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The Limitation on Sovereign Regulatory Autonomy and Internationalization of Investment Protection by Treaty: An African Perspective

Published online by Cambridge University Press:  29 October 2015

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Abstract

This article contextualizes the debate about the implications of the investment treaty regime for regulatory autonomy. It points out that, to understand why the investment treaty regime limits sovereign powers and to be able to reconstruct a regime to make it responsive to the needs of both foreign investors and host countries, it is necessary to revisit the history of investment protection by treaty and assess the terms of investment treaties in relation to that history. The article argues that investment protection by treaty was primarily aimed at protecting the private business interests of investors from the developed world who invested abroad. This overarching historical objective influenced the terms of investment treaties. This is manifested in the terms of classical investment treaties which provide for absolute rights for foreign investors. The article calls for the reconstruction of investment treaties to make room for public interest regulation.

Type
Research Article
Copyright
Copyright © SOAS, University of London 2015 

INTRODUCTION

“It is difficult to understand the [bilateral investment treaty] generation without looking first at [its] … broader historical picture.”Footnote 1

“What I am about to say may have been said many times before, here and there, hidden in tombs of decisions and dusty volumes. An occasional scholar has even attempted to express these basic premises within the confines of one treatise … Nevertheless, all these efforts, and especially those partial glimpses of eternal truth which are spread on dog-eared pages of yellowing books, have left most readers somewhat unsatisfied.”Footnote 2

These quotations highlight the point that, although much may be written on a subject, much may still remain hazy and confused or mixed up about the subject and the way ahead, if efforts are not made to understand the subject in its proper context. The same can be said about international investment treaties and the debate about their implications for states’ policy space and regulatory autonomy. Much ink has been spilt on the adequacy and future of international investment treaties and arbitration.Footnote 3 Existing legal scholarship has focused on the inability of investment arbitration appropriately to strike the so-called “balance” between investors’ rights and the protection of larger community interests. Indeed, the key debate to engage the attention of investment law scholars and policy-makers has been the role of investment law and arbitration in protecting legitimate investment interests without compromising the obligations and rights of states to protect the public interest.

This article, through historical and interpretive analysis, addresses the question of the ability of international investment treaties and arbitration to respond simultaneously to states’ needs for policy space and regulatory autonomyFootnote 4 to protect the public interest, and the protection of foreign investment and investors’ rights. Is it possible to construct an international investment law and arbitration system that can guarantee investment protection and at the same time leave states with the policy flexibility and regulatory autonomy to protect broader societal non-investment interests, without considering the history of the international investment regime? Are international investment treaties not primarily intended to restrict governmental regulation in the interest of foreign investment protection? Can international investment treaties, given their history, terms and objectives, achieve any effect other than to limit governmental regulation? This article argues that, not only is it difficult to understand the investment treaty framework “without looking first at the broader historical picture”Footnote 5 of the treaty framework, but it is even more difficult to appreciate the relationship between foreign investment treaties and arbitration on the one hand, and policy space and regulatory autonomy on the other, without situating the debate within the historical context of investment treaty law and arbitration.

It is fundamental to address the question of whether investment treaties are both theoretically and practically necessary at all. Historically, investment treaties were designed in response to the concerns of foreign investors and their home countries over political and regulatory risks, such as expropriation and nationalization.Footnote 6 Investment treaties were thus aimed at limiting states’ regulatory actions at their very inception. Therefore, the more compelling issue is whether, given the history and objectives of investment treaties, they can ever have an effect other than to limit states’ regulatory autonomy. Admittedly, much has been written about the history of investment treaty law and arbitration.Footnote 7 However, existing historical narratives present, in the words of Professor Mueller, only “glimpses of internal truth”.Footnote 8

It is well settled that investment treaties and the international investment dispute settlement system constrain or have the potential to limit the policy choices of states. An attempt to understand the relationship between investment treaties, the international investment dispute settlement system and states’ policy choices “must start with an inquiry into the historical context and conditions”Footnote 9 within which investment treaty arbitration was constructed.Footnote 10 In assessing the issue of imbalance between investors’ interests and sovereign prerogatives in international investment law, existing scholarship has presented partial glimpses of the internal truth because it has focused mainly on the actual or perceived cases of failure of the investor-state arbitral system. It is argued, in the main, that investment arbitration leads to a shift away from the host states’ position of ultimate control over national affairs, since arbitration often results in scrutiny of domestic laws and practices in the light of treaty rules.Footnote 11 This scrutiny covers sensitive domestic measures, including environmental protection, resource conservation, public health, banking reforms, revocation of permits, measures adopted in response to economic crises, termination of concession contracts and application of tax laws.Footnote 12 This concern about the impact of investment treaty law and arbitration on regulatory autonomy has generated significant controversies manifested in a “rising backlash … characterised by a reevaluation on the part of both developed and developing countries”.Footnote 13 In these significant controversies, little attention is paid to the historical context of international investment treaties, and how that history has informed their terms and conditioned the way the investor-state arbitral system has functioned and will function in the future. An examination of the manner in which the investment treaty regime was established and the aims it was supposed to achieve will better illuminate what may be termed “bias” in the international investment system: who wins, who loses, and why. An understanding of the origin and development of the international investment protection regime is also “critical to evaluating the challenges for countries … posed by that system as well as the prospects for effectively addressing them”.Footnote 14

In sum, this article argues that the internationalization of foreign investment protection by treaty and arbitration was primarily aimed at protecting the private business interests of investors from the developed world who invested abroad. This overarching historical objective to advance private foreign investment interests greatly influenced the nature of the terms of investment treaties. As the international investment regime was constructed then and largely exists now, neither is it aimed at protecting the interests of both foreign investors and states, nor do the terms of treaties allow this objective to be achieved. As demonstrated below, given the history, objectives and terms of investment treaties and investment arbitration, they cannot have had any different effect than to limit states’ regulatory and administrative actions. Therefore, if states are genuinely interested in preserving their regulatory autonomy or right to regulate in the public interest, then this interest has to be factored into the terms of investment treaties, if indeed it is the case that these treaties are a pre-requisite for investment protection at all.

