International Investment Agreements:

Negotiating for Sustainable Development

12-15 January 2015
Casablanca, Morocco

Recent trends in global FDI, investment

policies and IIA reform
Hamed El-Kady, Investment Policy Officer
Diana Rosert, Associate Legal Affairs Officer

1. International investment trends

Cautious optimism returns to global FDI

Driven mainly by developed countries, FDI flows are expected
to rise over the next three years

FDI inflows, global and by group of economies, 19952013 and projections

20142016
(Billions of dollars)

54%

Source: UNCTAD, World Investment Report 2014.

The largest recipients of FDI

Developing and transition economies constitute half of the
top 20 host economies
(Billions of dollars)

Source: UNCTAD, World Investment Report 2014.

Largest investors in the world

Six developing and transition economies rank among the top
20 investors
(Billions of dollars)

Source: UNCTAD, World Investment Report 2014.

2. Recent policy developments

The international setting of investment rules

Absence of a multilateral cross-sectoral agreement on investment
(unlike trade, services, IPR)
Absence of a global body administering the process
International investment rulemaking lacks system-wide
coordination
Countries continue to conclude investment treaties on an
individual basis (bargaining power; various models; implications for
developing countries)
Perpetuating and accentuating the fragmentation of the IIA
network

The network of IIAs consists of

Bilateral investment treaties (BITs)

Free trade agreements / economic partnership agreements with
investment provisions (FTAs/EPAs)
Regional integration agreements (EU, ECOWAS, CARICOM,
MERCOSUR, COMESA, Arab investment agreement, ASEAN)
Sectoral agreements dealing with investment in a specific sector
(Energy Charter)

Core Elements in international investment

agreements (IIAs)
Definitions (investment/investor)
Admission and establishment
Core standards of treatment and protection:
Principle of fair and equitable treatment
Principles of non-discrimination (NT/MFN)
Expropriation
Transfer of funds
Dispute settlement (investor-State and State-State)

The number of newly signed IIAs continues to

decline
In 2013, 44 new IIAs were signed, bringing the total number of
IIAs to 3,236
Trends in IIAs signed, 1983-2013

Source: UNCTAD, IIA database.

The top ten signatories of BITs in the world

Number of BITs, end 2013

Germany

134

China

130

Switzerland

119

United Kingdom

105

France

102

Egypt

100

Netherlands

97

Belgium and Luxembourg

93

Italy

93

Korea, Republic of

91
0

20

Source: UNCTAD, IIA database.

40

60

80

100

120

140

160

Top IDB signatories of BITs

Turkey

Rise of mega-regionals brings challenges and

opportunities

Five large-scale negotiations:

TTIP (EU-US) (~45% of global GDP)
RCEP (ASEAN plus Australia, China, India, Japan, NZ, Korea)
(~50% of global population)
Trans-Pacific Partnership (12 countries) (~35% of global GDP)
EU-Canada CEPA (~26% of global GDP)
COMESA-SADC-EAC Trilateral FTA

Regional IIAs generally do not provide for the phasing out of older BITs
between the parties.

The parallel existence of BITs and the more recent regional

agreements with investment provisions has systemic implications and
poses a number of legal and policy questions.

Regionalism can still provide an opportunity for IIA rationalization.

The increase in IIAs has been paralleled by an

increase in investor-State disputes

At least 56 new cases were initiated in 2013, constituting

the highest number of known treaty-based disputes ever
filed in one year.

The total number of known treaty-based cases reached 568

in 2013 and the total number of countries that have
responded to one or more investment treaty arbitration
increased to 98.

Among a broad range of governmental measures challenged

in 2013, claims relating to measures in the renewable
energy sector are the most numerous

Known investment treaty arbitrations

(cumulative and newly instituted cases)
In 2013, 56 new ISDS cases were filed - the second largest
annual number in history
Trends in known ISDS cases, 19872013

Source: UNCTAD, ISDS database.

3. IIA reform

The IIA regime is undergoing a period of reflection,

review and reform

While almost all countries are parties to one or several IIAs,

few are satisfied with the current regime for several
reasons:

Growing uneasiness about the actual effects of IIAs in

terms of promoting FDI or reducing policy and
regulatory space;

Increasing exposure to ISDS and the lack of specific

pursuit of sustainable development objectives.

