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Bilateral Investment Treaties and Regional Initiatives and Investment Agreement Frameworks: Multiplying Incoherence in Response to External Threats?. Yao Graham at Colloquium on Africa’s Economic Integration: Internal Challenges and External Threats 6-8 May, 2014, Accra.

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Bilateral Investment Treaties and Regional Initiatives and Investment Agreement Frameworks:Multiplying Incoherence in Response to External Threats?

Yao Graham at

Colloquium on Africa’s Economic Integration: Internal Challenges and External Threats

6-8 May, 2014, Accra


Scope types of international investment agreements
Scope-Types of International Investment Agreements Investment Agreement Frameworks:

  • Bilateral Investment Treaties

  • Free Trade Agreements with Investment provisions e.g. Cariforum EPA, North African Free Trade Agreements, NAFTA

  • Regional Investment Agreements, e.g. COMESA Investment Area, SADC Protocol on Finance and Investment, ECOWAS Energy Protocol


Declining trend in new signing
Declining trend in new signing Investment Agreement Frameworks:


New mega regional agreements
New mega regional agreements Investment Agreement Frameworks:

  • The Trans-Pacific Partnership (TPP)

  • The Regional Comprehensive Economic Partnership (RCEP)

    • ASEAN, Australia, China, India, Japan, NZ, and South Korea

  • The US-EU Transatlantic Trade and Investment Partnership (TTIP)

  • The Trilateral FTA between SADC-EAC-COMESA

  • These four potential future agreements alone involve 76 countries with a total population of over 4.5 billion people and a combined GDP representing over 90% of world GDP

    These agreements may change the landscape of the international investment regime


  • Map of african iias
    Map of African IIAs Investment Agreement Frameworks:

    • Close to 1000 (793 by end 2013 according to UNCTAD, 27% of all BITs)

    • Canada Africa FIPA - Egypt (1997) Tanzania, Cote d’Ivoire, Cameroon, Madagascar, Mali, Nigeria, Senegal, Zambia (2013)

      • Ongoing Ghana, Tunisia, Burkina Faso

    • USA BITs -Cameroon, DRC, Congo Rep., Egypt, Morocco, Mozambique, Senegal, Rwanda (2012)

      • 16 TIFAs (COMESA, UEMOA, EAC, Angola, Mauritius, Ghana, Liberia, Mozambique, Nigeria, Rwanda, South Africa, Algeria, Egypt, Libya, Tunisia

    • Germany BITs - 42 African countries (2013)

    • China BITs - Africa 34 countries

    • UK BITs - Africa 22 countries


    African trends
    African Trends Investment Agreement Frameworks:

    Credit: Hamed El-Kady UNCTAD


    African leaders
    African leaders Investment Agreement Frameworks:

    Credit: Hamed El-Kady UNCTAD



    3 doubt

    9

    9

    Importance of BITs- What do investors say? American multinationals, 2010

    Adapted from: Yackee, ‘Do Bilateral Investment Treaties Promote Foreign Direct Investment?,’ 51 Virginia Journal of International Law 51(2). Credit Poulsen 2014


    4 doubt

    10

    10

    What do investors say?

    European multinationals, 2000

    Source: European Commission, Survey of the Attitudes of the European Business Community to International Investment Rules, conducted by T.N. Sofres Consulting on behalf of the European Commission, DG Trade, 2000.


    Issues with iias
    Issues with IIAs doubt

    • Broad application restricts State’s powers to regulate investment to protect identified public policies

    • Establish broad standards to be interpreted by tribunals

    • Investor –state dispute resolution mechanism/ arbitration provides for treaty based intrusion and enforcement

      • One sidedness in disciplining role of arbitration because only investor can initiate process

      • Threat of suit or award can force abandonment of important policy initiatives rooted in public interest

        • Zimbabwe and Tanzania


    Issues with iias1
    Issues with IIAs doubt

    • Imbalance between rights and obligations of state and investor in favour of investor

    • Wide coverage of BITs- consequence of wide definition of investment and state “measure”

    • Measure

      • 2013 Canada-Benin BIT “any law, regulation, procedure, requirement, or practice”

