The IISD Model International Agreement on Investment for Sustainable Development: Assessing Progress at Three Years OECD Global Forum on Investment VII 28 March 2008 Howard Mann Senior International Law Advisor International Institute for Sustainable Development www.iisd.org/investment
Agenda Why did IISD undertake the development of the Model Agreement? The MA and the discourse on IIA regime Key principles in the MA Self-assessment of progress, and lack of progress, to date Panel assessments of progress, and lack of progress to date Discussion Introduction to IISD project on investment incentives and subsidies
Why did IISD Undertake the Model Agreement? Basic Understanding: Sustainable development is an investment problem Achieving SD tomorrow is based on investments made today Current regime does not address this at all International investment law is part of public international law on globalization Need to show an alternative vision is possible Answer the so you think you can do better sayers Need to establish a basis for a new discourse, an agenda for a new discourse
The Model Agreement and the discourse on IIA regime IISD Model Agreement is only alternative vision still Over 40,000 web site hits on text since 2005 Three languages, third printing coming in English Dozens of presentations, conferences, around world Including multiple governmental presentations Columbia U. conference, OCT 2007, IGOs recognize need for changes in regime References in a growing number of articles, books Multiple law school investment courses Subject of LLM and Ph.D. theses OECD Investment committee! Major support to IISD capacity building and capacity provision work
Key Principles of the MA Objective made clear: Promote Investment for Sustainable Development Focus on quality, not quantity of investment Benefits for local economic and social development Minimization/elimination of negative impacts Designation of appropriate rights and obligations for government and business IISD Guideposts, 2005 Model Agreement: transparency, accountability, legitimacy (equitable)
Key Principles: Rights and Obligations Comprehensive: Expressly include rights and obligations of foreign investors, host states and home states No hierarchy of investor rights over others Must reflect full impact of investments, not just enable them Rights and obligations must be aimed at SD, not investment environment Need for sound and evolving SD strategies and regulations, not deregulation, especially in developing countries
For. Investor Rights and Obligations Rights Obligations Foreign Investor Good governance agenda for investors, investment National treatment Most favoured nation Minimum international standards No expropriation w/o compensation Senior management Transfer of assets * IISD: More developed text, less room for vagueness Minimalist language does not mean minimalist obligations, has led to expansive interpretations e.g. on expropriation, NT Comply with local laws Pre-establishment impact assessment Anti corruption Environmental management/international environmental obligations Human rights protection Core labour standards Provision and publication of information CSR (most economic, social) Investor liability Tie it to investor-state for enforceability *DO WE HAVE ENOUGH?
Key Principles: Dispute Settlement Goals: Dispute settlement as part of a public international law regime, not just ad-hoc dispute settlement GATT/WTO: 125 cases before permanent system with appeals Investor-state: now over 300 cases we know of Independent, Transparent and Accountable Subject to Rule of Law: appeals, accountable, correctness as a standard
Key principles: institutional framework Focus on regime building for SD, not for dispute settlement for investor rights Multilateral regime, regional or bilateral Conference of the Parties Secretariat Technical assistance committee on promoting investment for SD Financial mechanism Dispute settlement body: oversee arbitration process like in WTO Legal Assistance Centre National contact points OECD Guidelines type complaint role
Progress on objectives In treaties: Some evidence of change in BITs, growing inclusion of goal of SD in preambles, slow but steady COMESA CCIA regional agreement EPA negotiations Commonwealth project now In Arbitrations: Some recent cases argue away from initial default of most favourable interpretation for investor, more balance observable
Progress on rights and obligations In treaties: Rights: clear move to better definition of investor rights, away from minimalist language Better statements on state right to regulate w/o compensation Obligations: Slight progress: compliance with local laws No inclusion of obligations on foreign investors yet (corruption?) COMESA CCIA: built in future agenda on SD investor responsibilities ( Pacific and Caribbean initial draft negotiating texts reflect IISD approach In Arbitrations: Corruption vitiates right to remedies More recognition of state rights to regulate, degree and balance is disputed (Methanex v. Metalclad, eg) Decisions remain divergent, irreconcilable
Progress in dispute settlement In treaties: More transparency generally, US and Canadian led COMESA CCIA: full transparency in state-state and investor-state Caribbean and Pacific draft negotiating texts ICSID revision partial success UNCITRAL Rules battle now Arbitrators, lawyers in arbitrations now leading opposition, reducing own accountability Appeal, recognized in some treaties as a possible need In arbitrations: Transparency accepted in some ways Degree varies, enthusiasm varies, large role of parties
Progress in institutional framework In Treaties: More reflection of role of parties, NAFTA interpretative statement approach COMESA, regional institutional framework established, forward looking agenda Multilateral idea stalled, no existing forum (UNFCC-type option?) In arbitrations: Some battling over investor-state arbitrations between arbitration centres It appears some rules, bodies selling confidentiality as a virtue to use them US agreements recognize potential need for appellate process