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Negative - Bilateral Investment Treaty
Negative - Bilateral Investment Treaty
Openers...................................................................................................................................................................................... 4
Generic....................................................................................................................................................................................... 5
A) Definitions: Clarification.................................................................................................................................................5
B) Methodologies...............................................................................................................................................................6
C) Tables............................................................................................................................................................................. 7
D) Source Indictments.........................................................................................................................................................9
Topicality – Reform.................................................................................................................................................................. 11
A) Short Shell.................................................................................................................................................................... 11
B) Long Shell..................................................................................................................................................................... 12
i. Standards..................................................................................................................................................................12
ii. Definitions................................................................................................................................................................ 12
iii. Interpretation...........................................................................................................................................................12
iv. Violation................................................................................................................................................................... 13
v. Impacts..................................................................................................................................................................... 13
Solvency 1 – Alt Cause Financial Policy................................................................................................................................14
A) Financial Policy.............................................................................................................................................................14
B) Tax System.................................................................................................................................................................... 15
C) Impact – Zero Positive Effect........................................................................................................................................16
Solvency 2 – Russia Won’t Ratify..............................................................................................................................................17
A) Russia Doesn’t See the Point........................................................................................................................................17
B) Impact – Russia Won’t Ratify........................................................................................................................................18
Solvency 3 – Alternative Evidence FDI Ø ↑........................................................................................................................19
A) 1NC Shell...................................................................................................................................................................... 19
B) Alt Ev 1 – Political Risk Ratings......................................................................................................................................20
C) Alt Ev 2 – Political Risk Insurers....................................................................................................................................21
D) Alt Ev 3 – Investor Knowledge & Appreciation.............................................................................................................23
E) Impact – FDI Ø ↑..........................................................................................................................................................25
F) Response – Formal Law Ø Impact Commercial Affairs..................................................................................................26
G) Response – “Investors Should Care” is Irrelevant.........................................................................................................27
Solvency 4 – Law & Society Empirics FDI Ø ↑.....................................................................................................................28
A) 1NC Shell...................................................................................................................................................................... 28
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B) Empiric 1 – Legal Ignorance..........................................................................................................................................29
C) Empiric 2 – Legal Pluralism...........................................................................................................................................30
D) Empiric 3 – Legal Ambiguity..........................................................................................................................................31
E) Impact – Investment Decisions Ø Effected...................................................................................................................32
Disadvantage 1 – Capital Controls............................................................................................................................................33
A) 1NC Shell...................................................................................................................................................................... 33
B) Link – Tanked Economy................................................................................................................................................34
C) XT – Capital Controls.....................................................................................................................................................35
D) XT – Economic Recovery...............................................................................................................................................37
i. Response – Historical Precedent Russian Capital Account Convertibility............................................................38
ii. Response – Historical Precedent Chilean Encaje..................................................................................................39
iii. Response – Historical Precedent Malaysian Capital Controls..............................................................................40
E) Internal Link – Decreased Policy Space.........................................................................................................................41
F) 2NC Impx xt – Anti-American Backlash.........................................................................................................................42
G) 2NC Impx xt – Anarchy.................................................................................................................................................43
AT – NPM Clause.................................................................................................................................................................. 44
AT – Not Current Crisis Specific............................................................................................................................................45
IPR Disadvantages – Uniqueness and Links..............................................................................................................................46
A) Uniqueness – Russian IPR Enforcement Bad Now........................................................................................................46
B) Internal Link – BITs Enhance IPRs.................................................................................................................................47
C) Internal Link – Plant and Animal Patents......................................................................................................................48
Disadvantage 2 – Drug Access..................................................................................................................................................49
A. 1NC Shell...................................................................................................................................................................... 49
B. Link – Drug Access Denied............................................................................................................................................50
C. Impact 1 – Death..........................................................................................................................................................52
D. Impact 2 – Public Health...............................................................................................................................................53
E. Implication – Human Rights..........................................................................................................................................54
AT – Pharmaceutical Innovation...........................................................................................................................................55
AT – Exemptions................................................................................................................................................................... 56
AT – Compulsory Licensing...................................................................................................................................................57
Disadvantage 3 – Food Sovereignty.........................................................................................................................................58
A. 1NC Shell...................................................................................................................................................................... 58
B. External Link – GMOs are Patented..............................................................................................................................59
C. XT – Farmers Put Under................................................................................................................................................60
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D. XT – Food Sovereignty..................................................................................................................................................62
1. Food Sovereignty Violated........................................................................................................................................62
2. Impx xt – Food Sovereignty is a Human Right...........................................................................................................64
Disadvantage 4 – Innovation....................................................................................................................................................65
A. 1NC Shell...................................................................................................................................................................... 65
B. XT – Innovation Destroyed...........................................................................................................................................66
C. XT – Research Blocked..................................................................................................................................................68
D. 2NC Impact – Injustice..................................................................................................................................................69
E. Refutation – Historical Precedent Italy....................................................................................................................70
F. Refutation – Historical Precedent Silicon Valley......................................................................................................72
Disadvantage 5 – Human Rights Violated.................................................................................................................................73
A) 1NC Shell...................................................................................................................................................................... 73
B) Internal Links................................................................................................................................................................ 74
i. Indigenous Rights Implicated....................................................................................................................................74
ii. Economic Reforms Implicated..................................................................................................................................75
iii. Right to Water Implicated........................................................................................................................................76
iv. Freedom of Assembly Implicated.............................................................................................................................77
AT – Precedent that Arbitrators Protect Rights....................................................................................................................79
C) XT – Non-Transparent System......................................................................................................................................80
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Openers
Jason Yackee 10 – If developing countries want to attract FDI, they need something other than BITs
Jason W. Yackee [Assistant Professor of Law, University of Wisconsin Law School; J.D. (Duke University School of
Law); M.A., Ph.D., Political Science (University of North Carolina at Chapel Hill)] “Do Bilateral Investment Treaties Promote Foreign Direct
Investment? Some Hints from Alternative Evidence” [VIRGINIA JOURNAL OF INTERNATIONAL LAW, 2010, Forthcoming] <accessed
September 4, 2010> http://ssrn.com/abstract=1594887 (EG)
“This conclusion admittedly has an unfortunate aspect to it. BITs
are unlikely to be a quick‐and‐easy cure‐all for whatever ails the
developing country that is failing to receive all the foreign investment that it wants. BITs are not magic wands,
the wave of which produces, with a poof and a cloud of smoke, a foreigner with pockets stuffed with cash. If
developing countries wish to attract foreign investment, they probably need to do something other than sign and ratify
BITs.”
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Generic
A) Definitions: Clarification
Prabhash Ranjan 09 – Definition: Bilateral Investment Treaty (FDI)
Prabhash Ranjan [PhD in Philosophy, King's College London, University of London; M.Phil (Master of Philosophy), WB National University
of Juridical Sciences; LL.M (Master of Laws) in International Commercial Law, SOAS, London; LL.B (Bachelor of Laws) Campus Law Centre,
Faculty of Law, University of Delhi; BA in Economics, Ramjas College, University of Delhi; Former Visiting Scholar, Sydney Law School,
University of Sydney; Expert on international investment law, Ministry of Finance, Government of India; Assistant Professor of Law, WB
National University of Juridical Sciences; Former Research Assistant, University College London; Former Legal Researcher, CUTS Centre
for International Trade, Economics and Environment, Jaipur, India] “Tread Cautiously on Bilateral Investment Treaties” November 25,
2009 THE HINDU BUSINESS LINE <accessed August 30, 2010> http://ssrn.com/abstract=1598767 (EG)
“BITs, often perceived as admission tickets to foreign investments, are international agreements signed between
two countries under which each country binds itself, internationally, to offer legal protection and
nondiscriminatory treatment to foreign investments of the other country.”
Examples:
Malaysia: At the height of the Asian financial crisis, Malaysia placed a one-year ban on the
repatriation of capital (for details, see p. 7).
Argentina: When the country’s financial and currency crises of 2001 became unsustainable, the
government prohibited domestic and foreign investors from transferring funds abroad, required
central bank approval of wire transfers, and banned foreign currency futures transactions.
2. Indirect: These measures seek to make cross border flows more costly. One of the most common is a
reserve requirement with a central bank, set at a certain percentage of the investment and for a certain
length of time.
Examples:
Chile: From 1991-1998, the government required foreign investors to place a deposit in a non-
interest paying account with the central bank for one year (for details, see p. 7).
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Colombia: In 2007, the government acted to combat inflation by introducing a special deposit
requirement on short-term foreign portfolio capital and requiring foreign direct investment to stay
in the country for a minimum of two years.5 These controls were relaxed in September 2008.”
B) Methodologies
Rudiger Ahred 00 – Survey Methodology
Rudiger Ahrend [Senior economist, OECD] “Foreign Direct Investment into Russia – Pain without Gain? A Survey of
Foreign Direct Investors” May 2000 RECEP Discussion Paper [Organization for Economic Co-Operation and
Development (OECD)] <accessed September 3, 2010> http://papers.ssrn.com/sol3/papers.cfm?
abstract_id=620122 (EG)
“The survey, that we developed (and upon which this article is based) was conducted in the spring of 2000 by the European
Business Club in Moscow among its members. For confidentiality reasons we do not know the names of the surveyed enterprises.
We do have some data that allow us to classify them by sector and size - both of the investing parent company, as well as of their
Russian subsidiary. We were told that the 46 enterprises that responded are mainly European, or if they were non-European
multinationals they have at least a large presence in Western Europe. As all surveyed enterprises have at least some presence
in Moscow, there may be some bias towards the Russian capital in our sample. Still, a very large part of FDI has in fact gone to
Moscow, and many of the surveyed investors also have investment projects in Russian regions. Given the limits of our sample, especially
the focus on European investors, it is certainly not representative for all foreign direct investors in Russia. Nonetheless we would expect
foreign direct investors from other continents to face similar problems as those enterprises that we surveyed. Our limited sample size
does not allow for more elaborate econometric techniques, but we are convinced that the survey nevertheless offers insights into
foreign direct investment in Russia. For the surveyed enterprises the number of employees in Russia ranges from 2 to
2500, with an average number slightly below 200. The size of parent companies range from 15 to 400,000
employees, with a mean of 44,000. Roughly one third of the enterprises surveyed are actively producing
industrial goods in Russia, approximately one third are distribution & sales companies, and roughly 10% are in
banking, consulting and transport respectively.”
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C) Tables
Yackee 2010,
Yackee 2010,
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Yackee 2010, “Figure 4, below, shows distributions of responses for all six scalar questions. It is notable, for instance, that only
approximately 20 percent of GCs reported higher than medium (>3) familiarity with BITs, that no GC reported that non‐lawyer senior
executives were “very familiar” with BITs, and that only approximately five percent of GCs viewed BITs as “very important” to the typical
FDI decision.”
