Investment protection agreement

Investment Protection Agreement (English International Investment Treaties or International Investment Agreements ) are international treaties between states. They provide direct investment by foreign natural or legal persons (eg. As companies) in a foreign state legal protection, particularly against property affecting measures such uncompensated expropriations . Investment protection agreements are often concluded as bilateral agreements (Bilateral Investment Treaty, BIT). But there are also regional agreements with corresponding regulations, for example Chapter 11 of the North American Free Trade Agreement or the Energy Charter Treaty . The agreements currently being negotiated between the EU and Canada ( CETA ) and the USA ( TTIP ) also contain investment protection provisions. The actual effects of investment protection agreements on the scope and direction of foreign direct investment are controversial.

Regulatory background

In addition to investment protection agreements, investments are protected under international law by two other mechanisms, namely through customary international law on aliens and through contracts between investors and the host state ( investment contract ). From the investor's point of view, however, both mechanisms show deficits: Claims under aliens law can only be asserted by the home country of the investor by way of diplomatic protection , but not by the investor himself. Whether the investor has a claim against his home country to exercise diplomatic protection is determined according to its national law, although most states do not provide for such a claim. In contrast, protection through an investor-state contract is easier for the investor to plan. However, it remains problematic that these contracts are traditionally subject to the national law of the host state and that the host state thus has the option, despite the contract, to change the legal framework conditions to the detriment of the investor.

Investment protection agreements try to compensate for both deficits: First of all, they give the investor the opportunity to take legal action against the host state directly against the host state without the involvement of the home state at an international arbitration tribunal . In addition, investment protection agreements are international treaties so that the host state cannot evade its obligations through its national legislative options.

History and Development

Forerunners of the investment protection agreements were various friendship, trade and shipping treaties that existed between individual states in earlier centuries. In addition to other regulations, some of these contracts also contained provisions that protect investments.

The first investment protection agreement of the current kind was concluded on November 25, 1959 between Germany and Pakistan . In the years that followed, Western European countries concluded a whole series of investment protection agreements, typically with developing and emerging countries.

In 1965 the International Center for Settlement of Investment Disputes (ICSID) was established to facilitate dispute settlement under the agreements. Around 150 countries have joined the ICSID Convention to date.

In the 1970s and 1980s, further bilateral investment protection agreements were steadily concluded; the USA also launched a BIT program in 1977 and, like China, concluded the first agreements from 1982 onwards. In 1987 there were 256 bilateral investment protection agreements in force.

After the fall of the “ Iron Curtain ” in 1989, there was a wave of new contracts, so that in 2011 around 3000 such contracts were already in force worldwide. The Federal Republic of Germany alone has bilateral investment protection agreements with 130 countries.

In addition to investment protection agreements, international investment protection regulations can also be found in a number of regional economic agreements (e.g. NAFTA , MERCOSUR ) as well as in international agreements, e.g. within the framework of the WTO (TRIPS agreement, GATS agreement, TRIMs agreement). An attempt to replace the increasingly confusing system of thousands of investment protection agreements around the world with a uniform multilateral agreement failed for the time being at the end of the 1990s with the Multilateral Agreement on Investment ( MAI ) within the OECD .

While older investment protection agreements are essentially limited to the protection of investments that have already been made, newer agreements increasingly include the upstream question of market access , i.e. the possibility of being able to make a certain investment as a foreigner, in their scope. This is particularly the case with the investment protection agreements concluded by the USA.

Protection standards

Although the agreements currently in force are very similar in terms of content, it should be noted that the agreements can be designed differently in detail. In the following, therefore, only general concepts can be presented, but these can be found in most agreements. In addition to the general promise to create favorable conditions for investments, investment protection agreements contain a number of specific obligations for the host state of an investment. A distinction can be made between absolute and relative protection standards:

Absolute protection standards

Protection against unlawful expropriation (Engl. Protection from unlawful expropriation)

The facts of expropriation in investment protection agreements codify the expropriation protection of aliens law under customary international law . The (additional) codification is explained on the one hand by the fact that in the 20th century the existence of the foreign law obligations was disputed by the representatives of the Calvo doctrine and in this respect a contractual clarification was required. In addition, unlike claims from investment protection agreements, claims under foreign law can only be asserted through diplomatic protection . It should be noted that the protection of property in investment protection agreements (in contrast to human rights agreements) only protects the value of property, but not its existence: The agreements only set conditions that an expropriation must meet, but they do not prohibit the expropriation itself. The legality requirements set out in the agreements regularly include acting in the public interest , a non-discriminatory character, compliance with a due process , and the payment of immediate, adequate and effective compensation.

