CURRENT INTERNATIONAL LEGAL REGIME

GOVERNING CROSS BORDER INVESTMENT

LAW

CROSS-BORDER INVESTMENT LAW

Relationship between law and international investment

 Enhances or diminishes the predictability of investment

transactions
 Calculability of transactions – Study on the growth of capitalism
 Max Weber’s 3 conditions for law to be calculable
 Legal text must lend itself to prediction
 Non- arbitrary administration and application of the legal text
 Contracts must be enforced
 Increases or reduces associated transaction costs
 Allocation of cost and benefit is determined by the applicable laws
 An instrument to Direct, Control and Encourage International
Capital Flows
 Defines and Regulates investment rights, responsibilities and
relationships
 Means to resolve investment disputes
 Three legal Frameworks

National legal framework

Contractual legal framework
International legal framework
 Treaty Law
 Customary Laws
 International institutions
International Law in Private International Investment

International law affects private international

investment in 3 ways:
 It influences domestic legislation. Eg: Articles of Agreement of
the IMF and GATT, etc.
 Certain rules of international law apply directly to individuals
and companies and may even afford them an international
means of redress. Eg: Bilateral Investment Treaties
 International law creates international organizations and
institutions which play important roles in many areas of
international investment. Eg: ICSID
 Customary International Law and General Principles of Law
governing Investment

 Standard of treatment to foreign persons with respect to making

investments in host state territory
 Standard of treatment to foreign persons and their assets once such
investment has been made
 Principle of equality
 International Minimum standard
 Under US Law – a state is responsible under international law for
injury resulting from:
 Taking by the state of the property of a national of another state that
 Is not for a public purpose; or
 Is discriminatory; or
 Is not accompanied by provision for just compensation
 If repudiation or breach is discriminatory/motivated by non-commercial
considerations
 If foreign national is not given an adequate forum to hear his claim
 Deficiencies of Customary International law in Investments

 Failed to take into account contemporary investment practices and

to address important issues of concern to foreign investors. Eg: right
of foreign investors to make money transfers from host country,
bring foreign managers into host country, etc.
 Principles that did exist were vague and subject to varying
interpretation. Eg: no principles to calculate appropriate
compensation
 Sharp disagreements between industrialized and newly decolonized
countries. Eg: Minimum standard of protection to foreign capital
exporting countries – is it a principle of equality or is it a means to
maintain the poverty of the under-developed countries?
 No mechanism to pursue claims against host countries that seized
their investments or refused to respect their contractual obligations.
 Treatification of International Investment Law

 Treaties have now become the fundamental source of international investment law
 Referred to as International Investment Agreements – are instruments by which
states:
 Make commitments to other states with respect to the treatment they will accord to investors and
investments from those other states
 Agree on some mechanism for the enforcement of those commitments
 3 types of investment agreements:
 Bilateral Investment Treaties

 Bilateral economic agreements with investment provisions

 Other investment related agreements involving more than 2 states

 These treaties grant covered investors:

 Full protection and security
 Fair and Equitable treatment
 National Treatment
 Most-Favoured nation treatment
 Full rights to make international monetary transfers
 Protection against arbitrary treatment and expropriation without adequate compensation
 Objectives of Investment Treaties

 Primary Objectives:
 Investment Protection
 For capital exporting investors to invest safely and securely
 To create a stable international legal framework
 Recourse to unprejudiced judicial process for redress
 Investment Promotion
 Reciprocity and mutual protection
 Increase of capital and technology in host state
 BITS have terms that encourage/ obligate the host country to create favorable
investment conditions in its territory
 Secondary Objectives:
 Market liberalization
 Relationship building
 Domestic investment Encouragement
 Improved governance and a strengthened rule of law