The Implications Of Bilateral Investment Treaties On Sustainable Economic Development - Literature review Example

?Running head: THE IMPLICATIONS OF BILATERAL INVESTMENT TREATIES ON SUSTAINABLE ECONOMIC DEVELOPMENT The Implications Of Bilateral Investment Treaties On Sustainable Economic Development Insert Name Insert Grade Course Insert Tutor’s Name August 1, 2011 Literature Review The Implications of Bilateral Investment Treaties on Sustainable Economic Development Federico Ortino observes that for the last forty years, many nations have been involved in activities that are aimed at promoting and protecting foreign investments for economic benefits.1 Further, the author has discovered that among different nations economic cooperation among are valued given the overriding belief that such co-operations have the ability to spur and stimulate economic growth and development both in home and host countries.2 As a result, there has been numerous bilateral investment treaties (BITs) being signed by cooperating countries.3 Differing arguments both for and against BITs have found place in scholarly work and today, there exists a lot of literature on BITs. Ortino goes a head to observe that, as far as economic growth and development has become an issue in the fast globalizing world, BITs continue to perform great role in ensuring developments in various parts of the globe are achieved.4 The emerging evidence of modern BITs demonstrate that the issue of sustainable development is becoming core aspect of BITs as the call to balance the needs of investors and host countries gain momentum. Therefore, the current involvement of this paper will be to analyze the existing literature on BIT. Largely, the paper will involve carrying out literature review on BIT and sustainable development. \ Bilateral Investment Treaties According to Federico Ortino, Bilateral Investment Treaties (BITs) became popular in early 1990s as the need for economic cooperation among countries grew.5 The understanding among countries as to why BTs were necessary was the overall belief that there was need to promote investment, encourage private industrial and financial enterprise, both geared towards achieving economic growth and development for both participating states.6 As the regime of BITs, set in it became clear that the majority of BITs were designed and framed at protecting the interests of foreign investors and this was done through enactment of few basic treatment guarantees. The author continues to explain that the purpose of these treatment guarantees was to see less of discrimination acts against foreign investors by host countries7. Also intention was to protect foreign investors from unfair and expropriatory conduct by host States and further enable the liberalization of investment flows through the appropriate mechanisms of reduction of market access barriers.8 Research carried out shows that modern BITs could be characterized by three major substantive protection measures to the foreign investors. USINDIA Business Council expresses that, formulation of BIT gives foreign investors assurance on no discrimination.9 Accordingly, the observation made in this article is that, BITs have become pivotal to both National Treatment (NT) and Most-Favored Nation (MFN) treatment whereby foreign investors are treated on equal measure and basis just like investors from the host country.10 Secondly, the article summarizes that BITs assure fair and equitable treatment (FET) where foreign investors are assured and legally protected against arbitrary, unfair, and inequitable treatment11. Further analysis of the article it become clear that, international law standards have been put in place to guarantee foreign investors full protection and security for their investments.12 Moreover, the author of the article express that, BITs have been clarified to take into considerations of indirect expropriation where today there is emphasis of no expropriation without due process and full compensation.13 As a result of this, there has been adoption and implementation of laws that ban expropriation of investment unless clear and due law is observed and where compensation is