Anthony Aust. Handbook of International Law

Подождите немного. Документ загружается.

76. For the ESA Convention, see 1297 UNTS 161 (No. 21524); ILM (1975) 864; UKTS (1981) 30. The

website is www.esa.int.

Page 371

International Telecommunications Union

The International Telecommunications Union (ITU), with its headquarters in Geneva, has been a UN

specialised agency since 1947, but dates from 1932 and is the direct successor to the nineteenth-

century International Telegraph Union, which grew out of the International Telegraph Convention

1865.

Despite the enormous advances in technology its basic aims have not changed. Its purpose is

to maintain and extend international co-operation for the improvement and rational use of global

telecommunications of all kinds, involving both governments and the private sector. Almost all

states are members. It allocates radio frequencies, and is thus intimately involved in regulating

satellite communications. Since it registers frequencies in relation to particular locations, in effect it

assigns locations of satellites in the geostationary orbit.

77. See its excellent website, www.itu.int.

78. 130 CTS 123, 198 and 148 CTS 416.

Page 372

19 International economic law

The forgotten man at the bottom of the economic pyramid.

Lowenfeld, International Economic Law, Oxford, 2003

Sornarajah, The International Law of Foreign Investment, 2nd edn, Cambridge, 2004

Collier and Lowe, The Settlement of Disputes in International Law, Oxford, 1999

International economic law is a convenient term to cover mainly the multitude of bilateral and

multilateral treaties made since the Second World War on trade, commerce and investment. That

does not mean that it is a new subject. There are numerous bilateral treaties on trade from earlier

centuries, an Anglo/Portuguese treaty of 1353 providing for mercantile intercourse.

In the

nineteenth and twentieth centuries there were many treaties on trade, customs, establishment and

navigation. The last fifty years has seen important multilateral treaty-making in these areas and the

conclusion of numerous bilateral investment treaties (BITs). A detailed description of the various

new international and regional economic organisations is beyond the scope of this chapter. One can

give only a brief overview of the subject, principally BITs and the WTO and similar organisations,

concentrating more on the settlement of economic disputes. Dispute settlement in general is dealt

with in Chapter 22 below.

Most countries that achieved their independence after the Second World War were developing,

and most remain so. During the colonial era, the imperial powers controlled trade and investment

between their colonies and themselves and third states. With independence, the new states could

have more control over trade and the activities of foreign investors, but they also needed to

encourage foreign investment. Initially, the considerable problems caused by the expropriation of

foreign businesses had discouraged investors.

1. Franklin D. Roosevelt, broadcast, 7 April 1932.

2. 1(2) Dumont 286.

Page 373

Most businessmen are not that aware of treaties, which they may see as the concern only of

governments. Even when a treaty is seen as relevant to business, it may appear too difficult to

enforce. Many treaties have dispute settlement clauses, but such clauses usually require diplomatic

negotiations and, if that fails, international arbitration or recourse to an international tribunal such as

the International Court of Justice (ICJ). Such settlement procedures may also depend on a further

agreement between both parties. Even on the relatively rare occasions that a dispute goes to

international arbitration or the ICJ, it can take many years, and action will remain in the hands of

ministers, diplomats and other officials. Some businesses may therefore regard treaties as largely

irrelevant to finding quick, practical solutions to commercial problems. They are wrong.

Bilateral investment treaties

One of the answers to a problem of lack of foreign investment was for a developing state to enter

into a bilateral investment treaty (BIT) which, because it guarantees protection of foreign

investments, also promotes such investments.

The Federal Republic of Germany and Pakistan

concluded the first BIT in 1959. In the 1970s, concern by foreign investors for the need to establish

and maintain a stable climate for investment grew. Expropriation and nationalisation by countries as

diverse as Chile, Iran, Jamaica and Libya demonstrated the need for more effective protection and

led to a growing number of BITs. Capital-exporting nations like France, Japan, The Netherlands, the

United Kingdom and the United States have entered into many BITs. There are now over 2,000,

compared with around 300 in 1990. More recently, the World Bank has been organising fresh

rounds of BIT-making, so bringing into being what is rapidly becoming a homogeneous (but not yet

common) set of rules to govern the global investment market.

A BIT has at least seven distinct advantages for the foreign investor. The first, and most obvious,

is that it avoids interminable and often inconclusive disputes as to what rules of customary

international law govern investment, how the rules should be applied, and how an unresolved

dispute between an investor and the host state can be resolved. (For this

3. This is reflected in the name by which the treaties are called by the United Kingdom, for example the

Turkmenistan–UK Investment Promotion and Protection Agreement (IPPA) 1995, UKTS (2003) 47.

Page 374

purpose, ‘host state’ includes the various executive, legislative and judicial organs of the state, right

down to local authorities and local courts.) Without a BIT, an investor in a dispute with a host state

would normally first have to exhaust his local remedies – using local law and going through the

local courts up to the final court of appeal – before his own state could pursue his rights in

international law, such as they may be.

Without a BIT, there are no relatively easy (or indeed any)

means of resolving the dispute.

The second advantage is that, if the host state is alleged to be in breach of the BIT, the investor

does not have to ask his own government to take up the claim. Although investors are not parties to

BITs, the treaties give foreign investors the right to take host states to international arbitration, and

they do not have to exhaust local remedies first. In fact, the investor does not have to involve his

own government at all. Nor does the host state have to agree to the arbitration; the process is

compulsory once the investor invokes it. This means that it is quicker and surer, the disgruntled

investor keeping control of the procedure. Nor is there any risk of the dispute becoming just one on

the list of bilateral disputes (including other commercial issues) between the two states. If it were, it

might have to take its turn, or might not be pursued at all by the investor’s state.