THE CRITICISM AND BACKLASH AGAINST INVESTMENT TREATIES AND ARBITRATION

Investment treaties, constitutionalization of investment protection and public policy objectives

Investment treaties and the investment dispute settlement system have come under serious attack. The dominant concern among investment scholars, policy-makers and countries around the world is that investment treaty law and arbitration is not the sole guarantee of foreign investment attraction and development. In fact, it is seen as a threat to states’ progress and development. Investment treaty arbitration is a very powerful tool that investors use to further their profit goals while restraining states from pursuing public interest objectives. A commitment to foreign investment promotion and protection can shape the national policies of states in a variety of fields, including development policymaking, human rights and environmental protection.Footnote 15 Investment treaties have crippling implications for constitutional understanding and design, ideas about governance, democracy, jurisprudence and policy. Professor David Schneiderman has argued that transnational legal regimes can have numerous domestic legal effects on state projects because they “may directly have the force of law according to domestic constitutional standards or domestic constitutions themselves may be expected to conform to the demands of regional or international integration”.Footnote 16 It “is these implications which … form the most fruitful research agenda for those interested in the system and its development”.Footnote 17 These implications obviously raise “constitutive questions of legal system making or jurisprudence, and compliance”.Footnote 18

The degree to which treaties make states more attractive to foreign investors depends on the extent to which treaties accord more favourable protection to foreign investment compared to that offered by competing municipal law. In the process of seeking to make states more attractive to foreign investors, treaties may limit policy space and regulatory autonomy. At the request of foreign investors, this situation has led to investment tribunals scrutinizing domestic measures meant to protect the public interest.Footnote 19 Professor Gus Van Harten highlights the tensions between domestic public policy choices and investment treaty law and arbitration. He argues that the decision by developing states to consent to compulsory arbitration is a major policy decision in its own right, because it transfers a core segment of the state's adjudicative authority in the regulatory sphere to international tribunals and foreign courts, as well as transferring the power to determine the legality of sovereign acts to private arbitrators. Moreover, developing countries’ regulatory conduct in a wide range of fields including industrial development, taxation, public health and environment, broadcasting and utilities regulation now falls within the jurisdiction of international arbitrators.Footnote 20 The Argentine experience in particular demonstrates that multiple claims may be brought against a state in response to regulatory decisions that are general in scope and do not specifically target foreign investors.Footnote 21

Based on the perspective that investment treaties contain pre-commitments that bind future generations to pre-determined institutional forms and policies, investment law scholars have analysed the potential for some degree of “constitutionalization” in the context of investment and trade law.Footnote 22 This legal scholarship has described investment law and arbitration as a form of “public law adjudication”, “global administrative law” or “global constitutional and administrative law”.Footnote 23 Professor Harten sees investment treaty arbitration as a unique form of “public law adjudication”,Footnote 24 which means “a treaty-based regime that uses rules and structures of international law and private arbitration to make governmental choices regarding the regulatory relationship between individuals and the state”.Footnote 25 Professor Jane Kelsey is of the view that “international policy and treaty-making has now penetrated deeply into areas that were previously the domain of domestic law”.Footnote 26 According to Professor Kelsey, investment and other international agreements contain pre-commitments that bind future generations of citizens to certain pre-determined institutional forms and policies. They are difficult to amend, include binding enforcement mechanisms, and serve a different constituency by “conferring privileged rights of citizenship on corporate capital, while constraining the power of the nation state and the democratic rights of its citizens”.Footnote 27

Central to the argument on the “constitutionalization of investment protection” is the idea that the investment rules regime resembles national constitutions in terms of their ability to constrain the conduct and actions of states. Since it is investment tribunals that interpret investment treaties and decide on what states can or cannot do, investment arbitration has a central role in giving effect to the constitution-like nature and implications of investment treaties. This approach provides the analogical and theoretical basis for examining the implications of commitments to protect foreign investment in relation to domestic choices. In other words, constitutionalization of investment protection “contains within it some difficult debates about … liberalization and globalization, about legitimacy, democracy and international order, about how legal systems are made, and by whom”.Footnote 28

The reactions of states to international investment treaty implications for regulatory autonomy

States themselves have reacted in varied ways to the implications of investment treaty law and arbitration restricting their domestic policy space. Suzanne Spears has analysed states’ responses regarding the implications of investment treaties for policy space and regulatory autonomy.Footnote 29 A number of Latin American states have responded by: denouncing, renegotiating or refusing to enter into international investment agreements; withdrawing from the Convention on the Settlement of Investment Disputes between States and Nationals of other States (ICSID Convention);Footnote 30 or seeking to limit the jurisdiction of the International Centre for the Settlement of Investment Disputes (ICSID). Some states, including the United States, Norway and South Africa, are also undertaking or have undertaken reviews of their investment treaties to determine whether they strike an appropriate balance between the principles of investment protection and host states’ need for regulatory flexibility, or whether additional changes need to be made. Finally, some states have issued joint interpretations of their existing investment treaties or have adopted new investment treaty language that seeks to address the tension between competing interests.Footnote 31 The reality then is that investment treaties do constrain the ability of states to pursue public policy objectives, as evidenced not only by the many arbitration challenges against state measures intended to protect the public interest in the areas of development, human rights and environmental protection and safety, but also by states’ reactions.

THE INTERNATIONALIZATION OF INVESTMENT PROTECTION BY TREATY AND ITS OBJECTIVES

Customary international law and the protection of foreign property

Investment treaties were developed to replace customary international law and domestic legal systems that had previously been used to protect aliens and their property abroad. The basic principles of customary international law regarding the protection of foreign property include a prohibition against the discriminatory taking of alien property. In upholding this principle, the Permanent Court of International Justice (PCIJ) held that “the prohibition against discrimination … must ensure the absence of discrimination in fact as well as in law. A measure which in [its] terms is of general application, but in fact is directed against … [foreign] nationals … constitutes a violation of the prohibition”.Footnote 32 Another principle of customary international law aimed at protecting alien property against arbitrary seizure is that the taking of foreign property must be for public purposes or for the purpose of public utility.Footnote 33 In the Case Concerning Certain German Interests in Polish Upper Silesia,Footnote 34 the PCIJ held that the only prohibited measures are those which international law does not sanction in respect of foreigners and that “expropriation for reasons of public utility, judicial liquidation and similar measures are not affected”.Footnote 35 A third principle of customary international law in respect of the protection of foreign property is that, where there is expropriation, the foreigner must be compensated. This principle has generated much controversy. The issue is whether general legislative and policy measures intended to establish better economic conditions or social order, when applied to both foreign investors and nationals alike, should still provide for full compensation of expropriated property.Footnote 36

Criticisms were made against customary international law which supposedly justified the need for a new system to protect foreign property. It was argued for instance that customary international law had “virtually nothing to say about the right of foreign investors to make monetary transfers from a host country or to bring foreign managers into the host country to manage their investment”.Footnote 37 Secondly, customary international law was criticized on the ground that its principles were subject to varying interpretations. For example, it was said that customary international law did not have principles governing the calculation of compensation.Footnote 38 Thirdly, it was submitted that customary international law was not suitable for investment protection because it generated controversy and disagreements between home and host countries.Footnote 39 Fourthly, “existing international law offered foreign investors no effective enforcement mechanism to pursue claims against host countries that seized their investments or refused to respect their contractual obligations”.Footnote 40 As a result of these perceived deficiencies of customary international law, aliens and foreign investors “had no assurance that investment arrangements and contracts made with host country governments would not be subject to unilateral change by those governments at some later time”.Footnote 41 Therefore:

“To change the dynamics of this struggle to protect the interests of their companies and investors, capital exporting countries began a process of negotiating international investment treaties that, to the extent possible, would be (1) complete, (2) clear and specific, (3) uncontestable, and (4) enforceable … As a result of this process, a widespread treatification of international investment law took place in a relatively short time. By the beginning of the twenty-first century … foreign investors in many parts of the world were protected primarily by international treaties rather than by customary international law alone.”Footnote 42

