Investor-State Treaties and Evolution of the Law — Yes, It is a Positive Development.

             Global Investment


     The move by various countries,  both developed and developing such as Indonesia, South Africa and Australia, to redraw bilateral treaties providing for investor-state provisions, should be resisted. The EU should continue to negotiate such provisions within the context of the TPP.
     Investor-state provisions in bilateral trade agreements and investment treaties promote greater foreign direct investment. It takes governments out of the game of bringing actions on behalf of companies and allow private corporate actions. This reduces government friction and promotes the normalization and commercialization of FDI.
      In fact, this approach is a more modern approach to settling transnational disputes than the 19th century prohibition in international relations against giving ‘standing’ to private parties in international arbitration. The now discredited “Calvo Clause.” That approach is dysfunctional and outdated.
     Trade and investment today are conducted by corporations and they should have a viable recourse over contract disputes often involving nationalization and bad state behavior. 
….. “Investor-State Treaties Promote the Law. Financial Times (March 26, 2014).
….. “Indonesia to Redraw Terms for Investors as Litigation Rises.” Financial Times (March 27, 2014).

About Stuart Malawer

Distinguished Service Professor of Law & International Trade at George Mason University (Schar School of Public Policy).
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