New book on international investment agreements in developing countries

International investment agreements emerged in the 1960s as treaties signed between sovereign states, in which those states guarantee various standards of treatment to be accorded to foreign investors. In the 1970s, investor-state arbitration evolved as a means of dispute resolution with the establishment of International Centre for the Settlement of Investment Disputes (ICSID).

When compared to other means of international dispute settlement, investor-state arbitration is unique. This is because a private party, namely a foreign investor can sue sovereign states directly without any requirement to proceed through their home states. Most foreign investors are multinational companies (though this form of dispute resolution is also available to investors who are natural persons).

The investor-state arbitration system therefore significantly exposes sovereign states to the risk of suit by multinational companies. Historically, developed countries have exported significant amount of foreign direct investment (FDI) capital to developing countries. However, over the course of time, this trend flipped and developing countries began to export significant amounts of FDI capital to other jurisdictions (both developed and developing). The inclusion of Most-Favoured-Nation (MFN) clauses in investment treaties was to ensure that host-states would provide foreign investors with no less favourable treatment than that received by investors from any other country.

MFN clauses in investment treaties have economic and political implications. As most of the investment treaties are bilateral instruments, arbitral tribunals have in the past struggled to decide whether MFN clauses could import any more favourable substantive, procedural or jurisdictional clauses from other investment treaties signed by a host-state. Any expansive application of MFN naturally places more obligations on the host-states, while favouring foreign investors. Any misapplication of MFN may, therefore, illegitimately interfere with the consent of a host-state as expressed in the investment treaty, thereby infringing the sovereignty of that state.

In the 1990s there was an upsurge of investor-state arbitral proceedings, usually commenced by investors from the developed countries against developing host-states. Although this trend has continued, in recent times many proceedings have also been brought against host-states that are developed countries.

Dr Sharmin’s book examines the implication of an expansive application of MFN clauses in investment treaties, mainly against developing host-states. This book proposes an appropriate scope of MFN, which could guide a range of stakeholders including the arbitrators, lawyers, policy makers, existing and prospective foreign investors, and students of international economic law. The book will also be of interest to non-lawyers, given its focus on contemporary international economic and political developments.

About Dr Tanjina Sharmin

The author of the book, Dr Tanjina Sharmin, is a lecturer at the Faculty of Law, Monash University. Tanjina pursued her LLM in commercial and international laws at the University of Cambridge and is a former Commonwealth Scholar. She also holds an LLB and LLM from the University of Dhaka, the premier university in Bangladesh, and a PhD from Monash University, supported by an International Post Graduate Research scholarship. Tanjina currently teaches corporations law and contract law in the Monash law faculty, and is pursuing research in the areas of international economic law, arbitration and general commercial laws.