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INTERNATIONAL INVESTMENT LAW LECTURE 1 INTRODUCTION OF INTERNATIONAL INVESTMENT LAW Ngo Trong Quan (LL M ) Deputy Chair of Discipline on International Trade and Investment Law Faculty of International.
INTERNATIONAL INVESTMENT LAW LECTURE 1: INTRODUCTION OF INTERNATIONAL INVESTMENT LAW Ngo Trong Quan (LL.M.) Deputy Chair of Discipline on International Trade and Investment Law Faculty of International Trade and Business Law ngotrongquan@hlu.edu.vn Ngo Trong Quan Outline History of International Investment Law Sources of International Investment Law Scope of Investment Treaties Ngo Trong Quan • A road construction company called Toll-Stoy won a US$200 million contract to build a 200kilometre toll road from Port City, which is the seaside economic centre of Ruritania, to Capital City At great expense, Toll-Stoy sent two crews to Ruritania and one began building from Port City and one began construction from Capital City They were just about to meet up and complete the road when they got to the Sacred Valley There disaster struck because the government could not release the land for the completion of the road There were indigenous people in the Sacred Valley who did not wish to leave their homes • Moreover, not just had Toll-Stoy got stuck at Sacred Valley, there were some indigenous people who took it upon themselves to destroy some of Toll-Stoy's heavy equipment, including earth movers They also broke fingers and toes of some of Toll-Stoy's employees It is not quite clear whether the government knew that these vigilantes had it in mind to engage in violence • In any event, Toll-Stoy sought an injunction in Ruritanian courts to remove the residents of Sacred Valley so that the road could be completed, and Toll-Stoy also filed for compensation in the courts But neither of those efforts led to any kind of decision Source: Arbitration International (2008), Birth of an ICSID Case – Act I, Scene I, Volume 24, Issue Ngo Trong Quan • Investment lawyer: Well, I know you were looking for a tough litigator to help you in Ruritania, but I’m here today to propose a completely different approach to this issue that you have in Ruritania, and we believe based on our experience that it is an approach which is much more likely to get you the kind of compensation that Toll-Stoy deserves • Toll-Stoy counsel: And what approach is this? • Investment lawyer: Have you considered a claim under a BIT? • Toll-Stoy counsel: A BIT? • Investment lawyer: A Bilateral Investment Treaty • Toll-Stoy counsel: A Bilateral Investment Treaty? What’s that? • [Lengthy conversation about the BIT system…] • Investment lawyer: Well, the BIT gets you out of Ruritanian courts and before a neutral independent body of arbitrators that has the power to render an award for millions of dollars for Toll-Stoy and you can take that award and have it treated as a judgment in a 142 countries around the world • Toll-Stoy counsel: Oh, now I’m interested Tell me more Source: Arbitration International (2008), Birth of an ICSID Case – Act I, Scene I, Volume 24, Issue Ngo Trong Quan The History of International Investment Law 1.1 The genesis of international investment law 1.2 The development of international investment law 1.3 The current features of international investment law Ngo Trong Quan The History of International Investment Law 1.1 The genesis of international investment law • The law of protection of aliens abroad – substantive aspects • The emergence of an international minimum standard - Developed states’ concern with level of protection and treatment granted to their nationals in other states Foreigners must be treated in accordance with a minimum standard of treatment (a requirement of international law independent of those by host states) - Argentinian Jurist Carlos Calvo (Calvo doctrine): Host states could not treat foreign nationals more favorably than their own nationals Foreigners must assert their rights before domestic courts and no right of diplomatic protection by their home state or access to international tribunals Ngo Trong Quan The History of International Investment Law 1.1 The genesis of international investment law • The law of protection of aliens abroad – substantive aspects • The emergence of an international minimum standard - Neer v Mexico (1926): “The treatment of an alien, in order to constitute an international delinquency, should amount to an outrage, to bad faith, to wilful neglect of duty, or to an insufficiency of governmental action so far short of