Robert French, former Chief Justice of the High Court of Australia
The economics, law and practice of that area of international trade and commerce relating to investment treaties and their dispute resolution mechanisms have been the topic of intense debate for some time. Political leaders, treaty negotiators, public officials, legal practitioners, trade law academics, industry and public interest advocacy groups are engaged in a multi-dimensional conversation. This book of edited papers takes its readers to the leading edge of that conversation in the Asian region.
The editors’ stated objective, set out in the opening paragraphs of Chapter 1, is to ‘consider the extent to which most states in Asia and Oceania … have been or are more likely to become “rule makers” rather than “rule takers” in international investment law’. The book also raises the important question: what is the good of it? – namely, whether international investment agreements incorporating Investor-State Dispute Settlement (isds) mechanisms increase foreign direct investment (fdi) and promote good governance in host states consistent with host state autonomy. The econometric analysis applied to that question bears a resemblance to climate change science in the multiplicity of variables in play and the equivocal answers to questions about cause and effect over short timeframes. There is a country-by-country analysis of these and related questions which cover 16 countries in the region – Thailand, Indonesia, Singapore, Malaysia, The Philippines, Vietnam, Cambodia, Myanmar, Laos, Brunei, Australia, New Zealand, Korea, Japan, China and India. Among those specific country chapters is a chapter on the connection between the asean Investment Regime and global investment law. Country-by-country review is followed by two chapters offering forward-looking perspectives. One by Professor Leon Trakman discusses an empirical case for establishing standing panels in investor-state arbitration. The last chapter by Donald Robertson concerns governance and international investment treaties, subtitled ‘A Principled Approach to Assessing Regulatory Action’.
Luke Nottage and Julien Chaisse, who are the editors of this book, with Professor Sakda Thanitcul from Chulalongkorn University, usefully set out in Chapter 1 a comprehensive overview of the succeeding chapters in the book, coupled with their own commentary on those chapters. It is a kind of Preface on steroids. It also stands by itself as a comprehensive account of trends in international investment agreements in the region, the historical and related political perspectives which inform their terms and particularly their provisions for investor-state arbitration. Those perspectives are set in the larger context of the economic and political evolution of the region generally. Throughout the book the reader is reminded that while international trade and commerce may be global, the politics that informs its law and practice is, in important respects, local.
Chapter 2 by Dr Shiro Armstrong from the Crawford School of Public Policy, is concerned specifically with the effect of isds provisions on inbound fdi. The results are properly described as ‘complex’. Chapter 3, written by Jason Yackee, an Associate Professor at the University of Wisconsin Law School, offers Thailand as a case study on that question. It poses a major challenge to econometric analysis of the functionality of isds. The inconclusive results of the analysis may reflect what the author calls ‘random noise from measurement error’. On the other hand they may also indicate an absence of any meaningful relationship between isds and foreign investment in Thailand. A policy implication advanced is that Thailand should not ratify the icsid Convention or agree to include isds in future trade and investment treaties in the expectation that it will thereby attract foreign investment.
Chapter 4 by Luke Nottage and Sakda Thanitcul also looks at Thailand and its evolution, including its gradual acceptance of investor-state arbitration from the mid-1990s. They refer to public sensitivity about isds, inflamed by the seizure of the then Crown Prince’s aircraft in Germany by the German investor-beneficiary of an isds award. Given the reverence accorded to the Monarchy in Thailand, it was predictable that the seizure constituted a major diplomatic incident – although evidently not a matter of great concern to the investor. The authors suggest a new Model Bilateral Investment Treaty, developed in 2013, may serve to deflect public criticism of isds. This chapter offers a good example of the intersection of local politics with international trade law and practice.
Chapter 5 by Antony Crockett, with experience practising as a foreign legal consultant in Jakarta, takes the reader to Indonesia and begins with that country’s decision in 2014 to terminate 67 bilateral investment treaties which it had signed since the late 1960s. At the time foreign investment inflows were at their highest level. The decision has been linked to local concerns about a damages claim in excess of $US1.3 billion brought against Indonesia under isds investment arbitration, although the claim was dismissed in 2016. Protectionist trends were also a factor. On the other hand, recent developments confirm that Indonesia still considers that foreign investors should be assured of minimum standards of protection under international law with the backing
In Chapter 6, Mahdev Mohan, an Assistant Professor at the Singapore Management University School of Law, considers the evolution of Singapore’s treaty practice by reference to the European Union-Singapore Free Trade Agreement. This chapter is of interest not only for what it says about Singapore, but also for its discussion of the decision of the Court of Justice of the European Union that provisions of the agreement with Singapore fell outside the European Union’s exclusive competence and required the consent of member States. The decision is likely to increase the risk of delay in its implementation and other European free trade agreements embodying isds.
