IISD | September 2017
Assessing the impacts of investment treaties: Overview of the evidence
by Jonathan Bonnitcha
A network of over 3,000 partially overlapping treaties governs international investment. These investment treaties grant international legal protection to foreign investors from certain types of adverse action by the governments of the host states in which they invest. Crucially, it is normally possible for foreign investors to enforce these legal protections through international arbitration.
Investment treaties were originally negotiated bilaterally between developed and developing countries. More recently, developing countries have signed investment treaties with one another. Investment treaties between developed countries remain rare—though this may change, as seen for instance in the conclusion of the Comprehensive Economic Agreement between Canada and the European Union (CETA), which includes an investment chapter. Although there are relevant differences between investment treaties, they are remarkably uniform in their core provisions. Most provide a common suite of protections to foreign investors, including guarantees of compensation for expropriation, “fair and equitable treatment” and non-discriminatory treatment. Some more recent investment treaties also include binding investment liberalization provisions, which prevent a state from imposing restrictions or conditions on new foreign investment that are not applied equally to domestic investors.
Investment treaties are only one aspect of the legal regime governing foreign investment. The laws and policies of the host state in which an investment is made are also relevant, as are contracts negotiated directly between investors and host states. Recent high-profile arbitrations, however, have focused public attention on the investment treaty regime. Relying on investment treaties, foreign investors have demanded compensation for government decisions to introduce new environmental and public health measures. However, foreign investors have also brought claims for compensation following tax increases, changes to the regulatory regime governing utility pricing and alleged mistreatment by the judiciary in host states. Foreign investors’ claims under
investment treaties are not always successful. Foreign investors’ ability to frame plausible multimillion-dollar claims against a wide range of host government actions—and the fact that these claims are adjudicated through a system of private arbitration—has made investment treaties controversial. With this background in mind, this scoping study seeks to provide an overview and assessment of existing evidence of investment treaties’ impacts.