International investment agreements:International investment agreements:key issues and featureskey issues and features

Thomas WestcottThomas Westcott

Legal AdvisorLegal AdvisorUNCTADUNCTAD

Topics for discussionTopics for discussion

1.1. Definitions and scopeDefinitions and scope

2.2. Admission and establishmentAdmission and establishment

3.3. Four pillars of protection:Four pillars of protection:− Standards of treatmentStandards of treatment− ExpropriationExpropriation− TransfersTransfers− Settlement of disputesSettlement of disputes

4.4. Liberalisation through NT and MFNLiberalisation through NT and MFN

5.5. TransparencyTransparency

Definitions and ScopeDefinitions and Scope

•Matter coverage: define those assets to which the treaty applies.

•Subject coverage: define those persons and legal entities to which the treaty applies.

•Geographical coverage: define the territory to which the treaty provisions apply.

•Temporal coverage: determine the date of entry into force of the IIA and its duration.

Scope of an IIAScope of an IIA

Definition of “investment”Definition of “investment”

Depending on purpose of treaty, two main approaches:Depending on purpose of treaty, two main approaches:

A.     Open-ended A.     Open-ended asset-based definitionasset-based definition : broad : broad protection protection

Including usually:Including usually:

Movable and immovable propertyMovable and immovable property Various types of interest in companies Various types of interest in companies Claims to money and claims under a contract having Claims to money and claims under a contract having

a financial valuea financial value Intellectual Property RightsIntellectual Property Rights Business concessions, including natural resources Business concessions, including natural resources

concessionsconcessions

Example of asset-based definitionExample of asset-based definition

BIT Ethiopia – Sudan 2000 Art. 1 DefinitionsBIT Ethiopia – Sudan 2000 Art. 1 Definitions

For the purpose of this Agreement: a) "Investment" means every kind of asset invested by Investors of one

Contracting Party in the territory of the other Contracting Party, in accordance with the laws and regulations of the latter, and in particular, though not exclusively, includes:

(i) movable and immovable and any other rights such as mortgages, liens or pledges;

(ii) Shares, stocks and debentures of companies or interests in the property of such companies;

(iii) claims to money or to other assets or any performance having an economic value,

(iv) intellectual and industrial property rights, including rights with respect to copy rights, patents, trade marks, trade names, industrial designs, trade secrets, technical processes and know-how and goodwill;

(v) business concessions conferred by Law or under contract, including concessions to search for, cultivate, extract or exploit natural resource;

A change in the form in which assets or capitals have been invested or reinvested shall not affect their designation as "Investments" for the purpose of this Agreement.

Definition of “investment”Definition of “investment”

BB.     Alternative definitions:.     Alternative definitions:

Closed list definition (finite list)Closed list definition (finite list)

Enterprise–based definitionEnterprise–based definition

Focus on the “business enterprise” or the “controlling interests in Focus on the “business enterprise” or the “controlling interests in a business enterprise”. Includes the establishment or acquisition a business enterprise”. Includes the establishment or acquisition of a business enterprise, as well as a share in a business of a business enterprise, as well as a share in a business enterprise, which gives the investor control over the enterpriseenterprise, which gives the investor control over the enterprise

Tautological definitionTautological definition

Definition of the term "investment" in economic terms. Covering Definition of the term "investment" in economic terms. Covering every asset that an investor owns and controls, directly or every asset that an investor owns and controls, directly or indirectly, that has the characteristics of an investment. Approach indirectly, that has the characteristics of an investment. Approach complemented by explicit exclusion of several kind of assetscomplemented by explicit exclusion of several kind of assets

Investment - key issuesInvestment - key issues

Claims of money:Claims of money: will all claims of money be covered? Even those will all claims of money be covered? Even those claims of money not related to FDI? What about payments derived from claims of money not related to FDI? What about payments derived from commercial transactions or from the sale of goods and services?commercial transactions or from the sale of goods and services?

Debt instruments:Debt instruments: will all debt instruments be covered? What about will all debt instruments be covered? What about those debt instruments with short-term maturity? Should there be a those debt instruments with short-term maturity? Should there be a minimum maturity term specified?minimum maturity term specified?

Intellectual property rights (IPRs):Intellectual property rights (IPRs): should a reference to a legal should a reference to a legal framework be included? Would only those IPRs provided in accordance framework be included? Would only those IPRs provided in accordance to domestic legislation be considered an investment? Those IPRs to domestic legislation be considered an investment? Those IPRs existing pursuant international agreements?existing pursuant international agreements?