On 1 July 2017, the European Commission stated that ‘for the eu, isds is dead’. The European Union is now pursuing an investment court system in its trade agreements. Singapore’s approach to the negotiation of the free trade agreement is described as ‘conservative, judicious and pragmatic’. That characterisation is linked by the author to the general observation by Stephen Schill that while Asian actors in the past have been primarily rule takers, they are increasingly developing a critical edge and redefining their engagement with international investment policy.
Chapter 7 moves to Malaysia and its experience with isds. Malaysia has more than 70 investment guarantee agreements, most of which provide for isds. It has been subject to three claims and Malaysian companies have invoked isds provisions against Chile, Ghana and China. Those cases are all discussed in this chapter. The authors suggest that Malaysia also has become more of a rule maker in international investment law than a rule taker. It continues to liberalise its investment regime
Chapter 8 travels to the Philippines. Anselmo Reyes, Professor of Legal Practice at the University of Hong Kong, gives an account of the Philippines’ experience with fdi and investment disputes. He looks to economic growth trends, fdi and corruption, and finds only moderate achievements compared with neighbouring Asian states. Domestic law continues to encourage significant ‘economic nationalism’. The Philippines has been half-hearted about opening its domestic enterprises to competition from abroad. Its experience with fdi has been ‘lukewarm’. Economic nationalism, reserving certain strategic enterprises to Filipino nationals or their companies, is supported by the Constitution and promoted in legislation. Bilateral investment treaties into which the Philippines has entered routinely require that an investment must be made in accordance with Philippine law, thus engaging with the Constitution and economic legislation. It is suggested by the author that the Philippines has shown itself to be adept at using bilateral investment treaties to advance a strategy of
Chapter 9 concerns Vietnam. Nguyen Manh Dzung and Nguyen Thi Thu Trang, Managing Partner and Counsel respectively in a shipping and adr law firm in Vietnam, point to the challenges and opportunities for that country’s legal system in the global market. There are problems of enforcement of contracts in Vietnam and public sector transparency which have engendered concerns by foreign investors that they will not obtain equal treatment. The authors refer to Vietnam’s 64 bilateral investment treaties and 11 free trade agreements as well as its active involvement in negotiations relating to the Regional Comprehensive Economic Partnership and the European Union-Vietnam Free Trade Agreement. isds was not recognised under Vietnamese domestic law until 2005. The authors conclude that Vietnamese legal frameworks have been amended and transformed to be more consistent with international standards promoting the rule of law and enhancing good governance.
Chapter 10 focusses on Cambodia. Dr Romesh Weeramantry, of Clifford Chance in Hong Kong, refers to steps taken by Cambodia in recent years to attract fdi through its involvement in the Association of South East Asian Nations, investment agreements and free trade agreements. The chapter deals with Cambodia’s arbitration law and practice, its domestic law on investment, the court system, corruption and fdi patterns. The general conclusion offered is that Cambodia’s economy has advanced significantly since the Pol Pot years. There is no evidence to measure scientifically the extent to which that development is due to Cambodia’s international investment program. The real test for Cambodia will come if an investment treaty claim made against it proves to be successful and it is required to pay damages to a foreign investor. The author is optimistic that Cambodia will not abandon its international investment agreement program in that event. It is more likely to re-evaluate or recalibrate it.
Chapter 11 is written by Jonathan Bonnitcha, a lecturer in law at the University of New South Wales. It takes us to the troubled country of Myanmar. It reviews Myanmar’s approach to investment treaties and its experience in investor-state arbitration under those treaties. It also considers Myanmar’s domestic laws relevant to international investment arbitration. Interestingly, inward fdi to Myanmar has increased from less than $US1 billion in 2010 to over $US3 billion in 2015. The author observes that Myanmar’s experience does not fit the pattern of other developing countries which did not carefully assess the effectiveness of the agreements they entered into in promoting fdi or the risks associated with investment treaty arbitration. The majority of Myanmar’s
Chapter 12, co-authored by Romesh Weeramantry and Mahdev Mohan, examines international investment arbitration in Laos. Laos has had an investment law for more than 20 years and is a party to several bilateral and regional investment agreements. The chapter examines the history, evolution and current nature of Laos’ relationship with international investment law and examines two investment treaty claims instituted against that country. The authors acknowledge that Laos may fall within the description by Professor Simon Chesterman of Asian States as historically displaying an ambivalence to international law and institutions. Nevertheless, Laos is said to be committed to arbitration through attempts to enact domestic legislation supportive of arbitration and foreign investments through its international investment agreements and providing investors with arbitration rights.