Investment treaties were thus primarily aimed at replacing customary international law to provide effective protection for investments abroad. There was a deliberate effort on the part of “capital exporting” countries to develop a system of investment protection that was predominantly and primarily private investment protection oriented, because it was their investors who invested abroad and it was they and their investors who were dissatisfied with customary international and domestic legal systems which had previously been used to protect foreign investment. The public interest did not feature in this encounter between the claimed limitations of customary international law and the need for a more “effective” investment protection regime. There was, indeed, an attempt by developed countries to impose their preferred standards of investment protection on states hosting their investors. In fact, as far back as the Middle Ages, the sovereigns of European states sought to protect and advance the interests of their nationals in other countries through negotiating with those countries for commercial and trading rights for their nationals. Professor Jeswald Salacuse has argued, for instance, that:

“During this period, treaties were not only used to establish mutual economic relationships among nations but were also employed as instruments of economic domination. One of the most important treaties in this respect was between the King of France and the Ottoman Sultan in 1536, providing for reciprocal trading and navigation rights between the two monarchs’ subjects. Although this agreement and others like it purported to be based on principles of equality and mutuality, they in fact favoured European nationals, not Ottoman subjects, because of their superior economic and technological power. These treaties were the basis of what became known as the capitulary system. Individual treaty chapters (capitula in Latin) granted foreign traders a variety of privileges, including exemptions from customs duties, the right to be governed by home country law, freedom from the jurisdiction of local courts, and the right to sue and be sued exclusively in special consular courts. In many places, these treaties became the basis of a fully-fledged extraterritorial system of privilege and immunity that applied not only to all European nationals, but also to a select group of Ottoman subjects.”

These capitulations were an institutionalized symbol of the inferiority and subservience of local institutions and individuals to European power, and they facilitated the domination of much of the non-western world by western states. Treaties having a similar effect were negotiated in many areas including the Middle East and Asia. Thus, the international economic treaty became an important instrument for spreading European economic power and influence. For people in the non-western world, however, these treaties were an instrument of economic exploitation [T]he historical foundations of the investment treaties that proliferated in the twentieth and twenty-first centuries and became an important basis for much contemporary international investment law may be traced to these early trading agreements.”Footnote 43

Domestic legal systems, diplomatic espousal and the protection of foreign property

A number of limitations had been identified with domestic legal systems, for which reason a case was made for an international system for investment protection and investment dispute resolution. Thus, it had been argued that a serious barrier to obtaining redress in some host-country courts was local bias.Footnote 44 Investment treaty arbitration was, therefore, meant to serve as an insurance against local prejudice.Footnote 45 It was also said that, because of state immunity, foreign investors could not successfully pursue claims against host countries.Footnote 46 Again, the “efficiency of local courts”Footnote 47 was identified as another of the many concerns of foreign investors, because “developing countries often lack responsive, robust legal systems capable of effectively adjudicating complex claims”.Footnote 48 Further in the past, “partially in response to perceived abuses by foreign investors, some host nations tried to restrict a foreign investor's remedies to its local courts and deprive them of the protection of international law, aware that any remedy there would likely be illusory”.Footnote 49

As a result of these “shortcomings”, foreign investors were hesitant to submit their disputes to host countries and often resorted to their places of domicile to resolve their disputes where there was a factual connection to the disputes. Foreign investors, however, faced a similar series of obstacles in their home country, including a lack of jurisdiction in the absence of a contractual provision to the contrary, host country immunity from their home country's courts, the act of state doctrine under which courts are reluctant to pass judgment on the actions of governments, and the inapplicability of the host state's laws in the investor's home country.Footnote 50 The remedies available to foreign investors where they could not obtain a direct remedy from the host country also included “gunboat diplomacy” whereby home states often used force to protect the interests of their investors abroad and diplomatic espousal, which involved intervention by foreign investors’ home governments in the form of diplomatic correspondence. Diplomatic espousal often required the exhaustion of local remedies.Footnote 51 In short:

“The shortcomings of both national and international remedies for government interference with foreign property rights led to the development of depoliticized alternatives. These efforts were naturally supported by developed countries, which sought both greater protection and greater access to markets for their citizens’ capital, intellectual property, and assets. The efforts were also supported by many developing countries.”Footnote 52

Although there were claims about developing countries benefiting from increased investment inflows through the protection of foreign private capital, if an international rather than domestic dispute resolution system was developed, it is clear that this was principally to protect the interests of developed countries’ investors who made investments abroad. Assuming that domestic legal systems and customary international law had presented genuine obstacles, the point can still be made that investment treaty arbitration was aimed at meeting developed countries’ foreign investors’ interests. This is because the point had not then been made that, because domestic legal systems were supposedly inefficient, foreign investors chose not to invest in the particular countries. Since foreign investors and their home countries chose an alternative system of foreign investment protection that would allow them to continue to invest in countries that had “inefficient” legal systems, developed home countries and their investors either stood to benefit from investment abroad or were simply charitable to the developing world. Any “charitable theory of foreign investment abroad” cannot hold water. Developed countries would not disagree with developing countries over minimum standards of investment protection if they and their investors were not out to benefit at the expense of developing countries or if they were investing abroad as a form of charity to benefit the developing world and the developing world understood it stood to benefit.Footnote 53

Foreign investment protection in the 19th and 20th centuries

Early forms of trade and investment protection

The history of foreign investment protection goes back further than the history of “bilateral” investment treaties, which are the primary instruments for investment protection today.Footnote 54 Customary international law had already developed a number of principles, including state responsibility for injury to aliens. The early treaties were primarily trade-oriented agreements. Investment played a much less important role in early treaties, although those treaties included provisions for protecting the property of nationals of the other contracting party in the host country's territory.Footnote 55 The commercial treaties of the time were known as friendship, commerce and navigation treaties, and were often used by the United States. Protection accorded under these treaties for persons, ships and other property included: most-favoured nation and the protection of vessels, crews, passengers and cargoes; obligations to protect the property of nationals of the party in the host country's territory; almost complete protection and security of commercial property and persons engaged in commerce; the right of equal access to domestic courts; prohibitions on the seizure of vessels, cargoes, merchandise and effects without the payment of equitable and sufficient compensation or indemnification; prohibitions on the confiscation of other property during hostilities; and prohibitions on restricting the repatriation of earnings.Footnote 56 Many of the principles underlying these protections eventually found their way into the international investment treaties known today, albeit in a different form.Footnote 57

Thus, friendship, commerce and navigation treaties from which modern investment treaties derived some of their principles, such as national treatment, most-favoured nation treatment and fair and equitable treatment, developed as instruments for protecting private property rights of countries that traded abroad. These treaties did not develop with host countries’ interests at heart; the investment treaty framework has borrowed from this framework and operates as such.

