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Capitalism, International Investment Law and the Development Conundrum

Priscilla Schwartz

Abstract

International investments in developing countries are fraught with varied influences, competing interests and contestations about their contribution to development. This article examines the main vehicle of foreign investment – international investment law (IIAs) – to ascertain its role as a development tool particularly for developing African states. It uses theories and legal analysis of capitalism and development, to argue that IIAs represent forms of capital, capitalisation and growth processes as development – “capitalist growth development investment” (DFDI). It argues that FDI literature erroneously propagate the construction and framing of investment capital and promote the intangible assets of transnational corporations as the most important factor in FDI’s growth propensity for developing host states. It shows how this flaw roots IIAs, especially BITs in capitalism, capitalisation of assets and entitlement rights as the factors of growth needing substantive protection, but neglects the relational effect of growth development as a contribution of foreign investments to the developing host states. This contrasts with the broader development orientation of African economic cooperation and preferential trade and investment agreements, creating thereby the potential for conflicts between various investment regimes on the concept of development. The article calls for a new rationality in defining investment capital, which encourages the application of the economic concept of “asset” or “capital” to LDCs natural resources that may form the subject of investments. This will facilitate their “transnationalisation” and “capitalisation” and invariably enhance and protect their growth potential, including through IIAs. It also entails suggestions on how developing host states can protect the broader development contribution of IIAs.

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  1. 1

    The United Nations Committee for Development Policy (UN DESA 2011), available at: <http://www.un.org/en/development/desa/policy/cdp/ldc/ldc_criteria.shtml>, accessed 9 January 2012. The current triennial review criteria for designation involve the low-income criterion (GNI $750-$900), Human Assets Index (HAI) (nutrition, health, education and adult literacy) and economic vulnerability criterion.

  2. 2

    That is as opposed to a focus on the creation of a legal structure for investment protection; see M. Sornarajah, State Responsibility and Bilateral Investment Treaties, 20 Journal of World Trade (1986), 79-98, at 82; UNCTAD, The Role of International Investment Agreements in Attracting FDI to Developing Countries UNCTAD, Series on International Investment Policies for Development (New York and Geneva: UN, 2009), pp. 6 and 10 (UNCTAD IIAs 2009).

  3. 3

    UNECA, Economic Report on Africa Governing Development in Africa: The Role of the State in Economic Transformation (UNECA, Addis Ababa, Ethiopia, March 2011). See UNCTAD, Benefiting from Africa’s Natural Resources, available at: <http://www.unctad.org/templates/Page.asp?intItemID=5214&lang=1 11 Nov 09>, accessed 12 January 2011.

  4. 4

    The term IIAs is used interchangeably with foreign investment (FDI) to refer to legal transactions involving the cross-border flow of capital, whether portfolio or direct (equity interests and non equity arrangements), reflecting an interest or control of capital or assets used in production or services abroad to generate profit or wealth. The focus here is on the objective of the IIAs to protect and promote such investments. The definition is adapted from meaning in UNCTAD, World Investment Report (United Nations, 2006) p. 293, (UNCTAD WIR, 2004); also UNCTAD/WIR 2004; and M. Sornarajah, The International Law on Foreign Investment (3rd edn, CUP, New York 2010), p. 8.

  5. 5

    The Atlantic Charter, Joint Declaration of the President and the Prime Minister, U.S.-UK, 14 August 1941, 35 American Journal of International Law Supp. 191, 192 (1941). By 1944, “concession agreements” were the mainstay of IEL; see T. Guldberg, International Concessions: A Problem of International Economic Law, 15 Nordisk Tidsskrift for International Ret, no. 47 (1944).

  6. 6

    “The Appointment of the Cabinet Minister Resident in West Africa: CO Publicity Note on Lord Swinton’s Appointment” Imperial Policy and Colonial Practice 1925–1945 (Ashton and Stockwell eds., Institute of Common Wealth Studies London HMSO). p. 321.

  7. 7

    J.M. Cipher and J.L. Dietz, The Process of Economic Development (3rd ed., London: Routledge, 2008), p. 99; Truman, 20 January 1949 (cited in J. Beard, The Political Economy of Desire (London, Cavendish: Routledge, 2007), p. 159).

  8. 8

    A. Anghie, Sovereignty, Imperialism and the Making of International Law (New York: CUP, 2005), p. 68.

  9. 9

    M.F. Lindley, The Acquisition and Government of Backward Territory in International Law: Being a Treatise on the Law and Practice Relating To Colonial Expansion (New York: Negro Universities Press, 1969), p. 91.

  10. 10

    M. Sornarajah, Mutations of Neo-Liberalism in International Investment Law, 3 Trade, Law and Development, no. 1 (2011), 204.

  11. 11

    J.W. Salacuse and N.P. Sullivan, Do BITs Really Work?: An Evaluation of Bilateral Investment Treaties and Their Grand Bargain, 46 Harvard International Law Journal, no. 1 (2005), p. 69. Note that the decolonisation of African states occurred largely between 1951 and 1980, commencing with Egypt in 1951 and ending with Zimbabwe in 1980. South Africa gained independence in 1961 and freedom from apartheid in 1994.