Fair and equitable treatment

Because of its conceptual breadth, a violation of the fair and equitable treatment standard is very often invoked in investment proceedings. Some investment protection agreements, for example NAFTA , expressly equate the standard with the international minimum standard . In case law, the standard is often classified as a legitimate expectation , in which it is asked whether the state has disappointed legitimate expectations of the investor, for example in which the state behaves contradicting previously given assurances.

Comprehensive protection and security

This standard is intended to close a protection gap resulting from the fact that states are generally not responsible for all actions emanating from their sovereign territory. Investments z. B. be protected against insurgents. The standard constitutes a guarantor obligation, so that a state failure can also constitute a violation. However, the standard only obliges the state to act that is possible and reasonable ( due diligence ), so it is not a guarantee .

Umbrella clause

By means of an umbrella clause, the host state undertakes to the investor's home state that it - the host state - will comply with all obligations it has entered into towards the investor. Examples of such obligations are investor-state contracts or other promises. In practice, umbrella clauses are problematic in several ways: First, questions of attribution can arise if the state did not act directly against the investor, but through a national company under private law that it controls. In addition, the ratio of claims from the investment protection agreement (English treaty claims ) to claims from investor-state contracts (English contract claims ) is problematic, because an umbrella clause can potentially upgrade any simple breach of contractual duty to a breach of the agreement.

Right to transfer of profits (English transfer of funds)

This standard is intended to prevent a host state from making a foreign investment subject to the condition that profits generated from it are not allowed to leave the country.

Relative protection standards

National treatment (Engl. National treatment)

The standard of domestic equality is violated if the foreign investor was treated worse than domestic investors in a comparable situation. This can be both legal and factual inequality of treatment. The question of what requirements are to be met to justify unequal treatment is not finally clarified in literature and case law.

MFN (Engl. Most favored nation treatment)

While the subject of comparison is a domestic investor in the case of national equality, a comparison is made with a foreign investor in the case of most-favored nation treatment. The question of whether the most-favored nation principle gives the investor the opportunity to assert more advantageous provisions from another investment protection agreement without the need for specific unequal treatment with an individual other investor is very problematic: In principle, the investor from State A can only opt out of State B rely on the agreement between A and B. The most favored nation principle could now allow him to invoke more advantageous provisions in the agreement between State B and State C, even if there is no specifically better treated investor from State C. In practice, this problem occurs particularly in connection with dispute settlement clauses.

Conflict between investment protection and state regulation

In terms of legal policy, investment protection agreements are sometimes accused of restricting the host states' regulatory leeway unreasonably. In this context, it should first be noted that most (older) agreements do not contain a catalog of exceptions for state regulation, as is known, for example, from Art. XX of the GATT . The state's interest in regulation is therefore mainly discussed in connection with the protection standard of (indirect) expropriation.

In literature, state practice and jurisprudence it is undisputed that the expropriation offense in investment protection agreements does not prohibit the host states from accessing foreign assets, but from the expropriation threshold onwards certain conditions are linked to legality under international law. Accordingly, the question arises under which conditions a regulation constitutes an expropriation and thus a compensation has to be paid as a legality condition. Three approaches can be distinguished in literature and jurisprudence: It is sometimes argued that regulation can never constitute expropriation (radical police powers doctrine). Others make the existence of an expropriation dependent on the effects the regulation has on the investor ( sole effect doctrine). Finally, a weighing of investor interests with the regulatory interests of the state is sometimes required (moderate police powers doctrine).