Post-World War II investment protection efforts

Immediately following World War II, there was increased focus on facilitating the international flow of capital and investment, especially following the establishment of international institutions such as the International Bank for Reconstruction and Development (which had the purpose of promoting private foreign investment), the International Monetary Fund and the General Agreement on Tariffs and Trade. Various efforts were made to establish a legal framework for the protection of foreign investment. These efforts resulted in, for example, the final act of the UN Conference on Trade and Employment: the Havana Charter for an International Trade Organisation of 24 March 1948. This charter was supposed to empower the International Trade Organisation to promulgate rules on international investment and trade. However, the “capital exporting” countries and their investors “considered that the Charter's investment-related provisions did not create an effective investment protection regime”Footnote 58 and, partly due to opposition from the western business community, the Havana Charter was not ratified. Further international efforts were made to prepare multilateral conventions exclusively to govern foreign investment. These included the International Chamber of Commerce's International Code of Fair Treatment of Foreign Investment of 1949, the International Convention for the Mutual Protection of Private Property Rights in Foreign Countries of 1957, and the Organisation for Economic Co-operation and Development Draft Convention on the Protection of Foreign Property of 1967. Again, as with the friendship, commerce and navigation treaties, these efforts were all aimed at protecting private business, irrespective of their implications for the interests of host countries, and they failed partly because of opposition to their implications for sovereignty and lack of consensus as to their content.

Post-independence era investment protection efforts

During the colonial period, investment in the developing world was in the context of colonial expansion and the imperial legal system gave protection to investment in the colonies. Therefore, there was no need for international investment law. In those parts of the world that were uncolonized, a blend of diplomacy and force was used to protect foreign property. Power was the “final arbiter of foreign investment disputes in this early period. The use of force to settle investment disputes outside the colonial context was a frequent occurrence.”Footnote 59

Political independence increased the development of modern treaty regimes. A number of developing countries gained political independence from the late 1950s onwards. The acquisition of independence and sovereignty by the new states changed the nature of foreign investment protection in the former colonies. Foreign companies now had to be regulated by the municipal law of the newly independent states, which asserted control over their natural resources.Footnote 60 This historic epoch marked an important phase in the development of investment treaties. European countries started bilateral investment treaty negotiations. These investment treaties shared the features of previous commerce treaties but were unique, and unlike previous bilateral commercial and trade agreements. These new treaties dealt “exclusively with foreign investment and sought to create an international legal framework to govern investments by the nationals of one country in the territory of another. The modern bilateral investment treaty (BIT) was thus born.”Footnote 61

The main concern of the newly independent states was that the form of foreign investment protection as it operated was imperialistic and a form of neo-colonialism, since it involved foreign control over the means of production and would result in the continued exploitation of the developing world.Footnote 62 Efforts by the newly independent nations to assert control over their national economies and to maintain their territorial integrity resulted in these countries closing their doors to foreign investment and in the nationalization of foreign property.Footnote 63 There were nationalizations and expropriations of foreign concessions in a number of these states, including Libya, Iran, Egypt, Cuba, Chile and Venezuela.Footnote 64 It was, therefore, only after decolonization and the dissolution of colonial empires that the need for a system of protecting foreign investment in the manner known today came to be felt by the former colonial and imperial powers, which now became the “exporters” of capital to “capital importing” countries, the then colonies and elsewhere.Footnote 65

Germany, which is said to have lost all of its foreign investments upon its defeat in World War II, took the lead in investment treaty-making and protection when it signed a bilateral investment treaty with Pakistan in 1959.Footnote 66 A number of former colonisers felt the need to safeguard existing investments made by their nationals in the newly independent territories. The former colonial powers, including the United Kingdom, Belgium, France and the Netherlands, therefore developed “bilateral” treaty programmes and concluded bilateral investment treaties with their former colonies and other developing countries. Other European countries that had no colonies, such as Switzerland, Austria and Italy, also joined the bilateral investment treaty movement. A very important innovation of the new bilateral investment treaty protection regime was the creation of an international investment dispute settlement mechanism for aggrieved foreign investors to bring claims against host governments directly before international arbitration. Arbitration was given an “extraordinarily important”Footnote 67 role in foreign investment protection. European and North American countries also held the view that foreign investment was to be protected under minimum standards of international law.

These new developments in investment protection were resisted by third world states that insisted that foreign investment was to be governed by municipal law.Footnote 68 The third world did not sustain its position on the application of domestic law to foreign investment, mainly because economic development was defined as an integral part of the need for a transnational investment regime requiring new structures, management and legal doctrines.Footnote 69 The history of the development of investment treaty protection for foreign investment is therefore largely driven by developed countries and their foreign investors abroad. The international character of investment treaty law and arbitration remains rooted in the pre-colonial, colonial and post-colonial conflict over foreign ownership and control of local resources and assets. Both during the colonial era and now, most cross-border investments come from Europe and the United States, and foreign-owned assets are predominantly owned by western companies. The modern origins of investment law and arbitration thus lie in the late 19th and early 20th centuries, when most of the world was organized into European empires and large amounts of western capital flowed abroad.Footnote 70 This modern system of investment law built on and “improved” investment protection under domestic law, customary international law, friendship, commerce and navigation treaties and early efforts after World War II.

The fundamental purpose behind investment treaties that emerges from this history is that the protection of private property and contractual rights was, and remains, the overarching objective of the international investment regime.Footnote 71 This overarching objective reflects the desire of investors from developed states to invest safely and securely in developing countries, free from any form of regulation. Therefore, under such a system, the public interest hardly received any consideration. Prior to this system, inter-state mechanisms were used to resolve investment disputes. With most non-European countries gaining independence and at a time when developed countries had already made investments in the third world and had an entrenched interest in protecting their existing investments and with fewer, if any, investments being made by developing countries in developed countries, the “international community” deemed it necessary to establish an international investment regime, since foreign investors could not trust the third world countries.Footnote 72 The establishment of international investment arbitral systems, especially the ICSID Convention and ICSID, coincided with the gaining of independence by some former colonies. The development of the international investment protection regime was meant to re-subject states that had just gained independence to foreign investment protection standards that were predominantly championed by developed countries. Just as their legal and cultural systems were “uncivilized” before and during colonialism, the newly independent or emerging states in Africa and the then colonized world generally could not guarantee effective protection of foreign investments within their territories, hence the need for international standards of investment protection. The whole imperial “civilizing missing” that justified colonialism as a means of “redeeming” the “backward” and “undeveloped” people of the non-European world by incorporating them into the “universal civilization” of Europe was central to the international investment treaty framework, just as it was in the case of general international law.Footnote 73

