The Journal of

WORLD INVESTMENT

ABSTRACTS 

Craig VanGrasstek: Peace, Security, and Middle East Trade—Is Discrimination the Problem or the Solution?

In a 9 May 2003 commencement address at the University of South Carolina, President George W. Bush proposed “the establishment of a U.S.–Middle East free trade area (Fta) within a decade.” Trade discrimination has long been part of the problem in U.S. relations with the Middle East, but this latest offer aims to make it a part of the solution. This article seeks to place the current initiative in context by reviewing the development of three distinct but related strands of discrimination in United States–Middle East trade relations: negative discrimination, especially in relation to the Arab League’s boycott of Israel; a combination of negative and positive discrimination in the critical petroleum trade; and positive discrimination in the form of bilateral free trade agreements with some Middle East States. In any case, U.S. trade with this region has never been either politically neutral or governed solely by market forces. The author not only provides a detailed history of U.S.–Middle East trade relations but also looks at what this history implies for the future.

Craig VanGrasstek is Executive Director of the Program on Trade and Negotiations at the John F. Kennedy School of Government, Harvard University; and President, Washington Trade Reports, Washington, D.C.

Jacques Werner: Making Investment Arbitration More Certain—A Modest Proposal

Despite its impressive advances over the last decades, international arbitration has been and remains a fragile institution. Countries always have choices, and those dissatisfied with the way investment arbitration functions can opt out of it. This is what Saudi Arabia did following the Aramco Decision in 1963. On the other hand, when Mexico was found at fault in the Nafta Metalclad Decision, it appealed that conclusion in a Canadian court. Appeals from arbitral decisions, however, are not always possible or practicable, no matter how flawed those decisions may be. As examples, the author offers a critical history of the recent Loewen Decision under Nafta and the two conflicting Lauder Decisions under bilateral investment treaties. Is it time to introduce an appellate court for international investment arbitral awards? The author presents the case for this as well as submitting a more modest proposal that places the responsibility for the integrity of the arbitral system squarely on the shoulders of the arbitrators.

Jacques Werner is Principal of Werner & Associés, Geneva, Switzerland; and Publisher and Editor of The Journal of World Investment and The Journal of World Intellectual Property.

Christian Leathley: The Mercosur Dispute Resolution System

This article offers a comprehensive look at Mercosur’s dispute resolution system which regulates State-to-State and investor–State dispute procedures. It describes how the system works and offers a critical overview of its effectiveness. The current system exhibits shortfalls in terms of accessibility to private investors, overt political influences, the absence of an independent supra-national judicial body, the speed of the process and the incomplete character of Mercosur’s legal acts. Looking to the future, consideration is given to the factors that will affect the development of the Mercosur dispute resolution system, especially to the array of external influences including the World Trade Organization, the North American Free Trade Agreement, the Free Trade Agreement of the Americas and the growing trend of bilateralism.

Christian Leathley is Associate at Wilmer, Cutler & Pickering, London; and a member of the International Arbitration Group.

Andrew I. Chukwuemerie: Commercial and Investment Arbitration in Nigeria’s Oil and Gas Sector

Nigeria, like other developing countries, has significant revenue from natural resources (oil and gas in its case) as the mainstay of its economy. That developing countries have had a pronounced scepticism towards international commercial arbitration is also a notorious fact. This article examines how arbitration works in Nigeria in the important oil and gas sector. In the process, the genesis of the aforementioned scepticism is traced. The recent jurisprudence of the International Centre for Resolution of Investment Disputes with respect to developing countries and its possible effects on their perception of the Centre and the Icsid Convention are examined in light of the great hopes and potential of the Icsid. Ways of overcoming the scepticism are proffered along with a discussion of other issues of interest to international arbitration practitioners and potential investors in Nigeria and other countries with similar legal and social dynamics.