State Contracts:State Contracts: need for special treatment in definitions or need for special treatment in definitions or substantive parts of the agreement.substantive parts of the agreement.

Exclusions:Exclusions: Public debt? Property acquired not for an economic activity Public debt? Property acquired not for an economic activity (i.e. (i.e. leisure houses)? Short term debt instruments?leisure houses)? Short term debt instruments?

Definition of “investor”Definition of “investor”

A. Natural personsA. Natural persons

Criteria of nationality Criteria of nationality Criteria of domicile or residenceCriteria of domicile or residence

Natural persons - exampleNatural persons - example

Nationality criterion: Nationality criterion:

BIT China - Germany, 2003,BIT China - Germany, 2003, Art. 1 Definitions Art. 1 Definitions 2. the term "investor" means (a) in respect of the Federal Republic of Germany: Germans within the meaning of the

Basic Law for the Federal Republic of Germany, (…) (b) in respect of the People’s Republic of China: natural persons who have the nationality

of the People’s Republic of China in accordance with its laws, (…)

BIT Uganda – Mozambique, Art. 1 DefinitionsBIT Uganda – Mozambique, Art. 1 Definitions

4. "investor" of a Contracting Party shall mean: a) any natural person who is a national of that Contracting Party in accordance with its

law…

Domicile or residence criterion: Domicile or residence criterion: BIT Canada -Argentina, 1991, Article 1- Definitions BIT Canada -Argentina, 1991, Article 1- Definitions

b) The term "investor" means (i) any natural person possessing the citizenship of or permanently residing in a Contracting Party in accordance with its

laws, (…) who makes the investment; (…).

Definitions - investorDefinitions - investor

B. Legal entitiesB. Legal entities

Criteria to determine the nationality of the legal Criteria to determine the nationality of the legal entity/investor: entity/investor:

Country of organization or incorporationCountry of organization or incorporation Country of seatCountry of seat Ownership and controlOwnership and control Denial of benefits clauseDenial of benefits clause: : (deny treaty protection to

those companies that are controlled by investors of a non-Party (particularly with which the host country does not maintain diplomatic relations) and/or that have no substantial business activities in the territory of the party under whose laws it is constituted)

Legal entities – example 1Legal entities – example 1

Criterion of the “seat”:Criterion of the “seat”:

BIT China - Germany, 2003 BIT China - Germany, 2003

Article 1: Definition Article 1: Definition

2. the term "investor" means (a) in respect of the Federal 2. the term "investor" means (a) in respect of the Federal Republic of Germany: any juridical person as well as any Republic of Germany: any juridical person as well as any commercial or other company or association with or without commercial or other company or association with or without legal personality legal personality having its seat in the territoryhaving its seat in the territory of the of the Federal Republic of Germany, irrespective of whether or not Federal Republic of Germany, irrespective of whether or not its activities are directed at profit; (…).its activities are directed at profit; (…).

Legal entities – example 2Legal entities – example 2

Criterion of ownership or control:Criterion of ownership or control:

Andean Community - Decision 291 Regime for theAndean Community - Decision 291 Regime for theCommon Treatment of Foreign Capital and Trademarks,Common Treatment of Foreign Capital and Trademarks,Patents, Licensing Agreements and Royalties Patents, Licensing Agreements and Royalties

Article 1: … Foreign Enterprise: Article 1: … Foreign Enterprise:

an enterprise incorporated or established in the recipient an enterprise incorporated or established in the recipient country, in which country, in which national investors own less than fifty one national investors own less than fifty one percent of the equity capitalpercent of the equity capital or, if more than that, in the or, if more than that, in the judgment of the competent national agency that judgment of the competent national agency that percentage is percentage is not reflected innot reflected in the technical, financial, the technical, financial, administrative and commercial administrative and commercial management management of the of the enterprise.enterprise.

Legal entities – example 3Legal entities – example 3

Example of combined criteria:Example of combined criteria:

BIT China - Germany, 2003BIT China - Germany, 2003

Article 1: Definition Article 1: Definition

2. the term "investor" means (b) in respect of the People’s2. the term "investor" means (b) in respect of the People’s

Republic of China: Republic of China:

economic entities, including companies, corporations, economic entities, including companies, corporations,

associations, partnerships and other organizations,associations, partnerships and other organizations,

incorporated and constituted under the laws and incorporated and constituted under the laws and regulations of and with their seats in the People’s Republic regulations of and with their seats in the People’s Republic of China, irrespective of whether or not for profit and of China, irrespective of whether or not for profit and whether their liabilities are limited or not.whether their liabilities are limited or not.