If the dispute is decided in favour of the investor, the BIT requires the award to be enforceable in

the courts of the host state. If a host state were not to legislate for this, or if it were interfere in the

enforcement process, not only would this give rise to a separate claim by the investor’s state,

but it

would badly affect the host state’s standing in the eyes of other states and their investors. The fact

that BITs have such an effective dispute settlement mechanism means that the initiation, or mere

threat, of the arbitration process may well persuade the host state to resolve the dispute without the

need for it to go to trial.

A typical BIT

Most investor states have model BITs which they follow to varying degrees, depending on the

negotiating strength of the other state. Although the obligations are expressed as reciprocal, in

practice the two parties are a developed state and a developing state, the first representing the

investor, the other the state hosting the investment. No two BITs are identical,

4. See p. 441 below.

5. See Chapter 21 on state responsibility.

6. See Dolzer and Stevens, Bilateral Investment Treaties, The Hague, 1995. See also http://ita.law.uvic.ca.

Page 375

but they normally have fairly similar definitions of ‘investor’ and ‘territory’ and provisions on fair

and equitable treatment; national or most-favoured-nation treatment (MFN) with regard to taxes,

repatriation of investments, payments, income, profits etc.; expropriation; national or MFN

treatment for losses due to war, revolution, insurrection etc.; the settlement of disputes; and the

duration of the BIT and its continued application to investments made before termination.

The entities protected

BITs protect investments made by nationals of one state in the territory of the host state. Nationals

are defined as natural persons having the nationality of the investor’s state, and legal persons as

corporations, partnerships, firms or associations incorporated under its laws.

A third advantage of

BITs is that they often provide that investor companies include also those incorporated under the law

of the host state, but controlled, directly or indirectly, by a company incorporated under the law of

the investor’s state. An investment made in the Philippines by a local company controlled by a

company incorporated in The Netherlands would be protected under the Netherlands–Philippines

BIT 1985.

Investments are often made through companies incorporated in the most favourable jurisdiction

for protection (‘strategic incorporation’), although other important factors must also be considered,

including tax advantages. Thus investments can be made abroad through companies incorporated in

third states. Protection will be further increased when the state of incorporation of the investor

company and the host state are parties to a BIT. A German investment made through a Luxembourg

company would be protected if the host state has a BIT with Luxembourg. Companies also make

investments through subsidiary companies incorporated in the overseas territories of their own or

another state. It is therefore important that the relevant BIT also protects investments made by

companies incorporated in such territories.

Types of investment protected

BITs define investment in broad terms. For example, the UK–Venezuela BIT 1995

defines

‘investment’ as ‘every kind of asset held and in

7. See p. 182 above on the customary international law problems of determining the nationality of

corporations.

8. 1488 UNTS 304 (No. 25565).

9. UKTS (1996) 83.

Page 376

particular, though not exclusively, includes’ movable and immovable property, shares, contractual

rights, intellectual property rights, and business concessions, including ‘concessions to search for,

cultivate, extract or exploit natural resources’ (the latter being commonly included).

Two approaches are used to determine which investments will be protected. The more usual is to

protect all aspects of an activity that meet the definition of ‘investment’. The other, although much

less often found, is to add a requirement that the investment must be approved in writing by the

other state in order to qualify for protection.

Contractual disputes, whether with a company in the host state or with the host state itself, are not

covered by the BIT, except in so far as the host state has done something that goes beyond a mere

breach of contract, such as operating the contract in a way that benefits local company rivals to the

detriment of the foreign investor.

Treatment of investments

Since BITs have two basic purposes – to encourage investments and to protect them – they require

the host state to accord ‘fair and equitable treatment’ to inward investment. This is a basic and

general standard recognised in customary

Page 377

international law and is not related to the domestic law of the host state. To give substance to the

concept of fair and equitable treatment, certain BITs list the activities that are to be protected against

injurious measures. This could be said to be the fourth advantage of BITs.

In addition, investments enjoy most-favoured-nation or national treatment. MFN treatment gives

the foreign investor the same rights as those granted by the host state to investors from the most-

favoured third state. Under national treatment, the investor is granted treatment equal to that

accorded to local nationals. Often, a BIT provides for the standard to be whatever is most favourable

to the investor, which is not necessarily national treatment.

BITs also encourage investment by providing for the free transfer abroad of earnings and capital:

this is the fifth advantage of BITs.

Expropriation and compensation

There are, even now, controversial issues in customary international law relating to the expropriation

of foreign investments. These include even such basic questions as: to what extent does international

law, rather than the legislation of the host state, govern expropriation? Do the rules of international

law prohibit expropriation which is discriminatory or which is not done for a public purpose? How

is compensation to be determined? A BIT resolves these issues as between the parties by regulating

the conditions under which expropriation may be carried out and compensation awarded (the sixth

advantage). Expropriation is prohibited if it is done in a discriminatory way or is not done for a

public purpose, some specifying that the purpose must be related to internal needs. But payment of

compensation for expropriation is required in any event. Because BITs are quite tightly drafted,

some host states have tried to get around the restrictions on expropriation by indirect means. Naked

expropriation is now unusual: physically taking over an oil field is just too crude. But discriminatory

treatment, or expropriation by indirect means, is still a problem, even in some developed

economies.

Onerous environmental requirements or discriminatory or penal tax regimes can also

amount to expropriation. Some governments have imposed new taxes which in practice apply only

to foreign investments, or which bear more heavily on foreign investors than on local businesses and

which significantly affect the value of the foreign investment. Arbitral awards have found such

methods amount to expropriation.

But the tables have been turned. Originally, BITs were seen as protecting investors from the

developed world from the governments of the third world. Now some developed countries, in

particular the United States, are being challenged by developing country investors over the

imposition of taxes or other unfair treatment of their investments. And they are using BITs to do

this.