Regulation of International Capital Movement - Essay Example

?METHODOLOGY PAPER Proposed Topic: The Regulation of International Capital movement under Bilateral Investment Treaties: A Critical Analysis INTRODUCTION Starting in the 1990s, there has been a steady increase in the bilateral investment treaties (BITs). (Sauvant and Sachs, 2009, p935) During this period, the World Bank has identified around 700 such treaties. (Sornarajah 2010, p172) This is mainly attributed to the globalization phenomenon and the permeation of liberal trade. In the Gulf region, for instance, there was a proliferation capital exchange that ushered in a type of sophistication and daring among local capital investment players. As the Gulf countries traded with the world, they have gained both capital and expertise to go beyond the passive investments that have dominated the flow of capital in the region in the past. Legrenzi and Momani have pointed this out, arguing that the profits accumulated from the years of stable and high oil prices have enabled the GCC states to have a wider range of investment choices. (p20) A parallel development is the perception that BITs have or will create a special limb of international customary law. (Dolzer and Schreuer, 2008, p2) It has been argued for the most part that BITs have evolved to such an extent that they have their own unique regulatory laws within the wider scope of international commercial laws. (Dolzer and Schreuer, p2) This expectation led to the favorable attitude on BITs. Sornarajah, however, raised an interesting point warranting further exploration and research. According to him, the fact that there has been an increase in BITs for some time and no legal standards has been established as yet should already demonstrate how these treaties have not been able to create the “customary principles of international law” for protecting the movement of foreign capital. (p232) This is critical because, as with the case of all states and regional blocs all over the world, the GCC states are prone to the vulnerabilities and risks that are brought about by the deficiencies of the global economic system. For instance, the 2009 economic crisis that was triggered by the US mortgage crisis sent shocks all over the world, illustrating the argument that there is no safe place for investors. Oil prices, for its part, has now become relatively impervious of late as the highly integrated international system become more and more strict in addition to how the world is scrambling to tap alternative energy sources. Therefore, the need for BIT regulation is underscored. Aside from intelligent investment decisions, the GCC member-states have used regulatory mechanisms to control international capital movement especially concerning the BITs in a bid to prevent and mitigate risks and threats. This paper will explore this theme. The aim is to outline the current capital movement landscape, identify the regulatory mechanisms that govern it (i.e. statutes, treaties, etc.) and assess their strengths, failures, points of opportunities and challenges. 2. SOURCES AND DATA ANALYSIS This research uses several approaches within the qualitative method of inquiry. The sources of the information, hence, are composed of both primary and secondary data, which will often be referenced in order to outline specific cases and important statutes that govern BITs. These sources can include academic journals as well as other texts published on the subject (i.e. published dissertations and news reports), Internet sources in addition to data available from corporate websites among other documents released and published by organizations, individuals and documents from the GCC governments and their agencies. Relevant information from international organizations will also be used. In addition, this study will also conduct interviews on selected resource persons, which could be composed of legal luminaries, specializing in the GCC jurisprudence, investors, policymakers and other stakeholders that are authoritative in discussing the GCC BIT subject. The number of these resources would be from 5-7, which is expected to provide enough primary data to support, corroborate and update the secondary sources. 3. LITERATURE REVIEW As a qualitative research, the literature will play a crucial part in the study. The examination of the extant work on the topic will include the legal, economic and policy perspectives. It will also cover the theoretical and real-world cases as provided by academics, economists and even the media. Finally, the literature review will also focus on the prevailing themes in the academic perspectives on future trends, patterns, opportunities and challenges. 4. RESEARCH METHODOLOGIES Since this is a descriptive and analytical research, this study will not use models for empirical inquiries. Instead, this researcher will use a combination of methods to address the multi-dimensional character of the research subject. For example, the data collected through the secondary sources will be augmented by ‘black-letter' doctrinal analyses and ‘law in context' approach. The idea is to capture the complexity of having to discuss the general subject of bilateral investment treaties and the specific experiences of GCC states for a comprehensive critical outline of the topic. The ‘black-letter’ model aims to systematize, correct and clarify specific statutes on any particular topic through a distict analytical framework to authoritative texts that are composed of both primary and secondary research. (McConville and Chui, 2007, p4) It is, hence, the most appropriate model to explain the BIT system and the related statutes and legal decisions such on matters concerning arbitration. Moreover, it can provide the representation of some universal standards and rules that are acceptable in the international community by clearly and authoritatively establishing the framework in which BITs are contracted and implemented as well as their resolution in the events of disputes. In this respect, the strategy is clearly understood as crucial in identifying legitimate solutions to problems, say, of contractual enforcement. Furthermore, the ‘black-letter’ model can also enable this study to gain deeper insight on the Sharia law, which is a fundamental source for policy and regulation. Meanwhile, ‘law in context' approaches will be utilized in order to understand BITs in the context of the GCC experience. According to Slapper and Kelly, this contextualist model examines and analyzes the law as a social phenomenon and, hence, operates within a social context. (Slapper and Kelly, 2009, p11) This researcher believes that this model can provide invaluable insights on the GCC experience and accurately explain and depict the reasons behind the issue of BIT, its initiation and enforcement. For example, the problems of enforcement compliance can be better understood as the issue is explained in the Islamic context, with its own unique variables. Say, the refusal to comply based on Shari’a law can be better understood and explained. In an effort to be scientific in the method of research, this study would follow the linear progression of the academic research model. As has been outlined and demonstrated in this proposal, a problem or an issue is identified, research is initiated, and then, a thesis is formulated. Afterwards, the research would finally commence, which would be followed by the analysis and the requisite recommendations/conclusion. 5. EXAMINATION OF RELEVANT CASE LAWS An important variable in the examination of case laws for the purposes of this study is theoretical analysis espoused in the literature by virtue of the United Nations Conference on Trade and Development relative to the doctrine of fair and equitable treatment. (UNCTAD, 2009, p11) Case law will be analyzed to demonstrate the practical difficulty of establishing a clear and cohesive body of customary international law relative to the doctrine of fair and equitable treatment. Related cases include but are not limited to: United Mexican States v Metalclad Corporation 2001 BCSC 664, The Loewen Group, Inc and Raymond L. Loewen v United States of America Case No. ARB(AF)/98/3 Washington, (2003), S.D. Myers Inc. v Canada 2000-2002 NAFTA, Pope and Talbot Inc and The Government of Canada Award on the Merits of Phase 2, Read More