Widespread concerns about the functioning and the impact

of the IIA regime are resulting in calls for reform.

A broad consensus is emerging on the need to address major

challenges and improve the system.

Emerging policy actions towards reform

Many countries follow a wait and see approach
At the same time, IIA reform has been occurring at different
levels of policymaking
At least 40 countries (and 5 regional organizations) are
currently in the process of reviewing and revising their model
treaties/IIA approaches
Countries have also continued negotiating IIAs at the bilateral
and regional levels, with novel provisions and reformulations
(some directed at sustainable development objectives)
A few countries terminated some of their BITs or denounced
international arbitration conventions
At the multilateral level, countries have come together to
discuss specific aspects of IIA reform

Reform of the IIA regime four paths of action in

WIR 2014

Path
Status quo

Disengagement

Policy action
Abstaining from substantive changes to IIA policies

Eliminating international investment-related commitments

Selective adjustments

Pursuing selective changes to integrate selected sustainable

development elements and other features into future IIAs

Systematic reform

Redesigning IIAs to promote sustainable development, balance

rights and obligations and reform ISDS, including in existing
treaties

Source: UNCTAD, World Investment Report 2014.

By the end of 2013, more than 1,300 BITs

reached the stage where they can be terminated
or renegotiated at any time
Treaty expiration provides a window of opportunity for improving
the IIA regime
Countries need to analyze the pros and cons of treaty termination
and its implication for the overall investment climate and existing
investments
Cumulative number of BITs that can be terminated or renegotiated

Source: UNCTAD, World Investment Report 2013.

Debate about the usefulness and legitimacy of the

ISDS mechanism has gained momentum
Concerns with the current ISDS system relate, among others,
to:
a perceived deficit of legitimacy and transparency
contradictions between arbitral awards
difficulties in correcting erroneous arbitral decisions
questions about the independence and impartiality of
arbitrators
concerns relating to the costs and time of arbitral
procedures

UNCTAD outlined five sets of reform options for

international investment arbitration in WIR 2013

Reform of the IIA regime at the core of WIF 2014

The 2014 UNCTAD IIA Conference identified a number of
key and pressing issues that need to be addressed,
effectively sketching the contours of a roadmap for
reform.
It was broadly agreed that the IIA regime and ISDS
system need to be reformed in a comprehensive and
gradual way.
This requires a joint or coordinated approach towards IIA
reform.
Participants called upon UNCTAD to work with other
stakeholders and develop a roadmap for IIA reform that
offers concrete solutions to make IIAs more supportive of
sustainable development.
Next UNCTAD meeting: 25-27 February 2015, Geneva

4. Concluding remarks

Challenges faced by developing countries

arising from IIAs

Investment policies often formulated in a vacuum

Lack of coordination / consultation between negotiators of FTAs,

BITs, State contracts (inter-ministerial, IPA dialogue)

Bargaining power and pressure during negotiations (pressure

from other party and pressure from within)

IIAs signed for non-economic reasons

Awareness about practical options to reform the IIA regime

(timeframes)

Manage overlapping and sometimes conflicting approaches

between bilateral and regional IIAs

Investment treaty takers not makers

Suggested action points

Elaborate a vision on how FDI can contribute to inclusive and socially

equitable economic development

Elaborate a policy vision on how IIAs can help achieving this objective
(at least not hinder)

Elaborate transparent consultations with non-governmental

stakeholders, civil society, academia, to help build a broad domestic
support base for new policies

Reconsider past international investment commitments with the aim

of achieving coherence and identifying inconsistencies (through treaty
termination, amendments and renegotiations.

Establish an inter-ministerial task force responsible for supervising

and monitoring international investment commitments (treaties,
investor-State disputes, strategic policy orientation of FDI)

Consider new types of IIAs that focus on investment promotion and

cooperation

THANK YOU!
hamed.el.kady@unctad.org
diana.rosert@unctad.org

The Investment Policy Hub:

http://investmentpolicyhub.org
UNCTAD websites:
www.unctad.org/diae
www.unctad.org/wir
www.unctad.org/fdistatistics

@unctadwif