guaranteed14. BITs and Sustainable Development Marcus Keller is of the view that the vibrancy of legal environment in which foreign investors have found room to operate and where there is legal protection has brought to the forefront the issue of whether BITs in real sense endeavor to promote sustainable development15. For instance, the author observes that developing nations suffocated with the need for foreign direct investment (FDI) have become victims of BITs that strip such governments’ powers and rights to regulate and direct economic, social, and political development of their countries16. Despite all these, the author posits that, the question that might be asked is, in which way do BITs continue to suffocate environment for sustainable development?17 First, according to Luke Eric Peterson, disputes involving investors and states have increased under BTs agreements.18 What investors have discovered is that BITs have become the appropriate avenues in which investors are able to challenge legal and policy developments that in most cases may not appeal to the investors.19 For instance, the author identifies the key areas of concern as where it has become common among many investors especially those in developing countries to challenge states governments on important issues such as nationalization of investment.20 In addition, Luke Peterson express that there is growing tendency by many foreign investors to challenge host government on areas like public interest regulations in critical areas of health, environment, and labor relations.21 When it become clear that In essence the author note that host governments have become captive of international law a situation that make the author to regret that sustainable economic development in such countries become compromised and become a debatable issue22. On his part in contributing to the literature of BITs and sustainable economic development, Kevin Gallagher note that, the presence of BITs, majority of nations have found themselves in vicious cycles of confusion.23 The author goes ahead to express that this is always evident when the governments lack knowledge as to what extent the treaties provide adequate safeguards for legitimate government functions such as taxation, regulation, and even application of human rights standards.24 Moreover the author goes ahead to note that BITs manifest great weakness with regard to dealing with indirect expropriation.25 As a result of this, it becomes clear for the author that for some governments there has been problem and challenges in developing policy framework. This in turn has led to little achievement or development of sustainable development in the concerned countries26. Furthermore, in some cases when BITs lack clear explanation on how adequately should the local firms in developing nation’s needs to be protected, then it become evident that sustainability of such local firms is compromised27. In making summary on BITs, the author observes that in some cases BITs restrict host countries from initiating and implementing polices that are aimed at benefiting domestic firms or even providing preferential treatment to disadvantaged groups’ in the country28. In such circumstances fair and equitable treatment together with national treatment are restricted by BITs between the concerned states.29 On their part, Nico Schrijver and Friedl Weiss express that in many of the developing countries, sustainable development is attached to land and subsequent natural resources30. Moreover, the authors finds out that, what is becoming common in majority of BITs is that during arbitrations involving nationalization, there are instances when the arbitrators have shown little sympathy with regard to rationale nationalization.31 In such cases, the authors content that providing compensation for nationalization of investments; BITs appear to favor foreign investors who in most cases enjoy higher levels of treatment than nationals of the concerned countries32. When this takes place, there is little progress in reforming land policies together with polices affecting key natural resources.33 Lastly, the authors finds out that sustainable development in developing