Добавил:

Upload Опубликованный материал нарушает ваши авторские права? Сообщите нам.

Вуз:

Белорусский государственный университет

Предмет:

[НЕСОРТИРОВАННОЕ]

Файл:

Muchlinski, The Oxford Handbook of Internationa...docx

Скачиваний:

Добавлен:

01.05.2025

Размер:

2.29 Mб

Скачать

☆

<<< < Предыдущая 1 2 3 4 5 6 7 8 9 10 1112 / 6112 13 14 15 16 17 18 19 20 21 22 23 24 25 > Следующая >>>

Investment treaty practice of the usa and Canada. 66 For example, the us-Uruguay bit of 25 October 2004 states, by Article 3(1):

Each Party shall accord to investors of the other Party treatment no less favourable than it accords, in like circumstances, to its own investors with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments in its territory. 67

This is followed by Article 3(2), which extends the same protection to investments, and Article 4(1) and (2) which cover, respectively, the MFN protection of investors and investments. These provisions make entry to the host state subject to the principle of non-discrimination, and, to that extent, represent a restriction on the host state's sovereign power to regulate the entry of foreign investors. However, the application of this principle is subject to the right of the host state to exclude certain sectors from foreign investment. 68 Therefore, the US Model accepts restrictions on entry, provided they are applied in a manner that does not discriminate against US investors. 69 Under the Russian Federation-US BIT, the contracting states agreed that, for a period of five years, the Russian Federation would be able to require permission for large-scale investments that exceed the threshold amount in the Russian Federation Law on Foreign Investments of 4 July 1991, provided that this power was not used to limit competition or to discourage investment by US companies and nationals. 70

The extension of full non-discrimination protection to the pre-entry stage is not without its problems. Indeed, this was one of the issues that helped to stall the negotiations over the MAI. 71 Establishment is also covered in the draft Supplementary Agreement to the Energy Charter Treaty (ECT). Given the policy-sensitive nature of natural resource extraction, particularly its relation to the inherent right of peoples to enjoy and utilize fully and freely their natural wealth and resources, 72 the negotiations on the ECT did not result in the adoption of a full right of establishment.

end p.244

Instead, an interim solution was arrived at. Thus Article 10(2) of the ECT has established a non-legally binding ‘best efforts’ clause for contracting parties to grant foreign investors non-discriminatory treatment concerning the making of their investments. In addition, Article 10(5) introduces a ‘standstill’ on new restrictions for foreign investors and a commitment progressively to reduce remaining restrictions (‘rollback’). Furthermore, Article 10(6) allows the contracting parties to make at any time a legally binding voluntary commitment to grant foreign investors non-discriminatory treatment with regard to the making of an investment. Moreover, Article 10(4) provides for negotiations on the extension of the non-discrimination principle to the pre-establishment phase by means of a Supplementary Treaty. These negotiations began in 1995. Negotiations were suspended in 2002, pending the outcome of discussions over a multilateral framework on investment in the WTO, but have not been resumed. 73

As noted in the introduction to this section, apart from the two main models of admission and establishment provisions in contemporary IIAs, three further approaches were identified by UNCTAD in its study of admission and establishment provisions in IIAs. 74 These arise from regional economic integration agreements, including the EC Treaty, and the WTO GATS Agreement. Thus they represent specific legal responses to particular policy goals, resulting in distinctive types of admission and establishment regimes. Each is examined in turn.

(i) The GATS-type ‘Positive List’ Approach

The General Agreement on Trade in Services (GATS) contains a right of establishment. 75 By Article I thereof, trade in services is defined as the supply of a service inter alia through the commercial presence of a service supplier of one member in the territory of any other member. 76 Furthermore, by Article XXVIII(d) ‘commercial

end p.245

presence’ is defined as meaning ‘any type of business or professional establishment, including through (i) the constitution, acquisition or maintenance of a juridical person, or (ii) the creation or maintenance of a branch or a representative office within the territory of a Party for the purpose of supplying a service’. This definition is consistent with the existence of a right of establishment. Such a right will exist where a member of the GATS makes specific commitments on market access under Article XVI of the GATS. Article XVI goes on to state that, in sectors where the member undertakes market access commitments, it is prohibited from imposing certain listed limitations on the supply of services, unless it expressly specifies that it retains such limitations. These limitations include measures that would affect access through inter alia direct investment. Thus, in the absence of express reservation, the member cannot restrict or require specific types of legal entity or joint venture through which a service could be provided, nor impose limits for the participation of foreign capital drawn up in terms of limits on maximum foreign shareholding or total value of individual or aggregate foreign investment. 77

The wording of Article XVI makes clear that the receiving state is entirely free in determining the extent of its market access commitments, and that it may expressly reserve powers to limit the mode of supply; there is no general obligation to remove all barriers concerning the entry and establishment of service-providing firms. Each member of GATS is obliged to do no more than set out the specific market access commitments that it is prepared to undertake in a schedule drawn up in accordance with Article XX of the GATS. Thereafter, members shall enter into subsequent rounds of negotiations with a view to achieving progressively higher levels of liberalization. 78

This approach has been termed the ‘GATS-type positive list’ or ‘bottom-up’ approach to investment liberalization. It contrasts with the NAFTA-style ‘negative list’ or ‘top down’ approach, which was described earlier, and which is also used in the OECD Liberalisation Codes. 79 There is a continuing debate over which approach

end p.246

is better. Countries committed to progressive liberalization argue that a positive commitment to liberalization, coupled with a ‘negative list’ of exceptions, is more likely to result in actual liberalization of entry and establishment conditions. On the other hand, developing countries, in particular, have favoured the GATS-type approach on the ground that it allows for a more considered and gradual process of liberalization, which the ‘negative list’ approach does not, as this requires an ex ante determination of which sectors should be excluded from the pressures of open competition with foreign investors. Such a calculation may be impossible to make at the time of entering into an international agreement, especially for a country with limited resources to assess the competitive condition of its economic sectors. By contrast, the ‘positive list’ approach does not put immediate pressure on the country to make choices as to exclusions from rights of entry and establishment. Rather, the host country can wait and see which of its sectors evolves to a position where it can be opened to competition from foreign investors. 80 Thus, by adopting this approach, the GATS stops short of guaranteeing rights of establishment in all cases, and leaves a wide margin of discretion to the members. Indeed, a blanket abolition of national controls over services would have been impossible to negotiate. Consequently, a slower, progressive approach to liberalization has been adopted by all the participating states.

(ii) The EC-type ‘Right to Establishment’

This is referred to by UNCTAD as the ‘mutual-national-treatment model’. 81 This approach is directed towards providing special treatment to FDI originating in a given region. It is a component in the process of creating an integrated single regional market. National treatment is granted to all investors belonging to the member countries. The benefits are akin to those of global-market liberalization, but are obviously limited to a given region. In relation to the operations of companies or firms, Article 48 of the EC Treaty provides:

Companies or firms 82 formed in accordance with the law of a Member State and having their registered office, central administration or principal place of business within the

end p.247

Community shall, for the purposes of this chapter, be treated in the same way as natural persons who are nationals of Member States.

The right of establishment, as it applies to companies and firms, includes, ‘the right to take up and pursue activities as self-employed persons and to set up and manage undertakings, in particular companies or firms within the meaning of the second paragraph of Article 48, 83 under the conditions laid down for its own nationals by the law of the country where such establishment is effected, subject to the provisions of the chapter relating to capital’. 84Article 55 of the EEC Treaty extends Article 48 to the provision of services, ensuring that companies can also benefit from the freedoms accorded in that area to natural persons. Article 48 suggests two possible routes into another member state: first, the establishment of a new company, or the transfer of an existing company, from one member state to another, known as ‘primary establishment’; secondly, the establishment of an office, branch, or subsidiary in another member state, termed ‘secondary establishment’. 85 In each case, the member states must not impose obstacles to the freedom of establishment such as for example, differential tax treatment or other advantages, that are granted to local investors but not to those from another member state.

