UNCTAD'sInvestment Policy Framework for

Sustainable Development(IPFSD)

International Investment Agreements – Balancing Sustainable Development and Investment

Protection

10-11 October 2013, Berlin

Elisabeth Tuerk, Officer-in-ChargeInternational Investment Agreements (IIAs) Section

Investment and Enterprise Division (DIAE)UNCTAD

UNCTAD’s IPFSD: Why now?

1. Evolving global investment landscape for a new investment-development paradigm/path

2. Imperative for mainstreaming sustainable development into the investment policy core

3. Investment policy making at a crossroads: at times of reflection, review and revision  

4. Challenges of systemic flaws, issues of policy coherence, synergy and effectiveness

Need guidelines and tools

Foreign direct investment is the largest source of development finance

FDI, remittances and ODA to developing economies, 2000-2012(Billions of dollars)

Developing economies surpass developed economies as FDI recipients for the first time

FDI inflows by group of economies, 1995 – 2012(Billions of dollars)

0

500

1 000

1 500

2 000

2 500

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

52%

World total

Developing economies

Transition economies

Developed economies

42%

4

SUSTAINABLEDEVELOPMENT

Imperative for mainstreaming sustainable development into the investment policy core

Changes in national investment policies, 2000 – 2012(Per cent)

Investment policy making at a crossroads: Most countries remain keen to attract FDI while becoming

more selective and reinforcing regulatory frameworks

0

25

50

75

100

94%

Liberalization/promotion 75%

6%

Restriction/regulation 25%

12

Investment policy making at a crossroads: The number of newly signed IIAs continues to decline

Trends in IIAs, 1983–2012

The current three-year average of one new IIA per week is considerably lower than the 4 new IIAs per week average of the mid-1990s.

A record number of 58 new ISDS cases were initiated in 2012

Known ISDS cases, 1987-2012

58 new ISDS claims in 2012 - the highest number for a single year.Total number of known cases at the end of 2012: 514.

UNCTAD’s IPFSD: Why now?

1. Evolving global investment landscape for a new investment-development paradigm/path

2. Imperative for mainstreaming sustainable development into the investment policy core

3. Investment policy making at a crossroads: at times of reflection, review and revision  

4. Challenges of systemic flaws, issues of policy coherence, synergy and effectiveness

Need guidelines and tools

UNCTAD'sInvestment Policy Framework for Sustainable Development

(IPFSD)

IPFSD

HolisticPlacing sustainable development at the core

SystemicAddressing all dimensions of investment policy

SynergisticFostering interaction with relevant national and international policies

IPFSD: Key characteristics

IPFSD helps policymakers address today’s investment policy challenges

IPFSD: Structure & components

…overarching objective of investment policymaking …Investment for sustainable development1

…involving all stakeholders … standards of public governance …predictable, efficient and transparent procedures for investorsPublic governance and institutions3

…adequate protection to established investors … non-discriminatoryInvestment protection and treatment8

…aligned with sustainable development goals … minimize risk of harmful competition for investment

Investment promotion and facilitation 9

…address shared investment-for-development challenges … avoid investment protectionism

International cooperation 11

…grounded in a country’s overall development strategy … coherent and synergetic …

Policy coherence2

…regular reviews for effectiveness and relevance …Dynamic policymaking 4

…setting out rights and obligations of States and investors in the interest of development

Balanced rights and obligations5

…in the interest of the public good and to minimize potential negative effects

Right to regulate6

…in line with development strategy … open, stable and predictable entry conditions …Openness to investment7

…promote adoption of and compliance with best international practices of CSR …

Corporate governance and responsibility 10

IPFSD: Core principles for investment policymaking

How national investment policymaking works in the IPFSD

The challenges of international investment policymaking

International investment policymaking: 3 levels

• Formulating a strategic approach to international engagement on investment

– Integrating IIAs into a country's development strategy– Understanding what IIAs can and cannot do

• Designing sustainable development friendly IIA clauses– What type of agreement (BIT or FTA)– What type of relationship (bilateral or regional)– With whom

• Engaging in multilateral consensus building

IIA table of elements in the IPFSD: How it works

An excerpt from the IPFSD framework

Examples of IPFSD policy options

• Carefully craft scope and definitions clause.

• Structure FET as an exhaustive list of State obligations.

• Distinguish legitimate regulations from regulatory takings.

• Make full protection and security commensurate with a country’s level of development.

• Limit the scope of the transfer of funds clause.

• Include exceptions to protect human rights, health, labor standards, and the environment.

• Consider, in light of host country’s quality of judicial and administrative system, no ISDS, or last resort ISDS jurisdiction.

• Create an institutional setup that makes the IIA adaptable to changing development contexts.

Reference for policy making: a "policy at a glance" for politicians, a handbook for

national policy makers, and “checklist of options” for treaty negotiators

Tool for technical assistance: framework for IPRs, basis for updating regulatory

regimes, menu for training, a handbook for general advisory services

Basis for consensus-building:

• Short-term: promoting common understanding on key issues related to investment

for sustainable development;

• Longer-term: a stepping stone for formulating common denominators of multilateral

cooperation

Living framework for all stakeholders to contribute: "open source“ on the web and

discussion forum for best practices.

IPFSD: What for? End-use

IPFSD – What for? End-use and next steps

Growing tendency to craft treaties in line with sustainable development objectives

By the end of 2013, more than 1,300 BITs will be at the stage where they could be terminated or renegotiated at any time

Cumulative number of BITs that can be terminated or renegotiated

Treaty expiration provides window of opportunity for improving the IIA regime. Countries need to analyse the pros and cons of treaty termination and its implication for the overall investment climate and existing investments.

Source : UNCTAD

The Investment Policy Hub and the IPFSD

UNCTAD websites:www.unctad.org/diae

www.unctad.org/wirwww.unctad.org/fdistatistics

The Investment Policy Hub:http://investmentpolicyhub.org

@unctadwif

THANK YOU!