Legal entity – example 4Legal entity – example 4

Extent of treaty protection:Extent of treaty protection:

US BIT Model, 2004US BIT Model, 2004

Article 17: Denial of Benefits Article 17: Denial of Benefits

2. A Party may deny the benefits of this Treaty to an investor 2. A Party may deny the benefits of this Treaty to an investor of the other Party that is an enterprise of such other Party of the other Party that is an enterprise of such other Party and to investments of that investor if the enterprise has no and to investments of that investor if the enterprise has no substantial business activities in the territory of the other substantial business activities in the territory of the other Party and investors of a non-Party, or of the denying Party, Party and investors of a non-Party, or of the denying Party, own or control the enterprise.own or control the enterprise.

Admission and EstablishmentAdmission and Establishment

Admission of foreign investmentAdmission of foreign investment Traditionally, right of States to control and limit Traditionally, right of States to control and limit

addmission. Recent trend towards States deciding addmission. Recent trend towards States deciding to limit this right.to limit this right.

Two approaches in IIAs:Two approaches in IIAs:

Admission modelAdmission model: entry in accordance with laws : entry in accordance with laws and regulations of the host country: NO and regulations of the host country: NO LIBERALIZATIONLIBERALIZATION

Pre-establishment modelPre-establishment model: right of establishment. : right of establishment. National treatment at the pre-establishment stage National treatment at the pre-establishment stage (approach of western hemisphere, Japan, Korea): (approach of western hemisphere, Japan, Korea): LIBERALIZATION : removal of barriers to accessLIBERALIZATION : removal of barriers to access

Admission modelAdmission model

Host country discretion: laws and Host country discretion: laws and regulations relating to entry may changeregulations relating to entry may change

Once admitted, foreign investment is Once admitted, foreign investment is granted NT and MFNgranted NT and MFN

No exceptions in the treaty: no need.No exceptions in the treaty: no need.

Australia – India BITAustralia – India BIT

1. Each Contracting Party shall encourage and promote favourable 1. Each Contracting Party shall encourage and promote favourable conditions for investors of the other Contracting Party to make conditions for investors of the other Contracting Party to make investments in its territory. Each Contracting Party investments in its territory. Each Contracting Party shall admit shall admit such investments in accordance with its laws and investment such investments in accordance with its laws and investment policiespolicies applicable from time to time. applicable from time to time.

Tanzania – Netherlands BIT (2001) Tanzania – Netherlands BIT (2001)

Art 2 Promotion and Protection of InvestmentsArt 2 Promotion and Protection of Investments

“Each Contracting Party shall within the framework of its laws and “Each Contracting Party shall within the framework of its laws and regulations, promote economic cooperation through the protection regulations, promote economic cooperation through the protection in its territory of investments of investors of the other Contracting in its territory of investments of investors of the other Contracting party. party. Subject to its right to exercise powers conferred by its laws Subject to its right to exercise powers conferred by its laws or regulations, each Contracting Party shall admit such or regulations, each Contracting Party shall admit such investmentsinvestments.”.”

Examples of admission model: Examples of admission model:

Pre-establishment modelPre-establishment model NT and MFN at all stages of the investment, NT and MFN at all stages of the investment,

including at the pre-establishment stage: including at the pre-establishment stage: ‘establishment, acquisition and expansion’.‘establishment, acquisition and expansion’.

Lists of exceptions: all countries have closed Lists of exceptions: all countries have closed sectors or non conforming measures.sectors or non conforming measures.

Mostly negative lists. Very few exceptions (TAFTA)Mostly negative lists. Very few exceptions (TAFTA)

The commitment is made in the Treaty, the The commitment is made in the Treaty, the national laws must be in conformity with Treaty national laws must be in conformity with Treaty obligations.obligations.

Establishment of investment Establishment of investment Each contracting Party shall permit establishment of a new business enterprise or Each contracting Party shall permit establishment of a new business enterprise or acquisition of an existing business enterprise or a share of such enterprise by acquisition of an existing business enterprise or a share of such enterprise by investors or prospective investors of the other Contracting Party on a basis no less investors or prospective investors of the other Contracting Party on a basis no less favorable than that which, in like circumstances, it permits such acquisition or favorable than that which, in like circumstances, it permits such acquisition or establishment by:establishment by: (a) investors or prospective investors of any third state; (a) investors or prospective investors of any third state; (b) its own investors or prospective investors. (b) its own investors or prospective investors.