Where a company seeks to enter a host member state through secondary establishment methods, it must show a real and continuous link with the economy of a member state to qualify as a beneficiary of this right. 86 Thus entry into a mere contractual arrangement in the host member state will not suffice in the absence of an established place of business. 87 However, more recent case-law from the ECJ accepts that a company can be set up in any member state, regardless of whether it pursues economic activity there, even if the main purpose of such establishment is to avoid more onerous regulatory requirements in the member state where the economic activity is actually carried out. 88 The only circumstances where this will not

end p.248

be allowed is where the establishment in another member state is designed improperly to circumvent the national legislation of the country in which the business in fact operates, or where some fraud or abuse is involved. 89 This development allows for a degree of regulatory arbitrage for investors between the company, and other laws, regulating establishment in the EU member states.

It is clear from Articles 48 and 55 of the EC Treaty that the right to establishment and the right to provide services in another member state can only be enjoyed by a company formed in accordance with the law of a member state and having its registered office, central administration, or principal place of business within the Community. This is wide enough to cover the EC-based subsidiaries of non-EC parent companies. However, the EC Treaty does not guarantee these rights to companies that have no legally recognized EC presence in the sense of Article 48. Therefore, it is not possible for, say, a US- or Japanese-based company to invoke the EC Treaty if it is denied access to the economy of a member state whether for the purpose of establishing a place of business or for the provision of cross-border services. In the absence of a common Community policy on inward investment from outside the EC, individual member states retain discretion over their policy towards investors from outside the EC. 90 In general, the member states of the EC espouse an ‘open door’ to non-EC investors, so there should be little real disadvantage to such investors.

Other regional economic organizations have also followed the EC-type right of establishment model, though there is no developed case-law as in the EC to interpret the scope and content of these provisions. 91 Examples include The Treaty Establishing the Caribbean Community (CARICOM Treaty), 92 The Agreement on Arab Economic Unity (AEU Agreement—1964), 93 the ECOWAS Revised Treaty of 1993, 94 and the ASEAN Framework Agreement on the ASEAN Investment Area of 1998. 95

end p.249

(iii) Regional Industrialization and Admission and Establishment

The process of progressive regional industrialization within regional groupings of developing countries has produced a commonly pursued policy directed at establishing a supranational form of business organization, the purpose of which is to augment regional economic development. Under this model, two or more members of a region establish an MNE and mutually grant special rights of admission and establishment, such as national treatment. First initiated by the Agreement on Andean Sub-Regional Integration, the ‘Cartagena Agreement’, 96 this model benefits from greater know-how and capital resources, reducing nationalism in favour of economies of scale, which can serve larger markets. Theoretically, it relies on production factors readily available to the MNE in the region (which is not always the case). According to Article 1(f) the Cartagena Agreement, ‘For the purposes of this Code, an Andean Multinational Enterprise shall be a company fulfilling the following requirements: The sub-regional majority of the capital must be reflected in the technical, administrative, financial and commercial management of the company in the judgment of the corresponding national competent entity’. 97 Similarly, the Community Investment Code of the Economic Community of the Great Lakes Countries (CEPGL—1982) provides a scheme for the promotion of joint and community enterprises enjoying the freedom to form and invest capital in the territory of a member state. 98 A similar policy has been followed in the Agreement for the Establishment of a Regime for CARICOM Enterprises (CARICOM—1987). 99

(5) Balancing Admission and Establishment and Regulatory Discretion

The preceding discussion has shown that at the level of both national laws and international agreements, there is considerable variation in the nature and extent of

end p.250

rights of admission and establishment for foreign investors. As noted in the introduction to this chapter, while the dominant trend in national laws has been towards liberalization, this is now showing signs of some revision, with a minority of countries beginning to reconsider the extent to which they are willing to give investors a free rein in their country. This affects not only the question of how investors are going to be treated upon entry but also how much freedom of action they will enjoy after entry. The latter will depend to a great extent on the manner in which host countries conduct their admission and establishment policies, as these will, to a large extent, determine the scope of the investors' post-entry freedom of action.

At the international level, while the majority of IIAs still retain a controlled entry approach, the full liberalization model is gaining ground, especially in bilateral FTAs with investment provisions. The question arises: given the gradual acceptance of pre-entry rights of non-discriminatory admission and establishment, how far will such international developments control developments under national laws? The acceptance of a positive right of entry and establishment under an IIA or FTA with investment provisions is, in effect, a restriction of state sovereignty in the field of admission of aliens and results in a voluntary exclusion of national regulatory discretion. This assumes that the free entry of any investor is desirable and so does not require control.

Such a policy outcome is not necessarily for the best in all cases. For example, the proposed takeover, in 2006, of the UK's biggest gas supplier, Centrica, the owner of British Gas, by the Russian state-controlled gas monopoly, Gazprom, raised concerns in government circles. 100 It led the then Secretary of State for Trade and Industry, Alan Johnson, to consider passing a statutory instrument under section 58 of the Enterprise Act 2002 to control bids in the energy supply industry that might threaten energy security. 101 This revelation prompted a critical response from Gazprom, which threatened to divert supplies to other customers, and made the Secretary of State appear inconsistent as he had been a vocal critic of other EC member states that had sought to control foreign bids. 102 The matter was put to rest by the then Prime Minister, Tony Blair, who pledged that any future bid by Gazprom would be handled in the normal way by the independent competition authorities. 103 This case has prompted significant discussion over the real limits of a commitment to liberalization in relation to foreign takeovers of UK firms. That concerns over Gazprom were aired should come as no surprise. On New Year's Day 2006, Russia suspended gas supplies to the Ukraine. Earlier, Vladimir Putin, the Russian President, removed the old management and brought in his own supporters, making

end p.251

the company even closer to the heart of the Russian state. 104 Whether Gazprom acts as a truly independent commercial entity may be open to question. In such circumstances, it may be unwise to consider any bid purely on economic grounds.

The case of Gazprom gives rise to a wider issue. Might it not be relevant to take into account the economic, social, and political culture from which foreign investors come? Companies from authoritarian or undemocratic states, or those from corrupt states, with little or no tradition of corporate accountability and transparency, may bring with them a tradition of bad corporate practice which may undermine effective and open regulation. Surely there is a case for some form of review of these practices in the public interest, especially in relation to bids in sensitive sectors. The narrow logic of market efficiency can appear very inadequate when it comes to such questions, questions that are central to the efficient and honest administration of a market economy. It may be easier to review this matter at the stage of entry than allowing the investor to benefit from open entry and live with the possibility of corporate malpractice thereafter. Equally, social issues, such as employment effects and regional effects, have not lost their importance and, as noted earlier, certain cultural industries may warrant protection. It may be the case that, in practice, some kind of ‘public interest' review needs to occur. 105 The political pressure for this may become irresistible in the future.