    According to UNCTAD, the majority of FDI mainly target African natural resources and related services and manufacturing industries; see UNCTAD, World Investment Report (Geneva: United Nations, 2009), pp. 42-45 (UNCTAD WIR 2009).

  12. 12

    General Assembly Resolution 1803 on Permanent Sovereignty over Natural Resources (GAR 1803) GA Res. 1803 (XVII)/17 UN GAOR Supp. (No. 17) at 15/UN Doc., A/5217 (1962); (also Integrated Economic Development and Commercial Agreements Resolution, UN/G.A. Res. 523 (VI) (1952); Declaration on the Establishment of a New International Economic Order UN/G.A. Res. 3201 of May 1 1974 in 13 I.L.M. 715 (1974); The Charter of Economic Rights and Duties of States (UN/G.A. Res. 3281 of 12 December 1974 in 14 I.L.M. 251 (1975); The Dakar Declaration Developing countries on Raw Materials February (1975) in 14, ILM (2) 1975; – U.N. Draft Code of Conduct on Transnational Corporations 23 I.L.M. 626 (1984).

  13. 13

    For an insightful account on the post-colonial conflicts over international investment normative prescriptions, see Sornarajah (2011), supra note 10, pp. 210-215.

  14. 14

    The Abs-Shawcross Draft Convention, reprinted in The Proposed Convention to Protect Private Foreign Investment, 9 Journal of Public Law (1960), 115. Also the OECD Draft Convention on the Protection of Property Adopted by the Council in its 150th Meeting on 12 October 1967 7 ILM (1967), 117. See also Lord Shawcross, The Problems of Foreign Investment in International Law, 102 Hague Recueil (1961), 334. Note also the failed OECD negotiated Multilateral Agreement on Investment (MAI) (1998), available at: <http://www.oecd.org/daf/mai/>, accessed 12 December 2012.

  15. 15

    The IIA regime comprises of BITs, PTIA, other investment-related economic cooperation agreements, international law principles and investment arbitration decisions. There are almost 2,600 BITs – see UNCTAD, Investor-State Dispute Settlement and Impact on Investment Rule Making 3 (2007), UN Doc. UNCTAD/ITE/IIA/2007/3.

  16. 16

    See Report on the Green Economy in the Context of Sustainable Development And Poverty Eradication, Report of the United Nations Conference on Sustainable Development (Rio de Janeiro, Brazil, 20–22 June 2012) A/CONF.216/16 (Part III); also United Nations Environment Programme (UNEP), Towards a Green Economy: Pathways to Sustainable Development and Poverty Eradication (2011), available at: <www.unep.org/greeneconomy>.

  17. 17

    The emphasis is on the theory of growth development and not on patterns of development.

  18. 18

    D.F. Ruccio, Development and Globalisation (London and New York: Routledge, 2011), p. 4.

  19. 19

    The Concise Oxford English Dictionary (11th ed., OUP, 2009).

  20. 20

    R. Clarke, “Introduction” in C. Kirkpatrick et al. (eds.), Handbook on development Policy and Management (Cheltenham, UK: Edward Edgar, 2002), pp. 5-7.

  21. 21

    Growth is measured by calculating either the GNP or GDP. The GNP calculation is of total value of all income whether or not derived from within the country; while GDP is the total value of all income created within the country; P. Aghion and P. Howitt, Economics of Growth (Massachusetts, USA: MIT Press, 2009), p. 24; Cipher and Dietz, supra note 7, p. 31.

  22. 22

    M.P. Todaro and S.C. Smith, Economic Development (11th ed., London, New York: Addison-Wesley, 2011), p. 111.

  23. 23

    Ibid. Under the Marshall plan, massive amounts of US financial and technical assistance were employed to facilitate the rapid rebuilding of war torn European countries; this injection of capital (and historical experience of the developed countries) was handy for economist to replicate in Africa.

  24. 24

    J. Nitzan and S. Bichler, Capital as Power: A Study or Order and Creorder (Canada: Routledge, 2009), p. 69 (Citing Arthur Pigou 1935). Note that capital has been viewed severally by economists and philosophers alike as: “instruments of production”; as “consisting of non-human productive agencies”; as “an abstract quantum of productive wealth”; as “that part of the wealth of a country which is employed in production”; and as “stocks accumulated into capital” (see pp. 68-69).

  25. 25

    Ibid, pp. 68-69.

  26. 26

    Ibid. Note that the concept of “capital” predates that of “capital goods”.

  27. 27

    Ibid.

  28. 28

    Ibid, p. 69.

  29. 29

    See J.J. Norton, Capital Adequacy Standards: A Legitimate Regulatory Concern for Prudential Supervision of Banking Activities? 49 Ohio State Law Journal (1988–1989), 1304.

  30. 30

    Todaro and Smith (2011), supra note 22, pp. 11-112.