countries may not be achieved when majority of BTs continue to suppress and weaken domestic institutions, the rule of law, and even governance structures and mechanisms.34 When this happens, what emerges is the crippling of the social and political order apart from the underperformance of the economic order and when these entirely combine, the overall sustainable development agenda is negatively affected.35 Conclusion Through the above literature review, it has been found out that sustainable development was formulated as guiding slogan to see appropriate and sensible use of resources with an aim of not compromising the future generation needs36. However, in order to spur developments and bring about economic growth and development, Federico Ortino observes that BITs have become common in modern world as countries enhance their economic cooperation. Literature review has been explored on the role and impact of BITs on sustainable development especially in developing countries. What comes out from this review is that modern regime BITs still need redress especially with regard to balancing and enhancing fair and equitable treatment of both investors and host countries as expressed by majority of authors37. In addition, it has been suggested that there is need to facilitate transparency and reduce corruption especially with regard to investment disputes.38 Lastly, Nico Schrijver and Friedl Weiss, calls for modern BITs to be designed with more concentration on sustainable development where this will require putting the interests of investors and host countries on equal measures specifically with regard to social and environmental issues.39 Bibliography Caliskan, Y, The development of international investment law: lessons from the OECD MAI negotiations and their application to a possible multilateral agreement on investment (Universal Publishers, Florida, 2008) < http://books.google.com/books?id=IrkPakQzyWgC&pg=PA116&dq=bilateral+investment+treaties+and+sustainable+development&hl=en&ei=W0U3TqXSD86FhQfRtayJAg&sa=X&oi=book_result&ct=result&resnum=1&ved=0CCoQ6AEwADge#v=onepage&q=bilateral%20investment%20treaties%20and%20sustainable%20development&f=false > accessed 1 August 2011. Campbell, D, International protection of foreign investment (Yorkhill Law Publishing, New York, 2006) < http://books.google.com/books?id=sDwBrkoGKZ4C&pg=PA52-IA54&dq=bilateral+investment+treaties+and+sustainable+development&hl=en&ei=vUA3ToLhFYXMhAfp-eS1Ag&sa=X&oi=book_result&ct=result&resnum=4&ved=0CDkQ6AEwAzgU#v=onepage&q=bilateral%20investment%20treaties%20and%20sustainable%20development&f=false > accessed 1 August 2011. Cotula, L, Investment contracts and sustainable development: how to make contracts for fairer and more sustainable natural resource investments (IIED Publishers, London, 2010) < http://books.google.com/books?id=-Zqqxw5x68sC&pg=PT41&dq=bilateral+investment+treaties+and+sustainable+development&hl=en&ei=ZTg3TpamJMuFhQf5rNWrAg&sa=X&oi=book_result&ct=result&resnum=9&ved=0CFQQ6AEwCDgK#v=onepage&q=bilateral%20investment%20treaties%20and%20sustainable%20development&f=false >accessed 1 August 2011. Emory Law Journal, Rethinking bilateral investment treaties in Sub-Saharan Africa (N.d) < http://www.law.emory.edu/fileadmin/journals/elj/59/59.4/Johnson.pdf >accessed 1 August 2011. Gallagher, K, Handbook on trade and the environment (Edward Elgar Publishing, United Kingdom, 2008) < http://books.google.com/books?id=LpHiobgEuMgC&pg=PA276&dq=bilateral+investment+treaties+and+sustainable+development&hl=en&ei=ZTg3TpamJMuFhQf5rNWrAg&sa=X&oi=book_result&ct=result&resnum=3&ved=0CDUQ6AEwAjgK#v=onepage&q=bilateral%20investment%20treaties%20and%20sustainable%20development&f=false > accessed 1 August 2011. Gehring, M, Sustainable Development in World Investment Law (Kluwer Law International, Netherlands, 2010) < http://books.google.com/books?id=6j45H_rTFYAC&pg=PA65&dq=bilateral+investment+treaties+and+sustainable+development&hl=en&ei=_Cw3TrzqLMewhQe927mPAg&sa=X&oi=book_result&ct=result&resnum=1&ved=0CCsQ6AEwAA#v=onepage&q=bilateral%20investment%20treaties%20and%20sustainable%20development&f=false > accessed 1 August 2011. Keller, ML, International Organization and