A second concern arising from the effect of admission and establishment guarantees in IIAs is that such a commitment binds future governments that did not sign the IIA or FTA in question to uphold rights of admission and establishment even if such an ‘open door’ approach is not seen to be in the public interest by subsequent administrations. This raises the question of responsiveness to changes in national policy and whether general controls over pre-entry discretion over admission and establishment are ultimately legitimate, especially where that change of policy is sanctioned by popular approval. In this connection, it is necessary to bear in mind the nature of national procedures for the conclusion of international treaties and whether IIAs in particular have been adopted in accordance with the required constitutional procedures. In some countries, BITs are given the force of national law. For example, by Article 157 of the Sri Lankan Constitution, BITs are given the force of law in Sri Lanka, and no executive or administrative action can be taken in contravention of the treaty, save in the interests of national security. 106 However, in many countries, IIAs are only binding as international legal obligations. This

end p.252

raises the possibility that a conflict could arise between the market-opening provisions of an IIA and inconsistent subsequent laws that seek to control admission and establishment.

This raises the further question of whether existing legal approaches to admission and establishment offer a good policy choice for host countries. In this regard, retaining the controlled entry approach may prove more satisfactory from the perspective of preserving a state's right to regulate admission and establishment. It has the virtue of preserving national policy space by making entry and establishment conditional on the processes of national law as applied at the pre-entry stage. Here the applicable IIA does not seek to control state sovereignty over admission of aliens and defers to national law and practice. That said, the controlled entry model is at odds with the push towards liberalization and market access rights that is a logical concomitant of the rise of global production chains operated by multinational enterprises, which was highlighted in the introductory chapter.

There is little doubt that the full liberalization approach is better suited to these imperatives. It opens up the host country to investment and allows for a reduction of regulatory barriers to entry and establishment, thereby making the decision to invest a more efficiency-led decision which tends to enhance economic welfare. This is particularly the case in the contemporary economy where technical change is faster, internationally integrated production systems are the norm, and FDI is the dominant form of technology transfer. 107 However, there may be good policy reasons for restricting the entry of foreign investors for a number of reasons. 108 First, in a developing country context, it may be necessary to protect infant domestic entrepreneurship against overwhelming foreign competition which could drive local entrepreneurs into less complex activities or to those with lower foreign presence, perhaps by selling local facilities to foreign entrants. Of course, it is necessary not to over-protect and risk creating a permanently uncompetitive local industry, but, with attention being paid to this issue, a degree of protection may result in highly competitive new local industries, as in the case of the Republic of Korea or Taiwan. Secondly, local firms may be better at deepening local technological knowledge, disseminating it within the host economy and creating local spillover effects, given a greater commitment to their country than foreign investors might show. Thirdly, foreign investors may be ‘footloose’ and their activities may need to be carefully scrutinized on entry to ensure that their investment will last and make an enduring contribution to the local economy. Finally, foreign investors may need to be controlled as a result of their tendency to respond to outside factors, such as international markets, parent company decisions, and home country concerns.

Such concerns should not be overstated and they have been used to justify protectionist policies in host countries which act to the detriment of consumers and to

end p.253

the development of an efficient economy. However, they are not unreal concerns. Thus, the question remains how to ensure a balance between rights of admission and establishment and rights to regulate if a positive commitment to the extension of such rights has been made by the host country in an IIA. A number of alternatives present themselves.

First, the full liberalization model already contains an exception device in the form of the negative list. Its merits relative to the selective liberalization approach of the GATS-type positive list mechanism have already been discussed briefly above. Here the effects of the negative list approach on national policy space will be considered. The major result of this approach is to exclude the non-discrimination standard at the pre-entry stage from a pre-selected list of sectors. This will have the effect of freezing the negative list and preventing other sectors from being added unless all other parties consent. 109 It may also discourage the progressive liberalization of listed sectors as the political cost of doing so may be too great at the national level. So, paradoxically, a negative list may act as a de facto brake on progressive liberalization. It also carries with it the risk, as noted earlier, of omitting sectors that the host country did not feel needed protection at the time of the conclusion of the treaty. Subsequent changes in market conditions or political circumstances could then demand a degree of protection which would be unlawful under the treaty. Thus, the negative list approach may be inflexible in its results and could lead to a backlash against the treaty if it is perceived as an illegitimate restriction on the right of the host country government to respond to changed circumstances and to control foreign entry into an open sector. A final risk is that too many sectors are excluded and so the commitment to liberalization in the treaty is weak or effectively non-existent. In this regard, as noted above, the positive list approach may in fact give more flexibility as it does not require an ex ante analysis of the competitive situation of major sectors of the economy but allows for a gradual liberalization of those sectors deemed sufficiently competitive to be exposed to competition from foreign investors.

Secondly, even where a sector is subject to full rights of admission and establishment, certain exclusions based on public policy and national security concerns could be included in the IIA or FTA in question. For example US BITs contain an exception which allows a party to take measures to protect its essential security interests or to apply measures with respect to maintenance or restoration of international peace and security. 110 The Canadian model is notable for the inclusion of a general exceptions clause protecting the rights of the contracting parties to regulate in the fields mentioned by its terms. The clause follows the general pattern of Article XX GATT 1994 by listing areas in which regulation is consistent with the provisions of the BIT and adds a ‘chapeau’ requiring such regulation not to be arbitrary, discriminatory, or a disguised restriction on trade and investment. The exception covers,

end p.254

among other things, public policy, health, and prudential regulation. 111 Less certain is whether national economic interests can justify the exclusion of rights of entry and establishment. The World Bank Guidelines on the Treatment of Foreign Direct Investment assert:

Without prejudice to the general approach of free admission recommended in Section 3 above, a State may, as an exception, refuse admission to a proposed investment:

(a) which is considered, in the opinion of the State, inconsistent with clearly defined requirements of national security; or

(b) which belongs to sectors reserved by the law of the State to its nationals on account of the State's economic development objectives or the strict exigencies of its national interest. 112

end p.255

Such an exception is not normally found in IIAs. In relation to the full liberalization approach, any sectors so reserved under national laws should be entered into the negative list. This was the approach taken, for example, by Mexico when concluding the NAFTA. Its schedules reflect closely the restrictions and exclusions of foreign investors contained in the 1993 foreign investment law. 113

Concluding Remarks

The preceding discussion has shown that the international legal principles applicable to rights of admission and establishment ultimately depend on an exercise of state discretion: only where the host country agrees by way of a treaty obligation will such rights come into existence. There is no customary international law right of entry and establishment. Furthermore, the continuing dominant trend in IIA practice has been to retain a controlled entry model and not to extend positive rights of entry and establishment.

On the other hand, there are sound policy reasons why a host country may wish to open up its economy and to reinforce this by way of binding international obligations. Indeed, a rising trend in recent years has been towards the conclusion of such obligations in IIAs. These include BITs concluded with Western hemisphere countries and bilateral FTAs with investment provisions. This may indicate where future policy developments lie. Indeed, it could be said that the main reason for the continued dominance of the controlled entry model is inertia. Many agreements following this approach were concluded some years ago, mainly with European capital-exporting countries. They have not yet been replaced. More recent agreements, such as those with the USA or Canada, which did not conclude BITs until the 1980s, or the recent FTAs may therefore be a better indication of current practice in the field. That said, the recent moves towards more restrictive national laws and regulations, could, if more widely adopted, lead to a reinforcement of the controlled entry approach. Thus, the future development of this area of international investment law is not as settled as might be imagined.

end p.256

Select Bibliography

Biersteker, TJ, Multinationals, the State, and Control of the Nigerian Economy (Princeton, Princeton University Press, 1987)

Blumberg, Phillip I, Strasser, Kurt A, Georgakopoulos, Nicholas L and Gouvin, Eric J, Blumberg on Corporate Groups (New York, Aspen Publishers, 2nd edn, 2005)

Conklin, David, and Lecraw, Donald, ‘Restrictions on Foreign Ownership during 1984–1994: Developments and Alternative policies’, 6(1) Transnational Corporations 1 (1997)