Brunei is considered in Chapter 13 by Associate Professor Bruno Jetin from the Institute of Asian Studies at the University of Brunei Darussalam and Professor Julien Chaisse from the Chinese University of Hong Kong. Brunei is presented as a small oil-rich country with an open economy, the second wealthiest South East Asian economy after Singapore. The challenge of diversification requires inbound fdi. The authors review Brunei’s approach to bilateral investment treaties and free trade agreements. They characterise it as more of a rule taker than a rule maker. As a leading importer of capital and an emerging leader in capital export, it faces a challenge of reaping the benefits of international agreements while ensuring that it has regulatory capacity to sustain its growing economy.
Chapter 14 by Professors Sungjoon Cho of the Chicago-Kent College of Law and Jürgen Kurtz of the University of Melbourne Law School offers a regional perspective on departures from what they call ‘the global investment model’. Hence the opening words of their title: ‘The Limits of Isomorphism’. The chapter in an empirical way engages with the issues of diversity within a framework for convergence. They conclude that scholars of investment law and politics should define a form of global investment law ‘that is more inclusive and flexible than the conventional paradigm’.
Chapter 15, written by Amokura Kawharu (Associate Professor at the University of Auckland) and Luke Nottage, examines foreign investment regulation and treaty practice in Australia and New Zealand. That comprehensive and detailed examination is contextualised by reference to ongoing domestic political debates about the benefits and costs of such agreements and, in particular, isds processes.
Professor Joongi Kim of Yonsei University discusses Korea’s international investment agreements in Chapter 16. Korea has entered into 86 bilateral investment treaties, one trilateral agreement and 14 free trade agreements – the latter have become central to its trade and investment policy. The chapter focusses upon Korea’s approach to transparency in arbitration proceedings and its public interest exceptions in free trade agreements.
Tomoko Ishikawa, Associate Professor at Nagoya University, offers a Japanese perspective on recent developments in international investment agreements. The high-profile negotiations around the Trans-Pacific Partnership Agreement (tppa) enlivened a greater public awareness of concerns about the interaction between investor-state arbitration and state sovereignty particularly in relation to governmental, regulatory and procurement action and judicial power. There has been a greater tendency since 2010 to include detailed investor-state arbitration clauses and reference to public policy considerations. Having regard to the uncertain future of the tppa, there is an increased focus on the Regional Comprehensive Economic Partnership (rcep). Japan has asserted that it will ‘strategically and expeditiously’ promote negotiation on the rcep. The author suggests that the challenge of balancing investment protection and the public interest in the text of the rcep will require attention to be paid to models outside existing free trade agreements and arbitration case law.
Julien Chaisse in Chapter 18 describes China’s international investment policy with the subtitle ‘Formation, Evolution, and Transformation(s)’. Given China’s existing and increasing significance in the global economy, this is an important chapter. The author observes that China’s transition from capital importing to capital importing and exporting has required a reassessment of its approach to international investment agreements generally. China will, no doubt, have a role to play in the changing balance to be struck between investor and state interests in international investment agreements – many of which, according to the author, have changed little since the first such instruments were adopted in the 1970s.
Chapter 19, by Assistant Professors Prabhash Ranjan and Pushkar Anand, concerns isds in India’s 2016 Model Bilateral Investment Treaty. It is the last of the country-specific chapters. India’s Model Treaty is said to strike a balance too far in favour of the host state and against foreign investors. The authors contend that the isds provisions in the asean-India Investment Agreement provide much better balance. The development of India’s Model bit is said to show that to some extent it has become a rule maker rather than a rule taker in international investment law. Interestingly, the Model denies arbitral tribunals jurisdiction to review the merits of domestic judicial decisions in the host
The last two chapters, as already mentioned, consider two disparate but important topics. Chapter 20 by Professor Trakman from unsw, concerns the empirical case for extending standing panels in investor-state arbitration. He argues, inter alia, that internal and external panels are to be preferred to ad hoc appointment by disputants. The success of such mechanisms however will depend upon the attributes of the panels, their governance structures and how they work in practice. This chapter focusses upon the internal standing panel provided for in the China-Australia Free Trade Agreement.
The last chapter by Donald Robertson, a partner in Herbert Smith Freehills, is concerned with the formulation of principles for state-based regulation of markets and how they are embedded in the law. He argues that isds is one of the primary means by which such principles are articulated. He considers the particular question – when does state regulatory action amount to indirect expropriation of an investor’s property? The chapter includes a consideration of the phenomenon of global administrative law, in which States delegate to non-state actors responsibility for setting rules. Principles of best practice regulation are identified as subsidiarity, proportionality and rationality. They express, as the author says, ‘the fundamental values of public law’. It is appropriate that the last chapter should remind readers of the extent to which international investment law and practice exists and occurs in a public law space, both transnational and domestic.
This book provides a comprehensive account of developments in international investment law and practice in the Asian region. It places that account in a larger conceptual framework, partly defined by reference to rule making and rule taking by States. It also places it in the real and conceptually untidy world of domestic and international politics. I congratulate the editors and the contributors on their achievement.