A cursory reading of the UN literature on foreign investment and commercial law also leads to the conclusion that investment treaty law was predominantly meant to protect the primary interests of foreign investors from developed countries. The UN General Assembly resolution of 1954,Footnote 74 for instance, contained a number of recommendations addressed to both developed and developing countries for the “promotion of private capital flows”.Footnote 75 The General Assembly requested the UN Secretary-General to prepare annual reports describing the measures governments had taken to “facilitate and protect the flow of private capital”.Footnote 76 The measures were to provide “assurance either directly against the occurrence of non-business risks or towards the indemnification of the investor, should they occur”.Footnote 77 Again, in 1961, the Secretary-General carried out a survey on foreign investment arbitration targeted at member states, specialized agencies, and appropriate non-governmental and inter-governmental sources in order to secure their views on the measures to facilitate the settlement of disputes related to private investment. The questions addressed in the survey were whether the expansion and institutionalization of the arbitration or conciliation of investment disputes were likely to encourage the flow of such investments.Footnote 78 Most governments expressed interest in the possibilities of international arbitration as a means of adjusting investment disputes and forestalling their occurrence, thereby improving the international climate for private investment.Footnote 79 The principles underlying those proposals contemplated direct access by the investor to an arbitral body, thus “avoiding the political and practical implications”Footnote 80 of requiring the investor to seek espousal from the investor's home government. Arbitration was considered as providing “strong assurance to the investor”Footnote 81 while at the same time offering host governments “a ready alternative to the intervention of the investor's home government”.Footnote 82

THE OBJECTIVES AND TERMS OF INVESTMENT TREATIES IN RELATION TO REGULATORY AUTONOMY

A major theme emerging from this analysis is that the international investment regime is faced with a serious challenge of how to secure the benefits of investment liberalization without limiting the freedom of governments to pursue non-investment objectives.Footnote 83 This article argues that not only the history, but also the terms, of investment treaties, consistent with that history, make it impossible for the investment regime to secure the benefits of investment protection without limiting states’ freedom of action. The challenge facing the investment system therefore lies in how to reconcile states’ broad and unqualified commitments under investment treaties with their obligations to protect the public interest under municipal law.

“Bilateral” investment treaties operate on the implicit assumption that investors from both contracting parties will invest in the respective territories. However, it may be that investors from one contracting party may never invest in the territory of the other contracting party or, if they do invest, the investment may be so small, inconsequential and insignificant that a call for investment treaty protection may never arise. In such a case, if investment treaties did not exist, it really would not matter for such businesses. For instance, there is serious doubt about how many investors from a country such as Ghana are investing in the territories of countries which are parties to its bilateral investment treaties. It is, however, commonplace to find investors from Ghana's contracting parties investing in Ghana. This situation raises serious doubts about the “bilateralism” of Ghana's bilateral investment treaties. If there are no investors from Ghana who stand to benefit from investment treaties in the territories of Ghana's contracting parties, even if they invest in Ghana, then the need for Ghana to be party to “bilateral” investment treaties and the appropriateness of these instruments for investment protection are less than apparent.

Again, the bilateralism (in that they are intended to advance the mutual interests of two countries) of “bilateral” investment treaties is questioned on the basis of the objectives and terms of these treaties. The very objectives and terms of “bilateral” investment treaties make any claim about their bilateralism seriously suspect. To say that a treaty or other legal document or enactment is “bilateral” suggests that the enactment or document is not only agreed to by two parties, but also that it contains reciprocal, give-and-take, duties and rights. However, it is clear from the terms of investment treaties that they are, from the outset, asymmetrical and lopsided. Investment treaties confer rights on investors such as national treatment and most-favoured nation treatment, and require states to ensure the realization of these rights. The treaties are, however, completely silent on the rights of states, except perhaps the right to go to arbitration. Investment treaties do not impose corresponding duties on investors. Since states do not have substantive rights under investment treaties and since investors do not assume any obligations towards states under investment treaties, a state's right to sue foreign investors is of no practical significance. Given the imbalance in the protection of rights in investment treaties, arbitration is a mechanism for investors, not for states.

As states have no basis to make a legal claim for protection under investment treaties, these treaties will continue to shrink states’ policy space and regulatory autonomy, given their skewed objectives, structure and terms. States have assumed absolute, broad and unqualified responsibilities towards foreign investors that do not anticipate or make room for their need for policy space and regulatory autonomy. In their classical form, no room is made in investment treaties for states to lay claims to their sovereign prerogatives to make policy, enact laws and regulate in the public interest. As states assume such responsibilities towards foreign investors without foreign investors’ corresponding obligations in investment treaties towards states, states do not seem to have a legal basis to assert claims to policy space and regulatory autonomy in investment treaties. This article argues, then, that investment treaties by their very nature are asymmetrical and one-sided and that, left in their classical form, states’ need for policy and regulatory space can never be achieved. As the saying goes, “every tree bears fruits of its kind”. An apple tree bears apples and a mango tree bears mangoes. If investment treaties are one-sided in terms of the rights they protect and the duties they impose, they cannot be implemented otherwise; they will naturally operate to protect foreign investors whose rights they define. In other words, as investment treaties were designed with the primary aim of protecting foreign investors by limiting policy space and regulatory autonomy, they will and do operate to achieve that primary objective.

International investment treaties were designed with the primary object of restraining or limiting governmental actions and regulatory autonomy so that foreign investors can do business and make their profits free from governmental control and regulation. This is obvious from the terms of investment treaties and from the decisions of arbitral tribunals requiring predictable and stable laws, regulations and governmental actions when dealing with foreign investors. For example, in Tecnicas Medioambientales Tecmed SA v The United Mexican States,Footnote 84 the tribunal held that the fair and equitable treatment standard requires good faith, which in turn requires states to provide to investments treatment that does not affect the basic expectations the investor took into account to make the investment. The host state, in making and implementing laws and policies, must act in a manner that is consistently free from ambiguity and arbitrariness, and totally transparent.Footnote 85 This decision demonstrates that government discretion as to how it conducts national affairs is subject to the expectations of the foreign investor, because it requires that laws, rules and regulations must remain predictable and stable in the interests of investment protection. Therefore, investment treaties have an intentional effect on governmental regulation; their effects are the natural consequences of their objectives and terms. Therefore, if states want the free will and space to regulate, they have to reconsider whether the terms of investment treaties to which they agree are the most reasonable and appropriate way to guarantee investment protection.

It might be argued that host states receive the benefits of foreign investment and must therefore accept the restraining effect of investment treaties. However, the question is, if the benefits of investment treaties, for example development, were the goals of the treaties, why did their terms not explicitly make room for development? Initially, investment treaties were concluded between developed and developing countries, “usually at the initiative of the developed country in order to secure additional and higher standards of legal protection and guarantees for its investments firms than those offered under national laws”Footnote 86 and the developing country would sign an investment treaty “to attract foreign investors”.Footnote 87 If developing countries sign investment treaties to attract foreign investment for their development, it is not clear why they would sign them if they are intended for the reciprocal and mutual protection of investment. By the end of 1999, out of a total of 1,857 “bilateral” investment treaties, 737, or 40 per cent, were between developing and developed countries compared with 260 (68 per cent) at the end of 1989. African countries were found to be more actively involved in the investment treaty practice than any other region.Footnote 88 Between 1959 and 1999 when these “bilateral” investment treaties were signed, there were probably very insignificant, if any, numbers of investors in each individual developing country who were prepared to invest in the developed country partner's territory. If none did invest or investment was less likely, then there would seem to have been no reason for developing countries to sign investment treaties intended for the protection of their outward investments. If inward investment is what is central to development in the developing world and developing countries lacked investors to invest abroad, signing investment treaties intended for the protection of both inward and outward investments cannot be justified.