Dicken, Peter, Global Shift: Reshaping the Global Economic Map of the 21st Century (London, Sage Publications, 5th edn, 2007)

Esquirol, JL ‘Foreign Investment: Revision of the Andean Foreign Investment Code’, 29 Harv Int'l LJ 169 (1988)

Horton, S ‘Peru and ANCOM: A Study in the Disintegration of a Common Market’, 17 Texas Int'l LJ 39 (1982) at 45–7

Juillard, Patrick, ‘Freedom of Establishment, Freedom of Capital Movements, and Freedom of Investment’, 15 ICSID Rev—FILJ 322 (2000)

Karl, Joachim, ‘The Competence for Foreign Direct Investment—New Powers for the European Union?’, 5 JWIT 413 (2004)

Laviec, JP, Protection et Promotion des Investissements: Etude de Droit International Economique (Paris, Presses Universitaires de France, 1985)

Likosky, Michael B, Law Infrastructure and Human Rights (Cambridge, Cambridge University Press, 2006)

Looijsteijn-Clearie, Anne, ‘Centros Ltd—A Complete U-Turn in the Right of Establishment for Companies?’, 49 ICLQ 621 (2000)

Megwa, S ‘Foreign Direct Investment Climate in Nigeria: The Changing Law and Development Policies’, 21 Colum J Transnat'l L 487 (1983)

__ , ‘The Rise and Fall of the Multilateral Agreement on Investment: Where Now?’ 34 Int'l Law 1033 (2000) at 1048

Muchlinski, Peter T, Multinational Enterprises and the Law (Oxford, Oxford University Press, 2nd edn, 2007)

Osunbor, O ‘Nigeria's Investment Laws and the State's Control of Multinationals’, 3 ICSID Rev—FILJ 38 (1988)

Pattison, JE ‘The United States-Egypt Bilateral Investment Treaty: A Prototype for Future Negotiation’, 16 Cornell Int'l J 305 (1983)

Pollan, Thomas, The Legal Framework for the Admission of FDI (Utrecht, Eleven International Publishing, 2006)

Preziosi, A ‘The Andean Pact's Foreign Investment Code Decision 220: An Agreement to Disagree’, 20 U Miami Inter-Am L Rev 649 (1989)

Rodger, Barry J, ‘UK Merger Control Policies: the Public Interest and Reform’, 21 ECLR 24 (2000)

Rugman, Alan, and Verbeke, Alain, ‘Location Competitiveness and the Multinational Enterprise’, in Alan M Rugman and Thomas L Brewer (eds), The Oxford Handbook of International Business (Oxford, Oxford University Press, 2003)

Sassen, Saskia, ‘The Locational and Institutional Embeddedness of the Global Economy’, in George A Berman, Matthias Herdegen, and Peter L Lindseth (eds), Transatlantic Regulatory Co-operation: Legal Problems and Political Prospects (Oxford, Oxford University Press, 2000)

end p.257

Shihata, Ibrahim FI, ‘Recent Trends Relating to Entry of Foreign Direct Investment’ 9 ICSID Rev-FILJ 47 (1994)

Sornarajah, M, The International Law on Foreign Investment (Cambridge, Cambridge University Press, 2nd edn, 2004)

__ , International Investment Agreements: A Compendium Vol II (New York and Geneva, United Nations, 1996)

__ , World Investment Report 1999 (New York and Geneva, United Nations, 1999)

UNCTAD, Admission and Establishment, Series on issues an international investment agreements (New York and Geneva, United Nations, 1999)

__ , International Investment Agreements: Flexibility for Development, Series on issues in international investment agreements (New York and Geneva, United Nations, 2000)

__ , Host Country Operational Measures, Series on issues in international investment agreements (New York and Geneva, United Nations, 2001)

