
applying the local law may not always act impartially toward foreign investors and their
enterprises.16 The protection given by customary international law is also seen as being not
sufficient by foreign investors. ‘Not only did customary international law contain no generally
accepted rules on the subject, it also lacked a binding mechanism to resolve investment
disputes.’17 Customary international law mainly dwells on the right of the host state to regulate
the investment in its territory. As far as the right of investors is concerned, what has gained wide
recognition as part of customary international law is the principle which requires host states to
respect the property of citizens of other states, at least to the extent that the expropriating state
has a duty to compensate the foreign owner.18

After witnessing various upheavals in the past fifty or so years, the law of foreign investment
appears to be going through an even more interesting phase in its development. Specifically
following the signing of the first modern BIT between West Germany and Pakistan in 1959, the
conclusion of IIAs has been one of the most active areas of public international law making in
the last decades.19 Thus, based on the justifications as discussed above, a host state is
internationally required to give a minimum standard of protections to a foreign investment,
particularly to the business and the body of the investor, as the details of which are to be
discussed hereunder.

1.2 Common Standards and Protections

Fair and Equitable Treatment

The concept of fair and equitable treatment is a major, if not the most important, principle of
foreign investment law, and is also deeply rooted in customary international law. Violation of the
fair and equitable treatment principle by the host state concerned is the most common allegation
made by foreign investors before international investment tribunals. In the efforts made in the

16
Jeswald W. Salacuse, BIT by BIT: The Growth of Bilateral Investment Treaties and Their Impact on Foreign Investment in Developing Countries,
24 International Lawyer, (1990)p. 659.
17
Id., p. 660.
18
Brownlie, Principles of Public International Law, (Oxford University Press, Oxford, 5th ed. 1998), p. 535.
19
Supra note 16., p. 665.

4
immediate aftermath of the Second World War this concept figured prominently in various
multilateral instruments relating to foreign investment. When states began to conclude BITs as
the principal vehicle to regulate and promote foreign investment, this principle was incorporated
as a key provision. Briefly, this principle provides a basic level of protection to foreign investors
and is based on the elements of fairness and equity.20

The notion fair and equitable treatment has two aspects in the international law. The one is Most-
favoured Nation Treatment /MFN/, which requires a host state to give fair and equitable
treatment for foreign investors of different states.21 The reason why foreign investors seek
protection under the MFN principle is to avoid any discrimination against them which would put
them at a competitive disadvantage compared to other investors from third countries. The
underlying idea behind the MFN principle is to ensure equality of competitive opportunities
between investors from different foreign countries.22

The other aspect of fair and equitable treatment is National Treatment /NT/, in which requires a
host state to treat a foreign investor in not less than to a treatment given to its own
national/domestic investor. The objective of the national treatment principle is to address
discrimination on the basis of nationality of ownership of an investment. In order to ascertain
what discrimination is it is necessary to compare the treatment of the foreign investor to the
treatment accorded to a domestic investor in similar circumstances. What is a ‘like’ situation and
what is not depends on the nature of investment.23

Full Security and Protection and Security

Though there is no generally agreed definition of this term as different parties have claimed
different levels of protection under this principle, the entitlement of foreign investors to ‘full
protection and security’ is another norm to be found in many IIAs. The ‘full protection and
security’ standard applies essentially when the foreign investment has been affected by civil
strife and physical violence. The host state must show that it has taken all measures of precaution
to protect the investments of the investor in its territory. However, the guarantee of full

20
Surya P., “International Investment Law Reconciling Policy and Principle”, (Hart Publishing, Oxford and Portland, Oregon, 2008) P. 63.
21
Id.
22
Id., p. 68.
23
Id., p.71.

5
protection and security is not absolute and does not impose strict liability upon the state that
grants it.24

Protection Against Unduly Expropriation

Protection of foreign investment against expropriation is a centuries-old principle of foreign
investment law. International law does provide that states as sovereign entities can expropriate
the assets of foreign investors in certain situations, provided that a number of conditions outlined
in international law are met. But the meaning and scope of these conditions have attracted much
attention in both jurisprudence and in the foreign investment law literature. There is a large
amount of literature on what constitutes expropriation and what level of compensation is
required in international law against expropriation.25

As a rule of thumb, foreign-owned property may not be expropriated or subjected to a measure

tantamount to expropriation unless it is for public purpose, with non-discriminatory basis to be
taken in accordance with applicable laws and due process, and with full compensation.

