The Journal of

WORLD INVESTMENT & TRADE

ABSTRACTS 

Priscilla M.F. Leung and Guiguo Wang: State Contracts in the Globalized World

This article is an examination of the characteristics, forms and evolution of State contracts against the general trend of globalization, including the legal status of the stabilization clause, unilateral commitments by host countries, etc.  The article emphasizes
the impact of globalization on the formation of international norms and the effect of international norms on national laws. In its analysis, this article examines widely the practice of both Western countries and countries in Asia, with particular emphasis on the practice of contemporary China.

Priscilla M.F. Leung, Ph.D. in Law (Renmin University of China), is Associate Professor of Law and Associate Dean of the School of Law, City University of Hong Kong, and a Barrister in Law, Hong Kong. 

Markus Burgstaller: Nationality of Corporate Investors and International Claims against the Investor’s Own State

In Barcelona Traction, the International Court of Justice (Icj), in order to determine the nationality of a corporation, gave its preference to the test of incorporation or siège social, respectively. Since then, developments in customary international law show that, in the absence of a genuine link between the company and the incorporating State, protection might not be granted. Furthermore, international authorities support the rejection of international claims of foreign juridical persons in which nationals of the respondent hold the controlling interest. Whereas the case law of the International Centre for Settlement of Investment Disputes shows that the traditional criteria of incorporation or seat are used to determine corporate nationality, one may nevertheless detect a tendency towards looking for the true controllers. None the less, in Tokios Tokelės, the majority of the Tribunal decided not to pierce the corporate veil by way of looking at the true controllers. The President of the Tribunal, Professor Weil, dissented. He argued that the result, namely to allow an international claim against the investor’s own State, should have been avoided mainly by interpreting Article 25 of the Convention in the light of its object and purpose. The Tribunal's President, however, did not state that the piercing of the corporate veil, as understood by the Icj in Barcelona Traction, should have been allowed. This Article examines the latter line of argument and concludes that the Tribunal in Tokios Tokelės should have embraced it. By doing so, the Tribunal would well have avoided undermining the legitimacy of international investment arbitration.

Steffen Hindelang: “No Equals in Wrong?” The Issue of Equality in a State of Illegality—Some Thoughts to Encourage Discussion

This short article, with a view to encourage further discussion, moots one possible approach of how to “reconcile” the principles of non-discrimination and legality in the situation in which a band of investors, one foreign and the others domestic, in comparable circumstances are all in violation of the same national rule but where the host State, however, chooses to take steps only against the foreign investor. The article argues that, if a host State fails to apply generally a rule, i.e. the rule fails to create its intended “equal treatment” generally by large-scale illegal (non-)execution, a foreign investor, by virtue of the principle of equal application of law, is entitled to be protected temporarily against the burden of application until the moment that the host State is able to apply the given rule on an equal basis. 

Steffen Hindelang, Ref. jur. (Marburg), LL.M. (Sheffield), is Research Fellow, Lecturer and Doctoral Candidate in the Faculty of Law at Eberhard-Karls-University in Tübingen, Germany. His research is mainly directed towards the European and International Legal Framework on Foreign Investment. He is also the author of Bilateral Investment Treaties, Custom and a Healthy Investment Climate—The Question of Whether Bits Influence Customary International Law Revisited, which appeared in The Journal of World Investment & Trade, Volume 5, Number 5 (October 2004); and (with Max Gutbrod) of Externalization of Effective Legal Protection against Indirect Expropriation, which appeared in The Journal of World Investment & Trade, Volume 7, Number 1 (February 2006).