__ , World Investment Report 2003 (New York and Geneva, United Nations, 2003)

__ , World Investment Report 2006 (New York and Geneva, United Nations, 2006) Footnotes ?Professor G?mez-Palacio is an External Advisor to the Ministry of Foreign Affairs on matters of private international law. Founding Partner of G?mez-Palacio of Asociados. Arbitrator in NAFTA-related cases. Former Senior Consultant at the Centre on Transnational Corporations at the UN <http://www.g-pasoc.com>. The authors wish to extend their gratitude to Mr Donald McCarthy for his editing work and useful commentaries. 1UNCTAD, Admission and Establishment, Series on issues in international investment agreements (New York and Geneva, United Nations, 1999). 2UNCTAD, World Investment Report 2005 (New York and Geneva, United Nations, 2005) at 22. 3 See further Ibrahim FI Shihata, ‘Recent Trends Relating to Entry of Foreign Direct Investment’ 9 ICSID Rev—FILJ 47 (1994). 4 See UNCTAD, World Investment Report 2006 (New York and Geneva, United Nations, 2006) at 23–5. 5 See Federal Law on Foreign Investment in the Russian Federation, 9 July 1999: 39 ILM 894 (2000). ‘Russia to Set Controls on Foreign Investment’, Financial Times, 3 March 2006, p 6. ‘Russia Restricts Foreign Bids’, Financial Times, 11 February 2005, p 1. 6Thailand, The Ministry of Commerce, The Foreign Business Act Amendment: A Brief Explanation, 19 January 2007, available at <http://www.dbd.go.th/eng/FBA-explanation%20sheet%2019%20Jan%2007%20Rev4.pdf> and ‘Thais may Redraw Law on Foreign Ownership’ Financial Times, 28 December 2006, at 5. 7 See further Peter T Muchlinski, Multinational Enterprises and the Law (Oxford, Oxford University Press, 2nd edn, 2007) at 410–12. 8 See eg the speech of Nicolas Sarkozy reported in Martin Arnold, ‘Sarkozy Aims to Block Foreign Takeovers’, FT.Com, 29 March 2007, available at <http://www.ft.com/cms/s/4269a51a-de15-11db-afa7-000b5df10621.html>. 9 See UNCTAD, above n 1 and UNCTAD, World Investment Report 2003 (New York and Geneva, United Nations, 2003) ch IV. Professor Muchlinski is the author of the manuscript that forms the basis of the 1999 UNCTAD study. See too Thomas Pollan, The Legal Framework for the Admission of FDI (Utrecht, Eleven International Publishing, 2006), which also seeks to update the UNCTAD analysis. 10 Patrick Juillard, in response to Dr Ibrahim Shihata's article on FDI entry (see above n 4), addresses the differences between ‘freedom of establishment’, ‘freedom of capital movement’ and ‘freedom of investment’: Patrick Juillard, ‘Freedom of Establishment, Freedom of Capital Movements, and Freedom of Investment’, 15 ICSID Rev-FILJ 322 (2000). While this chapter identifies these concepts as ‘rights’, Juillard addresses them as ‘freedoms’, and, further, concentrates on the concept of ‘freedom of investment’. In his view, this concept is problematic. First, it depends on what is defined as ‘investment’ for which there is no accepted single definition. Secondly, the word ‘investment’ appears in many international instruments with differing purposes. See further Schlemmer, ch 2 above. Juillard also warns of the dangers of reading these concepts as interchangeable, though they do have correlations, as will be discussed further below. In the present authors' opinion, whether one refers to ‘rights’ or ‘freedoms’ in this context makes little difference in practice. Where an international agreement, or national law, offers investors the ability to enter and/or to become established in the national market, whether this is described as a ‘right’ or ‘freedom’ appears to be of little legal consequence. 11 See UNCTAD, above n 1 at 12. 12 Ibid . 13 See Ghana Investment Promotion Centre Act 1994 (Act 478 of 1994) ss 21, 22, available at <http://www.gipc.org.gh/IPA_Information.asp?hdnGroupID=4&hdnLevelID=4>. 14 On the nature and definition of performance requirements and their treatment under international investment agreements, see UNCTAD, Host Country Operational Measures, Series on issues in international investment agreements (New York and Geneva, United Nations, 2001). See too UNCTAD, Foreign Direct Investment and Performance Requirements: New Evidence from Selected Countries (New York and Geneva, United Nations, 2003) chs II-V covering Chile, India, Malaysia, and South Africa. 15 See further Michael B Likosky, Law Infrastructure and Human Rights (Cambridge, Cambridge University Press, 2006) ch 2. 16 See further UNCTAD, Incentives, Series on issues in international investment agreements (New York and Geneva, United Nations, 2004) and Muchlinski, above n 7 at 219–26. 17 On ‘standards of treatment’, including ‘national treatment’ and ‘most favoured nation treatment’, see Todd Griersen-Weiler and lan laird, ch 8 below. 18 Indeed, some of the recent investment cases under the NAFTA may be seen as essentially trade cases concerning discriminatory denial of market access opportunities. See eg SDMyers v Canada UNCITRAL Award of 12 November 2000, available at <http://www.naftaclaims.com> or 40 ILM 1408 (2001) and Pope and Talbot v Canada , Award on the Merits of Phase 2, 10 April 2001, available at <http://www.naftacliams.com>. 19 See further Schlemmer, ch 2 above; UNCTAD, Scope and Definition (New York and Geneva, United Nations, 1999) and UNCTAD, Bilateral Investment Treaties 1995–2006: Trends in Rulemaking (New York and Geneva, United Nations, 2007) at 7–13. It is common to exclude certain assets from the benefits of an agreement, such as short-term contracts or portfolio investment. This can be performed by narrowing the definition to cases of direct investments only. 20 This paragraph is adapted from Muchlinski, above n 7 at 85–6. 21 See World Investment Report 2003, above n 9 at 86–8. 22 See generally UNCTAD, World Investment Report 1999 (New York and Geneva, United Nations, 1999) Part Two, ‘Foreign Direct Investment and the Challenge of Development’. 23 The following paragraphs are adapted from Muchlinski, above n 7 at 31–2. 24 See Alan Rugman and Alain Verbeke, ‘Location Competitiveness and the Multinational Enterprise’, in Alan M Rugman and Thomas L Brewer, The Oxford Handbook of International Business (Oxford, Oxford University Press, 2003) 150 at 158–60, on which this paragraph draws. 25 See Rugman and Verbeke, above n 24. This is not to say that low wages are irrelevant in investment decisions. Much depends on the nature of the industry involved. More mature low technology industries will still see wage differentials as an important locational factor. 26 This paragraph is adapted from Muchlinski, above n 7 at 434. 27UNCTAD, above n 2 at 109. 28 Ibid . 29 Ibid at 111–16. UNCTAD has drawn up an ‘Innovation Capability Index’ which ranks countries according to their capability in absorbing R&D activity. The weakest regions are South Asia, in particular Pakistan and Sri Lanka, and Sub-Saharan Africa. See further ibid ch IV for more detailed analysis of R&D investment trends in developing countries. 30 See Rugman and Verbeke, above n 24 at 171–2. See too Peter Dicken, Global Shift: Reshaping the Global Economic Map of the 21st Century (London, Sage Publications, 5th edn, 2007) ch 8, Saskia Sassen, ‘The Locational and Institutional Embeddedness of the Global Economy’, in George A Berman, Matthias Herdegen and Peter L Lindseth, Transatlantic Regulatory Co-operation: Legal Problems and Political Prospects (Oxford, Oxford University Press, 2000) 47. Sassen notes that this process also creates centres of command and control around the main financial centres of the world. 31 See David Conklin and Donald Lecraw, ‘Restrictions on Foreign Ownership during 1984–1994: Developments and Alternative Policies’, 6(1) Transnational Corporations 1 (1997). On US restrictions, see Phillip I Blumberg, Kurt A Strasser, Nicholas L Georgakopoulos, and Eric J Gouvin, Blumberg on Corporate Groups (New York, Aspen Publishers, 2nd edn, 2005) vol 4. ch 152. US Federal laws restrict foreign investment in the following sectors: public broadcasting and telecommunications, coastal and internal shipping, internal air traffic (though liberalization is being considered), minerals exploitation on public lands, and atomic energy. Until recently state banking laws prohibited alien ownership or control of banks, although Washington State still maintains such restrictions. See too US, Canadian, and Mexican reservations to the North American Free Trade Agreement: 32 ILM 605 at 704–80 (1993) For example, current restrictions prohibit more than a 25% foreign holding of voting stock in a US airline: Federal Aviation Act 1958 Pub L No. 85–726 72 Stat 766 (1958) 49 USC ss 40101 ff (2003). 32Decree No. 16 of 16 January 1995, see ICSID, Investment Laws of the World Vol. VI (Dobbs Ferry, NY, Oceana Publications) Release 2001–1 Nigeria (June 2001) or the Nigerian Investment Promotion Commission (NIPC) website at <http://www.nipc-nigeria.org>. 33 Ibid ss 17, 18. In addition, the screening requirements of the old legislation were abolished and replaced with a registration requirement: see s 20 as amended by s 4 of Decree No. 32 of 30 September 1998 (available in ICSID, ibid or the NIPC website, ibid ). However, a foreign investor must incorporate a local company in accordance with Nigerian companies' legislation to obtain a valid registration: s 19 as amended by s 3 of Decree No. 32. The industries included in the negative list under s 32 are: arms production, production and dealing in narcotic and psychotropic drugs, production of military and paramilitary wares and accoutrement, and ‘such other items as the Federal Executive Council may, from time to time, determine’. The NIPC website lists only the first two in the list. 34Nigerian Enterprises Promotion Act 1972 (No. 4 of 1972) [1972] Official Gazette Fed Rep Nig 123 A11 (Supp Part A); Nigerian Enterprises Promotion Act 1977 (No. 3 of 1977); Nigerian Enterprises Promotion Act 1989 (No. 54 of 1989) [1989] Official Gazette Fed Rep Nig 76 A809 (Supp Part A); CAP 303 Laws of the Federation of Nigeria Vol 23 (rev edn, 1990). For analysis of the 1972 and 1977 Decrees see: S Megwa, ‘Foreign Direct Investment Climate in Nigeria: The Changing Law and Development Policies’ 21 Colum J Transnat'l L 487 (1983); O Osunbor, ‘Nigeria's Investment Laws and the State's Control of Multinationals’, 3 ICSID Rev-FILJ 38 (1988); TJ Biersteker, Multinationals, the State, and Control of the Nigerian Economy (Princeton, Princeton University Press 1987). For the background to the 1989 Act see: Nigerian Federal Ministry of Industries, Industrial Policy of Nigeria (Policies, Incentives, Guidelines and Industrial Framework) (January 1989) 41–5. 