William Mwanza, tralac Researcher, comments on UNCTAD’s reform of the IIA regime

The United Nations Conference on Trade and Development (UNCTAD) is hosting an expert meeting on “Taking Stock of International Investment Agreements (IIA) Reform” in Geneva on 16 March 2016. Ahead of this meeting, UNCTAD released an Issues Note highlighting major developments in IIA reform over the years. The expert meeting brings together Member States, and the international investment and development community to share their experiences on IIA reform. It is being held in response to a request for such dialogue made to UNCTAD at the conclusion of the Third UN Conference on Financing for Development (FfD), held in Addis Ababa in July 2015. Apart from sharing experiences and drawing lessons learnt in the reform process, the expert meeting will chart a way forward towards the IIA Conference to be held at the 2016 World Investment Forum in Nairobi in July 2016.

The Issues Note starts by highlighting how it has become imperative to systematically reform the global regime of IIA so as to bring it in line with the sustainable development agenda. Within this, there has been a noticeable global trend to formulate “new generation investment policies” that make inclusive growth and sustainable development integral to efforts to attract investment. This includes ensuring that efforts to protect and encourage investment do not affect the ability for Member States to pursue public policy objectives – as articulated in paragraph 91 of the 3^rd FfD Conference outcome document, the Addis Ababa Action Agenda (AAAA).

UNCTAD’s advocacy role on sustainable development-oriented IIA reform started in 2010. Since then, its annual World Investment Report (WIR) has proposed policy options for negotiation of IIAs taking into account sustainable development considerations, and possible pathways for reform of the IIA regime. This has resulted in the development of a ‘Roadmap for IIA Reform’. The Roadmap suggests that IIA reform should address five main challenges namely:

• Safeguarding the right to regulate while providing protection

• Improving investment dispute settlement

• Promoting and facilitating investment

• Ensuring responsible investment

• Enhancing systemic consistency

The roadmap proposes guidelines that could be followed including harnessing IIAs for sustainable development; focussing on critical areas of reform; properly sequenced actions at all levels; inclusiveness and transparency; and the development of a multilateral support structure. It suggests reform efforts must take place at the national, bilateral, regional and multilateral levels – starting with reviews at each level, and then formulation of action plans that translate into appropriate IIAs.

IIA reform is proceeding within the context of an increased proliferation of IIAs. 3286 agreements were in existence at the end of 2015. Of these, 2928 were bilateral investment treaties (BITs). 358 were economic agreements with investment-related provisions e.g. in economic partnership and free trade agreements, regional investment agreements and framework agreements on economic cooperation.

At the national level, at least 110 countries have reviewed their national and international investment policies since 2012, with most of these (about 100) using UNCTAD’s Policy Framework developed in that year. Of these, sixty have developed or are in the course of developing new model IIAs indicating their overall approach. Most of the model agreements include provisions that safeguard the right to regulate for public policy – including sustainable development – objectives, and provisions aimed at minimizing exposure to investment arbitration. Apart from model laws, other outputs of the review process have included contribution to ongoing modernization of countries negotiating documents and approach to policy making on international investment; decisions on whether certain IIA’s should be renegotiated, amended or terminated; and integrating IIA concepts into national laws. South Africa was the first African country to commence with a review of its international investment regime in 2008. More recently, UNCTAD has conducted national reviews for 5 other countries namely Congo, Djibouti, Madagascar, Mozambique and Sudan.

At the bilateral level, reform has included joint IIA consultations resulting in joint interpretations, consensual termination of current IIAs, renegotiation or amendment, or the development of new treaties.

At the regional level, reform includes collective treaty reviews and development of regional action plans leading to the development of common model laws, joint interpretations, renegotiations, and conclusion of new treaties. It is noted that regional (model) IIAs can contribute significantly to IIA reform. The 2007 COMESA model law is cited as one of the early regional model laws. The EAC is currently in the process of developing a regional model, and SADC concluded its model BIT in 2012. Although not mentioned in the Issues Note, SADC also regulates international investment regionally through its Protocol on Finance and Investment. At the continental level, the African Union is in the process of developing a Pan African Investment Code.

At the multilateral level, it is recognised that reform actions need to be undertaken in tandem with steps and actions being undertaken at the other levels. It is also noted that a global review of the IIA architecture and consensus-building at the multilateral level are important for the creation of a shared vision on systemic reform. It is acknowledged that global IIA reform is a great challenge, and that a common approach at all levels would be required to ensure that the IIA regime is stable, clear and predictable, and is one that effectively manages international investment relations while promoting sustainable development.

The outcome of the Experts Meeting being held in Geneva will provide important indications on the deliberations that can be expected at the Nairobi IIA Conference in July. For African countries, there is an increased impetus towards inclusion of investment provisions in regional agreements. It is important that reviews of international investment frameworks in respective regional economic communities be conducted so as to determine what is currently provided for and how best investment provisions can be developed. This should necessarily be augmented by more national reviews so that as lessons are increasingly shared, a coherent approach to the design and implementation of IIAs is fostered on the continent.

Tell us what you think.

---

Source:

UNCTAD. 2016. Reforming the IIA Regime – a Stocktaking. [Online]. Available at: http://www.tralac.org/news/article/9186-reforming-the-iia-regime-a-stocktaking.html