  31. 31

    Clarke, supra note 20, p. 2; Ruccio, supra note 18, p. 4; J. Nitzan and S. Bichler, Imperialism and Financialism: Story of a Nexus (Jerusalem and Montreal, September 2010), pp. 21-22; available at: <http://bnarchives.yorku.ca/289/>. For an enlightened discussion on the production function of capital and the role of profits see Nitzan and Bichler (2009), supra note 24, pp. 69-74.

  32. 32

    UNCTAD, International Investment Agreements: Key Issues (Volume III New York and Geneva, 2005) (UNCTAD IIA: Key Issues), pp. 143 and 153 (emphasis).

  33. 33

    Ibid, pp. 153-154. The effect of the technological progress enables more growth because its occurrence allows for a decrease in the capital output ratio (see Todaro and Smith (2011), supra note 22, p. 113). But developing countries lag behind developed countries as regards the generation and application of technology (see UNCTAD IIA: Key Issues, Ibid, pp. 153-154).

  34. 34

    Linkages could occur with the development of domestic enterprises, the demand for domestically produced inputs and services, capacities of domestic supplying firms, etc. labour and human capital could be formed through employment and skills development: see (UNCTAD IIA: Key Issues, supra note 32, p. 153); Todaro and Smith (2011), supra note 22, p. 113; R. Jolly, in C. Kirkpatrick et al. (eds.), supra note 20, “The History of Development Policy”, p. 17.

  35. 35

    Here productivity is in the economic sense of the utility that the capital (labour) produces – that is, the production of surplus value which is “denominated in universal units of socially necessary abstract labour”. Nitzan and Bichler (2010), supra note 31, pp. 21-22.

  36. 36

    See R. Cotterrell, The Politics of Jurisprudence (2nd ed., UK: Lexis Nexis, 2003), p. 212. Foreign ownership or control of capital and technology in third world states could represent Marxist “capitalist”. see UNCTAD IIA: Key Issues (2005), supra note 32, pp. 153-154.

  37. 37

    Ruccio (2011), supra note 18, pp. 20 and 127; 157.

  38. 38

    Bichler and Nitzan (2010), supra note 31, p. 6.

  39. 39

    Ruccio (2011)supra note 18, pp. 15, 114-145 and 156-157.

  40. 40

    M. Rupert, “Post Fordist capitalism and Imperial power”, in A. Anievas (ed.), Marxism and World Politics, Contesting Global Capitalism (London and New York: Routledge, 2010), p. 95.

  41. 41

    Ibid, p. 95.

  42. 42

    Ibid, p. 95.

  43. 43

    A. Callinios, “Does Capitalism Need the State System?” in A. Anievas (ed.), supra note 40, p. 23.

  44. 44

    Bichler and Nitzan (2009), supra note 24, pp. 7-10. The methods of capitalisation are distinct from capital; and the quantities and qualitative processes of capitalist power are expressed distributionally, as differential ratios of nominal “dollar” magnitudes and in the force and submission) which engenders distributional quantities (p. 8).

  45. 45

    Tangible investments are “fixed assets” such as land, building, fixtures and equipment, or “circulating assets” such as inventory. Intangible investments include shares, bonds, loans, stock and debentures issued by companies or bonds and other loan securities issued by public authorities and option to acquire such securities, or currency at a fixed price on a future date: see Norton (1988–1989), supra note 29, p. 1303.

  46. 46

    R. Pennington, The Law of Investments Markets (Oxford and London: Blackwell Law, 1990), p. 2; Norton explains that “the sale or rental of these goods and services is designed to produce a profit for the enterprise, with a substantial portion of the profit normally representing the implicit return on invested capital and being capable of reinvestment in capital goods”; see Norton (1988–1989), supra note 29, p. 1303.

  47. 47

    Cotterrell (2003), supra note 36, pp. 212-213; K. Davis and M. Trebilcock, Legal Reforms and Development, 22 TWQ (2001), 21; F.B. Cross, Law and Economic Growth, 80 T LR (2001), 1737, 1739.

  48. 48

    He perceived that “Legalism supported the development of capitalism by providing a stable and predictable atmosphere [and] capitalism encouraged legalism because the bourgeoisie were aware of their own need for this type of governmental structure”. see D.M. Trubek, Max Weber on Law and the Rise of Capitalism, 3 Wisconsin Law Review (1972), 740.

  49. 49

    See UNCTAD, World Investment Report: The Shift towards Services (New York and Geneva: United Nations, 2004) (UNCTAD WIR 2004); also UNCTAD/WIR 2006, 293; also M. Sornarajah (2010), supra note 4, p. 8; and The International Monetary Fund’s Balance of Payments Manual (1980), para. 408.

  50. 50

    They argue further that not only is there no objective means of separating productive from unproductive (“purely financial”) activity, but that the particular use to which cross-border capital may be committed for production purpose “is conceptually distinct, temporally separate and causally independent from the mere act of foreign investment”. Nitzan and Bichler (2010), supra note 31, pp. 11-12.

  51. 51

    Ibid, p. 23.

  52. 52

    See UNCTAD IIA: Key Issues (2005), supra note 32.

  53. 53

    Todaro and Smith (2011), supra note 22, p. 114.