As a result of the debate about state regulation law, some states have added a corresponding exception clause to their model BITs, on the basis of which new investment protection agreements are negotiated. As an alternative to such an exception clause, the literature suggests aligning property protection in investment protection agreements with property protection in human rights agreements.

Legal position of the investor

Most investment protection agreements provide the investor with a right of action before an international arbitration tribunal (so-called investor-state dispute settlement ). The investor can thereby assert a violation of protection standards in the investment protection agreement regardless of the home country and its diplomatic interests. However, it has not been finally clarified whether the investor is asserting his own subjective rights or only the rights of his home country. The question of right ownership becomes particularly relevant in practice if the host state, as the defendant, claims that the investor has agreed in an investment contract to settle all disputes relating to the investment before a contractually specified court. This contractual consent could then represent a waiver by the investor with regard to the rights (or at least the dispute settlement mechanisms) from the investment protection agreement, provided that the investor is regarded as the holder of the rights and thus as the person entitled to waiver.

Cognitive and enforcement proceedings

If a foreign investor suffers damage to his investment due to a violation of the investment protection obligations of the host state, he can sue the foreign state before an international arbitration tribunal ( investor-state dispute settlement ). The competent arbitration tribunal is specified in the investment protection agreement. The procedure and the institutional framework of the arbitral tribunal can, for example, follow the regulatory framework of the ICSID.

In the case of proceedings according to ICSID, unlike when invoking diplomatic property rights , the appeal to the host state does not have to be exhausted. This ensures that the host state cannot obstruct the foreign investor's legal action through unilateral national measures and delay or prevent his legal enforcement. ICSID arbitral awards are enforceable like a final, national judgment, without the possibility of objection by the state concerned. Furthermore, the proximity of the ICSID to the World Bank means that the states concerned generally refrain from illegal non-implementation of the ICSID arbitration awards.

In other arbitration proceedings, for example according to the rules of UNCITRAL or the International Chamber of Commerce in Paris, the arbitral awards obtained are usually internationally enforceable according to the New York Convention . In contrast to ICSID arbitral awards, there is a catalog of reasons for which the courts of the state in which enforcement is to take place can reject the declaration of enforceability (Art. V NYC). One of them is a violation of public policy .

Relationship between European law and international investment law

As international agreements, investment protection agreements initially exist independently in addition to European law . Nevertheless, problems can arise with the interaction of the partial legal systems, whereby two constellations must be distinguished - the ability of the states to conclude investment protection agreements with non-EU states (so-called extra-EU BITs), and the existence of investment protection agreements between individual EU States (so-called intra-EU BITs). Finally, the problem may arise that an obligation from the investment protection agreement made concrete by a judgment of an investment protection tribunal cannot be reconciled with EU law.

Extra EU BITs

With the Treaty of Lisbon , the competence for foreign direct investments was transferred to the European Union . This raises a number of subsequent problems, such as the precise delimitation of competencies, the future of the currently applicable investment protection agreements and the content of new agreements to be negotiated by the European Union .

Intra-EU BITs

Almost 200 of the investment protection agreements concluded worldwide are with the EU member states that have concluded them between themselves. Due to the existence of the EU and participation in the EU internal market, these intra-EU BITs affect Union law. The freedom of establishment (Art 49 ff. TFEU ) and the freedom to provide services (Art 63 ff. TFEU) as well as EU state aid law and EU antitrust law are in conflict with these BITs.

The provisions of the EU internal market take precedence over the BITs, even if they are older (e.g. in the case of the East Central European states that joined on May 1, 2004) in any case if there are overlaps in the regulatory content between EU law and the regulations in a BIT.

In Achmea , C-284/16, the European Court of Justice ruled - contrary to the Opinion of the Advocate General - that arbitration clauses in bilateral investment protection agreements between EU member states are incompatible with EU law under certain circumstances.

Conflicts between European law and international investment law

This article or the following section is not adequately provided with supporting documents ( e.g. individual evidence ). Information without sufficient evidence could be removed soon. Please help Wikipedia by researching the information and including good evidence.