international standards that every reasonable and impartial man would readily recognize its insufficiency.” Ngo Trong Quan The History of International Investment Law 1.1 The genesis of international investment law • The law of protection of aliens abroad – substantive aspects • The duty to provide compensation for expropriation and nationalization - Mexico’s nationalization of American petroleum companies (1936): US Secretary of State Cordell Hull claimed that the rules of international law allowed expropriation of foreign property but required “prompt, adequate, and effective compensation” (Hull Formula) - In 1962, the General Assembly adopted its Resolution 1803 on Permanent Sovereignty over Natural Resources which affirmed the right to nationalize foreign owned property and required only “appropriate compensation” Ngo Trong Quan The History of International Investment Law 1.1 The genesis of international investment law • The law of protection of aliens abroad – procedural aspects • “Gunboat diplomacy”: use of force by home states of foreign investors to recover contractual debts • Prohibition of threat or use of force in international law Increased use of diplomatic protection (home state endorses the claim of its national against host state elevating investor-state dispute to state-state dispute) • Drawbacks of diplomatic protection (no obligation to exercise protection & no obligation to transfer monetary compensation to nationals) The inclusion of dispute settlement provisions in contracts with states (submission of disputes to arbitration) Ngo Trong Quan The History of International Investment Law 1.2 The development of international investment law • The call for a New International Economic Order • Developing states’ support for the United Nations General Assembly Resolutions 3201, 3202, and 3281: a New International Economic Order and a Charter of Economic Rights and Duties of States: UNGA Resolution 3281: “In any case where the question of compensation gives rise to a controversy, it shall be settled under the domestic law of the nationalizing state and by its tribunals,…” • Developed states opposed to these Resolutions (due to lack of opinio juris to constitute customary international law) Insecurity about the customary international law governing foreign investment Ngo Trong Quan 10 International Commitments of Vietnam Regarding Investment 1.3 International Investment Agreements Concluded by Vietnam • Observations on major developments in Vietnam’s IIAs Guidelines on determination of indirect expropriation • CPTPP, Chapter 9, Annex 9-B & Annex 9-C • factors to consider + exceptions for measures pursuing legitimate public welfare objectives • Expropriation relating to land: compensation in accordance with applicable domestic legislation Ngo Trong Quan 23 International Commitments of Vietnam Regarding Investment 1.3 International Investment Agreements Concluded by Vietnam • Observations on major developments in Vietnam’s IIAs Addition of exceptions to protect regulatory space of host state • ACIA, Art 17+18 Similar to WTO GATT Art XX, GATS Art XIV • CPTPP, Chapter 9, Art 9.9.4 (Exceptions for restrictions on transfer of funds) • RCEP, Art 17.12-17.13 Incorporation of WTO GATT Art XX, GATS Art XIV Ngo Trong Quan 24 International Commitments of Vietnam Regarding Investment 1.3 International Investment Agreements Concluded by Vietnam • Observations on major developments in Vietnam’s IIAs Procedural improvements to dispute settlement mechanism • EVIPA: Annex on Mediation, Investment Tribunal System (2-tiered system) Modern IIAs have more detailed, clearer, predictable rules than in traditional IIAs A balanced approach between protection of investment and protection of host state’s regulatory space Ngo Trong Quan 25 International Commitments of Vietnam Regarding Investment 1.3 International Investment Agreements Concluded by Vietnam • A Closer Look at recent IIAs of Vietnam • CPTPP Investment Chapter, and • EU-VN Investment Protection Agreement Ngo Trong Quan 26 Investor-State Dispute Settlement in Vietnam 2.1 Coordination Process 2.2 Practice of ISDS in Vietnam Article 14 LOI 2020 Disputes over business investment activities in Vietnam shall be settled through negotiation and conciliation If the negotiation or conciliation fails, the dispute shall be settled by an arbitration body or by a court in accordance with Clauses 2, 3, and of this Article Every dispute between a foreign investor and a regulatory agency over business investment activities within Vietnam’s territory shall be