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D) Source Indictments
Jason Yackee 10 – Source Indicts: UNCTAD ‘98, Hallward-Dremeier ‘03, Salacuse & Sullivan ‘05 and, Neumayer
& Spess ‘05: Methodological challenges result in inconsistent results, once accounted for, the BIT-FDI link
disappears
Jason W. Yackee [Assistant Professor of Law, University of Wisconsin Law School; J.D. (Duke University School of
Law); M.A., Ph.D., Political Science (University of North Carolina at Chapel Hill)] “Do Bilateral Investment Treaties Promote Foreign Direct
Investment? Some Hints from Alternative Evidence” [VIRGINIA JOURNAL OF INTERNATIONAL LAW, 2010, Forthcoming] <accessed
September 4, 2010> http://ssrn.com/abstract=1594887 (EG)
“Surprisingly, however, analysts have had great difficulty reliably demonstrating a statistically significant,
substantively meaningful correlation between BITs and FDI using more sophisticated multivariate frameworks. In
the remainder of this section, I present a brief summary of the principle existing studies.30 UNCTAD provided the first important econometric
study of the relationship between BITs and FDI.31 In a 1998 publication, UNCTAD report results of a cross sectional time‐series model of the determinants of
bilateral FDI inflows. The study covered 72 host states over 23 years. The authors found that the relationship between BITs and FDI was
statistically weak, both in the sense of statistical significance and in the sense of magnitude of effect. The authors concluded that BITs could be expected to only
“marginally increase” FDI.32 A 2003 study by Hallward‐Driemeier, a World Bank researcher, reported somewhat more pessimistic
results.33 Hallward‐Driemeier conducted a TSCS analysis of 20 years of bilateral FDI flows from OECD countries to
developing countries. In most of her models BITs are either insignificantly correlated with FDI, or are significantly and,
counter‐intuitively, negatively associated, implying that BITs might actually harm a country’s FDI prospects. 34 Other of her
models show a statistically significant, positive correlation, but only for countries that already have strong domestic property‐rights regimes—countries that, Hallward‐
Driemeier suggests, are “the least in need of a BIT to signal the quality of their property rights”.35 Hallward‐Driemeier concludes that there is “little evidence that BITs
have stimulated additional investment.”36 In
a 2005 law review article, Salacuse and Sullivan analyze the effects of BITs on
aggregate (rather than bilateral) FDI flows, focusing in particular on the effects of signing a BIT with the United States.37 They report a statistically
significant and massive positive effect: entering a BIT with the United States is associated with an “increased global FDI to a given country in a given
year by 77%‐85% (at a 1%‐5% significance level).”38 In other words, entering a United States BIT might nearly double a country’s FDI inflows. Curiously, however, Salacuse
and Sullivan report that entering BITs with other OECD countries has no significant effect on FDI. The authors suggest that the source of the differential effect is the
comparative liberality of United States BITs.39 Neumayer
and Spess’s 2005 study is perhaps the most cited and influential of the various econometric
studies of BITs and FDI.40 The authors report(s) evidence that BITs have a highly significant and substantively important
positive impact on FDI inflows, such that, for example, a country might nearly double its FDI by signing BITs with a large number of capital‐exporting
countries. However, the authors find that this relationship is conditional on the strength of domestic political institutions in the host state. Host states with domestic
institutions that are ineffective at protecting the property rights of foreign investors are likely to see a significant impact on FDI upon signing a BIT. That positive effect
declines as domestic institutions improve. Neumayer and Spess conclude that BITs appear to be useful “substitutes” for domestic political reform. Rather than investing in
improving domestic institutions, a state that wishes to attract additional investment need only sign a BIT. Neumayer and Spess’s positive results are roughly consistent
with results of a 2004 study by Egger and Pfaffermayr of the effects of BITs on FDI outflows. The authors of the latter study find that ratifying a BIT is associated with a 30%
increase in outflows from the capital exporting country to the ratifying country. They conclude, “BITs exert a positive and significant effect on real stocks of outward
the studies discussed so far is that they typically fail to distinguish between differences in
FDI”.41 One potential problem with
what might be called the “strength” of investment treaties.42 As I have suggested above, if investors are likely to see great utility in BITs, it is
because the treaties give investors the right to sue states for treaty breaches. However, most BITs signed prior to 1985 do not contain investorstate arbitration provisions.
In a 2009 article, I argued that if BITs impact FDI, we should be most likely to see that effect as to “strong” BITs—e.g. those BITs that provide for arbitration. In other
words, perhaps the inconsistent results of existing studies is due to the fact that those studies lump together “strong” and “weak” BITs.43 I found, however, little evidence
that even strong BITs were correlated with FDI inflows. I suggested that these results cast doubt on the validity of the hypothesis that BITs should induce large inflows
in the most econometrically sophisticated study to date, Emma Aisbett identifies a number of
foreign investment. Finally,
serious methodological challenges that existing studies largely ignore, including problems of endogeneity,
autocorrelation, and omitted variables.44 She finds that once these problems are addressed using appropriate
statistical methods, significant correlations between BIT ratification and FDI inflows disappear.”
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Law & Society Rev. 08 – Source Indict: Bubb & Rose-Ackerman 07, Guzman 98 [on the enforceability of
investment contracts in international law]
Jason Webb Yackee [Assistant Professor of Law, University of Wisconsin Law School; J.D. (Duke University School of
Law); M.A., Ph.D., Political Science (University of North Carolina at Chapel Hill)] “Bilateral Investment Treaties, Credible Commitment,
and the Rule of (International) Law: Do BITs Promote Foreign Direct Investment?” (Dec 2008) LAW & SOCIETY REVIEW, Vol. 42, Iss. 4; pp.
805-832 (EG) (PB)
“Bubb and Rose-Ackerman (2007) and Guzman (1998) claim that in the absence of BITs, investment contracts are
not legally binding upon host states as a matter of international law. This is simply mistaken. Long-standing
international arbitral practice demonstrates that international tribunals are very willing to enforce investment
contracts against host states (KoIo & Walde 2000).6”
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Topicality – Reform
A) Short Shell
Point A) Requirement: Change Must Be Made
Without change in policy there is nothing to debate. If both teams support the status quo, the basis of debate
and conflict disappears. Requiring the affirmative to change the status quo is key to debate itself.
Point B) Violation: Plan Already Enacted
Anderson & Razavi 10 – A US-Russia BIT is a possible reality; negotiations are underway and remain positive
Alan M. Anderson [J.D., M.B.A., Cornell University; M.A., Norwich University; B.A., Coe College. Shareholder, Briggs and Morgan, P.A.,
Minneapolis, MN.] & Bobak Razavi [J.D., University of Wisconsin Law School; B.A., Amherst College. Associate, Briggs and Morgan, P.A.,
Minneapolis, MN.] “THE GLOBALIZATION OF INTELLECTUAL PROPERTY RIGHTS: TRIPS, BITS, AND THE SEARCH FOR UNIFORM
PROTECTION” GEORGIA JOURNAL OF INTERNATIONAL AND COMPARATIVE LAW, [Vol. 38, No. 2 (2010)] (EG)
“Arguably, the extent of U.S. loyalty to TRIPS will be measured in large part by whether the U.S. continues to push for Russian membership in the WTO. Since
late
2007, the U.S. and Russia have discussed the possibility of a U.S.- Russia BIT. 127 Negotiators from the two countries
held formal discussions in February 2008, discussing their respective model BITs and conducting a preliminary
evaluation of the potential for finding common ground that could eventually make a U.S.-Russia BIT a reality. 128
Presently, negotiations remain nascent but positive. 129 An agreement between the U.S. and Russia would
complete a protracted post-Cold War courtship between the two that extends back to 1992, when they
negotiated and signed a BIT that the Russian Duma ultimately never ratified. 130”
Point C) Impact: Voting Issue
The affirmative fails in its first duty: to uphold the resolution by presenting a change to the current system. That’s
a voting issue because without the affirmative presenting a change… there is no debate. The aff undermines the
foundation of debate itself.
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B) Long Shell
i. Standards
A- Brightline: Definitions should provide a clear distinction between what does and does not meet its standards
optimizing clarity and enhancing education.
B- Education: Policy debate, particularly in NCFCA is an education activity. Thus, whatever definitions provide the
parameters that best enhance the educational value of the debate should be accepted as the definitive boundary
for the round.
C- Fairness: Definitions should define a reasonable and fair interpretation of the resolution. A resolution too
narrow offers the affirmative no room to research for a good case, whereas one too broad would make it
impossible for my partner and I to prepare for debates.
ii. Definitions
A- Reform:
- “to put or change into an improved form or condition” – Merriam-Webster Online Dictionary (2010)
<http://www.merriam-webster.com/dictionary/reform>
- “(1) to change for the better [or] (2) Social or political change that seeks to remove corruption or
malpractice” – Webster’s II New Riverside Dictionary (1984)
B- Policy:
- “an overall plan, principle, or guideline; esp : one formulated outside of the judiciary” – Merriam-
Webster's Dictionary of Law (1996)
iii. Interpretation
A- Change Must Be Made: If the affirmative supports a policy that is already implemented, then they support the
status quo and they only affirm the legitimacy of current system.
- This interpretation provides a clear brightline. Cases that affirm existing policies fall outside the
resolution, and cases that change policies are fine.
- This interpretation is educational because it allows to compare and contrast the difference between the
current system and the affirmative plan. If the case affirms the status quo, there is no room for
comparison or debate.
- This interpretation is fair because it allows the affirmative plenty of avenues for research and support, but
sets a boundary that allows for negatives to
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iv. Violation
A- Status Quo: US and Russia have already negotiated and signed a BIT and are still discussing ratification
Anderson & Razavi 10 – A US-Russia BIT is a possible reality; negotiations are underway and remain positive
Alan M. Anderson [J.D., M.B.A., Cornell University; M.A., Norwich University; B.A., Coe College. Shareholder, Briggs and Morgan, P.A.,
Minneapolis, MN.] & Bobak Razavi [J.D., University of Wisconsin Law School; B.A., Amherst College. Associate, Briggs and Morgan, P.A.,
Minneapolis, MN.] “THE GLOBALIZATION OF INTELLECTUAL PROPERTY RIGHTS: TRIPS, BITS, AND THE SEARCH FOR UNIFORM
PROTECTION” GEORGIA JOURNAL OF INTERNATIONAL AND COMPARATIVE LAW, [Vol. 38, No. 2 (2010)] (EG)
“Arguably, the extent of U.S. loyalty to TRIPS will be measured in large part by whether the U.S. continues to push for Russian membership in the WTO. Since
late
2007, the U.S. and Russia have discussed the possibility of a U.S.- Russia BIT. 127 Negotiators from the two countries
held formal discussions in February 2008, discussing their respective model BITs and conducting a preliminary
evaluation of the potential for finding common ground that could eventually make a U.S.-Russia BIT a reality. 128
Presently, negotiations remain nascent but positive. 129 An agreement between the U.S. and Russia would
complete a protracted post-Cold War courtship between the two that extends back to 1992, when they
negotiated and signed a BIT that the Russian Duma ultimately never ratified. 130”
B- Affirmative Plan: The aff plan has the US Federal Government negotiate, sign, and ratify a BIT with Russia.
C- Violation: No Change – The United States has already negotiated and signed a BIT, so 2/3 of the plan has
already been completed; but furthermore, they are also pushing forward on ratification. Every provisions of the
affirmative plan is in the status quo already.
The aff violated the status quo because they don’t actually change anything at all. They are advocates of the
status quo.
v. Impacts
A- Education: Non-topical plans destroys education because it makes it virtually impossible to predict cases and
prepare for them. When we do predict it and research it, it harms education by forcing us to divert focus away
from legitimate plans that fit within the parameters of the resolution.
B- Fairness: Non-Topical plans destroys fairness; they already have infinite prep time, but non-topical plans are
almost impossible to predict so it doesn’t make for a fair competition.
Analogy: Counsels preparing for the merits of the case in order to have a fair and just trial.
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William Cooper 07 – Russian end of the investment climate proves inhospitable for US investors
William H. Cooper [Specialist in International Trade and Finance Foreign Affairs, Defense, and Trade Division] “Permanent Normal Trade
Relations (PNTR) Status for Russia and U.S.-Russian Economic Ties” July 10, 2007 CONGRESSIONAL RESEARCH SERVICE <accessed August
25, 2010> http://www.fas.org/sgp/crs/row/RS21123.pdf (EG)
“While they consider the investment climate to be improving, U.S. investors and potential investors complain
that the climate for investment in Russia remains inhospitable. For example, U.S. financial services providers have
criticized Russian government restrictions on foreign investment in the banking and insurance sectors and
prohibitions on the establishment of branches of foreign-owned insurance companies and banks. 7 Investors have
been also been wary of Putin Administration actions in reestablishing Russian government control over oil and
natural gas operations and over other natural resources.”