      • Same definition in 2008 USA-Rwanda BIT

      • Applies to all branches and levels of government

    • Wide definition of investment in draft Ghana-Japan BIT and USA-Mozambique BIT


    African challenges
    African challenges doubt

    • Not demandeurs but takers

    • Coherence and coordination

      • Across policy

      • Within investment policy and practice

        • Treaties, contracts and national laws

      • Across spheres

    • Constraints on Development strategy and choices

      • Freeze regulatory environment

    • Burdensome obligations

      • Institutional challenges

      • Implementation challenges

    • Costs of litigation


    Key areas of policy impact
    Key areas of policy impact doubt

    • Main areas:

      • national treatment; (Normally post establishment so can set entry requirements but Canada US BITs seek pre-establishment national treatment, leading to provisions for exceptions)

      • most favoured nation (MFN);

      • fair and equitable treatment;

      • restraint on performance requirements;

      • limits on expropriation

      • Senior management and board of directors

      • Improving investment climate (Ghana Japan eliminate or reduce restrictive measures

      • Provision of Information

    • Drawing from discussions on other countries and regions but looking at African agreements


    German model bit 2008
    German Model BIT 2008 doubt

    • Article 3

    • National and most-favoured-nation treatment

    • (1) Neither Contracting State shall in its territory subject investments owned or controlled by investors of the other Contracting State to treatment less favourable than it accords to investments of its own investors or to investments of investors of any third State.

    • (2) Neither Contracting State shall in its territory subject investors of the other Contracting State, as regards their activity in connection with investments, to treatment less favourable than it accords to its own investors or to investors of any third State. The following shall, in particular, be deemed treatment less favourable within the meaning of this Article:

    • different treatment in the event of restrictions on the procurement of raw or auxiliary materials, of energy and fuels, and of all types of means of production and operation;

    • different treatment in the event of impediments to the sale of products at home and abroad; and

    • other measures of similar effect.


    Usa canada
    USA/Canada doubt

    • (USA-Rwanda) Article 3: National Treatment

    • Each Party shall accord to investors of the other Party treatment no less favorable than that it accords, in like circumstances, to its own investors with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments in its territory.

    • Each Party shall accord to covered investments treatment no less favorable than that it

      accords, in like circumstances, to investments in its territory of its own investors with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments.

    • Canada-Tanzania BIT Article 4 - National Treatment

      1. Each Party shall accord to investors of the other Party treatment no less favourable than that it accords, in like circumstances, to its own investors with respect to the establishment, acquisition, expansion, management, conduct, operation and sale or other disposition of investments in its territory.

      2. Each Party shall accord to covered investments treatment no less favourable than that it accords, in like circumstances, to investments of its own investors with respect to the establishment, acquisition, expansion, management, conduct, operation and sale or other disposition of investments in its territory.


    Effects of nt mfn
    Effects of NT/MFN doubt

    • National Treatment

      • Local content legislation in Extractives

        • World Bank West Africa study

      • Reserving areas for locals

      • Affirmative action (BEE)

      • Most Favoured Nation Treatment (MFN)

        • Multilateralising effect

          • Effect on special development arrangements with particular countries

          • South-south cooperation

          • Regional cooperation


    Unbalanced exceptions
    Unbalanced Exceptions doubt

    • Areas – National Treatment, MFN, Performance requirements and nationality requirement for Senior management and Board of directors

    • E.g. Canada vs. Tanzania, Benin and Egypt, USA vs Rwanda

      • USA-Rwanda prohibition of performance requirements applies to third party investors

    • Ghana low capital areas

    • Imbalance in favour of capital exporter reflects not only power but also more clarity about economic interests and planning for them

    • AMV and provisions on preconditions for value addition and local enterprise ownership


    Other issues
    Other issues doubt

    • Dispute settlement

      • Power of tribunals, composition, processes and decisions

      • Ghana case

      • Mineral cases

      • Zimbabwe

      • Vulture funds

    • Expropriation

      • Attempt to define scope of regulatory takings in US Canada BITs


    Epas and performance requirements
    EPAs and Performance requirements doubt

    • Provisions under the Services, Investment and Competition Agreements in the CARIFORUM EPA combine to limit the powers of CARIFORUM countries to regulate the entry of EU capital, set the terms on which EU firms enter and under which they operate. All these Agreements provide for the national treatment of EU capital in the CARIFORUM countries meaning that they cannot be disadvantaged in any way in comparison with local economic actors, by measures such as performance requirements. Under the Investment Agreement the parties agreed, in respect of the areas they have decided to liberalise, to remove restrictions on foreign ownership, prohibit the use of instruments normally used to screen foreign investment for its local benefits and to provide national treatment for foreign capital which implies outlawing performance requirements “that encourage economic linkages or protect domestic enterprises” (Van Harten,2008).