  54. 54

    UNCTAD IIA: Key Issues (2005), supra note 32, p. 143.

  55. 55

    See generally J. VanDuzer, P. Simons and G. Mayeda, Integrating Sustainable Development into International Investment Agreements (commonwealth Secretariat 2013), pp. 388-389.

  56. 56

    Directed primarily by the investor needs and market availability such as natural-resource-oriented FDI, market-seeking FDI, efficiency-seeking FDI and strategic-asset-seeking FDI (UNCTAD IIA: Key Issues (2005), supra note 32, pp. 48 and 143).

  57. 57

    Such as capital exporting states, TNCs and market structure and the “inequality” in the ownership of capital.

  58. 58

    Involving investor interest, control or management over the assets used in production and the consumption derive from industrial processes.

  59. 59

    Relating to the structure of corporate groups and the variety of ownership and contractual relationships existing between members; and the use of economic, financial, and securities instruments in structuring assets

  60. 60

    Covering investor property rights, assets and interests – Ownership or entitlement “rights” from investments including: IPRs, technology, returns, profits and other economic interests.

  61. 61

    UNCTAD, South-South Cooperation In International Investment Arrangements, UNCTAD Series on International Investment Policies for Development (New York and Geneva: United Nations, 2005) (UNCTAD SSC/IIAS (2005), p. 31, available at: <http://unctad.org/en/docs/iteiit20053_en.pdf>, accessed 16 October 2012.

  62. 62

    Other specific investment implementing tools include investment protection clauses in trade agreements and in financing instruments.

  63. 63

    Out of 1,982 BITs signed by developing countries, Africa as a region accounts for 696 while LDCs account for 439; see UNCTAD IIAs (2009), supra note 2, p. 36.

  64. 64

    For more general analyses on BITs, see: Sornarajah (2010), supra note 4, p. 32; Salacuse and Sullivan (2005), supra note 11; A. Guzman, Why LDCs Sign Treaties That Hurt Them, Virginia Journal of International Law 38 (1998), 639-688; K. Vandevelde, The economics of Bilateral Investment Treaties, 41 Harvard International Law Journal, no. 2 (2000), 469-502.

  65. 65

    P. Muchlinski, Holistic Approaches to development in International Investment Law, in J. Faundez and C. Tan (eds.), International Economic Law, Globalization and Developing Countries (Cheltenham: Edward Elgar, 2010), p. 182.

  66. 66

    In the “pure investment” case, the notion of investment is broader to make it easier for investors to access dispute settlement procedures; the economic cooperation framework balances the investor private interests and the host country public interests; UNCTAD, Scope and Definitions of International Investment Agreements (2011), available at: <http://unctad.org/en/Docs/diaeia20102_en.pdf> (UNCTAD-IIAs Scope & Definition 2011), p. 22; see also Muchlinski, Ibid, p. 185.

  67. 67

    see UNCTAD-IIAs Scope & Definition (2011), Ibid, pp. 7 and 21; Other agreements take a narrow definition to exclude portfolio investment and other short-term capital flows (p. 41).

  68. 68

    The scope of protected investment include Property – movable, immovable and other rights; company shares, debentures and other form of participation; claims to money and contractual performance having a financial value; intellectual property rights, technical processes and know how; and business concessions (law/contract) to exploit natural resources: Treaty Between The Federal Republic of Germany and Sierra Leone Concerning Encouragement and Reciprocal Protection of Investment (8 April 1965) Art 1 and Art 8(1)-(v); Germany-SL BIT (1965).

  69. 69

    Article 1, Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Sierra Leone for the Promotion and Protection of Investments (Freetown, 13 January 2000 Treaty Series No. 17 2002) (UK-SL BIT).

  70. 70

    Treaty between the Federal Republic of Germany and the Rep of Botswana Concerning the Encouragement and Reciprocal Protection of Investments (23 May 2000 in force 6 August 2007) (Germany–Botswana BIT 2000).

  71. 71

    Agreement between the Government of the Republic of Ghana and the Government the Republic of Benin for the Promotion and Protection of Investments (18 May 2001) (Ghana–Benin BIT 2001); Agreement between the Government of the Republic of Ghana and the Government of the Republic of Mauritius for the Promotion and Reciprocal Protection of Investments 18 May 2001 (Ghana–Mauritius BIT (2001); and Agreement between the Peoples Republic of china and the Republic of Ghana 1(2 October 1989 in force 22 November 1991) (China–Ghana BIT 1989) respectively. All agreements can be accessed via the <unctad.org> For an African viewpoint, on the benefits as well as challenges of South-South cooperation see U.U. Ewelukwa, South-South Trade and Investment: The Good, The Bad and The Ugly – African Perspectives, 20 Minnesota Journal of International Law, no. 2 (2011), 514.

  72. 72

    Note that TNCs tend to transfer the results of innovation to most developing countries, but not the innovative capabilities themselves; and the relocation of their research functions abroad is overwhelmingly to other developed countries. (See UNCTAD IIA: Key Issues (2005), supra note 32, p. 155).