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B) Tax System
Rudiger Ahred 00 – A reasonable, transparent, and predictable tax system is needed before Russia can create a
good investment climate
Rudiger Ahrend [Senior economist, OECD] “Foreign Direct Investment into Russia – Pain without Gain? A Survey of Foreign Direct
Investors” May 2000 RECEP Discussion Paper [Organization for Economic Co-Operation and Development (OECD)] <accessed September
3, 2010> http://papers.ssrn.com/sol3/papers.cfm?abstract_id=620122 (EG)
“Even though improvements in a wide range of areas will be required before Russia can create a good investment
climate, foreign direct investment - especially when one produces locally in Russia – appears to be a much more attractive prospect than the general view in the
Western press would suggest. Still, there should be swift progress on at least the most pressing issues. Improving the tax law
seems an absolute priority. As indicated by the low significance of tax incentives for investment and location
decisions, foreign companies are not asking for temporary better treatment or tax rates far below international
standards; however, they are looking for a reasonable, transparent, and predictable tax system.”
Rudiger Ahred 00 – The most important issue for investors is the ever changing tax law; even more important
than Russian trade policy itself
Rudiger Ahrend [Senior economist, OECD] “Foreign Direct Investment into Russia – Pain without Gain? A Survey of Foreign Direct
Investors” May 2000 RECEP Discussion Paper [Organization for Economic Co-Operation and Development (OECD)] <accessed September
3, 2010> http://papers.ssrn.com/sol3/papers.cfm?abstract_id=620122 (EG)
“We provided the surveyed companies with a large list of problems that foreign investors might potentially face,
and asked them to rate them for their degree of importance. According to the responses the most important
problems by far are simply the inadequate and ever changing tax law. Next in the order come problems with property- and creditor
rights, customs, the risk of political change, macroeconomic instability, a weak banking sector, the Russian accounting system, and corruption. It is striking that
the tax law in itself is perceived as a much bigger problem than the tax authorities that are supposed to enforce
it. On the contrary custom authorities, and to a minor degree the frequent changes in trade policy, are rated as bigger
problems than Russian trade policy itself.”
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Rubins & Nazarov 08 – Putin’s administration marked a change in Russian policy that marked a sharp decrease
in signed investment treaties
Noah Rubins [M.A. in Dispute Resolution & Public International Law, Fletcher School of Law and Diplomacy; J.D., Harvard Law School;
B.A. in International Relations, Brown University; Member of the international arbitration and public international law groups
specializing is investment treaty arbitration] & Azizjon Nazarov [B.A. in Finance, Tashkent State University of Economics; M.A. in
International Law and Economics, Bern University, Switzerland; PhD Candidate, Tashkent State Institute of Law; Senior Lecturer in Law
and teaches Labour Law and International Commercial Arbitration, Westminster International University] “Investment Treaties and the
Russian Federation: Baiting the Bear?” BUSINESS LAW INTERNATIONAL Volume 9, Number 2, (May 2008) <accessed August 28, 2010>
(EG)
“The beginning of Putin’s administration marked a cardinal change in Russian policy with respect to investment
protection treaties. Most importantly, the rate at which new BITs were signed dropped sharply. Only three
treaties with relatively insignificant trading partners – Jordan, Thailand and Armenia – were concluded after 1999. Just
as disturbing, hardly any investment treaties were ratified by the Duma, an essential prerequisite for any such
instrument entering into force. The failure to ratify was particularly pronounced with respect to treaties
representing potentially significant inward capital flows: the US-Russian Federation BIT, for example, was signed
in 1994 and has languished in Duma committees ever since.”
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organization consistently errs in its evaluations of risk, presumably corporate clients will stop using their services. That risk of loss of
business arguably provides the organizations with some degree of incentive to produce accurate evaluations of risk. These quantitative ratings of the
If BITs work by reducing political risk (e.g. risk of expropriation),
investment‐related aspects of political risk provide us with an alternative means of testing whether BITs promote FDI.
then we might expect to see that organizations like the PRS Group or BERI systematically assign more favorable
risk ratings to those states that enter into BITs. If foreign investors rely on these ratings when deciding whether and where to invest, then BITs may influence the investment
decision‐making process indirectly, or at least independently of any specific knowledge or appreciation of BITs by foreign investors themselves. Alternatively, we might view the process by which organizations like the PRS Group
and BERI make political risk evaluations as likely to mirror the processes that businesses use when deciding whether to invest. If PRS Group and BERI experts take BITs into
account, then investors may do so as well. To examine whether BITs impact political risk ratings, I regressed the ICRG Investment Profile and the BERI Investment Attitude indexes
against a simple model of the determinants of political risk. I also include results for a third measure of political risk, a rating of “expropriation” risk developed by the University of Maryland’s IRIS Center and used by Knack and
Keefer.55 The IRIS measure is based on ICRG data, and arguably provides a more specific measure of the kinds of risk that BITs might reduce than does the more aggregate ICRG “Investment Profile” measure. For all three
measures, a higher rating means less risk (or, a higher rating means a more favorable investment climate). The ICRG Investment Profile variable has an observed range of 0 to 12, with a mean of 6.7; the BERI Investment Attitude
variable has an observed range of 0 to 0.2 to 4.8, with a mean of 2.4; the IRIS variable has an observed range of 0.5 to 10, with a mean of 7.1. My dataset is structured as a pooled cross ‐sectional time series (CSTS), meaning that
data is organized by country‐year. The sample of countries included in the models depends on the dependent variable used, but in all models is limited to developing (capital importing) countries. All models share a common
suite of control variables. While the models are relatively parsimoniously specified, it is important to note that adding more control variables would not necessarily reduce any potential problem of “omitted variable bias”.56 Per
capita gross domestic product (GDP) is included to control for the possibility that less developed countries may face increased incentives to expropriate foreign investment. The annual inflation rate controls for incentives to
expropriate during times of economic instability. Both variables are taken from the World Bank’s World Development Indicators. To control for a state’s history of investor ‐unfriendly behavior, I include a dummy variable
indicating whether a state was identified as a “mass expropriator” in Kobrin’s classic empirical study of the determinants of expropriation in the 1960s and 1970s.57 I also include a state’s “birth year” to control for the possibility
that newer states will face greater incentives to expropriate.58 Finally, I include the Polity IV Project’s measure of democracy in the host state.59 Political science scholarship suggests that the risk of expropriation and other
forms of opportunistic anti‐investor behavior are lower in democracies than in autocracies.60 The explanatory variable of principle interest in all of the models is a count of the number of strong bilateral investment treaties (or
strong investment chapters in free trade agreements) that a state has in force with major capital‐exporting countries. I consider a BIT to be “strong” if it contains the state’s pre‐consent to investor‐initiated arbitration for a wide
range of potential investor‐state disputes.61 This variable ranges from 0 to 15. Figure 2, below, provides a preliminary graphical analysis that sets the stage for the more complex statistical analysis that follows. The figure shows
scatterplots for the strong BITs variable (lagged one year) and the three measures of political risk. The data points are all country‐years for which political risk data is available. The scatterplots show a generally modest positive
correlation between the number of strong BITs in force and a country’s level of political risk, as indicated by the upward sloping trend lines. (Recall that a higher value on all three indicators indicates less risk). However, we also
see substantial variance around the trend lines. That variance suggests that BITs are, at best, a highly partial predictor of political risk ratings. Results for the regressions are presented in Table 1, below. The Table 1 models were
estimated using two alternative strategies: first, generalized least squares (GLS) with fixed effects (FE), a common approach for estimating CSTS models,62 and second, using an alternative panel corrected standard error (PCSE)
approach recommended by Beck and Katz for CSTS data.63 All models include a lagged dependent variable (LDV) (the country’s political risk rating in the prior year) in order to control for autocorrelation, as recommended by
Keele and Kelly.64 We can think of the LDV as controlling for the probability that a current year’s risk rating will be influenced by last year’s risk rating, the latter of which the expert rater will undoubtedly consult when
evaluating the level of risk in the upcoming year. The regression analysis provides little evidence that BITs meaningfully influence political risk
ratings. The BITs variable is statistically significant in only two of the six models, those using the ICRG Investment Profile rating as the dependent variable. BITs are not a significant
predictor of either the BERI measure of Investment Attitude or the IRIS measure of risk of expropriation , with the latter
result especially notable, given that BITs are often said to “work” precisely by reducing the risk of expropriation. In the ICRG models, where the BIT variable is significant and positively signed, the
magnitude of the effect is nonetheless substantively weak. For example, the coefficient on the BIT variable in Model One of 0.0740 implies that entering ten
additional BITs with major capital‐exporting countries might raise a country’s ICRG Investment Profile rating by less than a
single point on the ICRG’s 12‐point index. Model 2’s coefficient of 0.0375 implies an even less impressive effect. Moreover, if we include a year variable in the ICRG models in order to control
for time trends (results not shown), the BIT variable falls from significance, while the time counter is highly significant. What does influence risk evaluations? The LDV proves to be a highly significant and substantively important
predictor of risk ratings. A country’s perceived level of risk in 1989, for example, will strongly influence its perceived level of risk in 1990. Risk ratings are, in other words, relatively “sticky”, and that stickiness suggests that host
states desiring greater investment should not expect relatively easy policy changes (like the decision to enter into BITs) to influence investor perceptions of risk, at least over the short term. We also see relatively consistent
evidence that political democracy positively impacts risk ratings, a finding in line with past research on democracy and foreign investment: the Polity variable is significant and positive in four of the six models (the ICRG and IRIS
models), suggesting that greater levels of democracy are associated with less perceived political risk. In brief, the Table 1 models suggest either that BITs have no statistically significant impact on political risk ratings, or, if they
BITs do not appear to meaningfully influence subjective expert evaluations of political risk. These
have an impact, it is quite small.
results appear consistent with the simple bivariate graphical analysis presented in Figure 1, which showed only a modest
positive correlation between BITs and risk ratings.”
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C) Alt Ev 2 – Political Risk Insurers
Jason Yackee 10 – If political risk insurers take BITs into account when issuing PRI, then investors likely do so
when making investment decisions; Most insurers do not take BITs into account, and when they do, the impact
is slight
Jason W. Yackee [Assistant Professor of Law, University of Wisconsin Law School; J.D. (Duke University School of
Law); M.A., Ph.D., Political Science (University of North Carolina at Chapel Hill)] “Do Bilateral Investment Treaties Promote Foreign Direct
Investment? Some Hints from Alternative Evidence” [VIRGINIA JOURNAL OF INTERNATIONAL LAW, 2010, Forthcoming] <accessed
September 4, 2010> http://ssrn.com/abstract=1594887 (EG)
“Unlike political risk rating organizations like the PRS Group, which merely provide companies with investment‐related analysis, political risk insurers
provide foreign investors with insurance against certain adverse events, such as uncompensated expropriation by the host state,
damage resulting from political violence, and currency inconvertibility. Political risk insurance (PRI) has traditionally been provided by public agencies of capital exporting
Political
states (such as the United States Overseas Private Investment Corporation (OPIC)). However, private insurers also increasingly offer the product as well.65
risk insurers provide us with another alternative means of examining whether BITs succeed in promoting FDI. 66
First, if insurers take BITs into account when deciding whether and on what terms to issue PRI, that suggests that
investors—who, like insurers, have direct financial incentives to gauge political risk before deciding whether to invest—are themselves likely to
consider BITs as part of the investment decision‐making process. 67 Second, if PRI providers take BITs into account
when deciding whether to issue insurance, BITs may indirectly promote FDI (regardless of investor knowledge of appreciation of
BITs) by making PRI more available and more affordable. 68 An investor who will not invest absent PRI may be more likely to find affordable PRI
— and thus to invest—if BITs impact the insurer’s underwriting decisions. Of course, that latter possibility assumes that investors investigate the availability and price of
PRI at a relatively early stage in the investment decision‐making process, before the investor’s organization has become either formally or informally committed to a
particular investment decision. That assumption may be unrealistic, as investors typically apply for PRI late in the investment process, with PRI providers requiring such
things as an underlying investment contract and other detailed information about the planned investment.69 At that late stage, the professional and financial sunk costs
may be so high that corporate decision‐makers unwilling to back out of the decision to invest even if PRI is unable to more costly than initially assumed.70 In any event,
the question of whether PRI promotes investment is beyond the scope of the present article. My main goal in this section is rather to present results from a small e‐mail
Email surveys were sent to 56 companies across the globe.
survey of PRI providers that I conducted during the summer of 2008.