35Foreign Business Act BE 2542 (1999); see <http://www.dbd.go.th/eng/law/fba_e1999.phtml>. 36 An example of this approach can be shown in the US-Republic of Azerbaijan BIT (signed in 1997, following the 1994 US prototype BIT). The USA sets the following areas as exceptions from national treatment and most-favoured-nation treatment: fisheries; air and maritime transport, and related activities; banking, securities, and other financial services; and one-way satellite transmissions of Direct-to-Home (DTH) and Direct Broadcast Satellite (DBS) television services and of digital audio services. The Republic of Azerbaijan establishes the following areas as exceptions from national treatment and most-favoured-nation treatment: banking, securities, and other financial services. See too Canada-Costa Rica BIT 1998: both in UNCTAD 2007, above n 19 at 23. 37 For example, Mexico's concern for education as a cultural matter influenced its reservation on national treatment in NAFTA (Annex I-M-25). The cultural exception proposed in the draft Multilateral Agreement on Investment (MAI) was one of the unresolved issues that led to the eventual breakdown of the negotiations: see PT Muchlinski, ‘The Rise and Fall of the Multilateral Agreement on Investment: Where Now?’ 34 Int'l Law 1033 at 1048 (2000). 38 See further Muchlinski, above n 7 at 184–91. 39 Ibid at 201–13. Mexico's position in certain sectors under NAFTA, such as fishing on the high seas, coastal fishing, and fresh water fishing, whereby the reservation establishes: ‘with respect to an enterprise established or to be established in the territory of Mexico … investors of another Party or their investments may only own, directly or indirectly, up to 49 percent of the ownership interest in such an enterprise’. See Mexico Foreign Investment Law 1993 Art 7. See further Muchlinski, above n 7 at 202–4. 40 See Muchlinski, ibid at 201–2, on which the next paragraph is based. 41‘Foreign investment authorizations shall be evidenced in a contract executed by means of a public deed and subscribes, on the one part, by the President of the Foreign Investment Committee on behalf of the Chilean State should the investment require the agreement of said Committee or, should this not be applicable, by the Executive vice-president and, on the other part, by the persons contributing the foreign capital, hereinafter called “foreign investors” to all effects of this Decree Law. The contracts shall state the term within which the foreign investor may bring in the capital. This term shall not exceed 8 years for mining investments and 3 years for all others. The Foreign Investment Committee, however, by unanimous agreement of its members, may extend this limit up to twelve years in the case of mining investments, when previous exploration is required, depending on their nature and estimated duration thereof; in the case of investments in industrial and non-mining extractive projects for amounts not less than US$ 50,000,000—United States dollars or its equivalent in other foreign currencies—the Committee may extend the term up to eight years when the nature of the project so requires it.’ Art 3 (published in the Official Gazette on 16 December 1993), available at <http://www.foreigninvestment.cl/pdf/dl600_eng.PDF>. 42TRIMS Agreement Art 2. and Annex para 1. 43 Ibid Art 2 and Annex para 2. 44 See further M Sornarajah, The International Law on Foreign Investment (Cambridge, Cambridge University Press, 2nd edn, 2004) ch 3. 45 See eg the Nigerian Decree of 1995 cited at n 32 above and Ghana Investment Promotion Centre Act 478 of 29 August 1994: ICSID, Investment Laws of the World (Dobbs Ferry, NY, Oceana, Oxford University Press) Vol III Release 95–3 (June 1995), also available at <http://www.gipc.org.gh/IPA_Information.asp?hdnGroupID=4&hdnLevelID=4>. 46 JP Laviec, Protection et Promotion des Investissements: Etude de Droit International Economique (Paris, Presses Universitaires de France, 1985) at 77. 47 Muchlinski, above n 7 at 676–8. 48UNCTAD, in its study on Admission and Establishment, above n 1, identifies five models of admission and establishment clauses: investment control, which corresponds to the controlled entry approach in the text, selective liberalization, based on the GATs-type ‘opt-in’ sectoral liberalization approach, the regional industrialization programme approach, based on certain developing country regional integration agreements, the mutual national treatment approach of the EU, and the combined national treatment MFN approach, which corresponds to the full liberalization approach in the text. See too Pollan, above n 10 at ch 4 who uses a modified version of the UNCTAD classification. 49 See UNCTAD 1999, above n 1 at 38–9. 50 See examples cited in UNCTAD 2007, above n 19 at 21–2. See too Asian African Legal Consultative Committee (AALCC) Model BIT ‘Model A’ Art 3, which states inter alia that ‘[e]ach Contracting Party shall determine the mode and manner in which investments are to be received in its territory’. ‘Model B’ is more restrictive of investor's rights of entry in that its Art 3 makes the screening of investment proposals by the host country a mandatory treaty requirement, see 23 ILM 237 (1984) or UNCTAD, International Investment Agreements: A Compendium Vol III (New York and Geneva, United Nations, 1996) at 115. 51 Available at <http://www.unctad.org/sections/dite/iia/docs/Compendium//en/133%20volume% 205.pdf>. 52 Available at <http://www.unctad.org/sections/dite/iia/docs/Compendium//en/132%20volume% 205.pdf>. 53 See eg Agreement between the Caribbean Community (CARICOM), acting on behalf of the Governments of Antigua and Barbuda, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, St Kitts and Nevis, Saint Lucia, St Vincent and the Grenadines, Suriname, and Trinidad and Tobago, and the Government of the Republic of Costa Rica: ‘1. Each Party shall encourage and create favourable conditions in its territory for investments of the other Party, and shall admit such investments in accordance with its laws and regulations. 2. Once a Party has admitted an investment in its territory, it shall provide, in accordance with its laws and regulations, all necessary permits related to such investments.’ Art X.03. UNCTAD, International Investment Agreements: A Compendium Vol. XIV (New York and Geneva, United Nations, 2005) at 203. 54 UNCTAD 2007, above n 19 at 21–2. 55 The non-discrimination standard consists of the most-favoured-nation standard (MFN), which ensures no less favourable treatment as between foreign investors of different nationalities and the national treatment standard, which ensures no less favourable treatment as between domestic and foreign investors. See further Todd Grierson Weiler and lan A Laird, ch 8 below. 56 The full title of the Code is ‘The Common Regime of Treatment of Foreign Capital and of Trademarks, Patents, Licences, and Royalties’. An English translation appears in 11 ILM 126 (1972). The final amended version of Decision 24, as of 30 November 1976, appears in 16 ILM 138 (1977). The following paragraph is taken from Muchlinski, above n 7 at 657–8. 57 See S Horton, ‘Peru and ANCOM: A Study in the Disintegration of a Common Market’, 17 Texas Int'l LJ 39 (1982) at 45–7; Comment: ‘Chile's Rejection of the Andean Common Market Regulation of Foreign Investment’, 16 Colum J Transnat'l L 138 (1977); ‘Introductory Note’ to the Venezuelan Foreign Investment and Licensing Regulations and Related Documents of 1986–7 by John R Pate, 26 ILM 760 (1987). 58 English version 27 ILM 974 (1988). For analysis, see A Preziosi, ‘The Andean Pact's Foreign Investment Code Decision 220: An Agreement to Disagree’, 20 U Miami Inter-Am L Rev 649 (1989); JL Esquirol, ‘Foreign Investment: Revision of the Andean Foreign Investment Code’, 29 Harv Int'l LJ 169 (1988). 59Art 33. 60Andean Commission: Decision 291—Common Code for the Treatment of Foreign Capital and on Trademarks, Patents, Licenses and Royalties: 30 ILM 1283 (1991). 61‘Each state has the right: (a) to regulate an exercise authority over foreign investment, within its national jurisdiction in accordance with its laws and regulations and in conformity with its national objectives and priorities. No State shall be compelled to grant preferential treatment to foreign investment.’ United Nations General Assembly Resolution 3281 (XXIX) the Charter of Economic Rights and Duties of States Art 2(2) (adopted on 12 December 1974) available at <http://www.unctad.org/sections/dite/iia/docs/Compendium//en/6%20volume%201.pdf>. 62‘States have the right to regulate the entry and establishment of transnational corporations including determining the role that such corporations may play in economic and social development and prohibiting or limiting the extent of their presence in specific sectors.’ Draft United Nations Code of Conduct on Transnational Corporations Art 47 available at <http://www.unctad.org/sections/ dite/iia/docs/Compendium//en/13%20volume%201.pdf>. 63 UNCTAD 1999, above n 1 at 41. 64