  73. 73

    Germany–Botswana BIT (2000), supra note 70, Ad Article 1 Protocol; It also qualifies the concept of “returns” to mean “the amount yielded by an investment for a definite period, such as dividends, interests, royalties or fees”.

  74. 74

    Bichler and Nitzan (2010), supra note 31, pp. 21-22.

  75. 75

    Germany–Botswana BIT (2000), supra note 70; and Protocol Ad Article 3(b)). Such special measures include restriction on the purchase of raw materials, or energy or fuel or means of production or operation of any kind, unequal treatment in the case of impeding the marketing of products etc; (see Ad Article 3(a)).

  76. 76

    Ghana–Mauritius BIT (2001), supra note 71.

  77. 77

    Article 3 SL-Germany BIT (1965); and Article 2 SL-UK BIT (2002); Ghana–Mauritius BIT (2001); and Ghana–Benin BIT (2001) Article 6; China–Ghana BIT(1989) Article 4; Germany–Botswana BIT (2000) Article 4 respectively.

  78. 78

    Examples of the public interest element in the development contribution of an investment under Arbitral tribunals include: a highway construction, promissory notes issued to guarantee a loan equivalent to their amount, commercial transactions involving fundamental public interest, “consolidation agreement” – States guaranteeing the reimbursement of the loan a loan which contributes substantially to a State’s economic development. Patrick Mitchell v. Democratic, infra note 86, paras. 30.

  79. 79

    UNCTAD-IIAs Scope & Definition (2011), supra note 67, pp. 2-3 this practice sustains even with the shift in the focus of investments away from projects in the “capital-intensive natural resource extraction or infrastructure development project”.

  80. 80

    Ibid, p. 3; see SADC Model Bilateral Investment Treaty Template with Commentary (SADC Headquarters, Botswana July 2012).

  81. 81

    Fedax NV v Venezuela (1998) 37 ILM 1378, para. 43.

  82. 82

    Salini Construtorri S.P.A. and ltalstrade S.P.A. v. Morocco, ICSID Case No. ARB/00/4 42 ILM 609 (2003), para. 52; the so-called “Salini test”, the requirement of an investment are (i) duration; (ii) regularity of profit and return; (iii) assumption of risk; (iv) substantial commitment; and (v) significance for the host State’s development. See also Joy Mining Machinery Limited v. Egypt (ICSID Case No. ARB/03/11), para. 53.

  83. 83

    UNCTAD-IIAs Scope & Definition (2011), supra note 67, p. 61. Rejecting the objective condition is Biwater Gauff (Tanzania) Ltd. v. United Republic of Tanzania, ICSID Case No. ARB/05/22, Award (24 July 2008) para. 307-353.

  84. 84

    the commitment of capital or other resources, the expectation of gain or profit, or the assumption of risk (UNCTAD-IIAs Scope & Definition (2011), supra note 67, p. 115).

  85. 85

    Ibid, p. 115. The major disadvantage of the approach based on objective factors is that it may be hard to substantiate in practice: the quantum of committed capital/resources, what size will qualify as an investment, how to assess the duration of the transaction or its associated risk.

  86. 86

    Patrick Mitchell v. the Democratic Republic of Congo (ICSID Case No.ARB/99/7 Decision on the Application for the Annulment of the Award, 1 November 2006), paras. 25-33 and 39.

  87. 87

    L.E.S.I. S.P.A. et ASTALDI S.P.A. v. Algeria (ICSID Case No. ARB/05/3), Decision, 12 July 2006), para. 73 (iv).

  88. 88

    Convention on the Settlement of Investment Disputes between States and Nationals of Other States (March 1965), reprinted in 4 I.L.M. 524 (1965) (ICSID Convention). The ICSID Convention is not explicit on the role of the public purpose clauses investments in relation to the contribution that investments should make to the development of host states. The development objective in the agreement is in “the need for international cooperation for economic development, and the role of private international investment therein.” (ICSID Convention, Preamble & Art. 25(1)).

  89. 89

    Phoenix Action Ltd. v The Czech Republic (Phoenix Action Ltd) ICSID Case No ARB/06/5, Award of April 15 (2009) paras. 105 and 114; the six elements are: “1) a contribution in money or other assets; 2) a certain duration; 3) an element of risk; 4) an operation made in order to develop an economic activity in the host State; 5) assets invested in accordance with the law of the host State; 6) assets invested bona fide.”

  90. 90

    Phoenix Action Ltd. (Ibid.), para. 85 (emphasis added).

  91. 91

    Ibid.

  92. 92

    UNCTAD-IIAs Scope & Definition (2011), supra note 67, p. 120.

  93. 93

    Ibid.

  94. 94

    Ibid, pp. 121-122.

  95. 95

    Ibid, p. 22; enterprise-based definitions are usually limited to investment to enterprises that were a direct investment.

  96. 96

    Ibid, p. 23.

  97. 97

    Article 11 provides a caveat that restricts the right of investors operating from third states to request for compensation.

  98. 98

    For the “Salini test” requirements for an investment see (supra note 82).