    • “Thus, by sidelining domestic tools to encourage foreign investment, the EPA model displaces the adaptability that domestic instruments offer in terms of the tailoring and staging of regulation as the costs and benefits of market access in different sectors become more apparent over time. It is in this sense that the EPA model demands that ACP states relinquish core policy space; they must accept legal restrictions in a treaty instrument that lacks adaptability and that will be very difficult to adjust or withdraw from.” (Van Harten,2008).

    • Similar to detailed prohibitions in US/Canada BITs


    Epa issues and carribean lessons
    EPA Issues and Carribean lessons doubt

    • Pending EPAs with rendevous clauses to negotiate Investment issues on Cariforum Model

      • West Africa, East Africa, ESA, SADC and CEMAC


    Cariforum epa effects
    Cariforum EPA effects doubt

    • Provisions under the Services, Investment and Competition Agreements in the CARIFORUM EPA combine to limit the powers of CARIFORUM countries to regulate the entry of EU capital, set the terms on which EU firms enter and under which they operate. All these Agreements provide for the national treatment of EU capital in the CARIFORUM countries meaning that they cannot be disadvantaged in any way in comparison with local economic actors, by measures such as performance requirements. Under the Investment Agreement the parties agreed, in respect of the areas they have decided to liberalise, to remove restrictions on foreign ownership, prohibit the use of instruments normally used to screen foreign investment for its local benefits and to provide national treatment for foreign capital which implies outlawing performance requirements “that encourage economic linkages or protect domestic enterprises” (Van Harten,2008).

    • “Thus, by sidelining domestic tools to encourage foreign investment, the EPA model displaces the adaptability that domestic instruments offer in terms of the tailoring and staging of regulation as the costs and benefits of market access in different sectors become more apparent over time. It is in this sense that the EPA model demands that ACP states relinquish core policy space; they must accept legal restrictions in a treaty instrument that lacks adaptability and that will be very difficult to adjust or withdraw from.” (Van Harten,2008).


    Kicking away the ladder
    Kicking away the ladder doubt

    • Industrialisation experiences implications of NT/MFN ad performance requirement limitations

      • Most recently Asia

        • Performance requirements

        • Directing capital

        • Fostering local ownership

        • Joint ventures

        • Technology transfer/ R&D

    • Performance requirements –BITs and EPAs

      • Asian lessons

      • Structural transformation in mining

        • Local content issues

        • Local ownership

      • EPA market access


    How to change
    How to change? doubt

    • Interpretation

    • Revision/amendment

    • Replacement/consolidation

    • Termination

    • Revocation of treaty (awareness about expiration timeframes)

    • South Africa has been leading change in this regard


    Responses to challenges
    Responses to challenges doubt

    • Denouncing BITs - Latin American countries, South Africa , Indonesia

    • New Provisions seeking to address key issues (SADC model BIT, SA national law

    • Preserving regulatory space

      • Narrow definition of investment, detailed clauses on FET or indirect expropriation, exceptions to free transfer of funds, carve-outs for prudential measures).

      • Minimizing exposure to ISDS (e.g. excluding treaty provisions or policy areas from ISDS, limiting time period for submitting claims.


    Responses to challenges1
    Responses to challenges doubt

    • Balancing the rights and obligations of States and investors

      • Reflecting investor responsibilities in IIAs

      • Learning from CSR principles

    • Integrating international investment policies into national development strategies

    • Strengthening the development dimension in IIAs

      • Reference to the protection of health, labour, environmental standards

      • General exceptions (e.g. for protection of human, animal or plant life or health)

      • Not lowering standards clauses

      • Investment promotion provisions


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