Investment protection tribunals operate on the basis of international law. Decisions of such a tribunal can, since decisions are made on the basis of international law, violate European law. Member States of the European Union that are obliged to benefit from such an arbitration award in favor of a particular investor can initiate infringement proceedings if the arbitration award violates EU law. The tribunals are not domestic courts within the meaning of Art 267 TFEU and therefore they are not entitled to make submissions to the ECJ, nor are they obliged to make submissions. The European Court of Justice stated in March 2018 that an investor-state arbitration provision in an investment protection agreement concluded between two member states affects the autonomy of Union law and also fundamentally questions the compatibility of arbitration clauses in investment protection agreements with EU law.

literature

• Andrew Newcombe / Lluis Paradell: Law and Practice of Investment Treaties: Standards of Treatment Wolter Kluwer, Alphen aan den Rijn 2009, ISBN 978-90-411-2351-0
• Campbell McLachlan, Laurence Shore, Matthew Weiniger: International Investment Arbitration: Substantive Principles Oxford University Press, Oxford 2008, ISBN 978-0-19-955751-6
• Jörn Griebel: International Investment Law CH Beck, Munich 2008, ISBN 978-3-406-58085-7
• Peter Muchlinski, Federico Ortino, Christoph Schreuer (Eds.): The Oxford Handbook of International Investment Law Oxford University Press, Oxford 2008, ISBN 978-0-19-923138-6
• Rudolf Dolzer / Christoph Schreuer: Principles of International Investment Law Oxford University Press, 2nd ed., Oxford 2012, ISBN 978-0-19-965180-1

Web links

• German model investment protection contract
• ICSID website (in English)
• UNCTAD database of treaty-based investor-state dispute settlement cases , UNCTAD database with information on individual investor-state dispute settlement cases
• Investment Treaty Arbitration , freely accessible collection of judgments in investment protection proceedings
• UNCTAD Investment Instruments Online , freely accessible collection of investment protection agreements
• Digest of International Investment Jurisprudence , freely accessible jurisprudence database on international investment law
• Overview of German BITs (PDF; 149 kB), provided by the Federal Ministry of Economics
• BT print. 18/7753 , overview of German investment protection agreements and applicable protection standards
• Pia Eberhardt : Investment Protection at the Crossroads , Friedrich Ebert Foundation , May 2014
• Ingar Solty : Dictatorship of Capital? The four biggest myths of TTIP , overview of the development of investment protection agreements using the example of TTIP and CETA, October 2015
• German Investment Treaty Disputes , overview of investment arbitration proceedings with German participation