Treatment of Established Investment Treatment of Established Investment  1. Each Contracting Party shall grant to investments and to returns of investors of  1. Each Contracting Party shall grant to investments and to returns of investors of the other Contracting Party treatment no less favourable than that which, in like the other Contracting Party treatment no less favourable than that which, in like circumstances, it grants to investments and returns of: circumstances, it grants to investments and returns of:  (a) investors of any third State; (a) investors of any third State; (b) its own investors. (b) its own investors.  

Each Contracting Party shall grant investors of the other Contracting Party, as regards Each Contracting Party shall grant investors of the other Contracting Party, as regards the enjoyment, use, management, conduct, operation, expansion, and sale or other the enjoyment, use, management, conduct, operation, expansion, and sale or other disposition of their investments or returns, treatment no less favourable than that disposition of their investments or returns, treatment no less favourable than that which, in like circumstances, it grants to: (a) investors of any third State; (b) its own which, in like circumstances, it grants to: (a) investors of any third State; (b) its own

investors.investors.

Pre-establishment NT and MFN modelPre-establishment NT and MFN modelCanada-Lebanon BITCanada-Lebanon BIT

Fair and Equitable TreatmentFair and Equitable Treatment

1. Fair and Equitable Treatment1. Fair and Equitable Treatment

Absolute standard (not relative)Absolute standard (not relative)

3 approaches:3 approaches:

• Stand alone FETStand alone FET

• FET in accordance with the principles of FET in accordance with the principles of international law international law

• FET combined with MFN/NTFET combined with MFN/NT

Dutch model BIT

“1. Each Contracting Party shall ensure fair and equitable treatment of the investments of nationals of the other Contracting Party and shall not impair, by unreasonable or discriminatory measures, the operation, management, maintenance, use, enjoyment or disposal thereof by those nationals. Each Contracting Party shall accord to such investments full physical security and protection. …”

Kenya – United Kingdom BIT (1999), Art. 2 Promotion and Protection of Investment

“(2) Investments of nationals or companies of each Contracting Party shall at all times be accorded fair and equitable treatment and shall enjoy full protection and security in the territory of the other Contracting Party. Neither Contracting Party shall in any way impair by unreasonable or discriminatory measures the management, maintenance, use, enjoyment or disposal of investments in its territory of nationals or companies of the other Contracting Party”

 

Fair and Equitable Treatment: Fair and Equitable Treatment: examples examples

  

  

Fair and Equitable Treatment: Fair and Equitable Treatment: examplesexamples

Uganda – Eritrea BIT (2001), Article 3 Treatment of Investment

(1). Each Contracting Party shall in its territory accord to investments made by investors of the other Contracting Party fair and equitable treatment which in no case shall be less favourable than that accorded to its own investors or to investors of any third state, whichever is the more favourable from the point of view of the investors.

(2) Each Contracting Party shall in its territory accord investors of the other Contracting Party, as regards their management, maintenance, use, enjoyment or disposal of their investment, fair and equitable treatment which in no case shall be less favourable than that accorded to its own investors or to investors of any third State, whichever of these standards is the more favourable from the point of view of the investor.

2. International Minimum Standard of 2. International Minimum Standard of TreatmentTreatment

Content of the clause in US and Canadian treatiesContent of the clause in US and Canadian treaties Clarification of the standardClarification of the standard Explicit reference to international customary law (ICL)Explicit reference to international customary law (ICL)

Relationship with other standardsRelationship with other standards Explicit clarification that the violation of any other obligation of the Explicit clarification that the violation of any other obligation of the

agreement does not entail the violation of the minimum standard agreement does not entail the violation of the minimum standard of treatment – Same issue for State Contracts.of treatment – Same issue for State Contracts.

1. Each Party shall accord to covered investments treatment in accordance with customary international law, including fair and equitable treatment and full protection and security.  2. For greater certainty, paragraph 1 prescribes the customary international law minimum standard of treatment of aliens as the minimum standard of treatment to be afforded to covered investments. The concepts of “fair and equitable treatment” and “full protection and security” do not require treatment in addition to or beyond that which is required by that standard, and do not create additional substantive rights. The obligation in paragraph 1 to provide:  (a) “fair and equitable treatment” includes the obligation not to deny justice in criminal, civil, or administrative adjudicatory proceedings in accordance with the principle of due process embodied in the principal legal systems of the world; and (b) “full protection and security” requires each Party to provide the level of police protection required under customary international law.