Access to International Arbitration Tribunals

Another major protection available to foreign investors is access to international arbitration
tribunals operating under both public and private international law. Access to international
commercial arbitration has, of course, been commonplace and is a matter regulated by private
contracts between an investor and the host government.26 When the practice of concluding IIAs
to attract foreign investment began in the late 1950s and early 1960s, host states agreed to offer
additional protection to foreign investors by agreeing to international arbitration in legal disputes
with investors. The objective was to assure foreign investors that they would not suffer from any
hazards of delay and political pressure in the adjudication of investment disputes in national
courts.27

Repatriation of Profits

24
Id., p. 67.
25
Id., p. 74.
26
Id., p. 81.
27
Id.

6
The main objective of all foreign investment is to make profits and to repatriate those profits to
the home state. If repatriation of the profits is prevented by the host state, this purpose of the
foreign investor will be frustrated. Protection of the right to repatriate profits becomes an
objective of investment treaties. Repatriation of profits is necessary for the foreign investor, who
may have to service loans, buy equipment and machinery and pay for services. Many of the
treaties contain absolute statements protecting the right of repatriation. Hence, many IIAs
provides that foreign investors can repatriate profits, dividends, interests or any other earning
held in a host state to their respective home states.28

Ethiopia, in all its IIGs signed so far, has unequivocally recognized and incorporated all the
above mentioned standards and protections se commonly under international investment law so
as to the treatment and protection of foreign investors and their respective businesses in its
territory

1.3 New Concerns as a Public Policy Issues and the Regulatory Space

Despite all its conceived as well as the practical role playing to the growth and development of
countries across the world, foreign investment has brought issues that are already concerning, not
only a single developing or developed states, but also the global community, by large. Most of
these concerns are considered as public policy issues of a certain host state.

On the other hand, IIAs shows little concern for the internal affairs of a host state, like corruption,
environment and human rights interests involved in foreign investment. Because, investment
agreements entirely focuses on the protection of foreign investors and never concerns to the
interests of the international community or the host state in the protection of the values that were
of concern to them.29 IIAs constrain sovereignty. Investment treaties constrain sovereign rights
of control over the intrusive process of foreign investment which takes place entirely within the
territory of the host state. To this extent, the erosion of sovereignty in such treaties is
considerable. But, it is trite law that a treaty can control events that are entirely internal and
domestic. Indeed, it was recognized that states have various techniques of controlling foreign
28
Sornarajah M., “The Innternational law on Foreign Investment”, (Cambridge University Press, Cambridge, 3rd ed., 2010) p. 206.
29
Id., p. 224.

7
investment, and thus the state can promote its own development objectives. The issue arises as to
whether the right to control investment by the host state is lost as a result of investment treaties.
The answer depends on the type of treaty that is made.30

Furthermore, short of governments intervening to prevent human rights abuses by foreign

investors themselves, the host states’ right to regulate becomes a proxy for human rights in this
context. The paucity of reported cases to date involving clear invocations of human rights is
attributable to various factors. Investors are often adequately protected by IIAs themselves,
which impose often times no obligations on them. Host states cannot request arbitration
independently since this is also a preserve of investors.31

Part II
2. Reconciling Mechanisms

Thus, the IIAs should seek to balance investor rights and duties, preserve the State’s right to
regulate in the public interest and to acknowledge the importance of not only economic but also
social, human and environmental goals in their design, through various ways to highlighted
below.

2.1 Applying the General Principle of Customary International Law

As a sovereign state its right to control any activity undertaking within its own territory is
unlimited, and such right is now recognized in customary international law. Therefore, from the
entry to the whole process of the foreign investment, Ethiopia has sovereign power to regulate so
as to promote public welfare, it deems necessary.32 Accordingly, for example, the entry of any
foreign investment can be excluded, if Ethiopia believe from the beginning that such proposed
business is harmful, may be, to human health, safety, or wildlife.

30
Id., p. 232.
31
Marc J., “International Investment Agreements and Human Rights”, (INEF Research Paper Series 03/2010) p. 13.
32
Supra note. 28, p. 88.

8
Therefore, Ethiopia can always invoke customary international law to the regulation of internal
affairs through applying domestic laws. Because, it is assumed that, as in customary international
law, unaffected by treaty, the host state has an absolute right of control over the entry and
establishment and the whole of the process of foreign investment. Once a foreign investor enters
Ethiopia, both he and his/its property, as well as the manner of his/is business activities, are
subject to the laws of Ethiopia. This result flows from the fact that the foreign investor has
voluntarily subjected himself to the regime of the host state by making entry into it.33 And also,
once after a foreign investor entered into Ethiopia, he/it is customarily obliged not to engage in
corruption and other internal affairs of Ethiopia-as a host state.

2.2 Allowing the Inclusion of Human Rights and Environmental Clauses in IIAs

Regarding to human rights and the environment, both a host and a foreign investor have
substantive international and national obligation to ensure the protection of human rights and the
environment from harmful or degrading human or natural activities.