Andrew I. Chukwuemerie, LL.M., MCIArb., is a Mediator and Arbitrator of the World Intellectual Property Organization, Switzerland; Member, London Court of International Arbitration; Partner, Okibe Lawhouse, (Legal Practitioners, Arbitrators) Port Harcourt, Nigeria; Research Director, Centre for Arbitration Studies, Port Harcourt; Senior Lecturer in Law, Rivers State University of Science & Technology, Port Harcourt, Nigeria. His work in the field of international trade law has previously been published under the name Andrew I. Okekeifere.

David Bailey: U.S. Policy towards Inward Fdi—Cfius and Extension of the Concept of “National Security”

The current takeover bid for the U.S. telecoms firm Global Crossing by Singapore Technologies Telemedia, along with such recent takeovers as the Silicon Valley Group acquisition by the Dutch firm Asm Lithography in 2002, has focused attention on the critical role of the Committee on Foreign Investment in the United States (Cfius). This opaque and secretive body has played an increasingly significant role in U.S. policy toward inward investment and national security. This article traces the history of Cfius and its enabling legislation (in particular, the Exon-Florio Act) and shows how, especially post-September 11th, the term “national security” has taken on increased significance and a broader interpretation in regard to foreign investment in the United States. He points out that not only is this causing concern overseas but that it may also, ironically, affect the ability of the United States to continue to press other countries to further open up to U.S. investment in their economies.

David Bailey is Senior Lecturer in International Business Economics at the Institute for Industrial Development Policy, Birmingham Business School, Birmingham, U.K. He is also the author of Fdi in Japan: An "Open Door" or a Legacy of "Non-Institutional" Barriers? which appeared in the April 2003 issue of The Journal of World investment, Vol. 4, No. 2.

Brigid Gavin: Trade and Investment in the Wider Europe—EU Neighbourhood Policy for Enhanced Regional Integration

The European Union proposes to accelerate regional integration with the Wider Europe by constructing a Pan-Euro-Mediterranean market with its neighbouring countries to the east and the south. This post-EU-enlargement strategy entails a system of “super-regionalism” whereby the EU offers increasing access to its internal market through reciprocal liberalization while simultaneously fostering intra-regional free trade among the Mediterranean and Eastern European countries themselves. The building blocks of the Pan-Euro-Mediterranean market will be free trade and investment, harmonized legislation on standards and technical regulations, a common system for rules of origin, integration of transport, energy and telecoms networks, and rationalization of customs procedures. At the same time, the EU supports membership of all these countries in the World Trade Organization.

Brigid Gavin is Research Fellow at the United Nations University /Comparative Regional Integration Studies Centre, College of Europe, Bruges, Belgium.

C. Chatterjee: When Pre-Investment or Development Costs May or May Not Be Regarded as Part of “Investment” under Article 25(1) of the Icsid Convention—The Mihaly Case

This article discusses the status of pre-investment expenditures under the Icsid Convention and whether, on the basis of an alleged assignment of a claim by a private foreign investor whose home country is not a party to the Convention, an Icsid tribunal may entertain a claim filed by a corporation eo nominee, the government of which is a party to a relevant bilateral investment treaty. To illustrate the legal issues involved and how, in fact, they may affect actual and potential investors, the author examines the case of Mihaly International Corporation v. The Democratic Socialist Republic of Sri Lanka in detail. His conclusion is that, while such expenditures are usually treated as part of an actual investment in practice, such may well not be the case in law, unless the investor takes specific steps in the negotiating process to ensure this.

C. Chatterjee, LL.M. (Cambridge), LL.M., Ph.D. (London), is a Barrister and a member of the Law Department of London Metropolitan University. He is also the author of two previous articles that appeared in The Journal of World Investment: Investment-Related Promissory Notes Are Investments under the Icsid Convention—Fedax N.V. v. The Republic of Venezuela, Vol. 3, No. 1, February 2002; and Bias in Arbitrators and Bias against Arbitrators?, Vol. 3, No. 2, April 2002.