3. A determination that there has been a breach of another provision of this Treaty, or of a separate international agreement, does not establish that there has been a breach of this Article.  

 

Fair and Equitable Treatment Fair and Equitable Treatment US model BIT(2004)US model BIT(2004)

ExpropriationExpropriation

Expropriation protectionExpropriation protection

Content of the clauseContent of the clause Several categories of takings: Several categories of takings:

• expropriations,expropriations,• nationalizations, nationalizations, • direct or indirectdirect or indirect• Regulatory takings: measures tantamount to Regulatory takings: measures tantamount to

expropriationexpropriation• Creeping expropriationsCreeping expropriations

Conditions for the expropriation to be lawful:Conditions for the expropriation to be lawful: Public purposePublic purpose Non-discriminationNon-discrimination Due process of lawDue process of law CompensationsCompensations

Possible standards of compensation:

The Hull formula (prompt, adequate, effective) Appropriate compensation Different valuation methods: book-value method,

discounted cash-flow method,..

Expropriation and Regulatory Takings: Necessary clarification of the obligation

General exception: public health and safety. The right to regulate for public purpose.

Expropriation - compensationExpropriation - compensation

Expropriation protection: Expropriation protection: Uganda – Eritrea BIT (2001)Uganda – Eritrea BIT (2001)

Article 4 Expropriation

(1) Investments of each Contracting Party shall not be nationalised, expropriated or subjected to measures having effect equivalent to nationalisation or expropriation (hereinafter referred to as ‘’expropriation’’) in the territory of the other Contracting Party except for expropriations made in the public interest, on a basis of non-discrimination, carried out under due process of law, and against prompt, adequate and effective compensation.

(2) Such compensation shall amount to the fair market value of the investment expropriated immediately before the expropriation or impending expropriation became known in such a way as to affect the value of the investment. The fair market value shall include but not exclusively the net asset value thereof as certified by an independent firm of auditors.

(3) Compensation shall be paid promptly and include interest at a commercial rate established on a market basis from the date of expropriation until the date of payment.

Uganda – Eritrea BIT (2001) cont.Uganda – Eritrea BIT (2001) cont.

(4) The expropriated investor shall have a right to prompt review under the law of the Contracting Party making the expropriation, by a judicial or other competent and independent authority of the Contracting Party, of its case, of the value of investment, and of the payment of compensation, in accordance with the principles set out in paragraph 1 of this Article.

(5) When a Contracting Party expropriates the assets of a Company or an enterprise in its territory, which is incorporated or constituted under its law, and in which investors of other Contracting Party have an investment , including shareholding, the provisions of this Article shall apply to ensure prompt, adequate and effective compensation for those investors for any impairment or diminishment of the fair market value of such investment resulting from the expropriation.

TransfersTransfers

Free Transfer of FundsFree Transfer of Funds

Two types of transfers: inward and Two types of transfers: inward and outward.outward.

ExceptionsExceptions BOP safeguards: temporary BOP safeguards: temporary

derogationsderogations Transitional provisions: maintaining Transitional provisions: maintaining

existing restrictions.existing restrictions.

South Africa – Mauritius BIT (1998) 1. Each Contracting Party shall allow investors of the other Contracting Party the free

transfer of payment relating to their investments and returns, which shall include in particular, though not exclusively -

(a) profits, capital gains, dividends, royalties, interest, and other current income accruing from any investment;

(b) the proceeds of the total or partial liquidation of any investment; (c) repayments made pursuant to a loan agreement in connection with investments; (d) licence fees in connection to matters in Article 1(1)(b); (e) payment in respect of technical assistance, technical services and management

fees; (f) payments in connection with contracting projects; (g) earnings of nationals of the other Contracting Party who work in connection with

an investment in the territory of the Contracting Party; (h) compensation paid pursuant to the provisions of Articles 4 and 5. 2. All transfers shall be effected without undue delay in any convertible currency at the

market rate of exchange applicable on the date of transfer. In the absence of a market for foreign exchange, the rate to be used will be the most recent exchange rate applied to inward investments or the most recent exchange rate for conversion of currencies into Special Drawing Rights, whichever is the more favourable to the investor.