Responses were received from 14 companies, for a response rate of 25 percent, and represented a mix of large
and small public and private providers.71 Respondents were asked two main questions: first, was it the firm’s “standard practice to determine whether
the investment project will be covered by a BIT before agreeing to issue the insurance policy”? Second, “Does the presence or absence of a BIT influence the premiums
that your organization charges investors for expropriation insurance”? Respondents answering “yes” to the second question were then asked to provide an estimate of
Of the 14 respondents, eight said
the magnitude of any effect on premiums. Respondents were also asked to provide explanatory comments if possible.
that it was not standard practice to determine whether an investment would be covered by a BIT prior to issuing
a policy, and nine indicated that BITs have no impact on rates charged for expropriation insurance. Furthermore,
those respondents that indicated that BITs impact expropriation insurance rates suggested that the impact was
often apparently rather slight.”
Jason Yackee 10 – BITs don’t systematically affect PRI availability or premiums; this indicates that investors
likely don’t value BITs much and unlikely indirectly promotes FDI
Jason W. Yackee [Assistant Professor of Law, University of Wisconsin Law School; J.D. (Duke University School of
Law); M.A., Ph.D., Political Science (University of North Carolina at Chapel Hill)] “Do Bilateral Investment Treaties Promote Foreign Direct
Investment? Some Hints from Alternative Evidence” [VIRGINIA JOURNAL OF INTERNATIONAL LAW, 2010, Forthcoming] <accessed
September 4, 2010> http://ssrn.com/abstract=1594887 (EG)
“The number of respondents is too low to permit any sort of statistical evaluation, but the pattern of responses suggests, at a
minimum, that BITs only imperfectly and inconsistently impact PRI decisions. For many underwriters, including large
private providers motivated primarily by considerations of profit, BITs have no impact on insurance decisions. For others, that impact
may be relatively slight. In short, the practices of PRI providers provide little evidence in support of the hypothesis that
BITs should have substantively meaningful impacts on FDI. If PRI underwriters don’t highly value BITs, then
foreign investors are unlikely to value them much either. And if BITs don’t systematically influence PRI availability
or premiums, then the treaties are unlikely to indirectly promote FDI by making investments more readily
insurable.”
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Jason Yackee 10 – Survey respondents opinions and statements
Jason W. Yackee [Assistant Professor of Law, University of Wisconsin Law School; J.D. (Duke University School of
Law); M.A., Ph.D., Political Science (University of North Carolina at Chapel Hill)] “Do Bilateral Investment Treaties Promote Foreign Direct
Investment? Some Hints from Alternative Evidence” [VIRGINIA JOURNAL OF INTERNATIONAL LAW, 2010, Forthcoming] <accessed
September 4, 2010> http://ssrn.com/abstract=1594887 (EG)
“For example, a large private provider responded that “We rarely get info relating to a BIT until the later stages of
any disclosure info”, that BITs have “no direct influence—country risk factors may be affected a little but usually
other factors driving the price…aggregate pressure, competition, prices from [public providers]”, and that BITs
might impact pricing “less than 5%, if anything.” Another private provider responded that
In short BITs don’t effect pricing at all for me. I don’t regard the process as being robust enough
with enough of a successful track record. Furthermore, if one looks at Latin America at the moment
countries seem to unilaterally pull out of international arbitrations, so ultimately we give the
structure no credit.
This view of the limited utility of BITs and of international arbitration was echoed by another private underwriter:
A BIT is only of any real value to us if it is supported by bonds or letters of credit lodged with a third
party outside the country that may be drawn on relatively easily to compensate expropriation not
otherwise adequately compensated by the country in question. Promises of arbitration and
compensation not supported by realizable assets (and in most cases I suspect they are not) are not
that persuasive in reducing premiums (IMO). But then I am just a cynical underwriter[.]
… the BIT is not a deciding underwriting factor in most cases and other issues relating to the
character of the government in power, local government…, semi‐official corruption, the character
of the foreign company, the social, employment and poverty situation in the country and economic
issues regarding, say, any increase in commodity prices since a company won its license to drill or
extract are far more important.
A fourth private provider indicated that BITs were taken into account but were “not always required”, but that
their impact on premiums was only to “make[] the risk a bit more palatable”. Public providers also suggested that
BITs were largely irrelevant to their decisions. A developed‐country public provider commented that “the
existence of a [BIT] is a comfort but does not itself influence premium pricing”. Another developed‐country public
provider noted that “[BITs are considered a “minor factor” in assessing a government’s attitude toward business
and foreign investment” but “the premium rates quoted or charged are not influenced by the presence or absence
of a BIT alone”. On the other hand, one public provider responded that the presence of a BIT would have a
relatively large impact on premiums, raising premiums from 0.5% of insured value up to 0.94% “depending on the
project and country concerned”.72 A small private provider responded that “it is very important that a [BIT] exist”,
but suggested that the importance was due to the firm’s “small investment book”. Another public provider
affirmed that “the Board of Directors take seriously into account the fact that a BIT exists. … [T]his is considered
as a “positive” eligibility criterion for the Board of Directors’ decision. On the other hand, if there is not a BIT, this
does not mean that the application is rejected automatically. In that case, we evaluate more strictly the political
situation in the Host Country, and of course, we set a lower percentage of cover and a higher annual premium.”
However, the respondent added that it was impossible to indicate any general effect of BITs on premiums,
because “we evaluate each application on a ‘case‐by‐case’ basis.”
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D) Alt Ev 3 – Investor Knowledge & Appreciation
Jason Yackee 10 – Anecdotal and historical survey evidence suggests investors don’t know about or care about
BITs (3 examples)
Jason W. Yackee [Assistant Professor of Law, University of Wisconsin Law School; J.D. (Duke University School of
Law); M.A., Ph.D., Political Science (University of North Carolina at Chapel Hill)] “Do Bilateral Investment Treaties Promote Foreign Direct
Investment? Some Hints from Alternative Evidence” [VIRGINIA JOURNAL OF INTERNATIONAL LAW, 2010, Forthcoming] <accessed
September 4, 2010> http://ssrn.com/abstract=1594887 (EG)
“The hypothesis that BITs are likely to lead to large inflows of FDI typically seems to rely on a three ‐stage
assumption about investor knowledge and behavior. First, potential investors are aware of the treaties.73 Second,
investors appreciate the treaties either as actual, direct reducers of risk (and thus as enhancers of expected profitability) or as
reliable signals of a low‐risk environment. Third, investors base their investment decisions on the presence or
absence of a treaty because of their risk‐reducing or low‐risk‐signaling attributes. But do investors really know or
care much about BITs? Anecdotal and historical survey evidence suggests they might not. A small survey of business
executives conducted in 1976 found that only 16 percent of respondents were “familiar” with the ICSID system generally, and that only 4 percent felt that ICSID provided
“adequate safeguards”.74 A somewhat more recent study confirmed the continued validity of these results.75 Even
in the late 19 90s BITs and BIT‐
based arbitration appear to have remained an “often overlooked tool” in the legal arsenal of multinational
corporations.76 The international law firm Allen & Overy has recently advertised BITs to potential clients as
entailing “rights you never knew you had”.77 And a 1999 survey suggested that “many chambers of commerce
indicated that they had no familiarity with” the Energy Charter Treaty, a prominent multilateral “BIT” covering
energy sector investments.78”
Jason Yackee 10 – GCs Survey: Respondents indicate unfamiliarity with Bits, and did not view them as effective
protections against expropriation, adverse regulatory change, or influential in the “typical” FDI decision
Jason W. Yackee [Assistant Professor of Law, University of Wisconsin Law School; J.D. (Duke University School of
Law); M.A., Ph.D., Political Science (University of North Carolina at Chapel Hill)] “Do Bilateral Investment Treaties Promote Foreign Direct
Investment? Some Hints from Alternative Evidence” [VIRGINIA JOURNAL OF INTERNATIONAL LAW, 2010, Forthcoming] <accessed
September 4, 2010> http://ssrn.com/abstract=1594887 (EG)
“We see that the companies surveyed reported relevantly frequent consideration of foreign investment (median response of
4, where 5 indicated “frequently” and 1 indicated “never or rarely”). We also see that the median GC is relatively unfamiliar with BITs (2,
where 1 indicated “not at all familiar” and 5 indicated “very familiar”). Non‐lawyer senior executives were somewhat less familiar with
BITs, as the lower mean score (2.04) indicates. Respondents did not view BITs as particularly effective at protections against
expropriation (a median response of 3, where 5 indicated “very effective” and 1 indicated “not at all effective”). They were less impressed with
BITs as an effective shield against adverse regulatory change (median score of 2). This latter result is important, because
expropriation, in the classic sense, has become an exceedingly rare phenomenon, and most investments are probably not at any significant, real risk of classic
expropriation.85 If BITs have an important role to play in reducing risk, it is probably at reducing the risk of so‐called “regulatory
expropriation”—that is, at protecting companies against adverse regulatory changes that amount to less than a full
“taking” of the investment. In fact, GC skepticism about the ability of BITs to protect against regulatory change is consistent with the jurisprudence of
arbitral tribunals, which have so far refused to read an ambitious regulatory takings doctrine into the treaties.86 Finally, BITs don’t appear to be all that
important a consideration in the “typical” FDI decision, and only four respondents report that their company has
declined an investment opportunity specifically because of the absence of BIT protections. 87”
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Jason Yackee 10 – GCs (Fortune 200) survey: Indicates little knowledge of BITs and a pessimistic view of their
ability to influence FDI decisions [Includes: Methodology + defense]
Jason W. Yackee [Assistant Professor of Law, University of Wisconsin Law School; J.D. (Duke University School of
Law); M.A., Ph.D., Political Science (University of North Carolina at Chapel Hill)] “Do Bilateral Investment Treaties Promote Foreign Direct
Investment? Some Hints from Alternative Evidence” [VIRGINIA JOURNAL OF INTERNATIONAL LAW, 2010, Forthcoming] <accessed
September 4, 2010> http://ssrn.com/abstract=1594887 (EG)
“In an attempt to arrive at a more scientifically sound basis for gauging investor awareness of BITs I conducted a
mail survey of general counsel (GC) in large U.S.‐ based corporations. A copy of the survey instrument is included as an appendix to this
article. The survey was mailed to GCs in the top 200 U.S. corporations on the Fortune 500 list, with a first mailing
followed by a second mailing to non responders. The survey was purposefully short (one single‐sided page) to promote responses, and a small
incentive was included in each mailing.79 A second round of surveys was sent to U.S. corporations ranked between 201‐400 on the Fortune 500 list, but the results from
the second administration were not compiled in time for inclusion in this article. Respondents were promised that their identities and the identities of their corporations
would not be revealed. Using surveys to evaluate the extent to which BITs enter into corporate FDI decisions poses certain obvious difficulties, the primary of which is that
a corporation is a complex organization consisting of numerous individuals, each of whom may or may not posses relevant knowledge of the corporate practices with
which the study is concerned. Identifying relevant contacts, and persuading those contacts to participate, can be highly challenging, especially when the goal is a survey
covering a broad selection of corporations. I elected to direct my survey at GCs for both practical and substantive reasons. First, contact information for GCs is readily
identifiable in corporate documents, on corporate websites, and through mailing‐list companies like InfoUSA. Second, GCs were probably more likely to respond to the
survey than other high‐ranking corporate officials, such as CEOs, who may generally be both busier and less inherently interested in a questionnaire probing the extent to
which legal instruments influence corporate decisions. Third, and more substantively, there is good reason to expect that GCs are in a good position to gauge the
importance BITs to corporate decisions. In‐house counsel increasingly enjoy significant power and prestige within large corporations, and they are frequently called upon
to perform legal risk analysis of corporate proposals and decisions.80 GCs are often part of the senior management team (or consult frequently with it), and Kobrin
indicates that political risk analysis is often conducted at the senior management level and/or within in‐house legal departments.81 Furthermore, given the highly
technical and relatively inaccessible nature of BIT jurisprudence, busy non‐legal senior executives are unlikely to be in a position to either monitor or evaluate BIT
developments.82 If BITs come to the attention of FDI decision‐makers, they may be most likely to come to their attention through communications with an in‐house
Seventy‐five surveys were returned, for a response rate of 37.5 percent. This response rate is relatively high
lawyer.
considering the nature of the respondents.83 Responses were distributed across the Fortune 200, as Figure 3, below, illustrates. Respondents were
asked the following seven questions, the first six of which were answered on a scale of 1 to 5, where 1 was labeled “not at all familiar” (or its equivalent, depending on
question wording) and 5 was labeled “very familiar” (or its equivalent). The last question was in “yes/no/don’t know” format.