Particularly, when we think of regional and international instruments, we are envisaging

provisions that impose duties on states with respect to environment. The Treaty Establishing the
Latin American Integration Association requires member countries to;

“take into consideration, among other matters, scientific and technological cooperation,
tourism promotion and preservation of the environment”.34

It is observable that, according to this treaty, member states are duty bound to preserve
environment. In short, we can see efforts have been made at the international level to protect
environment. The efforts made by the MAI particularly are intended to relate investment to the
international Declaration of Environment and Development. Hence, the principles that are
enshrined under the Declaration would be applied. For example, the principle of polluter pays,
and precautionary approach would be applicable. According to the precautionary approach, prior

33
Id.
34
Treaty Establishing the Latin America, Article 14.

9
prevention of damage to environment is implemented while in case of polluter pages principle
one who damages the environment must restore it.

However, considerable disagreements among the negotiators have been deserved and it still
persists. The basic issue here is the balance between the investment liberalization objectives and
the environmental preservations and principles.35Cotonou Agreement (2000) also contains provisions
that link economic development and the environment. As per this agreement, FDI must apply and
integrate, at every level, the “principles of sustainable management of natural resources and the
environment.”36

The convention on Environmental Impact Assessment also provides, in stronger language as

follows:
The parties shall, either individually or jointly, take all appropriate and effective
measures to prevent, reduce and control significant adverse transboundary
environmental impact from prepared activities.37

Under this provision an activity includes activity that arises from FDI, Thus, even though the
convection is not an IIA, it has a significant implication for investment activities. Investment
activities are required to go through environmental impact assessment in order to control the
significant adverse impact upon the environment. The OECD Guidelines (the original 1976, the
reserves 1991 and the 2000 Guidelines) clearly indicate that transboundary corporations have the
obligation to protect the environment.38

The United Nations has prepared a draft code of conduct on the issue of environment. The code
incorporates some responsibilities of transnational corporations under paragraphs 41-43.

“Transnational Corporations shall/should carry out their activities in accordance with

national laws, regulations, administrative practices and policies relating to the

35
United Nations, International Investment Agreements: Key Issues (Vol. II, 2004), p. 83.
36
Contonou Agreement, 2000
37
Article 2 (1)
38
UN, OECD, p. 184.

10
 preservation of the environment of the countries in which they operate and with due
regard to relevant international standards.”

Transnational Corporations are duty bound to protect the environment and, where damages
happen, to restore it to the extent appropriate and feasible. They are required to take steps so as
to protect the environment and where damages occur to rehabilitate it. It doing so, they are
required to develop and apply adequate technologies for this purpose. What is more, translational
corporations should respond to requests of governments and “cooperate with international
organizations in their efforts to develop and promote national and international standards for the
protection of the environment.”39

Even concerning to human rights, there are tremendous instruments and treaty-practices that
references the minimum standard of human rights and imposes obligation on host states and
foreign investors. Because, investment agreements could address human rights concerns either
by directly imposing obligations on investors or by referring to state duties. In practice very few,
if any, investment agreements mention human rights or associated fields.40

The multilateral investment agreement for the Common Market for Eastern and Southern Africa
(COMESA), adopted in 2007, lists minimum human rights standards relating to investment as a
potential future agenda item for a meeting of ministers,41

From the aspect of national laws, the Ethiopian government, for example under the FDRE
Constitution, is obliged to ensure the protection and promotion of human rights,42 as well as to
protect the environment in the manner to fulfill citizen’s right to live in safe and healthy
environment.43 Such an obligation includes of minimizing the harmful practice by foreign
investors, because, as it is also provided under Art 92 (2) cum. Art. 40 of the FDRE Constitution,
all investment projects shall not damage or destroy the environment.

39
Id. P. 85.
40
OECD, 2008
41
Article 7 (2)(d)(iii)
42
Article 13 (1)
43
Article 92 (1) & (4)

11
Therefore, as a compliance to international, regional and national substantive obligation, and as a
reconciling method, Ethiopia need to refer human rights and environmental clauses directly in a
treaty dealing with foreign investment and investors.

2.3 Incorporating SD Clause in IIAs

FDI improves lives and societies by promoting and enabling economic development. But,
inclusive development nowadays includes sustainable development, and therefore such projects
can be attracted while being protected. The global community is mostly united on the mission of
achieving development “in its three dimensions – economic, social and environmental.”44
UNCTAD approaches the three dimensions in a balanced and integrated manner.45 This notion
could, we argue, help rebalance ISDS by integrating a no-dimensional view of development
when interpreting IIL. Lately, several initiatives have come to reflect a widespread consensus
that IIAs should include provisions that reflect the current understanding and relevance of
sustainable development. For example, we assert, that protection of human rights should be
carefully considered in the context of IIL. Thus, IIAs are being increasingly amended to reflect
new developments, such as the inclusion of sustainable development objectives.46 As explained
in the Introduction to the 2005 IISD Model International Agreement on Investment for
Sustainable Development:

[T]he model for IIAs developed 50 years ago no longer meets the needs of the global
economy in the 21st century. . . . We believe the time is ripe to propose a new model for
IIAs, a new direction that is consistent with the goals and requirements of sustainable
development and the global economy of the 21st century.47

For example, the proposed provisions on sustainable development to be included in the

modernized Energy Charter Treaty (“ECT”), which defines the context and objectives of

44
G.A. Res. 70/1, 2030 Agenda for Sustainable Development, at 3 (Sept. 25, 2015) (“We are committed to achieving sustainable development in
its three dimensions – economic, social and environmental – in a balanced and integrated manner.”).
45
Id.
46
See, e.g., Model Text for the Indian Bilateral Investment Treaty, UNITED NATIONS CONF. ON TRADE AND DEV., Pmbl, (Dec. 28, 2015),
https://investmentpolicy.unctad.org/international-investment-agreements/treatyfiles/
47
HOWARD MANN, ET AL., IISD MODEL INTERNATIONAL AGREEMENT ON INVESTMENT FOR SUSTAINABLE DEVELOPMENT, NEGOTIATORS’
HANDBOOK X (2nd ed., 2005)

12
sustainable development, focuses on the right to regulate and the levels of environmental and
labor protection, climate change and transparency etc.48

A major initiative vis-á-vis the inclusion of sustainable development objectives into IIAs has
been the UNCTAD’s Investment Policy Framework for Sustainable Development.49 As such, the
UNCTAD Framework refers to the following: (1) incorporating concrete commitments to
promote and facilitate investment for sustainable development, as most agreements include
hortatory language on encouraging investment in preambles or non-binding provisions on
investment promotion;50 (2) balancing State commitments with investor obligations and
promoting responsible investment, as most IIAs do not specify investor obligations or
responsibilities;51 (3) ensuring an appropriate balance between protection commitments and
regulatory space for development, as the protection of foreign investments cannot be absolute
and fundamentally limit governments’ regulatory freedom.
Therefore, Ethiopia, invoking such international trends, can reconcile its ambition for foreign
investment and public polices, through the incorporation of “sustainable development” clause in
investment agreements, whether bilateral or multilateral.

Concluding Remarks

Public policy has so many dimensions that seems have practical quarrel with international
foreign investment law while in the race to attract and ensure the minimum standard of
protection for foreign investors in host states. Customarily, states are sovereign in regulating any
activities inside in their respective territories, and so too in respect of foreign investors’. In the
same vein, foreign investors are duty-bound to respect the national laws of a host state, and
hence, they are obliged to engage in corruption and other internal affairs.

As sovereign entities, states have undertaken obligations under various environmental and
human rights treaties. They are thus under a duty to fulfill their obligations under these treaties.

48
See Energy Charter Secretariat [ECS], Report of the Modernisation Group on Progress Made in Fulfilling the Negotiations Mandate, at 46-53,
ECS Doc. CC 699 (Nov. 25,2020), https://www.euractiv.com/wp-content/uploads/sites/9/2022/11/ECT-reporton-progress-made_FS.pdf
[https://perma.cc/VMC2-BWDY] (proposed provisions on sustainable development).
49
UNCTAD, Investment Policy Framework for Sustainable Development, supra note 6.
50
Id., p. 77.
51
Id., p. 77-78.

13
But to do so they have to take certain regulatory measures and enact laws which may be seen as
undermining the interests of foreign investors who enjoy protection under BITs or regional trade
and investment treaties.

Many of the foreign investors invited to invest in the host countries concerned may have done so
to exploit lax environmental and other standards in the country of concern. When the host states
seek to raise environmental and other standards, such measures often clash with the interests of
foreign investors. Thus, the challenge faced by the contemporary law of foreign investment at
this juncture is balancing these competing principles and interests.

Saved to the minimum standard of protection, the inclusion of such dimensions of public policy
is not said to be affecting of foreign investors protection, nor the attraction of FDI. The construct
of host government social policies is operationalized using the World Bank’s Country Policy and
Institutional Assessment (CPIA) score for the quality of pro-social policies used by host
governments in the sample of 59 developing countries.52

Thus, the next generation of Ethiopia’s IIAs should seek to balance investor rights and duties,
preserve the country’s right to regulate in the public interest and to acknowledge the importance
of not only economic but also social and environmental goals in their design. Legitimate State
measures, either regulatory or of other nature, must be aimed at, for example, improving access
to water without unduly interfering with IIL. The drafting of new investment agreements should
reflect how states incorporate other substantive areas of international law and the guidance to
arbitrators who have to balance competing regimes. The rule of law at the crosshairs of IIL,
human rights law, environmental and other public policy issues, and ISDS can only be enforced
if reference is made to the relevant laws and rules in the context of human rights in the applicable
treaty itself.

References

52
Supra note 1, p. 96-97.

14
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Boston, Massachusetts: Kluwer.
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