1.

International Investment Law

1. Definitions
- Foreign Direct Investment (FDI) is defined as the transfer of the funds or materials from
one country to another country to be used in the conduct of enterprise in that country for
a direct or indirect participation in the earnings of company.
- Bilateral Investment Treaty (BIT), International Investment Agreements (IIAs), Free
Trade Agreement (FTA) are all agreements with the aim of regulation their investment
and trade relations.
- ICSID: International Centre for the Settlement of investment dispute, established in 1965.
Is the leading international arbitrational institution devoted to settle de investment
dispute.
2. International Investment Agreements (IIAs)
- Concluded by States, but providing some standards of protection in favour of foreign
investors;
- States undertakes reciprocally obligations in relation to the treatment of foreign investors
in their territories.
3. FDI
Salini test:
Main characteristic to qualify the specific ,,assets’’ as a form of investment under ICSID
Convention:
- Essential engagement of resources;
- A certain duration of the operation
- Risk;
- The contribution to the development of the Host State.
Foreign Direct Investment (FDI) is an investment made by a firm or individual in one country
into business interests in another country.
4. Standard of protection under international investment law:FET standard and
Expropriation
Relative Standard: a conduct of a state is compared with other conducts
- Most Favourite Nationa (MFN) Standard;
- National Treatment.
Absolute Standard: they don’t need to be compared with other conduct to determine the State
international responsibility
- Fair and Equitable Treatment (FET);
- Full protection and security.
FET: Party shall accord to cover the investment treaty in accordance with the international
customary law, including fair and equitable treaty and full protection and security.
FET Standards:
- Restrictive theory: FET Standard corresponds to the so called International Minimum
Standard ( Neer Case 1926);
- Extensive theory :
Expropriation
Expropriation identifies the taking of a property from its owner , for public use or benefit, by
the State or an authority.
In the context of International Investment agreement expropriation involves the transfer of a
wealth or a profit from one person (foreign investor) to another person (usually Host State or a
public person in the Host State).
- The state deliberately wants to deprive foreign investor , concerning his rights, in order to
satisfy public interest.
 Canada Expropriation Act provides that any interest in land or immovable real right …
that in the opinion of Minister, is required by the Crown for a public work or other public
purposes, may be expropriated by the Crown in accordance with the provisions of this
part.
 Rwanda Law according to Expropriation in the Public Interest provides that: Only
Government shall carry out the expropriation. The expropriation must by carried out only
in the public interest with prior, and compensation.
According to the IL States can expropriate:
International investment treaty provides usually a set forth of four precondition for a
expropriation to be valid:
1. The taking of property should be based on public reasons
2. Must respect the principle of non-discrimination
3. Due to process law
4. The state has to pay an adequate compensation to the foreign investor, whose property
was expropriated.
Prompt, Adequate and Effective Compensation
Compensation is the main element of the substantive protection in favour of foreign investors.
Treaties usually apply the Hull Formula, established by the US Secretary of State Cordel Hull,
which requires the payment of ,prompt, adequate, effective’’ compensation.
1. Prompt, refers that the payment need to be in a reasonable period of time after the taking;
2. Adequate , means that the compensation must be equivalent with the fair market value of
the expropriated investment, and must be calculated immediately before the expropriation
took place.
3. Effective means paid in a form which is real practical use for the person involved into,
and possibly convertible in a foreign exchange.
Indirect expropriation
Today investor-State tribunal mostly deals with indirect expropriationa rather than the direct one,
and IIAs in their majority refers to both direct and indirect expropriation.
Indirect expropriation refers to government’s measures, which have an negative effect on the
foreign investment, which do not involve transfer of the title of the investment, and do not impy
the transfer of wealth from the investor to the benefits of the State