Free Transfer of FundsFree Transfer of Funds

Dispute SettlementDispute Settlement

Two types of Dispute Two types of Dispute Settlement mechanismsSettlement mechanisms

State-to-State: State-to-State: applies only between State partiesapplies only between State parties to to the Agreement.the Agreement.

(like the DSU in the WTO, the ASEAN DSB) (like the DSU in the WTO, the ASEAN DSB)

Investor-to-State: Investor-to-State: allows private investors to submit allows private investors to submit claims against a host State to international arbitrationclaims against a host State to international arbitration

(eg. NAFTA and BITs)(eg. NAFTA and BITs)

Most IIAs contain both types of mechanismsMost IIAs contain both types of mechanisms

Investor-to-State mechanism Investor-to-State mechanism

• Consultations and negotiations (time-period)• Most IIAs do not require exhaustion of local remedies• In some, resort to local courts precludes subsequent submission

to international arbitration: the fork in the road.• Direct resort to international arbitration (institutional or ad hoc):

ICSID ConventionAd hoc arbitration following UNCITRAL Arbitration Rules

Investor-to-State mechanism Investor-to-State mechanism

• Constitution of tribunal (as per arbitral rules)• Applicable law: IIA’s provisions; law of the host-State;

investment contract, rules of international law.ICSID Convention (Article 42): absent agreement between parties, the tribunal shall apply the law of the host State and the applicable rules of international law.

• Arbitral awards: final and binding, but require exequatur (except in the case of ICSID awards)ICSID Members shall recognize and enforce the awards in their territory as if they were final judgements of a State court

NT and MFNNT and MFN

Non discrimination: NT and Non discrimination: NT and MFNMFN

National treatment: grant foreign National treatment: grant foreign investors, in like circumstances, investors, in like circumstances, treatment no less favourable than treatment no less favourable than the treatment of nationals.the treatment of nationals.

Most-favoured-nation treatment: Most-favoured-nation treatment: treat all foreign investors alike. No treat all foreign investors alike. No discrimination among foreign discrimination among foreign investors on the basis of nationality.investors on the basis of nationality.

National TreatmentNational Treatment

1. The application “de jure” and “de facto” of 1. The application “de jure” and “de facto” of the standardthe standard

Most agreements do not specifically limit the Most agreements do not specifically limit the scope of the national treatment standard only to scope of the national treatment standard only to a “de jure” test. Thus, jurisprudence has found a “de jure” test. Thus, jurisprudence has found that the standard applies both to “de jure” and that the standard applies both to “de jure” and “de facto” discrimination.“de facto” discrimination.

Approach may have a positive effect in fostering Approach may have a positive effect in fostering discipline in the domestic application of discipline in the domestic application of legislationlegislation

However, it is important to examine However, it is important to examine administrative practice and existing legislation administrative practice and existing legislation that may have a “de facto” discriminatory impact that may have a “de facto” discriminatory impact on foreign investment.on foreign investment.

2. Treatment “in like circumstances”2. Treatment “in like circumstances”Comparison requires a comparator.Comparison requires a comparator.

3. Best “in state treatment”3. Best “in state treatment”

When negotiating with countries having federal systems of When negotiating with countries having federal systems of government, a situation may arise when one subnational government, a situation may arise when one subnational unit discriminates among other subnational units from the unit discriminates among other subnational units from the same country. same country.

Important to ensure that the National Treatment standard Important to ensure that the National Treatment standard applies with respect to a regional level of government, applies with respect to a regional level of government, treatment no less favourable than the most favorable treatment no less favourable than the most favorable treatment accorded, in like circumstances, by that regional treatment accorded, in like circumstances, by that regional level of government to investments or investors of the level of government to investments or investors of the Party from which it forms a part. Party from which it forms a part. 

National TreatmentNational Treatment

4. Exceptions and reservations to national treatment

General exceptionsGeneral exceptions based on reasons of public health, order and based on reasons of public health, order and morals, and national security. Such exceptions are present in most morals, and national security. Such exceptions are present in most regional and multilateral investment agreements, and also in a regional and multilateral investment agreements, and also in a number of BITs. number of BITs.

Subject-specificSubject-specific exceptions which exempt specific issues from exceptions which exempt specific issues from national treatment, such as intellectual property, taxation national treatment, such as intellectual property, taxation provisions in bilateral tax treaties, prudential measures in financial provisions in bilateral tax treaties, prudential measures in financial services or temporary macroeconomic safeguards. services or temporary macroeconomic safeguards.