  99. 99

    For the “Phoenix Action Ltd” test see Phoenix Action Ltd. (2009), supra note 89.

  100. 100

    Ibid, para. 101.

  101. 101

    Sedelmayer v. Russian Federation (Germany/Union of the Soviet Socialist Republics BIT), Ad Hoc Arbitration Under The Stockholm Chamber Of Commerce Arbitration Rules, Award, 7 July 1998, para. 224.

  102. 102

    UNCTAD SSC/IIAS (2005), supra note 61, pp. 41 and 45.

  103. 103

    Treaty Establishing the African Economic Community (AEC Treaty) (Abuja 1991): includes all African States.

  104. 104

    The treaty Establishing the Economic Community of West African States (Lagos 1975) and the Revised Treaty of the Economic Community of West African States (Cotonou 1993) (ECOWAS Treaty). Members are: Benin, Burkina Faso, Cape Verde, Côte d’Ivoire, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, and Togo.

  105. 105

    The Treaty establishing COMESA (Kampala, Uganda, 1993) Member are Angola, Burundi Comoros, D.R. Congo, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Namibia, Rwanda, Seychelles, Sudan, Swaziland, Tanzania, Uganda, Zambia and Zimbabwe.

  106. 106

    Treaty of the Southern African Development Community (Windhoek, August 1992) (SADC Treaty)>Members are: Angola; Botswana; Lesotho; Malawi; Mozambique; Namibia; Swaziland; Tanzania; Zambia; and Zimbabwe.

  107. 107

    The SADC Protocol on Finance and Investment (Maseru, Kingdom of Lesotho 2006) (SADC-FIP); Investment Agreement for the COMESA Common Investment Area: Nairobi Kenya 2007 – (COMESA-CIA); Draft ECOWAS Community Investment Code March 2008 (Gilbert Addy & Falou Samb, Project No. 2007/146261, commissioned by the EC) – (ECOWAS-CIC.); ECOWAS Energy Protocol Dakar 31st January 2003 A/P4/1/03 – (ECOWAS-EP). Note that the AEC, ECOWAS, COMESA and SADC treaties set out the guiding principles for more comprehensive investment agreements while the respective protocols on investment detail the character of investment, the regulatory framework and the investment environment for the respective communities.

  108. 108

    See supra note 64 above for these features.

  109. 109

    COMESA Treaty (1993), supra note 105, Article 3(c) and Article 158.

  110. 110

    SADC-FIP (2006), supra note 107, ANNEX 1 preamble and Article 1 & 2(a); see also generally the SADC Declaration on Productivity Maputo, Mozambique (1999), available at: <http://www.sadc.int/documents-publications/show/832>, accessed March 2013).

  111. 111

    COMESA Treaty (1993), supra note 105, Article 151-(a) and Article 159 (1)(a)-(c).

  112. 112

    SADC-FIP (2006), supra note 107, Article 2 and 23.

  113. 113

    ECOWAS-EP (2003), supra note 107, Article. 10 (1) and (11) (emphasis).

  114. 114

    For e.g., COMESA-CIA, supra note 107 Article 159(2) employs the broad asset based definition; but ECOWAS-CIC, supra note 107 Chapter 1(c) (v) categorically excludes investments in nature of portfolio.

  115. 115

    See SADC-FIP (2006), supra note 107, Annex 1 Article 1(2).

  116. 116

    Concerns the exploration, extraction, refining, production, storage, land transport, transmission, distribution, trade, marketing, or sale of specified energy materials and products; see Article 1(13) ECOWAS-EP (2003), supra note 107.

  117. 117

    AEC Treaty (1991), supra note, 103 Article 4(c).

  118. 118

    Ibid, Article 3.

  119. 119

    ECOWAS-CIC, chapter 7(67)-(73) hold detailed terms on the types and conditions of transfer.

  120. 120

    AEC Treaty Article 6(2) (ii), Article 48(2) (b) & Article 55-57: Participation of non-African TNEs in the fields of mineral and water resources, nuclear energy, new and renewable energy will minimise, as members seek better knowledge of their natural resources potential. They aim also to master exploration techniques and the methods of pricing and marketing raw materials.

  121. 121

    ECOWAS Treaty, supra note 104, Article 54(2); COMESA Treaty, supra note 105, Article 101(a) (i)-(iv) & (h).

  122. 122

    see ECOWAS Treaty, supra note 104, Article 53 (b).

  123. 123

    ECOWAS-EP, supra note 107, Article 21. Taxation measures derive from domestic law and regulations of contracting parties, DTTs, or other arrangements binding the contracting parties.

  124. 124

    Ibid, Article 21(7)(a) & (b).

  125. 125

    AEC Treaty (1991), supra note 103, Article 51(1) (c) (d) and 51(2) (a); It also provides for members to “participate in extra-community trade and investment fora” (Art 42(b) (iii)).

  126. 126

    See SADC Treaty (1992), supra note 106, Article 5(2) (f); ECOWAS-CIC, supra note 107, Chapter 22 and ECOWAS-EP, supra note 107, Article 8 respectively.

  127. 127

    COMESA Treaty (1993), supra note 105, Article 128 emphasis added.