The use of concepts such as “capital exporting”Footnote 89 country and “capital importing” countryFootnote 90 in international investment discourse suggests that some countries “export” capital while others “import” it. This suggests that some countries invest and others receive investment. Since from the outset “bilateral” investment treaties have always been aimed at the reciprocal protection of investment from the two contracting countries, it is not clear whether a country that “imports” capital or receives investment (the capital importing country) but does not “export” capital or invest abroad needs to be party to such treaties.

Ghana's investment treaties, for example, are primarily aimed at investment promotion and protection, as evidenced by their titles. Specifically, the treaties are intended to: “encourage, protect and create favourable conditions for investment”;Footnote 91 “expand and strengthen economic and industrial cooperation on a long term basis and in particular, to create favourable conditions for investments”;Footnote 92 “create favourable conditions for investments in both States and to intensify the co-operation between private enterprises of both States”;Footnote 93 “extend and intensify the economic relations between them particularly with respect to investments”;Footnote 94 and “create favourable conditions for greater investments”.Footnote 95 By their terms, these treaties provide in favour of foreign investors in respect of: national and most-favoured-nation treatment; fair and equitable treatment; full protection and security; compensation for expropriation, civil wars and disturbances; free transfer of funds and repatriation of investment capital and returns; subrogation on insurance claims; right to protection under laws or rules that provide for better treatment to foreign investors than the provisions of the investment treaty do; and dispute settlement before investment tribunals. These requirements are intended to guarantee unqualified protection for private investment interests in Ghana irrespective of their limiting implications for the state's right to regulate and exercise other sovereign powers in the public interest. The terms of the treaties reflect the reason for which they were constructed to replace customary international law and domestic legal systems, namely to limit governmental regulation so as to protect private investment abroad. Development is not at the heart of the international investment protection regime, because the terms of the treaties do not help advance that development objective.

Thus, as a matter of form, investment treaties between two states can be described as “bilateral” in the sense that they are entered into between two states and claim to be aimed at promoting the interests of both states. Seen in this way, bilateral investment treaties may be described as constituting what may be termed “formal bilateralism” or “formal symmetry”. Since in substance, however, “bilateral” investment treaties contain provisions protecting only the rights of foreign investors, they are substantively unilateral, or “unilaterally symmetrical” and may thus be described as embodying a form of “substantive unilateralism” or “unilateral symmetry”.Footnote 96

Thus, the historical origins of investment treaties influenced their terms and the terms in turn define the way investment treaties are interpreted and enforced. A treaty is to be “interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose”.Footnote 97 In interpreting treaties, recourse may be had to supplementary means of interpretation, including preparatory works and the circumstances of the conclusion of the treaties.Footnote 98 Since the terms of investment treaties are to be interpreted in accordance with their objectives and purposes, an interpretation based on the terms of the treaties alone will result in the recognition and protection of the rights of foreign investors, for these are the rights recognized under investment treaties.

In other words, the restraining effects of investment treaties are as much about the provisions of these treaties as they are about the history of investment protection and international economic relations. International economic relations have a history of exploitation and abuse in the name of protecting “vulnerable” states that “lacked” the capacity to govern themselves. When these “vulnerable” states fought for their right to protect and rule themselves and with time acquired political independence, it was necessary to maintain the existing order and stability that offered guarantees to investors in the then colonies through imperial legal systems. The history of investment protection traces, in part, back to this context in international politico-economic relations.

It may well be argued that host states are willing parties to investment treaties, and that the proposition cannot hold water that the historical origins of investment treaties and their terms in relation to that history make it inevitable that they are biased in favour of foreign investors. However, in the past, some home states used force to protect their investors, which led some host states to prefer protection under treaty, however onerous the terms.Footnote 99 The use of force has now been replaced by templates or model investment treaties that reflect individual countries’ expectations regarding foreign investment protection standards. Any argument that host developing states are “willing” parties to investment treaties is effectively undermined by the use of model investment agreements, especially when unequal bargaining power is inherent in the nature of the investment negotiation involved. The state possessing the bargaining power in investment treaty negotiation “is likely to favour private investor interests”Footnote 100 because such a state “will at least be predominantly … interested in maximising the protection of its national investors”.Footnote 101 In other words, for the state with greater negotiating strength the “duality of public and private interests is obscured and replaced by an apparent congruence of interests between the state and investors from that State”.Footnote 102 In an investment negotiation process characterized by unequal bargaining power, bilateral treaties “are used to achieve the same protection of investments that would have been imposed by the state in a power position without a treaty”.Footnote 103

CONCLUSION

The basic, and perhaps sole, issue that has engaged the attention of investment scholars, policy-makers and governments is the concern that investment treaty law and arbitration has the ability to freeze policy space and regulatory autonomy, even in times of financial and economic turmoil. The debate can be divided into two camps. First, there are those who maintain the traditional wisdom that there is a relationship between foreign investment and development and that investment treaty law and arbitration is the surest way to attract foreign investment and achieve its benefits of development. This article calls this group the “traditional wisdom school of thought”. Secondly, there are others who hold the view that investment treaty law and arbitration cannot guarantee development and that, if they do contribute to development at all, their role is, at best, very minimal. The latter school thinks that the state has a central role in protecting the public interest. It is, therefore, very critical of the potential of investment treaties to compromise state responsibility to wider society. This may be called the “cautious school of thought” because it argues for investment treaties to be approached with caution and circumspection.

This article argues, on the one hand, that the “traditional wisdom school of thought” is pro-investor and therefore seeks to do everything possible to mislead uninformed governments and their countries. On the other hand, the “cautious school of thought”, which is critical about the implications of investment treaties and arbitration, has also failed to situate its discourse about the role of investment treaty law and arbitration in the historical context. There is a point in being critical about and pointing out the fact that investment treaty law and arbitration is not responsive to the concerns of states. However, if there has to be reform of investment treaty law and arbitration, and meaningful reform for that matter, then the debate needs to be situated in the proper context: the history, objectives and terms of investment treaties. The point is that, unless the implications of investment treaty standards are situated within the context of the reason underlying the protection of foreign investment by treaty, the debate will miss the background necessary for a reconstruction of an international investment regime that will be responsive to the needs of both foreign investors and host countries.

The internationalization of foreign investment protection through the use of international investment treaty law and arbitration was, historically, primarily aimed at protecting the private business interests of foreign investors. The public interest was not and has never been a primary consideration of the international investment regime. The terms of investment treaties as they exist perfectly reflect the historical reasons underlying the construction of investment treaty law and arbitration. Consequently, investment treaties and arbitration, in their current form, can never work to the satisfaction of both investors and states; they will serve their overriding objective of protecting investors’ interests. In other words, given the fact that the predominant goal of investment treaty law and arbitration is to protect the interests of foreign investors, investment treaty arbitration is not in a position to achieve the “balance” between private property rights and public interest concerns at the same time. Therefore, if foreign investment disputes are resolved in favour of foreign investors, it is because foreign investors have rights under investment treaties. In this sense any criticism of investment treaty law and arbitration as biased and lopsided might be said to be misplaced, not because it is not a legitimate argument, but because it fails to recognize that investment treaties are working to achieve their intended effects. What is the way going forward?