settled by Vietnam’s arbitral tribunal or Vietnam’s court, unless otherwise agreed under a contract or prescribed by an international agreement to which the Socialist Republic of Vietnam is a signatory Ngo Trong Quan 27 Investor-State Dispute Settlement in Vietnam 2.1 Coordination Process • Regulation on Coordination in the Settlement of International Investment Disputes issued in conjunction with Decision No 14/2020/QD-TTg dated 08 April 2020, effective from 01 June 2020 (Regulation 14): • Functions, tasks, and powers of state agencies involved in ISDS • Procedures for coordination and participation in ISDS at international forums Ngo Trong Quan 28 Investor-State Dispute Settlement in Vietnam 2.1 Coordination Process • Definitions (Art 2) • International investment disputes: • Disputing parties: between foreign investor v government of Vietnam or government bodies • Treaty-based disputes • Contract-based disputes • Presiding agency: focal agency in resolving a specific international investment dispute • Legal representative agency of government: Ministry of Justice • Other involved agencies, organizations and individuals Ngo Trong Quan 29 Investor-State Dispute Settlement in Vietnam 2.1 Coordination Process • Presiding agency (Art 5) Respondent agencies, E.g Ministries, Provincial People’s Committees Investor-state contract negotiating/signing agencies Ministry of Finance (disputes relating to loans, debts of government or guaranteed by government, or application of finance and tax laws) Other agencies decided by Prime Minister (disputes affecting foreign affairs, national security and defense) Ngo Trong Quan 30 Investor-State Dispute Settlement in Vietnam 2.1 Coordination Process • Coordination process In-dispute • Complaint & consultation by foreign investor • Negotiation • Conciliation • Domestic jurisdictions • International arbitration Pre-dispute • Correction of arbitral award • Enforcement of conciliation agreement • Recognition and enforcement of awards Post-dispute Ngo Trong Quan 31 Investor-State Dispute Settlement in Vietnam 2.2 Practice of ISDS in Vietnam • investor-state disputes recorded by UNCTAD • • • • • • • • Baig v Vietnam (2018, Korea – Vietnam BIT 1993) ConocoPhillips and Perenco v Vietnam (2017, UK – Vietnam BIT 2002) Cockrell v Vietnam (2014, US – Vietnam BTA 2000) TVB v Vietnam (2014, Netherlands – Vietnam BIT 1994) Recofi v Vietnam (2013, France – Vietnam BIT 1992) Dialasie v Vietnam (2011, France – Vietnam BIT 1992) McKenzie v Vietnam (2010, US – Vietnam BTA 2000) TVB v Vietnam (2004, Netherlands – Vietnam BIT 1994) Ngo Trong Quan 32 Investor-State Dispute Settlement in Vietnam 2.2 Practice of ISDS in Vietnam • Possible causes of conflicts between investors and government • Government side • Lack of transparency • Implementation of laws: unreasonable administrative procedures, inequality, breach of commitments in BITs/contracts • Investor side • Lack of goodwill, dishonesty • Lack of legal awareness Ngo Trong Quan 33 Investor-State Dispute Settlement in Vietnam 2.2 Practice of ISDS in Vietnam • Government conduct vulnerable to disputes in Vietnam • Withdrawal of investment certificates (registration), business registration • Adjustment/non-adjustment of investment registration certificates, business registration • Land recovery • Tax on capital transfer • Change in tax laws and policies in investment incentive sectors • Breach of infrastructure contracts Ngo Trong Quan 34 Investor-State Dispute Settlement in Vietnam 2.2 Practice of ISDS in Vietnam • Possible IIA breaches claimed • Expropriation, e.g McKenzie v Vietnam, TVB v Vietnam • FET, FPS, e.g McKenzie v Vietnam, Dialasie v Vietnam Ngo Trong Quan 35 Investor-State Dispute Settlement in Vietnam 2.2 Practice of ISDS in Vietnam • Measures to Prevent International Investment Disputes • Immediate precautionary measures • Long-term preventive measures Ngo Trong Quan 36 THANK YOU ngotrongquan@hlu.edu.vn Ngo Trong Quan 37 ... of international investment law 1.3 The current features of international investment law Ngo Trong Quan The History of International Investment Law 1.1 The genesis of international investment law. .. about the customary international law governing foreign investment Ngo Trong Quan 10 The History of International Investment Law 1.2 The development of international investment law • Negotiation... of law Ngo Trong Quan 16 The Sources of International Investment Law 2.1 Investment Treaties 2.2 Customary International Law 2.3 Other Sources Ngo Trong Quan 17 The Sources of International Investment