‘Each Party shall accord to investors of another Party treatment no less favourable than that it accords, in like circumstances, to its own investors with respect to the establishment, acquisition, expansion, management, conduct, operation and sale or other disposition of investments’ (Art 1102.1). This treatment is also granted to ‘investments’ (Art 1102.2). Art 1103 provides most-favoured-nation treatment, again to investors and investments, further stating in Art 1104 a guarantee to apply the better of said treatments. ‘Each Party shall accord to investors of another Party treatment no less favourable than that it accords, in like circumstances, to investors of any other Party or of a non-Party with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments’ (Art 1103.1). This treatment is also granted to ‘investments’ (Art 1103.2). ‘Each Party shall accord to investors of another Party and to investments of investors of another Party the better of the treatment required by Articles 1102 and 1103’ (Art 1104). ‘Articles 1102, 1103, 1106 and 1107 do not apply to: (a) any existing non-conforming measure that is maintained by (i) a Party at the federal level, as set out in its Schedule to Annex I or III, (ii) a state or province, for two years after the date of entry into force of this Agreement, and thereafter as set out by a Party in its Schedule to Annex I in accordance with paragraph 2, or (iii) a local government; (b) the continuation or prompt renewal of any non- conforming measure referred to in subparagraph (a); or (c) an amendment to any non-conforming measure referred to in subparagraph (a) to the extent that the amendment does not decrease the conformity of the measure, as it existed immediately before the amendment, with Articles 1102, 1103, 1106 and 1107. 2. Each Party may set out in its Schedule to Annex I, within two years of the date of entry into force of this Agreement, any existing non-conforming measure maintained by a state or province, not including a local government. 3. Articles 1102, 1103, 1106 and 1107 do not apply to any measure that a Party adopts or maintains with respect to sectors, sub-sectors or activities, as set out in its Schedule to Annex II. 4. No Party may, under any measure adopted after the date of entry into force of this Agreement and covered by its Schedule to Annex II, require an investor of another Party, by reason of its nationality, to sell or otherwise dispose of an investment existing at the time the measure becomes effective. 5. Articles 1102 and 1103 do not apply to any measure that is an exception to, or derogation from, the obligations under Article 1703 (Intellectual Property—National Treatment) as specifically provided for in that Article. 6. Article 1103 does not apply to treatment accorded by a Party pursuant to agreements, or with respect to sectors, set out in its Schedule to Annex IV. 7. Articles 1102, 1103 and 1107 do not apply to: (a) procurement by a Party or a state enterprise; or (b) subsidies or grants provided by a Party or a state enterprise, including government-supported loans, guarantees and insurance.’ NAFTA Art 1108. See <http://www.unctad.org/sections/dite/iia/docs/Compendium//en/60%20volume%203.pdf>. 65 These tend to involve NAFTA signatories but also more recently occur between developing non-NAFTA countries: Examples include FTAs between Canada-Chile, Mexico-Singapore, Mexico-El Salvador, Guatemala, and Honduras; US-Vietnam on Trade Relations, the New Zealand-Singapore Agreement on a Closer Economic Relationship, and the Singapore-Japan New Age Economic Partnership Agreement, all available at <http://www.unctad.org/iia> and see UNCTAD 2007, above n 19 at 79. See too Pollan above n 9 at 82–5. 66 On Canada see UNCTAD 2007, above n 19 at 24–25. 6744 ILM 268 (2005) at 217, also available at <http://ustr.gov/assets/World_Regions?Americas/South_America/asset_upload_file440_6728.pdf>. 68 See ibid Art 14(2). 69 Note JE Pattison's discussion of the US-Egypt BIT in this respect: Pattison, ‘The United States-Egypt Bilateral Investment Treaty: A Prototype for Future Negotiation’, 16 Cornell Int'l. 305 (1983) at 318–19. Pattison is critical of the broad exclusion of industries from the treaty which, in his opinion, created a substantial void in the protection offered. The current version of this treaty retains these exceptions: US-Egypt BIT Supplementary Protocol of 11 March 1986 para 3, available at <http://www.unctad.org/sections/dite/iia/docs/bits/us_egypt.pdf>. 70US-Russian Federation BIT 17 June 1992, Protocol para 4(a), 31 ILM 794 at 810 (1992). 71 See Muchlinski, above n 37 at 1041–3. 72 See Art 47 of the International Covenant on Civil and Political Rights. 73 See further the Energy Charter Treaty Secretariat (1998), Draft Supplementary Treaty to the Energy Charter Treaty, available at <http://www.encharter.org/fileadmin/user_upload/document/SP_draft_text.pdf>. 74 See UNCTAD 1999, above n 1. 75GATT Doc MTN/FA II-A1B; 33 ILM 44 (1994), available at <http://www.wto.org>. This section is taken from Muchlinski, above n 7 at 253–4. The same approach to market access in services has been adopted in The Economic Partnership, Political Coordination and Cooperation Agreement between the European Community and its Member States of the One Part and the United Mexican States of the Other Part (2000) Title II ‘Trade in Services’, Chapter I ‘General Provisions’, Article 4 ‘Market Access’ available at <http://www.unctad.org/templates/webflyer.asp?docid=1592&intItemID=2323&lang=1&mode=toc>. 76 Ibid Art 1(c). 77 Ibid Art XVI (2)(e)–(f). 78 Ibid Art XIX(1). 79Code on the Liberalisation of Current Invisible Operations (OECD/C(61)95) (hereinafter Invisibles Code); Code on the Liberalisation of Capital Movements (OECD/C(61)96) (hereinafter Capital Movements Code). The Codes are regularly updated by Decisions of the OECD Council to reflect all changes in the positions of Members. The updated Codes are periodically republished. The current editions at the time of writing are Invisibles Code (September 2004) and Capital Movements Code (October 2005), to which all subsequent references pertain. Both are available at <http://www.oecd.org/document/63/0,2340,en_2649_34887_1826559_1_1_1_1,00.html>. For background to the Codes see: OECD, OECD Codes of Liberalisation of Capital Movements and of Current Invisible Operations User's Guide (Paris, OECD 2003), available at <http://www.oecd.org/document/63/0,2340,en_2649_34887_1826559_1_1_1_1,00.html>; Forty Years' Experience with the OECD Code of Liberalisation of Capital Movements (Paris, OECD, October 2002), summary and conclusions available for download at the above website reference. In 1984, the Capital Movements Code was extended to include the right of establishment. Thus Annex A continues: ‘The authorities of the Members shall not maintain or introduce: Regulations or practices applying to the granting of licences, concessions, or similar authorisations, including conditions or requirements attaching to such authorisations and affecting the operations of enterprises, that raise special barriers or limitations with respect to non-resident (as compared to resident) investors, and that have the intent or the effect of preventing or significantly impeding inward direct investment by non-residents’. 80 See further World Investment Report 2003, above n 9 at 148–9; UNCTAD, International Investment Agreements: Flexibility for Development, Series on issues in international investment agreements (New York and Geneva, United Nations, 2000) at 60–4. 81 UNCTAD 1999, above n 1 at 22–6. The following paragraphs are taken from Muchlinski, above n 7 at 243 and 245. 82Art 48 goes on to define ‘companies or firms’ as ‘companies or firms constituted under civil or commercial law, including co-operative societies, and other legal persons governed by public or private law, save those which are non-profit making’. 83 See above n 82. 84EC Treaty Art 43. 85 See R v HM Treasury, ex p Daily Mail and General Trust plc [1989] 1 All ER 328 at 343 d–g per Advocate-General Darmon. 86 See General Programme for the Abolition of Restrictions on Freedom of Establishment, OJ sp edn 2nd Series IX p 7 Title I; Case 79/85 Segers [1986] ECR 2375; [1987] 2 CMLR 247. 87 See Foulser and another v MacDougall (Her Majesty's Inspector of Taxes) [2003] 1 CMLR 1079 (English High Court ChD) at paras 78–9. 88 See Centros Ltd v Erhvervs-OG Selskabsstyrelsen , Case C-212/97 [1999] 2 CMLR 551. Two Danish nationals had incorporated a company in England, but carried on the substantive business of the company in Denmark. The Danish authorities refused to register the Danish branch of the company on the ground that this arrangement sought to circumvent Danish rules concerning the paying up of a minimum capital, as would be required of a principal establishment. The ECJ held that this was in breach of Arts 43 and 48 even though the Danish authorities argued that the regulatory requirements were necessary to protect creditors and other contracting parties. See for analysis: Anne Looijsteijn-Clearie, ‘Centros Ltd—A Complete U-Turn in the Right of Establishment for Companies?’, 49 ICLQ 621 (2000). See too Kamer van Koophandel en Fabrieken voor Amsterdam v Inspire Art Ltd , Case C-167/01 [2005] 3 CMLR 937; Uberseering BV v Nordic Construction Company Baumanagement GmbH (NCC), Case C-208/00 [2005] 1 CMLR 1. 89Centros , ibid at para 24. 90 A common inward investment policy can be adopted under Art 57 of the EC Treaty. Such a policy was advocated by Art III.217 of the Draft Treaty Establishing a Constitution for Europe (Luxembourg, Office for Official Publications of the European Communities, 2003). For analysis see Joachim Karl, ‘The Competence for Foreign Direct Investment—New Powers for the European Union?’, 5 JWIT 413 (2004). See now the Treaty of Lisbon Art 2(158) creating a new Art 188C of the EC Treaty, giving the Community exclusive competence in foreign investment: OJ [2007] C306/91 or <http://www.eur-lex.europa.eu/JOHtml.do?uri=OJ: C:2007:306:SOM:EN:HTML>. 91 See UNCTAD 1999, above n 1 at 24–25. 92 See the Revised CARICOM Treaty 2001 Chapter Three ‘Establishment, Services Capital and Movement of Community Nationals’ at <http://www.caricom.org/jsp/community/revised_treaty-text.pdf>. 93 It provides for ‘… freedom of movement of persons and capital … and exercise of economic activities … for nationals of member States; and seeks economic unity among Arab League States’ (Art 1), available at <http://www.unctad.org/sections/dite/iia/docs/Compendium//en/55%20volume% 203.pdf . 94Arts 3(2) and 55 which commit member states to the removal of obstacles to the right to establishment within five years of the creation of a customs union between them: <http://www.ecowas.int/>. 95 This commits the member states to the introduction of full national treatment for investors from the region by 2010 subject to the exceptions provided for in the Agreement (Art 4(6) ), available at <http://www.aseansec.org/6466.htm>. 96Decision 292 of the Commission of the Cartagena Agreement (1991). The Andean Pact entered into force as of October 1969. 97 See <http://www.unctad.org/sections/dite/iia/docs/Compendium//en/47%20volume%202.pdf>. 98Community Investment Code of the Economic Community of the Great Lakes Countries (CEPGL—1982) entered into force 4 October 1987, see UNCTAD, International Investment Agreements: A Compendium Vol II (New York and Geneva, United Nations, 1996) 251. 99 The idea behind CARICOM is the establishment of a single market and economy among its members. Other examples are the Protocol Amending the Treaty Establishing the Caribbean Community (Protocol III: Industrial Policy—1999); and the Revised Treaty of the Economic Community of West African States (Revised ECOWAS Treaty—1993), available at <http://www.unctad.org/sections/dite/iia/docs/Compendium//en/40%20volume%202.pdf>. 100 The next two paragraphs are adapted from Muchlinski, above n 7 at 415–16. 101‘Centrica Threat Led to Rethink on Mergers’, Financial Times, 17 April 2006, p 1. 102‘Gazprom in Threat to Supplies’, Financial Times, 20 April 2006, p 1. 103‘Gazprom Block over Centrica Ruled Out’, Financial Times, 26 April 2006, p 1. 104 See Arkady Ostrovsky, ‘Energy of the State: How Gazprom Acts as a Lever in Putin's Power Play’, Financial Times, 14 March 2006, p 13. Terry Macalister, ‘Gazprom: No Bid for British Gas Owner Yet’, The Guardian, 27 April 2006, p 27. 105 See Barry J Rodger, ‘UK Merger Control Policies: The Public Interest and Reform’ 21 ECLR 24 (2000); Larry Elliott, ‘This Takeover Free-for-All is just Not Delivering the Goods’, The Guardian, 30 March 2006, p 33. 106 See Asian Agricultural Products Ltd v Republic of Sri Lanka , Case No. Arb/87/3, Final Award, 21 June 1990, 30 ILM 577 at 632 (1991). 107 See UNCTAD, World Investment Report 2003, above n 9 at 107. 108 Ibid at 104–5, on which the following account draws. 109 Pollan, above n 9 at 200. 110 See US-Uruguay BIT, above n 67 Art 18. 111Canada Agreement for the Promotion and Protection of Investments 2004 Art 10:

‘General Exceptions

1. Subject to the requirement that such measures are not applied in a manner that would constitute arbitrary or unjustifiable discrimination between investments or between investors, or a disguised restriction on international trade or investment, nothing in this Agreement shall be construed to prevent a Party from adopting or enforcing measures necessary:

(a) to protect human, animal or plant life or health;

(b) to ensure compliance with laws and regulations that are not inconsistent with the provisions of this Agreement; or

2. Nothing in this Agreement shall be construed to prevent a Party from adopting or maintaining reasonable measures for prudential reasons, such as:

(a) the protection of investors, depositors, financial market participants, policy-holders, policy-claimants, or persons to whom a fiduciary duty is owed by a financial institution;

(b) the maintenance of the safety, soundness, integrity or financial responsibility of financial institutions; and

3. Nothing in this Agreement shall apply to non-discriminatory measures of general application taken by any public entity in pursuit of monetary and related credit policies or exchange rate policies. This paragraph shall not affect a Party's obligations under Article 7 (Performance Requirements) or Article 14 (Transfer of Funds).

4. Nothing in this Agreement shall be construed:

(a) to require any Party to furnish or allow access to any information the disclosure of which it determines to be contrary to its essential security interests;

(b) to prevent any Party from taking any actions that it considers necessary for the protection of its essential security interests

(i) relating to the traffic in arms, ammunition and implements of war and to such traffic and transactions in other goods, materials, services and technology undertaken directly or indirectly for the purpose of supplying a military or other security establishment,

(ii) taken in time of war or other emergency in international relations, or

(iii) relating to the implementation of national policies or international agreements respecting the non-proliferation of nuclear weapons or other nuclear explosive devices; or

(c) to prevent any Party from taking action in pursuance of its obligations under the United Nations Charter for the maintenance of international peace and security.

5. Nothing in this Agreement shall be construed to require a Party to furnish or allow access to information the disclosure of which would impede law enforcement or would be contrary to the Party's law protecting Cabinet confidences, personal privacy or the confidentiality of the financial affairs and accounts of individual customers of financial institutions.

6. The provisions of this Agreement shall not apply to investments in cultural industries.