Q1. To your knowledge, how regularly does your company actively consider investing in foreign (nonUS.) operations, businesses, joint ventures, or
other projects?
Q2. How familiar are lawyers in your office with the basic provisions of Bilateral Investment Treaties (BITs)?
Q3. How familiar are nonlawyer senior executives in your corporation with the basic provisions of BITs?
Q4. In your view, how effective are international treaties like BITs at protecting foreign investments from expropriation by a foreign government?
Q5. In your view, how effective are international treaties like BITs at protecting foreign investments from adverse regulatory change in the foreign
country?
Q6. How important is the presence or absence of a BIT to your company’s typical decision to invest in a foreign country?
Q7. To your knowledge, has your company ever declined to invest (or to consider investing) in a particular foreign project specifically because of the
absence of a BIT?
Overall, the responses indicate a relatively low level of familiarity with BITs, a relatively pessimistic view of their
ability to protect against adverse host state actions, and a relatively low level of influence over FDI decisions.”
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E) Impact – FDI Ø ↑
Jason Yackee 10 – Intl gas & oil chair informant: BITs generally do little to promote FDI
Jason W. Yackee [Assistant Professor of Law, University of Wisconsin Law School; J.D. (Duke University School of
Law); M.A., Ph.D., Political Science (University of North Carolina at Chapel Hill)] “Do Bilateral Investment Treaties Promote Foreign Direct
Investment? Some Hints from Alternative Evidence” [VIRGINIA JOURNAL OF INTERNATIONAL LAW, 2010, Forthcoming] <accessed
September 4, 2010> http://ssrn.com/abstract=1594887 (EG)
“With the caveat that anecdotes aren’t proof, but merely another source of data from which to triangulate, I
offer the observations of an informant interviewed in the course of the survey of GCs discussed above. The
informant is the chair of the oil and gas section of a major international law firm, and has extensive experience in
facilitating and advising on all stages of major international and domestic oil and gas projects. The informant also lectures
regularly at professional conferences on legal risk assessment in the international oil and gas sector, and has authored practitioner‐oriented papers on the topic, including
I asked the informant his thoughts on the role that investment treaties play in
papers that discuss BITs. After explaining my project,
oil and gas investment decisions. Given the history of expropriation in that sector, one would think that oil and gas investors would be keenly interested
in BITs.105 The informant emphasized that for him personally, identifying the possibility of “treaty support” for a potential investment opportunity should
be a “common sense” part of due diligence. However, he added that many legal issues, including BITs, typically only come up “after the fact”
(after a dispute has arisen). It was only the relatively infrequent “sophisticated” client who would engage in rigorous legal due diligence prior to the decision
to invest, and if BITs came into the process, it was almost always part of a discussion of how to structure (e.g. trans‐ship) a
given investment that was already going to be made. This kind of structuring consideration was much more common for tax purposes than to
achieve BIT coverage, but he advocated (and had been involved in) considerations for BIT coverage purposes as well. I specifically asked the informant if he was aware of
any investment deals that had not gone forward because of the absence of a BIT, and his answer was quick and unambiguous: he
had “never seen anyone
not do a deal because there wasn't an investment treaty.” Why weren’t BITs more relevant to investor decisions?
In his view, it was the "nature of the business", which was "not driven by lawyers", but by "commercial" people
whose job was to “get the deal done as soon as possible”. Rigorous legal due diligence (even, he said, applying for OPIC or
MIGA insurance) holds up the deal, and for that reason is often avoided. The informant’s comments may or may not reflect wider industry
practice; they may or may not reflect practice in other sectors, such as manufacturing or services. They may reflect a totally and completely atypical set of professional
experiences.106 Indeed, in a sense they must, if it is really true that a country can nearly double its FDI inflows merely by entering investment treaties. I would suggest
that the
informant’s observations fit rather well into the preceding pages of analysis and exposition. They confirm
my sense, backed up by a lack of consistent empirical evidence, that BITs generally play little causal role in
promoting foreign investment.”
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Law & Society Rev. 08 – Investment contracts exist as an alternative to BITs and are just as enforceable against
state as BIT based arbitrations
Jason Webb Yackee [Assistant Professor of Law, University of Wisconsin Law School; J.D. (Duke University School of
Law); M.A., Ph.D., Political Science (University of North Carolina at Chapel Hill)] “Bilateral Investment Treaties, Credible Commitment,
and the Rule of (International) Law: Do BITs Promote Foreign Direct Investment?” (Dec 2008) LAW & SOCIETY REVIEW, Vol. 42, Iss. 4; pp.
805-832 (EG) (PB)
“Buteven if a host state's general reputational interest in maintaining a favorable investment climate is insufficient
to render problems of credible commitment negligible, foreign investors have long had the ability to create their
own individualized "BITs" in the form of a legally binding investment contract. 5 Investment contracts are especially common in the
highest-risk investment sectors (natural resource concessions and infrastructure development), and are often required as a condition for obtaining project financing or
investment insurance. Investment contracts typically include binding, enforceable agreements to arbitrate investment
disputes. These contract-based arbitration agreements often reference the very same arbitral facilities named in
BITs (e.g., the ICC or ICSID), and they, as well as any resulting arbitral awards, are just as enforceable against host states
as are BIT-based arbitrations and awards.”
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Law & Society Rev. 08 – Research indicates that investors are unlikely to give the (non)existence of BITs
decisive weight
Jason Webb Yackee [Assistant Professor of Law, University of Wisconsin Law School; J.D. (Duke University School of
Law); M.A., Ph.D., Political Science (University of North Carolina at Chapel Hill)] “Bilateral Investment Treaties, Credible Commitment,
and the Rule of (International) Law: Do BITs Promote Foreign Direct Investment?” (Dec 2008) LAW & SOCIETY REVIEW, Vol. 42, Iss. 4; pp.
805-832 (EG) (PB)
“The discussion above suggests competing theoretical expectations. The standard credible commitment theory of BITs suggests that
BITs should meaningfully impact investment decisions, and that this impact should be greatest in regard to the
formally strongest treaties. On the other hand, research in the law and society tradition suggests a more
pessimistic assessment: for reasons of legal ignorance, pluralism, and ambiguity, even the formally strongest BITs
are unlikely to be associated with significant increases in foreign investment, as investors are unlikely to give the
presence or absence of the treaties decisive weight.”
Law & Society Rev. 08 – BITs have little or no impact on investment decisions; b/c formal law has little effect on
private behavior
Jason Webb Yackee [Assistant Professor of Law, University of Wisconsin Law School; J.D. (Duke University School of
Law); M.A., Ph.D., Political Science (University of North Carolina at Chapel Hill)] “Bilateral Investment Treaties, Credible Commitment,
and the Rule of (International) Law: Do BITs Promote Foreign Direct Investment?” (Dec 2008) LAW & SOCIETY REVIEW, Vol. 42, Iss. 4; pp.
805-832 (EG) (PB)
“The standard credible commitment story of BITs suggests that the treaties have great promise to increase
foreign investment to developing countries by using the formal trappings of international law to prevent host
states from treating investors badly. My contribution has been to take this story seriously by examining whether the formally strongest treaties are
statistically associated with increased FDI. While I find some tentative evidence that privatization programs and the World
Bank's investment insurance program may promote FDI, my results suggest that BITs have little or no impact on
investment decisions, a result consistent with research suggesting that the formal trappings of law often have
only modest effects on private behavior.”
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C) XT – Capital Controls
Sarah Anderson 09 – US capital control policy is outdated; capital controls helped countries insulate against the
financial crisis
Sarah Anderson [MA in International Affairs, The American University; BA in Journalism, Northwestern University; Director of the Global
Economy Project, Institute for Policy Studies; Served 1998 and 1999 on the staff of the bipartisan International Financial Institutions
Advisory Commission; Member of the Investment Subcommittee of the U.S. Department of State’s Advisory Committee on International
Economic Policy; Co-author of the books Field Guide to the Global Economy and Alternatives to Economic Globalization] “COMMENTS
ON THE U.S. MODEL BILATERAL INVESTMENT TREATY BEFORE THE UNITED STATES DEPARTMENT OF STATE AND THE OFFICE OF THE U.S.
TRADE REPRESENTATIVE” July 17, 2009 INSTITUTE FOR POLICY STUDIES <accessed August 28, 2010> (EG)
“While the U.S. model treaty has remained rigid on capital controls, there has been a major rethinking of this
issue in the economics field. The International Monetary Fund (IMF) abandoned its blanket opposition to capital
controls after several countries used these measures effectively to avoid the worst impacts of the Asian crisis in
the late 1990s."2 In recent years, the Fund has advised at least two countries, Bulgaria and Croatia, to strengthen
one type of capital control, reserve requirements on capital inflows.3 And when Iceland imposed controls on capital outflows in the aftermath of the
country’s banking sector meltdown, the IMF advised the government “not to lift these restrictions before stability returns to the foreign exchange market.”4 A March
2009 IMF report notes that "The existence of capital controls in several countries and structural factors have helped to moderate both the direct and the indirect effects
IMF chief economist Kenneth Rogoff underscored this point in a New York Times article
of the financial crisis."5 Former
about India, in which he stated that the country’s stringent capital controls were helping to insulate that nation
from the current crisis.6 Columbia University economist Jagdish Bhagwati, a strong advocate of trade liberalization, and many others have pointed
out that there is little to no evidence that capital account liberalization is necessary for developing countries to
attract foreign investment. In fact, six of the top ten non-OECD foreign direct investment recipients [including
Russia] (China, Hong Kong, Russia, Brazil, Saudi Arabia, and India) have never signed a U.S. agreement restricting capital controls. 7”
Sarah Anderson 09 – As the crisis furthers, the US is eroding capital controls (proven effective) through BITs
Sarah Anderson [MA in International Affairs, The American University; BA in Journalism, Northwestern University; Director of the Global
Economy Project, Institute for Policy Studies; Served 1998 and 1999 on the staff of the bipartisan International Financial Institutions
Advisory Commission; Member of the Investment Subcommittee of the U.S. Department of State’s Advisory Committee on International
Economic Policy; Co-author of the books Field Guide to the Global Economy and Alternatives to Economic Globalization] “Policy
Handcuffs in the Financial Crisis: How U.S. Trade and Investment Policies Limit Government Power to Control Capital Flows” (February
2009) INSTITUTE FOR POLICY STUDIES <accessed August 31, 2010> www.IPS-DC.ORG (EG)
“As the global economy descends further into crisis, many governments are searching their tool bags for instruments to protect their people
from the ravages of financial volatility. Dozens of governments are lacking one particular tool that has proved effective in past
crises: capital controls. For more than 20 years, the U.S. government has pushed other governments to give up
their power to restrict the speed with which money flows in and out of financial markets. This effort was part of a broader
agenda to handcuff policymakers, limiting their ability to intervene in the economy in ways that curb the power of global corporations and financial firms. U.S.
officials have eroded capital controls both indirectly, through their influence with international financial institutions, and also directly, through
bilateral investment treaties and the investment chapters of trade agreements. To put teeth into these deals, they required that
governments respect the “rights” of investors to file claims against them in international tribunals.”