Eco-Political Standards (Epubli, N.d) < http://books.google.com/books?id=MrkNA47am_QC&pg=PA23&dq=bilateral+investment+treaties+and+sustainable+development&hl=en&ei=_Cw3TrzqLMewhQe927mPAg&sa=X&oi=book_result&ct=result&resnum=7&ved=0CEkQ6AEwBg#v=onepage&q=bilateral%20investment%20treaties%20and%20sustainable%20development&f=false > accessed 1 August 2011. Maul, J and Vyborny, K, Globalization, International Law and the future of International Investment Treaties, An Introductory Workshop on the International Institute for Sustainable Development’s Model International Agreement on Investment for Sustainable Development ( N.d)< http://docs.google.com/viewer?a=v&q=cache:0HmQ8mvjom8J:www.carnegieendowment.org/files/IISD.pdf+BILATERAL+INVESTMENT+TREATIES+and+sustainable+development&hl=en&pid=bl&srcid=ADGEESgkR_vlphHavsIhOWG9Bnesm50Loln-xCj40fF-iEVTxu4m2qyt6_00EBYIh5XPwdSu896xy52MIcHEjw9Iw--29PRD4GwAxFdFVIG60rzMpHDHH1eKeVEMglMHrrmQI56Ijyrh&sig=AHIEtbR0W15wYASp6VUDk6v0iSdAf6t9bQ&pli=1 > accessed 1 August 2011. Organization for Economic Co-operation and Development, Sustainable development: critical issues (OECD Publishing, 2001) < http://books.google.com/books?id=k19oQqWyZPIC&pg=PA230&dq=bilateral+investment+treaties+and+sustainable+development&hl=en&ei=ZTg3TpamJMuFhQf5rNWrAg&sa=X&oi=book_result&ct=result&resnum=1&ved=0CCoQ6AEwADgK#v=onepage&q=bilateral%20investment%20treaties%20and%20sustainable%20development&f=false > accessed 1 August 2011. Ortino, F, The social dimension of international investment agreements: Drafting a new BIT/MT model (OECD Global Forum on International Investment, 2008)> http://docs.google.com/viewer?a=v&q=cache:DIaDJj6tfGkJ:www.oecd.org/dataoecd/45/51/40311350.pdf+new+regime+Bilateral+Investment+Treaties&hl=en&pid=bl&srcid=ADGEESgTVd6bms4ex9dWjlDc0HwVXi0oW5w2OiooUu-jAElowgy4dc0EkqrBTlkLwNLiqHBfpTUZQ5kWaafK_Gv1N-6yw1x_t5iroddJNh9q5apKMiSFDwHV-UCmYXieI7DpPsmR0NAd&sig=AHIEtbRqq5eHFGYjhjkuXyipShAqz2O0sQ&pli=1 > accessed 1 August 2011. Peterson, LE, Bilateral Investment Treaties-Implications for sustainable development and options for regulation (Conference Report, FES Berlin, N.d)< http://www.fes-globalization.org/publications/ConferenceReports/FES%20CR%20Berlin_Peterson.pdf > accessed 1 August 2011. Puvimanasinghe, SF, Foreign investment, human rights and the environment: a perspective from South Asia on the role of public international law for development (Martinus Nijhoff Publishers, Netherlands, 2007) < http://books.google.com/books?id=T30Ji1X8LpoC&pg=PA157&dq=bilateral+investment+treaties+and+sustainable+development&hl=en&ei=vUA3ToLhFYXMhAfp-eS1Ag&sa=X&oi=book_result&ct=result&resnum=7&ved=0CEgQ6AEwBjgU#v=onepage&q=bilateral%20investment%20treaties%20and%20sustainable%20development&f=false > accessed 1 August 2011. Schrijver, N and Weiss, F, International law and sustainable development: principles and practices (Martnus Nijhoff Publishers, Netherlands, 2004) < http://books.google.com/books?id=eUCL78-tC5sC&pg=PA319&dq=bilateral+investment+treaties+and+sustainable+development&hl=en&ei=ZTg3TpamJMuFhQf5rNWrAg&sa=X&oi=book_result&ct=result&resnum=6&ved=0CEQQ6AEwBTgK#v=onepage&q=bilateral%20investment%20treaties%20and%20sustainable%20development&f=false > accessed 1 August 2011. Somarajah, M, The International Law on Foreign Investment (Cambridge University Press, London, 2010) < http://books.google.com/books?id=L0h9dWC_r9QC&pg=PA173&dq=bilateral+investment+treaties+and+sustainable+development&hl=en&ei=_Cw3TrzqLMewhQe927mPAg&sa=X&oi=book_result&ct=result&resnum=10&ved=0CFoQ6AEwCQ#v=onepage&q=bilateral%20investment%20treaties%20and%20sustainable%20development&f=false > accessed 1 August 2011. USINDIA Business Council, U.S.-India Investment Treaty (N.d) accessed 1 August 2011. Zarsky, L, International investment for sustainable development: balancing rights and rewards (Earthscan, London, 2005) < http://books.google.com/books?id=WeR2ip-xDd0C&pg=PA3&dq=bilateral+investment+treaties+and+sustainable+development&hl=en&ei=_Cw3TrzqLMewhQe927mPAg&sa=X&oi=book_result&ct=result&resnum=4&ved=0CDoQ6AEwAw#v=onepage&q=bilateral%20investment%20treaties%20and%20sustainable%20development&f=false > accessed 1 August 2011. Read More