Country-specific exceptionsCountry-specific exceptions whereby a contracting party reserves whereby a contracting party reserves the right to differentiate between domestic and foreign investors the right to differentiate between domestic and foreign investors under its laws and regulations – in particular, those related to under its laws and regulations – in particular, those related to specific industries or activities – for reasons of national economic specific industries or activities – for reasons of national economic and social policy. Country-specific exceptions may overlap with and social policy. Country-specific exceptions may overlap with subject-specific exceptions.subject-specific exceptions.

National TreatmentNational Treatment

MFN TreatmentMFN Treatment

Additional specific issues:

The Maffezzini jurisprudence and The Maffezzini jurisprudence and subsequent casessubsequent cases

Free rider issue: is there a free-rider Free rider issue: is there a free-rider problem in investment policy?problem in investment policy?

REIO and other exceptions: taxation, other REIO and other exceptions: taxation, other investment agreements.investment agreements.

Other IssuesOther Issues

TransparencyTransparency

Other issuesOther issues

• Governmental measures: home country measures, host country operational measures (limitation to operations and performance requirements), incentives

• Entry and sejourn of key foreign personel• Transparency• Environment and labour • Implementation issues: ratification, entry into force,

enactment/implementation of treaty obligations into national legislation, management of investment disputes

Transparency in IIAsTransparency in IIAs

1.1. Identify the actors of transparency Identify the actors of transparency obligations:obligations:

• Host countryHost country• Home countryHome country• InvestorInvestor

2.2. Content of the transparency obligation:Content of the transparency obligation:

• Degree of intrusiveness of transparency measures Degree of intrusiveness of transparency measures into the national legal system.into the national legal system.

TransparencyTransparency

3.3. Modalities for the implementation of Modalities for the implementation of transparency obligations:transparency obligations:

• Consultation and exchange of informationConsultation and exchange of information• Making information publicly availableMaking information publicly available• Answering request for informationAnswering request for information• Notification requirementsNotification requirements• Modalities can be voluntarily, binding, Modalities can be voluntarily, binding,

reciprocal, unilateral, ad hoc or be part of a reciprocal, unilateral, ad hoc or be part of a on-going processon-going process

TransparencyTransparency

4.4. Timing- Timely implementation of Timing- Timely implementation of transparency transparency

5.5. Exceptions and safeguards: Exceptions and safeguards: • National security and defenseNational security and defense• Legislative or judiciary processLegislative or judiciary process• Confidentiality of business informationConfidentiality of business information

6.6. Recent developments in IIAs:Recent developments in IIAs:• Transparency in the negotiation processTransparency in the negotiation process• Transparency in dispute settlement proceduresTransparency in dispute settlement procedures

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UNCTAD’s IIA work programmeUNCTAD’s IIA work programme

Research and policy analysis:Research and policy analysis: 11stst Series on issues in IIAs (28 booklets): completed Series on issues in IIAs (28 booklets): completed 22ndnd Series on international investment policies for Series on international investment policies for

development: on-goingdevelopment: on-going

E-tools:E-tools: BIT database (2,000 texts available)BIT database (2,000 texts available) Country list of BITsCountry list of BITs Compendium of international investment instruments Compendium of international investment instruments

(selection of relevant instruments and model agreements)(selection of relevant instruments and model agreements) Database of investment dispute casesDatabase of investment dispute cases Network of IIA Experts to exchange information and Network of IIA Experts to exchange information and

experiences (600 members)experiences (600 members)

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UNCTAD’s IIA work programmeUNCTAD’s IIA work programme

Technical assistance:Technical assistance: The distance-learning course on key issues in IIAs The distance-learning course on key issues in IIAs

(5 modules) in 5 languages(5 modules) in 5 languages The regional training sessions for IIA negotiators (including The regional training sessions for IIA negotiators (including

a negotiation skills workshop)a negotiation skills workshop) The advanced training courses on managing investment The advanced training courses on managing investment

disputesdisputes National and regional seminars on IIAs (tailor-made at the National and regional seminars on IIAs (tailor-made at the

request of countries or regional organizations)request of countries or regional organizations) Ad hoc advisory servicesAd hoc advisory services Facilitation of BIT negotiations and BIT signing Facilitation of BIT negotiations and BIT signing

ceremoniesceremonies