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Sarah Anderson 09 – The US restricts capital controls through BITs and FTAs
Sarah Anderson [MA in International Affairs, The American University; BA in Journalism, Northwestern University; Director of the Global
Economy Project, Institute for Policy Studies; Served 1998 and 1999 on the staff of the bipartisan International Financial Institutions
Advisory Commission; Member of the Investment Subcommittee of the U.S. Department of State’s Advisory Committee on International
Economic Policy; Co-author of the books Field Guide to the Global Economy and Alternatives to Economic Globalization] “Policy
Handcuffs in the Financial Crisis: How U.S. Trade and Investment Policies Limit Government Power to Control Capital Flows” (February
2009) INSTITUTE FOR POLICY STUDIES <accessed August 31, 2010> www.IPS-DC.ORG (EG)
“The United States has negotiated restrictions on capital controls through both bilateral investment treaties
(BITs) and free trade agreements (FTAs) with 52 national governments. In the 1980s, U.S. officials began pursuing BITs,
primarily with developing countries. These deals require each party to uphold long lists of investor rights, including the
right to transfer capital into and out of their territory “freely and without delay.” To date, the United States has
forged 40 such treaties that have entered into force. Another seven BITs have been signed but not yet ratified. 6”
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D) XT – Economic Recovery
Sarah Anderson 09 – Capital Controls Quotes
Sarah Anderson [MA in International Affairs, The American University; BA in Journalism, Northwestern University; Director of the Global
Economy Project, Institute for Policy Studies; Served 1998 and 1999 on the staff of the bipartisan International Financial Institutions
Advisory Commission; Member of the Investment Subcommittee of the U.S. Department of State’s Advisory Committee on International
Economic Policy; Co-author of the books Field Guide to the Global Economy and Alternatives to Economic Globalization] “Policy
Handcuffs in the Financial Crisis: How U.S. Trade and Investment Policies Limit Government Power to Control Capital Flows” (February
2009) INSTITUTE FOR POLICY STUDIES <accessed August 31, 2010> www.IPS-DC.ORG (EG)
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i. Response – Historical Precedent Russian Capital Account Convertibility
Bhagwati & Meyer 03 – Russia would have done better after the Asian crisis had it used capital controls
Jagdish Bhagwati [Professor of Economics, Columbia University] & Andre Meyer [Senior Fellow in International Economics, Council on
Foreign Relations] Testimony before the U.S. House of Representatives Committee on Financial Services Subcommittee on Domestic and
International Monetary Policy, Trade and Technology – (Tuesday, April 1, 2003) (EG)
“But consider a yet different, third question: you have gone to capital account convertibility, like Malaysia had, and capital starts leaving in huge amounts due to panic. Do
you then clamp down capital controls? So, we are then considering using capital controls when capital is leaving, not to moderate its size when it is entering. Here, again,
there seems to be a sound body of opinion that Malaysia did well to use capital controls. The reason is that, by
segmenting the capital markets (as noted
by many economists at the time, including Paul Krugman and Dani Rodrik), Malaysia managed to lower interest rates compared to what
would have been necessary otherwise because of rising interest rates elsewhere, and thus Malaysia managed to
follow an expansionary policy that enabled it to escape the deflation that followed rising rates in other afflicted
countries which followed the wrongheaded deflationary conditionality imposed by the IMF in the first year of the Asian crisis. Again,
for Russia, the Russian scholar Padma Desai of Columbia University has argued that Russia would have done
better in the aftermath of the Asian crisis if de facto capital account convertibility had been immediately
suspended temporarily.”
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AT – NPM Clause
VA J. of Intl. L. 08 – Argentina’s NPM claims have been met with contradictory rulings; indicative of very
different understandings of NPM bargains and functions
William W. Burke-White [Assistant Professor of Law, University of Pennsylvania Law School. Ph.D. (Cambridge, 2006); J.D. (Harvard,
2002), M.Phil. (Cambridge, 2000), B.A. (Harvard, 1998).] & Andreas Von Staden [Ph.D. Candidate, Princeton University; M.A. mult.
(Princeton, 2006; Yale, 2000; Hamburg, 1998).] “Investment Protection in Extraordinary Times: The Interpretation and Application of
Non-Precluded Measures Provisions in Bilateral Investment Treaties” VIRGINIA JOURNAL OF INTERNATIONAL LAW [Vol. 8, No. 2, (2008)]
(EG) (PB)
“Two of the BITs under which cases have been brought against Argentina— the U.S.-Argentina BIT and the Belgium-
Luxembourg Economic Union-Argentina BIT (BLEU-Argentina BIT)—include NPM clauses. 349 In each of these cases Argentina has
invoked the NPM clause,350 arguing that the measures it took were not precluded by the BIT, that there was no internationally wrongful act, and, hence, no
compensation is due to investors. Moreover, based on the long-standing United States policy of self-judging NPM clauses, Argentina has claimed that the NPM provision
in the U.S.-Argentina BIT is selfjudging and Argentina’s invocation of the clause subject only to good faith review.351 Though
more than forty cases are
presently pending against Argentina, only four awards involving NPM clauses have been handed down by ICSID
tribunals as of October 2007.352 The four awards illustrate both the interpretive challenges presented by NPM
clauses and the dangers of interpretive short-cuts by arbitral tribunals. Moreover, the four awards highlight very
different understandings of the risk allocation functions of NPM clauses. Whereas the tribunals in the cases of CMS v. Argentina,
Enron v. Argentina and Sempra v. Argentina found the NPM clause inapplicable, the tribunal in LG&E v. Argentina found the clause properly invoked and Argentina’s
liability precluded for a specified period during the crisis.353 Though
the contradictory outcomes cannot be reconciled, they can be
explained by the tribunals’ very different understandings of the bargain that lies behind the U.S.-Argentina BIT
and the risk allocation function of the NPM clause in the treaty.”
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Journal of World IP 01 – BITs create obligations to enforce TRIPs within a reasonable time
Peter Drahos [Professor in Law and the Director of the Centre for the Governance of Knowledge and Development in the Regulatory
Institutions Network, College of Asia and the Pacific, at the Australian National University, Canberra; He currently holds a Chair in
Intellectual Property at Queen Mary, University of London; Herchel Smith Senior Fellow in Intellectual Property, Queen Mary College,
University of London] “BITS and BIPS: Bilateralism in Intellectual Property” THE JOURNAL OF WORLD INTELLECTUAL PROPERTY Volume
4, Issue 6, pages 791–808 (November 2001)
“Typically, a BIT creates MFN obligations and national treatment obligations for the parties to the treaty. These
principles are not of much use to U.S. investors if the developing country in question does not have intellectual
property laws, has low standard law or is taking advantage of the transitional provisions under TRIPS MFN and national treatment in bilateral treaties have the
effect of equalising treatment but not of raising standards within a country. It is for this reason that “prospective BIT partners are generally
expected, at the time the BIT is signed, to make a commitment to implement ... TRIPS Agreement obligations
within a reasonable time.”* If this expectation is not met, the United States is ready to use its 301 process to
secure the necessary commitment (on t h s as a negotiating strategy see Section VII).”
Anderson & Razavi 10 – TRIPS failed in its basic mission: but BITs have raised the standards
Alan M. Anderson [J.D., M.B.A., Cornell University; M.A., Norwich University; B.A., Coe College. Shareholder, Briggs and Morgan, P.A.,
Minneapolis, MN.] & Bobak Razavi [J.D., University of Wisconsin Law School; B.A., Amherst College. Associate, Briggs and Morgan, P.A.,
Minneapolis, MN.] “THE GLOBALIZATION OF INTELLECTUAL PROPERTY RIGHTS: TRIPS, BITS, AND THE SEARCH FOR UNIFORM
PROTECTION” GEORGIA JOURNAL OF INTERNATIONAL AND COMPARATIVE LAW, [Vol. 38, No. 2 (2010)] (EG)
“On the heels of thirty-five years of BITs, the TRIPS [Trade related Aspects of Intellectual Property Rights]
agreement set out to deliver a level playing field for all IPR players by eschewing the bilateral BITs model in favor of a multilateral
model. The multilateral framework was appealing because it brought together many scores of nations as one big group. These nations then negotiated and agreed to
common investment terms en masse, instead of simply in pairs. Regrettably, much like other multilateral regimes that preceded it, TRIPS
has failed in its basic mission. It did not effect a comprehensive, level playing field with respect to IPR protection.
Instead, TRIPS merely established a baseline of minimum protections. This is evidenced by the fact that in the years since TRIPS’s adoption, BITs have proliferated more
rapidly than ever before. Thus, the multilateral TRIPS regime did not do away with the preexisting bilateral BITs regime. Instead, it simply added to it. Today, TRIPS
and BITs represent two core layers of nation-to-nation IPR protection mechanisms. In most cases , the new fleet of post-
TRIPS BITs have raised the standards set forth in TRIPS.”
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Cato Institute 00: Patent right Drugs are out reach of most sick Africans
Michael Kremer is a senior fellow at the Brookings Institution, a professor of economics at Harvard University, and a faculty fellow at the
Center for International Development, Harvard University. At the time this article was written, Rachel Glennerster was a visiting scholar
at the Center for International Development at Harvard University. She is currently a staff member at the International Monetary Fund.
The views expressed here, as well as any errors, are the sole responsibility of the authors and do not necessarily reflect the opinions of
the Executive Directors of the IMF, or other members of the IMF staff. {Regulation Volume 23, No. 2 August 28, 2000}
http://www.cato.org/pubs/regulation/regv23n2/kremer.pdf
“The monopoly pricing of patented goods prevents some people who need those goods from buying them. This
problem is illustrated vividly by the recent dispute between the United States and South Africa over aids drugs.
Up to 20 percent of pregnant women in South Africa are infected with HIV. Aids drugs cost more than $10,000
annually, well beyond the reach of most South Africans. Alternative, generic versions of the drugs would be much
cheaper, but buying these products would violate the patent rights of the original drug developers. ”
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Cato Institute 00: Under the status-quo current institutions Patents prevent people from obtaining drugs they
need to Survive
Michael Kremer is a senior fellow at the Brookings Institution, a professor of economics at Harvard University, and a faculty fellow at the
Center for International Development, Harvard University. At the time this article was written, Rachel Glennerster was a visiting scholar
at the Center for International Development at Harvard University. She is currently a staff member at the International Monetary Fund.
The views expressed here, as well as any errors, are the sole responsibility of the authors and do not necessarily reflect the opinions of
the Executive Directors of the IMF, or other members of the IMF staff. {Regulation Volume 23, No. 2 August 28, 2000}
http://www.cato.org/pubs/regulation/regv23n2/kremer.pdf
“To enable its citizens to obtain aids drugs more cheaply, South Africa is considering legislation to compel patent
holders to license their discoveries to generic manufacturers and to allow the importing of cheap generic drugs
from countries that do not respect the original patents. Opponents of the legislation argue that if intellectual
property rights are not respected, private firms will lose their incentive to develop new drugs. The United States initially
opposed the legislation. However, when aids activists began protesting against Al Gore, who had raised the issue as a chair of the U.S.-South Africa Binational
Commission, the United States rapidly backed down. The issues raised by the confrontation are deep. Patents, and the resulting legal monopolies,
create incentives for research and development that drive medical progress. But under our current institutions,
those same patents can sometimes prevent people from obtaining drugs that they need to survive.”