  128. 128

    SADC-FIP (2006), supra note 107, Annex 1 (Annex 1) Article 6; ECOWAS-CIC (2008), supra note 107, Chapter 3(4); COMESA Treaty (1993), supra note 105, Article 159(5) (a)-(g); and COMESA-CIA (2007), supra note 107, Article 9.

  129. 129

    The principle operates on a “like circumstances” basis, considering inter alia the effects on the local community, the environment and health-(ECOWAS-CIC Chapter 3(4) and Chapter 13 & 15). MFN non-regulatory discriminatory measures are qualified by exceptions for a wide range of social, environmental and cultural purposes.

  130. 130

    See SADC-FIP (2006), (supra note 107, Annex 1 (Article 7(1)); (Article 10). Article 13–14) – includes regulation to ensure sensitivity to health, safety or environmental concerns.

  131. 131

    COMESA Treaty (1993), supra note 105 Article 159(3) & (4). It includes within the scope of expropriation measures administrative action or omission where there is a legal obligation to act.

  132. 132

    ECOWAS-CIC (2008), supra note 107, Chapter 6(59(b)) and (57(a)-(f)); see also ECOWAS-EP (2003), supra note 107, Article 12 & 13.

  133. 133

    ECOWAS-CIC (Ibid, Chapters 15–19):- The responsibilities are for environmental protection and the transfer of environmentally sound technologies and management practices; employment promotion and security, human resources development and labour rights and standards; and addresses illicit payments or corrupt practices and transfer pricing. AEC Treaty Article 71(2) (a) has provisions regarding labour, employment and income and skilled manpower.

  134. 134

    See the Sierra Leone Investment Promotion Act, 2004 Act No 10, 2004 (SLIPA 2004); Sierra Leone Investment and Export Promotion Agency Act, 2007 (SLIEPA-2007);Ghana Investment Promotion Centre Act (Act No. 478, 1994) (GIPCA–1994), and the Ghana Investment Advisory Council (GIAC); COMESA Regional Investment Agency

  135. 135

    e.g., “the direct investment of foreign or domestic capital into a business enterprise” in the host country SLIPA (2004), supra note 134 section 1 (emphasis).

  136. 136

    Ibid.

  137. 137

    TRALAC-IPSA (2004), infra note 141, p. 8; also Investor entry is promoted and facilitated by the Botswana Export Development and Investment Authority (BEDIA) Botswana-IPR (2010), infra note 141, p. 25.

  138. 138

    Ghana IPR (2003), infra note 141, p. 23; this may be either in cash, or its equivalent in goods, plant and machinery, vehicles or other tangible assets imported to establish the enterprise.

  139. 139

    Botswana-IPR (2010), infra note 141, pp. 47 and 49 requires certain businesses to transfer technology to Botswana, to involve Botswana nationals in management and supervisory positions; and to enable expatriate positions to be localized within an agreed time period.

  140. 140

    TRALAC-IPSA (2004), infra note 141, p. 9; Ghana IPR (2003), supra note 141, pp. 39-40.

  141. 141

    UNCTAD, Investment Policy Review Sierra Leone (New York and Geneva: UN, 2010), p. 28 (SL-IPR 2010); GIPCA–1994), supra note 134, section 27; and UNCTAD, Investment Policy Review: Ghana (New York and Geneva: UN, 17 June 2003), p. 27 (Ghana IPR 2003); UNCTAD, Investment Policy Review-Botswana (New York and Geneva: UN, 2010), p. 28. (Botswana-IPR 2010); UNCTAD, Investment Policy Review Mauritius (New York and Geneva: UN, 2001); Trade Law Centre For South Africa, Investment Project South African Case Study (IISD Report May 2004), p. 3 (TRALAC-IPSA 2004)-Companies however do require approval from the South African Reserve Bank under the country’s exchange control regulations.

  142. 142

    SL-IPR (2010), supra note 134, p. 28.

  143. 143

    Botswana-IPR (2010), supra note 141, p. 28.

  144. 144

    TRALAC-IPSA (2004), supra note 141, pp. 6-7.

  145. 145

    Africa (ICSID Case No ARB(AF)/07/1).

  146. 146

    MPRDA Act No 28 of 2002 (in force May 2004). The mining rights legislation vests all mineral and petroleum rights in the South African Government. Businesses apply for a right to convert their former holdings into “new-order” rights to be held under license from the state. The Mining and Energy dept. considers how much progress the applicant has made in meeting social, labour and development objectives set out in a broad-based socio-economic empowerment mining charter, in line with the Constitutional goal to redress historical, social and economic inequalities. (see Piero Foresti and others v Republic of South Africa (ICSID Case No ARB (AF)/07/1); Roger Alford, ICSID Arbitration Filed Over South Africa’s Black Empowerment Program, available at: <http://opiniojuris.org/2007/02/20/icsid-arbitration-filed-over-south-africas-black-empowerment-program/>, accessed 10 June 2013); and Practical Law, Costs on discontinuance of ICSID arbitration where no clear winner Thomas Reuters Legal Update Case Report, 11-Aug-2010 <http://arbitration.practicallaw.com/4-503-0071>, accessed 10 June 2013.