An Chen: Should the Four Great Safeguards in Sino-Foreign Bits Be Hastily Dismantled?---Comments on Provisions concerning Dispute Settlement in Model U.S. and Canadian Bits

China has concluded bilateral investment treaties (Bits) with more than 110 countries and continues to negotiate new treaties and revise some existing ones. It is recognized that, in recent relevant negotiations, some Bit drafts provided by foreign counter-countries are based on the U.S. or Canadian Model Bits with moderate modifications. This article examines some critical provision concerning dispute settlement in the U.S. and Canadian Model Bits. The author considers that such provisions, in essence, require the host country to abandon the four great safeguards—i.e. the rights to “consent case by case”, to “exhaust local remedies”, to “apply the host country’s laws”, and even the right of invoking the “exception for the State’s essential security”. Such requirements not only deprive some rights authorized by relevant international conventions to host countries and conflict with the current circumstances in China but also ignore the bitter lessons provided by some developing countries, such as Argentina, and the shift in the latest legislations of some host countries. Hence, China, in its new round of negotiating Bits, should insist on stipulating in those Bits such rights authorized by relevant international conventions and preserve the Four Great Safeguards so as to strike proper balance between protecting the legitimate rights and interests of foreign investors and upholding China’s sovereign powers, as well as to play a model role in the establishment of reasonable legal norms for transnational investment activities, thereby benefiting the New International Economic Order.

Mahmoud Eljafari: A Short-Term Strategy for Private Investments in the West Bank and Gaza Strip

This article aims to formulate a short-term strategy for promoting private investments in the West Bank and Gaza Strip. In this regard, a short-term strategy for private investments is defined as a number of short-term objectives that could lead to enhance the capacity of the Palestinian economy. To accomplish the study, certain policies have been suggested, subject to control over natural resources  and the availability of human resources equipped with skills and competencies. Despite the limitations and constraints that restrict the performance of the Palestinian economy, a few options remain available to facilitate private investments in certain production and services sectors. Partnerships, subcontracting arrangements, and export processing free zones are the possible means that could be applied to intensify private investments. In addition, trade policies such as easy import substitution policy and export promotion policies are complementary means to attract private investments in the productive and tradable sectors. It is anticipated that intra-industry relationships will expand and, consequently, forward and backward linkages between and within economic sectors will be enhanced.

Mahmoud Eljafari is Professor and Director of the Institute of Business and Economics at AlQuds University, Jerusalem.

Kevin P. Gallagher and Melissa B.L. Birch: Do Investment Agreements Attract Investment?―Evidence from Latin America

In a globalizing world where many developing nations lag behind the developed world in technological capabilities, developing countries increasing look to foreign direct investment (Fdi) as a source to gain access to cutting-edge technology.  Much of Latin America and the Caribbean received unprecedented amounts of Fdi in the 1990s. In addition to liberalizing domestic trade and investment regimes, many countries in the hemisphere also signed regional and bilateral investment treaties (Bits) with developed country governments with the hope of receiving more Fdi. This article examines the determinants of Fdi in the hemisphere between 1980 and 2002. In addition to examining the determinants found in the economics literature, the authors also attempt to single out the extent to which an investment agreement can independently trigger Fdi flows. They perform an econometric analysis for these questions, looking at total Fdi and Fdi from the United States. Consistent with the bulk of other studies in the literature, they find that Bits with the United States do not independently attract U.S. Fdi, but a higher number of Bits with other countries is associated with more Fdi.

Kevin P. Gallagher is Assistant Professor in the Department of International Relations at Boston University, Boston, Massachusetts, and senior researcher at the Global Development and Environment Institute, Tufts University, Medford, Massachusetts.

 Melissa Birch is a researcher at the Global Development and Environment Institute, Tufts University.

Shin-yi Peng: Multilateral Disciplines on Services Procurement—Architectural Challenges under the Gats

This article concentrates on the services dimension of public procurement. The main purpose of this study is to explore the three fundamental questions: “Is it applicable”; “Is it necessary”; and “Is it feasible”?  The article argues that Gats Article xiii contains a general mandate.  Nevertheless, there is little justification for treating procurement of services in isolation in terms of transparency.  Measures affecting trade in services may be highly diverse, but the fundamental requirements for transparency do not vary greatly between government procurement and others.  It is unconvincing that there is a special need to develop “tailored and specific” transparency requirements for services procurement.  In addition, listing government procurement commitments in the form of a Gats Schedule seems rather ill-suited to the objectives of predictability.