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C. Impact 1 – Death
AfricaFocus 05: A hike in prices will cause thousands of death
AfricaFocus This website features high-quality analysis and progressive advocacy on African issues, with particular attention to priority
issues affecting the entire continent. “India/Africa: Threat to Generic Drugs” Mar 7, 2005 [EG] <accessed 01/12/09>
http://www.africafocus.org/docs05/ind0503.php
“Many patients need this second line of medications to survive. At least 20% of patients need these drugs after
three years of taking the initial course, and if they do not get the medication they will die. The costly, brand-name
versions are out of reach of most people living with AIDS. Brand-name versions of these drugs can cost 26 times as much as the generic
versions that India could make under appropriate and flexible patent standards. The global goal for the end of this year is to deliver AIDS medication to 3 million of the
people that need them. 20% of these people can be expected to need these second line drugs in three years time, and that adds up to 600,000 people! These 600,000
people could die without continued access to affordable medication.”
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AT – Pharmaceutical Innovation
UN Econ & Social Council 01 – “unprofitable diseases” are under-researched because of the economic incentive
The High Commissioner for Human Rights “Report of the High Commissioner on the Impact of the Agreement on Trade-Related Aspects
of Intellectual Property Rights on Human Rights” (June 27, 2001) UNITED NATIONS ECONOMIC AND SOCIAL COUNCIL 10-15, 27-58, U.N.
Doc. E/CN.4/Sub.2/2001/13 <accessed June 24, 2010> (EG)
“As IPRs are limited commercial rights, they are essentially driven towards economic reward; the objective of promoting
respect for human rights would at best appear to be secondary consideration. Two issues arise. First, as WHO has noted, the commercial motivation of
IPRs means that research is directed, first and foremost, towards “profitable” disease. Diseases that
predominantly affect people in poorer countries - in particular tuberculosis and malaria - still remain relatively
under-researched.44 The fact that patents create opportunities for economic reward that are optimized when
market conditions are right logically leads researchers away from “unprofitable” diseases to diseases that affect
people in markets where the return is likely to be greater. According to WHO, “questions remain as to whether the patent system will ensure
investment for medicines needed by the poor. Of the 1,223 new chemical entities developed between 1975 and 1996, only 11 were for the treatment of tropical
disease”.45”
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AT – Exemptions
Globalization and Health 07 – TRIPS flexibilities cannot be utilized by many
Greg Martin [Science and Research Department, World Cancer Research Fund] Corinna Sorenson [London School of Economics] and
Thomas Faunce [College of Law, Medical School, Globalization and Health Project – Centre for Governance of Knowledge and
Development, Australian National University, Australia] “Balancing intellectual monopoly privileges and the need for essential
medicines” Globalization and Health, Vol. 3, No. 4, (June 12, 2007) <accessed May 30, 2010> [EG] http://ssrn.com/abstract=1408836
“Despite the flexibilities granted by the TRIPS agreement, few developing countries have employed them to
develop policies to protect public health. Consequently, organizations such as Medecins Sans Frontieres and Oxfam argue that the provisions have
had minimal impact on improving access to affordable medicines for the world's poor. Effective implementation of such provisions, most
notably compulsory licensing, has been adversely affected by several factors. First, the implementation of
compulsory licensing is complex and requires a sufficient local administrative infrastructure, which is often
prohibitively expensive, with costs in excess of US$1.5 million. Second, the flexibilities provided by the TRIPS agreement
have been limited by a number of recent developments, such as bilateral and regional free trade agreements. Free trade agreements,
negotiated by the USTR industrialised countries (e.g., Australia and South Korea), [that] require commitments beyond those specified by
TRIPS. Such provisions include 1) extending patent terms beyond 20 years for delayed marketing approval, 2)
limiting parallel imports of patented drugs, restricting grounds for compulsory licensing, 3) imposing 'data exclusivity' rules, 4) defining
'innovation' to include minor 'me-too' molecular variations, 5) facilitating elimination of reference pricing, and 6) introducing the pro-
evergreening 'linkage' of safety and quality regulatory assessments of proposed new generic market entrants with patent checks.”
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AT – Compulsory Licensing
Ian Fergusson 03 – There is no guarantee the drug will be manufactured due to low economic incentives and
restrictions
Ian F. Fergusson [Analyst in International Trade and Finance Foreign Affairs, Defense, and Trade Division] “The WTO, Intellectual
Property Rights, and the Access to Medicines Controversy” Order Code RS21609 November 5, 2003 www.opencrs.com <accessed May
30, 2010> (EG)
“There also may be little economic incentive for a supplier to manufacture the product in the case of an LDC
issuing a compulsory license. Under the system contemplated by the Decision of August 30, 2003, a developing country with no
manufacturing capability may use a compulsory license to obtain a product for a generic manufacturer in another
country. However, the generic manufacturer in the second country may have no economic incentive to do so, especially in limited quantities to poor countries. In
addition, under many of the proposals the product would have to use special packaging or distinctive shapes to avoid
diversion. Under such restrictions, it is not certain that a generic producer would undertake the development and
formulation costs for such a limited market.15 Thus, even though a compulsory license was issued, the drugs may
never be manufactured. According to some NGOs and AIDS activists, this is precisely the result being sought. One activist claimed that restrictions
advocated by the U.S. create “a watertight system so that no generic drugs ever get through to the patients in
developing countries who desperately need them.”16”
Vanderbilt J. Enter. & Tech. L. 08 – The WTO discourages the use of compulsory licenses
Sara Beth Myers [J.D. Candidate, Vanderbilt University Law School, 2009; M.A., Yale University, 2005; B.A., Duke University, 2003] “A
Healthy Solution for Patients and Patents: How India’s Legal Victory Against a Pharmaceutical Giant Reconciles Human Rights with
Intellectual Property Rights” VANDERBILT JOURNAL OF ENTERTAINMENT AND TECHNOLOGY LAW Vol. 10 No. 3, pp. 763-798 (2008)
<accessed May 30, 2010> [EG]
“Novartis was adamant in asserting that its case against India was not about compulsory licenses, 181 yet the
company would have been in a much stronger legal position if India had granted a patent for Glivec and then
attempted to issue a compulsory license for the drug. Knowing this, Novartis made it clear that it “fully supports flexibilities in the TRIPS
agreement that allow governments to make exceptions to patent rights and import pharmaceuticals produced under compulsory license in case of a national emergency
or a lack of supply from the patent-holder.”182 Although
the WTO recognizes the need for compulsory licenses in order to
combat threats to global health such as HIV/AIDS and the avian flu, it still discourages the extended use of such
licenses.183”
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of strengthened intellectual property rights on genetically engineered (GE) crop plant varieties have raised
concerns of farmers and non-government organizations. Unfortunately, they seldom argue within the framework of internationally
recognized human rights. Instead, they make reference to rather fuzzy values, such as "food sovereignty.””
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Hastings International and Comparative Law Review 06 – Small farmers in developing countries will be unable
to take precautions against ‘violating’ the IPRs of GE crops
Peter Straub [LL.M., Between 1997 and 1999 he studied Law at the Philipps-University of Marburg, Germany, where he passed the First
State Examination in Law. In 2002 he passed the Second State Examination in Law. Between 2002 and 2004 he worked for different law
firms in Singapore and China. From 2004 to 2005 he studied at the National University of Singapore, where he graduated as Master of
Laws with a specialization in International and Comparative Law. He currently practices as an attorney-at-law in Hanover, Germany],
“Farmers in the IP Wrench - How Patents on Gene-modified Crops Violate the Right to Food in Developing Countries,” Hastings
International and Comparative Law Review, Winter, 2006, (29 Hastings Int'l & Comp. L. Rev. 187) (PV)
“It can be expected that in developing countries, where the wild ancestors of crop plants can still be found, manipulated
DNA from GE varieties will contaminate other crop varieties, especially "landraces." n32 The term "landraces" is used to describe plants that
are selected by traditional farmers from wild populations. n33 Due to illiteracy and the lack of information, small farmers in
developing countries will be unable to take precautions against the contamination of these other varieties. n34 In
2001 it was discovered that landraces of maize in Mexico had already been contaminated by transgenic DNA
from GE maize varieties from the United States even though a national moratorium against GE crops had been in
place since 1998.”
Hastings International and Comparative Law Review 06 – Because of IPR laws, small farmers in developing
countries might soon find themselves in a situation similar to that currently experience by US farmers
Peter Straub [LL.M., Between 1997 and 1999 he studied Law at the Philipps-University of Marburg, Germany, where he passed the First
State Examination in Law. In 2002 he passed the Second State Examination in Law. Between 2002 and 2004 he worked for different law
firms in Singapore and China. From 2004 to 2005 he studied at the National University of Singapore, where he graduated as Master of
Laws with a specialization in International and Comparative Law. He currently practices as an attorney-at-law in Hanover, Germany],
“Farmers in the IP Wrench - How Patents on Gene-modified Crops Violate the Right to Food in Developing Countries,” Hastings
International and Comparative Law Review, Winter, 2006, (29 Hastings Int'l & Comp. L. Rev. 187) (PV)
“The governments of developing countries find themselves under pressure from the United States and other
developed countries to join international (TRIPS) and bilateral (TRIPS plus) agreements on the protection of
intellectual property. These agreements would obligate them to modify their domestic IP laws and to protect
foreign intellectual property according to Western standards. As a result, traditional small-hold farmers in
developing countries might soon find themselves in a situation similar to that currently faced by farmers in North
America.”
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Hastings International and Comparative Law Review 06 – GE crops undermine farmers self-reliance
Peter Straub [LL.M., Between 1997 and 1999 he studied Law at the Philipps-University of Marburg, Germany, where he passed the First
State Examination in Law. In 2002 he passed the Second State Examination in Law. Between 2002 and 2004 he worked for different law
firms in Singapore and China. From 2004 to 2005 he studied at the National University of Singapore, where he graduated as Master of
Laws with a specialization in International and Comparative Law. He currently practices as an attorney-at-law in Hanover, Germany],
“Farmers in the IP Wrench - How Patents on Gene-modified Crops Violate the Right to Food in Developing Countries,” Hastings
International and Comparative Law Review, Winter, 2006, (29 Hastings Int'l & Comp. L. Rev. 187) (PV)
“Sustainability has different aspects. Environmental sustainability, for example, requires a judicious use of natural
resources to guarantee the stability of food supply for the future. n43 Economic and social sustainability are
meant to guarantee food supply in times of recession or other economic crises through effective markets and
public policies. n44 Opponents of agricultural gene-engineering have argued that GE crops threaten the
sustainability of food access in various ways. One main criticism is that such crops undermine farmers' self-
reliance by making them dependent on the TNCs that market GE crops.”
Thai Indian News 08: The spread of GM food is harming farmers b/c of IPR
Thai Indian News “Farmers protest over genetically modified crops in Delhi” May 6th, 2008 [EG] <accessed February 25, 2009>
http://www.thaindian.com/newsportal/south-asia/farmers-protest-over-genetically-modified-crops-in-delhi_10045775.html
Farmers from different parts of the country on Tuesday demonstrated at the Jantar Mantar on Parliament
“New Delhi, May 6 (ANI):
street over
the use of genetically modified crops in the country. Organised by Coalition for a GM-free India, the protesting farmers
demanded that the genetically modified technology should be banned in the country, as it was against the Indian
farmers interest. Protestors said that with the spread of genetically modified (GM) crops, farmers rights could be
seized in the name of the Intellectual Property Rights and patents.”