  147. 147

    The parties’ interests were so closely aligned that there was no advantage in pursuing the arbitration (see PLC Arbitration (2010), Ibid).

  148. 148

    TRALAC-IPSA (2004), supra note 141, p. 6.

  149. 149

    Ibid, p. 4. Such as establishing a local commercial presence through a variety of business entities – private or public companies, partnerships, trusts, and close corporations.

  150. 150

    This restriction is particularly common with the mining and energy sectors – see TRALAC-IPSA (2004), supra note 141, pp. 4-7; GHANA-IPR (2003), supra note 141, p. 7; Ghana Government retains a 10% free share with an option to acquire an additional 20% in mining ventures, thereby maintaining a managerial voice in these firms.

  151. 151

    GHANA-IPR (2003), supra note 141, p. 15. Unilever Company in Ghana combines many of the “classic” ingredients of FDI by a TNC: – aspects of production and consumption. It is primarily owned by the Unilever parent group (UK & the Netherlands), has about 25% of Ghanaian shareholders. It merged with UAC of Ghana Limited and Lever Brothers Ghana Ltd, with a further corporate consolidation phase with three companies in West Africa (Ghana, Côte d’Ivoire and Nigeria) to merge as a single company chaired from Ghana.

  152. 152

    TRALAC-IPSA (2004), supra note 141, pp. 4-7 and p. 9.

  153. 153

    M. Khor, Investment Treaties Come Under Fire (Third World Network, 19 November 2012), available at: <http://twnside.org.sg/title2/gtrends/gtrends408.htm>, accessed January 2013.

  154. 154

    These are taxes on corporate income, profits and dividends; sales taxes; duties, value-added tax (VAT) and property taxes, promotion activities and for Research and development (R&D) and training spending. See Botswana IPR-(2010), supra note 141, p. 30; SL-IPR (2010), supra note 141, p. 231; Mauritius-IPR (2001), supra note 141, pp. 19-20. Note that Botswana applies withholding taxes on payments to non-residents of interest, royalties and fees. Mauritius on the other hand offers a low tax regime for investors by offering widespread incentives.

  155. 155

    TRALAC-IPSA (2004), supra note 141, p. 29; Ghana-IPR (2003), supra note 141, pp. 29-30: Examples of incentives include – Tax holiday, Capital allowances (vary by sector); Location incentives (tax rebate): Corporate tax rate: Exemption from income tax; and loss carry-over.

  156. 156

    Mauritius IPR (2001), supra note 141, p. 35. The value of corporate income tax and tax credit incentives at one point was equivalent to nearly $20 million compared with total corporate tax payments of $52 million.

  157. 157

    Botswana IPR (2010), supra note 141, p. 27.

  158. 158

    Ghana-IPR (2003), supra note 141, pp. 13–14. FDI has also encouraged new occupational skills in information technology that pay high wages and new specialized occupational skills. However, labour productivity and industrial relations have proved difficult which typically operates under special subcontracting agreements p. 13 and 33.

  159. 159

    Regulation relating to technology transfer: Technology Transfer Regulations, 1992 (L.I. 1547) For example, total management and technical fee levels should not exceed 8% of net sales. Technology transfer agreement must be registered with the Investment Promotion Centre to be legally effective. This entails in the mining sector, where the use of capital-intensive technology has developed a pool of trained labour. (see Section 22 (2) GIPC Act supra note 134).

  160. 160

    M. Blakeney and G. Mengistie, Intellectual Property Policy Formulation in LDCS in Sub-Saharan Africa, 19 African Journal of International and Comparative Law, no. 1 (2011), 66–98.

  161. 161

    U.S. Embassy, Sierra Leone Investment Climate Statement, available at: <http://photos.state.gov/libraries/sierraleone/19452/pdfs/2012_ICS.pdf p19-21>, accessed 6 January 2013.

  162. 162

    Botswana-IPR (2010), supra note 141, p. 16; also p. 38; A full complement of legislation to protect intellectual property rights was completed in 2000; Mauritius has a modern copyright law and is in the process of finalizing a best practice law on industrial property e.g. patents, trademarks and industrial designs (Mauritius-IPR (2001), supra note, 141, p. 22).

  163. 163

    Sub-Saharan African LDCs introduced technology transfer regulations to improve their capacity for incremental innovation (the Council of Ministers technology transfer Regulation No. 121/1993 of Ethiopia). However, these regulations were criticised as stringent by organisations such as the World Bank, which influenced countries to repeal such laws (see Blakeney and Mengistie (2011), supra note 160, 66–98; also p. 75).

  164. 164

    TRALAC-IPSA (2004), supra note 141, p. 20.

  165. 165

    Mauritius-IPR (2001), supra note 141: diversifying the economy is the main value of FDI.

  166. 166

    Ghana IPR (2004), supra note 141, pp. 10–12 and 19.

Published Online: 2013-09-06

©2013 by Walter de Gruyter Berlin / Boston