First, investment treaties and arbitration do not have any inherent or intrinsic values that make them fundamentally better mechanisms for foreign investment protection. For investment treaty law and arbitration to achieve the desired results for foreign investors and respect states’ right to regulate, there is the need to rethink their terms and implementation. Since African countries sign investment treaties to advance their development needs, their rights to regulate in the interest of development must be integrated into the terms of investment treaties. In any case, it is not inherently impossible for domestic legal systems in Africa to protect foreign investment and to settle investment disputes. If domestic courts were inherently incapable of effectively resolving investment disputes, then they could also not be relied upon to enforce arbitral awards. There is therefore a need to reconsider the ethnocentric and imperialistic claim that the judicial systems in Africa and the developing world are ineffective for the settlement of investment disputes.

Secondly, investment treaties are premised on the idea of the reciprocal promotion and protection of investment. Yet, not all, if any, African countries that sign investment treaties have investors with the capacity to invest in the territories of their home states’ contracting parties. Since African states are far less likely to have their investors investing in the territories of their contracting parties, it is a misplaced priority for them to be party to treaties intended for the reciprocal promotion and protection of investment. Investment treaties are not the appropriate instruments for such African states to protect foreign investment. It would be better for them to rely on their domestic legal systems for foreign investment protection. Each country seeking to sign a bilateral investment treaty has to assess the nature of any investments that its investors might make in the territory of the prospective contracting party. If such a country's investors are less likely to invest in the territory, there would be no reason to sign a treaty intended for the reciprocal protection of investment.

Thirdly, even for states with investors that will invest in their partners’ territories, the most effective way to approach the issue of the regulatory chill of investment treaties is to undertake a fundamental restructuring of treaty objectives and terms, if they are really needed at all. To be symmetrical and mutually protective of the rights of the parties to them, investment treaties must spell out the duties and rights of all the parties, not just of one party. There is a need to reconsider the terms of investment treaties as a fundamental priority. The limiting effects of investment treaties on regulation are inevitable because the treaties were designed to achieve those effects. Investment treaties cannot, therefore, achieve any different effect than to limit governmental and legislative actions meant to protect the public interest. The protection of the welfare of the people is core in a government's exercise of its powers. Any exercise of governmental action that does not meet this threshold erodes and betrays the trust reposed in government leaders and public institutions. Since investment treaties make it unnecessarily difficult, if not impossible, for the public interest to be protected they, on that score, do not make sense and should be abolished. If investment treaties are continued as instruments for investment protection, the corresponding core rights of states, including the right to regulate in the public interest must be integrated into them.

Fourthly, investment treaties are created within the context of the existing duties of states towards society. Therefore, even under current practice where states’ duties and rights are not spelt out in investment treaties, they remain tacit and must be deemed to be acknowledged by both foreign investors and states as part of investment treaty commitments. This requires an approach to investment treaty interpretation whereby the states’ duties under both domestic and international law are taken into consideration in enforcing the rights of foreign investors. As Professor Kojo Yelpaala has rightly pointed out:

“[O]ne of the inherent and characteristic attributes of sovereignty is the police powers of the State. These powers exist and are inherent in the nature of sovereign States. Every treaty should start with the notion that these inherent attributes of the State exist and are not surrendered or abrogated by the State absent some specific language to the contrary in the treaty. Thus, when a treaty is silent on these matters the inherent characteristic attributes of the State must by necessity continue to exist. A tribunal called upon to interpret generalized protective provisions or schemes in a BIT must start with the presumption of the continuing vitality of the inherent characteristics of the State. Any interpretation of such generalized provisions that imposes restraints on the police powers and social policy choices of a State may do violence to the text of the treaty and the intention of contracting parties. For, it may impose obligations on the parties that were neither contemplated nor bargained for.”Footnote 104

The expectations of foreign investors are often taken into consideration in the interpretation of investment treaties.Footnote 105 In the interest of impartiality and objectivity, citizens’ expectations that governments should at all times be able to exercise their inherent powers to protect the public interest should equally be taken into consideration in interpreting investment treaties. Government and public expectations and preferences, as well as development policies, frequently change over time, and legitimately so. Some of the duties of states are prospective and dependent on contingent events. Different times with different situations need different policies and measures. New situations and factors may emerge in the domestic context, including changes in government and social pressures requiring governmental action at the time.Footnote 106 Therefore, governments should be protected by what is termed here the “public interest regulatory change doctrine”, by which the public and governments expect that, when public preferences and expectations change or when change is simply necessary in the public interest, governments should be able to make policy, regulatory, legislative or administrative changes in response to new demands and situations, without being constrained by investment treaty standards. This doctrine also stipulates that states must, in the first place, not undertake obligations that contravene their duties to protect the public interest and that, where they have already done so, they must renegotiate the terms of those obligations or the interpretation of investment treaties must take account of the states’ public interest obligations. Foreign investment rights must be respected and upheld by states. Investors’ rights, however, must not be protected at the expense of wider members of society, by whom and for whose welfare governments are constituted and sustained.

Historically, investment treaties and investment arbitration did not develop as instruments for the even-handed and objective protection of both foreign investment and host countries’ interests. In theory and practice, investment treaties have not operated to protect both private property rights and the non-investment interests of host countries. These facts must be at the forefront of African policymaking on investment protection. Moreover, investment treaty law and arbitration is not the sole determinant of investment inflows to a country. Neither is foreign investment a complete panacea to development; it is only one aspect of development policy. Therefore, foreign investment law and policy in Africa must be guided by the fact that investment treaty law does not come with automatic benefits and that there are inherent limitations to the international investment regime. For these reasons, African governments' policy space and the right to regulate in the public interest should not be sacrificed at the expense of a system that does not guarantee the development of a country. The international investment protection regime has its own goals to achieve, which for the most part do not accord with African countries’ governance and national development priorities. Therefore, African countries must in the first place undertake investment treaty commitments, if they need do so at all, that are consistent with their own constitutional obligations and national development priorities. A wholesale assumption of investment treaty obligations without tailoring treaty objectives and obligations in line with national goals and priorities will harm rather than benefit Africa, or indeed any individual country.

References

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4 The concepts of “policy space” and “regulatory autonomy” are used here to refer to the freedom of action and administrative, policy or regulatory flexibility and discretion that states need to be able to initiate and make policies and laws, and to implement them and regulate the way individuals and businesses should conduct themselves in society.

5 Montt State Liability, above at note 1 at 31.

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38 Salacuse, ibid.

