Investment%20Treaties

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Investment Treaties

• University of Miami
• School of Law
• September 10, 2008
• Mark Anderson
• Counsel Latin America the Caribbean
• Caterpillar Inc.

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Investment Treaties Should be Considered in 2
Situations

• Contracts with governmental entities
• Includes state-owned companies
• Sales of Cat products
• Other, e.g., land purchase (Panama)
• Governmental interference
• expropriation
• unfair/discriminatory treatment, regulation

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Advantages

• Substantive protections for investments
• International arbitration of claims and disputes
• Especially important in developing countries
• Avoid local courts, local favoritism
• Overcome issues of sovereign immunity
• Enforceability of arbitration awards
• New York Convention on enforcement of arbitral
  awards
• Arbitral award judgment of local court where
  enforced
• Very limited grounds to refuse enforcement
• No review of the merits

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Washington Convention on the Settlement of
Investment Disputes between States and Nationals
of Other States

• Entered into force in 1966
• 155 countries have signed, 143 ratified
• Vast majority of developing countries have
  ratified
• Exception India (but India does have many BITs)

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Washington Convention Article 25

• Establishes jurisdiction for ICSID
  (International Center for Settlement of
  Investment Disputes)
• Jurisdiction extends to
• disputes arising from an investment
• between a State/subdivision and a national of
  another State
• where the parties consent in writing to submit
  the dispute to ICSID
• Each of these issues is defined in the relevant
  investment treaty, not in the Washington
  Convention itself

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Multilateral Investment Treaties and BITs

• Many MITs (e.g., NAFTA, CAFTA, etc.)
• Over 2,300 BITs are in place between various
  countries around the world
• Purpose of BITs
• Encourage investment, esp. in developing nations
• Reduce risks to private investors through
  protections
• Enforce safeguards via international arbitration
  (usually ICSID)
• Each BIT is somewhat unique, although they share
  many similarities
• The U.N. Conference on Trade and Development
  maintains a list of BITs as well as text on many
  of them
• See www.unctad.org

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Panama

• A Case Study

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(No Transcript)
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U.S. Panama BIT

• Signed in 1982, became effective in 1991
• protocol (amendment) added in 2000 to account
  for Panamas ratification of the Washington
  Convention

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U.S. Panama BIT

• Key features
• investment defined very broadly
• Equity, debt, service, investment contracts
• Tangible and intangible property, mortgages,
  liens and pledges
• IP rights
• Licenses and permits
• Any right conferred by law or contract

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U.S. Panama BIT

• No discrimination, MFN Each party shall permit
  and treat such investment, and activities
  associated therewith, on a basis no less
  favorable than that accorded in like situations
  to investment or associated activities of its own
  nationals or companies, or of nationals or
  companies of any third country, whichever is the
  more favorable . . .

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U.S. Panama BIT

• Anti-discrimination, MFN clause
• government cannot give preferential treatment to
  domestic or foreign investors
• allows investor to analyze other BITs that host
  country has with other third countries in order
  to claim further protections
• example U.S.-Egypt BIT lacks fair and
  equitable treatment clause, but MFN bootstraps
  this in from other BITs that Egypt has (e.g.,
  U.K.)

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U.S. Panama BIT

• Fair and equitable treatment, no arbitrary or
  discriminatory measures
• No restrictions on current and capital transfers
• No expropriation, either directly or indirectly,
  except with prompt and adequate compensation

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U.S. Panama BIT

• Note on expropriation tribunals have defined
  expropriation broadly to encompass
  governmental action that effectively neutralizes
  the benefit of an investment. Indirect
  expropriation can occur when measures taken by
  the government deprive the investor in whole or
  in significant part of the use or reasonably
  expected economic benefit of an investment.

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U.S. Panama BIT

• Dispute resolution
• investment disputes defined very broadly
• Alleged breach of investment contract
• Violation of rights granted under the BIT
• Unless parties agree otherwise, at private
  companys or nationals option, investment
  disputes are resolved by ICSID arbitration
  (Panama automatically consents)

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U.S. Panama BIT

• . . . Any company duly incorporated,
  constituted or otherwise duly organized under the
  applicable laws and regulations of either Party
  or a political subdivision thereof but that,
  immediately before the occurrence of the event or
  events giving rise to the dispute, was owned or
  controlled by nationals or companies of the other
  Party, shall be treated as a national or company
  of such other Party.

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How did BIT affect Panama land purchase contract?

• Buyer (Cat) is entitled to protections of
  U.S.-Panama BIT (even though purchaser is
  Panamanian sub)
• All disputes arising from Cats investment to be
  resolved by arbitration (ICC) in a neutral
  location
• ICC arbitration prevails over all procedure from
  moment an investment is made by Cat
• Avoids statutory process for resolution of
  government contract claims

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Summary of Take-Aways

• Consider investment treaties when negotiating
  with government entities or state-owned companies
• Know what protections are available
• Dont waive important rights
• Consider defining important terms from the BIT in
  the contract
• investment
• National of what country?

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Summary of Take-Aways

• Consider investment treaties when facing unfair,
  punitive or arbitrary government actions
• Direct or indirect expropriation
• Unfair treatment vis-à-vis local nationals or
  other foreign nationals (if MFN)

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Summary of Take-Aways

• Consider the full spectrum of available treaties
• Example India
• No U.S. BIT, but BITs w/ U.K., Switzerland, etc.
  (arbitration via UNCITRAL)
• BITs define who is a national in different ways
  (e.g., Switzerland-India BIT has no ultimate
  control feature as in the U.S.-Panama BIT)

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Questions?

• Thank You