Experts call for new rules on businesses investing abroad

Time for outdated model of investment treaties to go

WINNIPEG — With $560 billion dollars flowing between countries, the International Institute for Sustainable Development (IISD) is calling for new international rules on foreign investment that address the development, environmental and human rights concerns that lie at the heart of sustainable development.

Guests gathered today at the Commonwealth Secretariat in London to celebrate the launch of this important international initiative at an event hosted by the Deputy Secretary-General Mrs. Florence Mugasha. Guests, including members of the London diplomatic corps and leaders in the international investment field, were on hand for the release of the proposed international treaty.

In her opening remarks, Commonwealth Deputy Secretary-General, Mrs Florence Mugasha highlighted the importance of trade and investment issues. She said these "are potent vehicles for accelerated development of member states". She welcomed the inclusive approach adopted by the IISD and commended the Model Agreement for consideration by Commonwealth member states.

IISD's Model International Agreement on Investment for Sustainable Development comes at an opportune moment.

Investment from abroad plays an increasingly significant role in many economies world wide. This foreign investment must contribute to local poverty alleviation and environmental improvement, but there has been no effort to date to make international investment agreements achieve these goals.

In the absence of a single international set of rules, more than 2300 bilateral investment treaties have arisen to fill the vacuum. This patchwork of bilateral treaties has failed to meet the broader challenges that increased global investments face, including poverty alleviation, resource depletion, human rights violations, and corruption.

"The current model of investment agreements was developed in the international economic climate of the 50's and 60's, which was characterized by a fear of communism and the impacts of decolonization on business interests," explains Dr. Howard Mann, Senior International Law Advisor for the International Institute for Sustainable Development.

"Given this focus, the agreements in the past have focused on just one aspect of the investment process - the protection of foreign capital and investments."

"While this may have been appropriate for the time, this goal no longer meets the needs of the global economy in the 21st century," he added.

Although there have been several high-profile attempts to negotiate a single universal treaty governing global investment – including through the United Nations, the Organisation for Economic Cooperation and Development and the World Trade Organization - such initiatives have met with sharp opposition from non-governmental groups and developing countries for their narrow focus on business and corporate interests.

IISD's model agreement addresses these shortcomings by setting out an ambitious but balanced agenda for a new multilateral effort, which would:

• Protect investor rights and public goods in a manner that is legitimate, transparent and accountable;

• Balance investor rights with core responsibilities, including in the areas of development, environment and human rights;

• Establish a transparent, balanced and fair international dispute settlement process which serves the interests of investors and the communities receiving foreign investment.

By developing and publishing its model investment agreement, IISD is seeking to provide new tools for negotiators of international investment agreements, especially from developing countries. IISD is also seeking to ignite debate amongst investors, developed and developing countries, and the public as to the appropriate international rules for governing trans-border business activity.

"Her Excellency Dr. Maleeha Lodhi, High Commissioner for Pakistan underlined the need for a new and balanced approach to international investment agreements. She said investment should be aimed at genuine sustainable development rather than mere growth. In this regard a revised model international investment agreement, which takes into account the aspirations of developing countries, is a good basis to work on."

"This bold new approach to international investment agreements will set an agenda to improve the negotiation climate and will move us away from the heavy handed 'take it or leave it' approach which has characterized investment negotiations in the past, while simultaneously moving us closer to sustainable development goals," says Mann.

Background Information

Further information

• IISD Home

• Trade Home

• Investment Home

• IISD Model International Agreement on Investment for Sustainable Development - Negotiators' Handbook
  This publication contains the full text of IISD's Model International Agreement on Investment for Sustainable Development, with an article-by-article commentary explaining in clear language the intent and nuances of the text. It is essential reading for negotiators of IIAs struggling against the current model to craft agreements that will serve their national interests. But it is also written to engage a wider audience of stakeholders concerned about the future path of international law and globalization.

• A Southern Agenda on Investment? Promoting Development with Balanced Rights and Obligations for Investors, Host States and Home States
  This paper identifies major issues of concern for developing countries that are vital from the perspective of sustainable development but that are not being addressed in the current negotiating processes, beginning with the very need for investment to support development goals

• Lessons Learned on Trade and Sustainable Development
  This book distills the lessons from six years of research undertaken by and for the Trade Knowledge Network (1998 - 2004). It draws on in-country research, thematic research and workshop papers to identify the key issues, and explores in depth what the TKN research has to say about them. The result is an excellent primer on the issues faced by the South in the area of trade and sustainable development. The book includes a companion CD covering all of the surveyed TKN research (more than 40 papers in all, including several in Spanish).