39 Ibid.

40 Ibid.

41 Id at 78.

42 Id at 78–79 (emphasis added).

43 Id at 81–83 (emphasis added).

44 Dugan et al Investor-State Arbitration, above at note 6 at 13.

45 Ibid.

46 Id at 14.

47 Id at 15.

48 Ibid.

49 Id at 16.

50 Id at 19–23.

51 Id at 26–34.

52 Id at 45.

53 See the background to the Declaration on the Establishment of a New Economic Order, GA res 3201 (S-VI) UN doc A/Res/3201 (S-VI) (1 May 1974), which was intended to retain regulatory autonomy within states and create binding obligations on investors; also UNCTAD International Investment Rule-Making, above at note 14 at 9–10 showing that, while developed countries “contended that customary international law established an international minimum standard of treatment to which foreign investors were entitled in the territory of the host country”, developing and socialist countries denied that claim and argued instead that foreign investment was entitled to, at most, only the treatment afforded by a host-country government to investments made by its own nationals.

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55 Salacuse, id at 84 and Vandevelde “A brief history”, above at note 7 at 158.

56 Salacuse, id at 84–85.

57 JE Alvarez “The once and future foreign investment regime” in M Arsanjani et al (eds) Looking to the Future: Essays on International Law in Honor of W Michael Reisman (2010, Martinus Nijhoff) 607 at 615 onwards.

58 Salacuse The Law of Investment Treaties, above at note 37 at 87–88.

59 M Sornarajah The International Law on Foreign Investment (3rd ed, 2010, Cambridge University Press) at 19–20. See also Salacuse, id at 83.

60 Anghie Imperialism, Sovereignty, above at note 54 at 224.

61 Salacuse The Law of Investment Treaties, above at note 37 at 94.

62 K Nkrumah Neo-Colonialism: The Last Stage of Imperialism (1970, Panaf Books) at x.

63 Ibid. Vandevelde “A brief history”, above at note 7 at 166.

64 Kaushal “Revisiting history”, above at note 13 at 499.

65 Sornarajah The International Law, above at note 59 at 21.

66 Salacuse The Law of Investment Treaties, above at note 37 at 91–92.

67 Anghie Imperialism, Sovereignty, above at note 54 at 225.

68 Kaushal “Revisiting history”, above at note 13 at 500.

69 Anghie Imperialism, Sovereignty, above at note 54 at 225. Also see Kaushal, id at 501–07, discussing why bilateral investment treaties began to be concluded around the same time that developing countries asserted their refusal to comply with the terms of foreign investment protection proposed by developed countries; and Guzman, ATWhy LDCs sign treaties that hurt them: Explaining the popularity of bilateral investment treaties” (1998) 38 Virginia Journal of International Law 639Google Scholar. Particularly because funding from international financing institutions and official sources declined in the 1980s, foreign investment became the only readily available source of capital for developing countries. See UNCTAD International Investment Rule-Making, above at note 14 at 14–15.

70 Harten Investment Treaty Arbitration, above at note 3 at 15–16.

71 This is also evidenced by the fact that the UN Draft Code of Conduct on Transnational Corporations, which was intended to provide guidelines for transnational corporations “in order to contribute to the development goals and objectives of the countries in which they operated”, failed. It failed because development was not a priority of the investment system, which meant that countries “could not agree as to whether, and to what extent, foreign investors should be subject to multilateral obligations, and what should be their nature”: UNCTAD International Investment Rule-Making, above at note 14 at 14.

72 WS Dodge “Investment treaties between developed states: The dilemma of dispute resolution” in Rogers and Alford (eds) The Future of Investment Arbitration, above at note 3, 165 at 167.

73 Anghie Imperialism, Sovereignty, above at note 54 at 223–45.

74 GA res 824 UN GAOR, 9th sess (1954).

75 Dugan et al Investor-State Arbitration, above at note 6 at 45.

76 Ibid.

77 Progress report by the Secretary-General, ESC, 29th sess UN doc E /3325 (1960) at 170–73.

78 Report by the Secretary-General, ESC 32nd sess, UN doc E/3492 (1961).

79 Id, para 278.

80 Id, para 281.

81 Ibid.

82 Ibid.

83 Mattoo, A and Subramanian, ARegulatory autonomy and the multilateral disciplines: The dilemma and a possible solution” (1998) 1 Journal of International Economic Law 303CrossRefGoogle Scholar.

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85 Id, para 154.

86 UNCTAD “Bilateral investment treaties 1959–1999” (UN doc UNCTAD/ITE/IIA/2, 2000) at 1.

87 Ibid.

88 Id at 4 and 5.

89 Id at 1.

90 Ibid.

91 Agreement between the People's Republic of China and the Government of the Republic of Ghana Concerning the Encouragement and Reciprocal Protection of Investments, entered into force on 22 November 1991.

92 Agreement between the Government of the Republic of Ghana and the Government of Malaysia for the Promotion and Protection of Investments, entered into force 18 April 1997.

93 Agreement between the Kingdom of Denmark and the Government of the Republic of Ghana Concerning the Promotion and Protection of Investments, entered into force 6 January 95.

94 Agreement on Encouragement and Reciprocal Protection of Investments between the Kingdom of the Netherlands and the Republic of Ghana, entered into force 1 July 1991.

95 Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Ghana for the Promotion and Protection of Investments, entered into force 25 October 1991.

96 Yelpaala “Fundamentalism in public health”, above at note 9 stating (at 251) that “developing countries suffer from unequal bargaining power in their dealings with developed countries”.

97 Vienna Convention on the Law of Treaties, entered into force 27 January 1980, art 31(1).

98 Id, art 32.

99 For example, Vandevelde “A brief history”, above at note 7, stated (at 160): “As an alternative to diplomacy, nations sometimes utilized military force to protect foreign investments. The Roosevelt Corollary to the Monroe Doctrine, for example, explicitly authorized the use of force by American troops in the Western Hemisphere to collect debts owed to American citizens. And, in fact, the United States intervened in Latin America on repeated occasions during the first third of the Twentieth Century, until the Good Neighbor Policy of the Roosevelt Administration ended the practice.” In fact the United States “even threatened capital-importing states with withdrawal of aid unless certain requirements were admitted”: Sutherland “The World Bank Convention”, above at note 7 at 369. Vandevelde also notes that investment treaties of the post-colonial era were “drafted by the developed country and offered to the developing country for signature, with the final agreement reflecting only minor changes from the original draft”: id at 170. See also Borchard, EMLimitations on coercive protection” (1927) 21 American Journal of International Law 303CrossRefGoogle Scholar.

100 A Mills “The public-private dualities of international investment law and arbitration” in Brown and Miles Evolution in Investment Treaty Law, above at note 3, 97 at 112.

101 Ibid.

102 Ibid.

103 Yelpaala “Fundamentalism in public health”, above at note 9 at 249.

104 Yelpaala, KFundamentalism in public health and safety in bilateral investment treaties [Part II]” (2008) 3/2Asian Journal of WTO & International Health Law and Policy 465 at 469–70Google Scholar.

105 See for example Tecnicas Medioambientales Tecmed, above at note 84, para 154.

106 UNCTD “World investment report 2012” at 108.