Individual evidence

1. ↑ Griebel: International Investment Law. 2008, p. 19 ff.
2. ↑ On the meaning of investor-state contracts: Dolzer, Schreuer: Principles of International Investment Law. 2008, p. 72 ff.
3. ↑ [ARCHIVE law on the contract of November 25, 1959 between the Federal Republic of Germany and Pakistan for the promotion and protection of capital investments] ( English / German , PDF) In: Bundesgesetzblatt . July 6, 1961. Archived from the original on September 28, 2015. Retrieved September 28, 2015.
4. ↑ Andrew Newcombe / Lluis Paradell: Law and Practice of Investment Treaties: Standards of Treatment , page 42 f.
5. ↑ Andrew Newcombe / Lluis Paradell: Law and Practice of Investment Treaties: Standards of Treatment , page 47
6. ↑ Andrew Newcombe / Lluis Paradell: Law and Practice of Investment Treaties: Standards of Treatment , page 47
7. ↑ Griebel, Lessons from the Success Story of International Investment Law, Kölner Schrift zum Wirtschaftsrecht 2011, p. 99.
8. ↑ Overview of the Federal Ministry of Economics on bilateral economic relations as of August 11, 2014
9. ↑ List of investment protection agreements as of September 19, 2016
10. ^ Markus Krajewski: International Economic Law . 2nd edition, Hüthig Jehle Rehm, 2009, ISBN 3-8114-9629-8 , pp. 203 f. (Rn 644 ff).
11. ↑ See Schill, The Multilateralization of International Investment Law, 2009.
12. ↑ See e.g. the preamble to the agreement between the Federal Republic of Germany and the People's Republic of China on the promotion and mutual protection of capital investments, Federal Law Gazette 2005 II p. 733.
13. ↑ On the different concepts in investment law and in human rights protection, see Kriebaum, Protection of Property in Völkerrecht, 2008.
14. ↑ Griebel, International Investment Law, 2008, p. 76.
15. ↑ Dolzer / Schreuer, Principles of International Investment Law, Second Edition, 2012, p. 130.
16. ↑ See the case groups in Dolzer / Schreuer, Principles of International Investment Law, 2008, pp. 133ff.
17. ↑ Griebel, International Investment Law, 2008, p. 75.
18. ↑ On the problem area cf. Dolzer / Schreuer, Principles of International Investment Law, 2008, p. 153ff.
19. ↑ Griebel, International Investment Law, 2008, p. 79ff .; Dolzer / Schreuer, Principles of International Investment Law, 2008, pp. 188ff. and 253ff.
20. ↑ See, for example, the Public Statement on the International Investment Regime ( memento of the original dated November 16, 2012 in the Internet Archive ) Info: The archive link has been inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. on the one hand and a replica by Professor Newcombe in the Kluwer Arbitration Blog on the other. 
21. ↑ Dolzer / Schreuer, Principles of International Investment Law, 2008, pp. 89ff.
22. ↑ Overview of the approaches represented in Griebel, Internationales Investitionsrecht, 2008, p. 77f.
23. ↑ E.g. the 2004 model BIT of the USA and Canada.
24. ^ Kriebaum, Property Protection in Völkerrecht, 2008, pp. 549ff.
25. ^ Douglas, The hybrid foundations of investment treaty arbitration, British Yearbook of International Law (74) 2004, p. 184; Spiermann, Individual Rights, State Interests and the Power to Waive ICSID Jurisdiction under Bilateral Investment Treaties, Arbitration International (20) 2004, p. 210ff.
26. ↑ Krajewski, Wirtschaftsvölkerrecht, 2006, § 3 Rn. 647ff .; Dolzer / Schreuer, Principles of International Investment Law, 2008, pp. 214ff .; Griebel, International Investment Law, 2008, p. 114ff.
27. ↑ Griebel, International Investment Law, 2008, pp. 116ff.
28. ↑ Dolzer / Schreuer, Principles of International Investment Law, 2008, p. 249.
29. ↑ Dolzer / Schreuer, Principles of International Investment Law, 2008, pp. 287ff.
30. ↑ Krajewski, Wirtschaftsvölkerrecht, 2006, § 3 Rn. 674.
31. ↑ See Bungenberg / Griebel / Hindelang (ed.), International Investment Protection and European Law, 2010.
32. ↑ Wehland, " Arbitration on the basis of bilateral investment protection agreements between EU member states and the objection of conflicting Community law ", Arbitration VZ 2008, p. 222, names a number of around 190 BITs.
33. ↑ The content of the regulations between Union law and the BITs under international law are not necessarily the same. Therefore, BITs are not automatically derogated from Union law and these contracts do not necessarily have to be terminated by the Union member states.
34. ^ OF THE COURT (Grand Chamber) of March 6, 2018.
35. ↑ OPINION OF THE ADVOCATE GENERAL of 19 September 2017.
36. ↑ Journal for Environmental Law : Inadmissible arbitration clause in investment protection agreements between EU member states , issue 7-8 / 2018, page 415 ff.
37. ↑ Judgment of the Grand Chamber of the European Court of Justice of March 6, 2018 in Case C ‑ 284/16 , accessed on December 13, 2018
38. ↑ Elaboration PE 6 - 3000 - 57/18 of the European department of the German Bundestag : The judgment of the ECJ of March 6, 2018 in case C-284/16 (Slovak Republic / Achmea BV) and its effects on CETA and the multilateral Investment Court. ( PDF; 219 kB )

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