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D. XT – Food Sovereignty
1. Food Sovereignty Violated
David Kaplan 04 – WTO trade policies violate food security and human rights
David M. Kaplan [Ph.D. and Assistant Professor of Philosophy at Polytechnic University, Brooklyn; He is the editor of readings in the
Philosophy of Technology and co-editor of Society, Ethics, and Technology (Wadsworth, 2005). Recently, he has turned his attention to
the moral and political dimensions of of technologically modified food and enhancement technologies.] “What’s Wrong with Genetically
Modified Food?” in Frederick Adams, ed. Ethical Issues of the 21st Century ((Charlottesville: Philosophy Documentation Center Press,
2004) “What’s Wrong with Genetically Modified Food?” http://www.csid.unt.edu/files/What's%20Wrong%20With%20Genetically
%20Modified%20Food.pdf <accessed May 30, 2010> [EG]
“Now, instead of entering the thickets of scientific debates, we can make a stronger argument on principle: GM
food production, distribution, and consumption, driven by market imperatives, backed by institutional power,
violates our human rights. Specifically, the trade policies enforced by the WTO that requires nations to purchase
GM food, privatize public farms, and transform agricultural production from subsistence to export violates the
internationally recognized right to food security.”
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Hastings International and Comparative Law Review 06 – small farmers are very important in developing
countries as they are usually the primary produces of staple food
Peter Straub [LL.M., Between 1997 and 1999 he studied Law at the Philipps-University of Marburg, Germany, where he passed the First
State Examination in Law. In 2002 he passed the Second State Examination in Law. Between 2002 and 2004 he worked for different law
firms in Singapore and China. From 2004 to 2005 he studied at the National University of Singapore, where he graduated as Master of
Laws with a specialization in International and Comparative Law. He currently practices as an attorney-at-law in Hanover, Germany],
“Farmers in the IP Wrench - How Patents on Gene-modified Crops Violate the Right to Food in Developing Countries,” Hastings
International and Comparative Law Review, Winter, 2006, (29 Hastings Int'l & Comp. L. Rev. 187) (PV)
“These small-hold farmers are very important for sustainable access to food in these countries as they are usually
the primary producers of staple food. Their production contributes to the local availability of food and helps shield the
n50
population from price spikes on regional and world markets. In many developing countries, the small-hold farming sector is, for a
majority of the population, also the only possibility of earning a livelihood. n51 Small-hold farmers are usually self-reliant in their food
production, and play important roles in the local food supply. Through the cultivation of landraces and seed exchange with
other farmers, they create new varieties that are especially adjusted to the climatic conditions of the particular
region. n52 The cultivation of such indigenous varieties is a further safeguard for food security. The use of GE
seed would compromise all of these important functions.”
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Disadvantage 4 – Innovation
A. 1NC Shell
Point A) Link – Innovation Destroyed
Dr. Natalia Karpova 00 – Historically, patent legislation decreases innovation is Russia
Dr. Natalia N. Karpova [Professor of the Academy of National Economy at the Russian Government] “LEGAL PROTECTION AND
COMMERCIALISATION OF INTELLECTUAL PROPERTY IN RUSSIA” 2000 Paper for Panel 2 <accessed July 12, 2010>
http://www.unece.org/operact/enterp/documents/panel2.pdf (EG)
“A reduction of inventive activity was observed after implementation of the Patent Law of the Russian Federation
in 1992. There has been a sharp drop in the number of invention applications submitted by Russian applicants
(from 200 000 in 1989 up to 28 000 in 1993).”
Point B) Impact – Research Blocked
Boldrin & Levine 08 – Research & Development into cancer is hindered because of patent protection
Michele Boldrin PhD [Professor of economics; fellow of the Econometric Society; research associate of the Center for Economic Policy
Research in London and for FEDEA in Madrid.] David K. Levine PhD [John H. Biggs Distinguished Professor of Economics at Washington
University in St. Louis; President of the Society for Economic Dyamics; fellow of the Econometric Society; research associate of the
NBER; member of the Sloan Research Fellowship Program Committee;co-editor of NAJ Economics] “Against Intellectual Monopoly”
January 2, 2008 [EG] <accessed 19/01/09> http://www.dklevine.com/papers/imbookfinalall.pdf
“It could be, and sometimes is, argued that the modern pharmaceutical industry is substantially different from the chemical industry of the last century. In particular, it is
it would seem
argued that the most significant cost of developing new drugs lies in testing numerous compounds to see which ones work. Insofar as this is true,
that the development of new drugs is not so dependent on the usage and knowledge of old drugs. However, this
is not the case according to the chief scientific officer at Bristol Myers Squib, Peter Ringrose, who ‘told The New
York Times that there were ‘more than 50 proteins possibly involved in cancer that the company was not working
on because the patent holders either would not allow it or were demanding unreasonable royalties.’”
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B. XT – Innovation Destroyed
Michele Boldrin & David Levin 08: An absence of patent protection could increase innovation in the software
industry by 15%
Michele Boldrin PhD [Professor of economics; fellow of the Econometric Society; research associate of the Center for Economic Policy
Research in London and for FEDEA in Madrid.] David K. Levine PhD [John H. Biggs Distinguished Professor of Economics at Washington
University in St. Louis; President of the Society for Economic Dyamics; fellow of the Econometric Society; research associate of the
NBER; member of the Sloan Research Fellowship Program Committee;co-editor of NAJ Economics] “Against Intellectual Monopoly”
January 2, 2008 [EG] <accessed 19/01/09> http://www.dklevine.com/papers/imbookfinalall.pdf
“Notice, in particular, that patenting is found to be a substitute for R&D, leading to a reduction of innovation. In
the authors’ calculation, innovative activity in the software industry would have been about 15% higher in the
absence of patent protection for new software.”
Michele Boldrin & David Levin 08: Intellectual monopoly decreases economic freedom
Michele Boldrin PhD [Professor of economics; fellow of the Econometric Society; research associate of the Center for Economic Policy
Research in London and for FEDEA in Madrid.] David K. Levine PhD [John H. Biggs Distinguished Professor of Economics at Washington
University in St. Louis; President of the Society for Economic Dyamics; fellow of the Econometric Society; research associate of the
NBER; member of the Sloan Research Fellowship Program Committee;co-editor of NAJ Economics] “Against Intellectual Monopoly”
January 2, 2008 [EG] <accessed 19/01/09> http://www.dklevine.com/papers/imbookfinalall.pdf
“What we have argued so far may not sound altogether incredible to the alert observer of the economics of innovation. Theory aside, what have we shown, after all? That
thriving innovation has been and still is commonplace in the absence of intellectual monopoly and that intellectual
monopoly leads to substantial and well-documented reductions in economic freedom and general prosperity.”
Michele Boldrin & David Levin 08: Switzerland benefited from not having patents
Michele Boldrin PhD [Professor of economics; fellow of the Econometric Society; research associate of the Center for Economic Policy
Research in London and for FEDEA in Madrid.] David K. Levine PhD [John H. Biggs Distinguished Professor of Economics at Washington
University in St. Louis; President of the Society for Economic Dyamics; fellow of the Econometric Society; research associate of the
NBER; member of the Sloan Research Fellowship Program Committee;co-editor of NAJ Economics] “Against Intellectual Monopoly”
January 2, 2008 [EG] <accessed 19/01/09> http://www.dklevine.com/papers/imbookfinalall.pdf
“Mid-nineteenth century Switzerland [a country without patents], for example, had the second highest number
of exhibits per capita among all countries that visited the Crystal Palace Exhibition. Moreover, exhibits from
countries without patent laws received disproportionate shares of medals for outstanding innovations. 7”
Michele Boldrin & David Levin 08: IPR is unnecessary and bad ;)
Michele Boldrin PhD [Professor of economics; fellow of the Econometric Society; research associate of the Center for Economic Policy Research in London and for FEDEA in
Madrid.] David K. Levine PhD [John H. Biggs Distinguished Professor of Economics at Washington University in St. Louis; President of the Society for Economic Dyamics;
fellow of the Econometric Society; research associate of the NBER; member of the Sloan Research Fellowship Program Committee;co-editor of NAJ Economics]
“Against Intellectual Monopoly” January 2, 2008 [EG] <accessed 19/01/09> http://www.dklevine.com/papers/imbookfinalall.pdf
“...most innovations have taken place without the benefit of intellectual monopoly. Indeed, the system of
intellectual monopoly as it exists today is of recent vintage – some parts of the current system are only a few
years old and their damaging effects are already visible and dramatic.”
Michele Boldrin & David Levin 08: IPR is harm and no good
Michele Boldrin PhD [Professor of economics; fellow of the Econometric Society; research associate of the Center for Economic Policy Research in London and for FEDEA in
Madrid.] David K. Levine PhD [John H. Biggs Distinguished Professor of Economics at Washington University in St. Louis; President of the Society for Economic Dyamics;
fellow of the Econometric Society; research associate of the NBER; member of the Sloan Research Fellowship Program Committee;co-editor of NAJ Economics]
“Against Intellectual Monopoly” January 2, 2008 [EG] <accessed 19/01/09> http://www.dklevine.com/papers/imbookfinalall.pdf
“Intellectual monopoly is not a cause of innovation, but it is rather an unwelcome consequence of it. In a young
dynamic industry full of ideas and creativity, intellectual monopoly does not play a useful role. It is when ideas
run out and new competitors come in with fresher ideas, that those bereft of them turn to government
intervention – and intellectual “property”– to protect their lucrative old ways of doing business.”
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Michele Boldrin & David Levin 08: Patent protection is unneeded and undesirable
Michele Boldrin PhD [Professor of economics; fellow of the Econometric Society; research associate of the Center for Economic Policy Research in London and for FEDEA in
Madrid.] David K. Levine PhD [John H. Biggs Distinguished Professor of Economics at Washington University in St. Louis; President of the Society for Economic Dyamics;
fellow of the Econometric Society; research associate of the NBER; member of the Sloan Research Fellowship Program Committee;co-editor of NAJ Economics]
“Against Intellectual Monopoly” January 2, 2008 [EG] <accessed 19/01/09> http://www.dklevine.com/papers/imbookfinalall.pdf
“...there is little need to strengthen patent protection since alternative appropriation methods are available and
widely preferred. Instead, stronger patent protection could be leading to undesirable ‘second-order’ effects such
as the use of patents to block competitors.14”
Michele Boldrin & David Levin 08: Low IPR protection increases the quality of innovation
Michele Boldrin PhD [Professor of economics; fellow of the Econometric Society; research associate of the Center for Economic Policy Research in London and for FEDEA in
Madrid.] David K. Levine PhD [John H. Biggs Distinguished Professor of Economics at Washington University in St. Louis; President of the Society for Economic Dyamics;
fellow of the Econometric Society; research associate of the NBER; member of the Sloan Research Fellowship Program Committee;co-editor of NAJ Economics]
“Against Intellectual Monopoly” January 2, 2008 [EG] <accessed 19/01/09> http://www.dklevine.com/papers/imbookfinalall.pdf
“...lowering intellectual property protection decreases the monopoly distortions for all consumers of the “good”
ideas. With a larger market, many more consumers benefit from the greater usefulness and availability of all
these “good” ideas. Second, lowering intellectual property protection makes it harder for “marginal” ideas to
make it into the market.”
Michele Boldrin & David Levin 08: Patents don’t increase but stifle innovation
Michele Boldrin PhD [Professor of economics; fellow of the Econometric Society; research associate of the Center for Economic Policy Research in London and for FEDEA in
Madrid.] David K. Levine PhD [John H. Biggs Distinguished Professor of Economics at Washington University in St. Louis; President of the Society for Economic Dyamics;
fellow of the Econometric Society; research associate of the NBER; member of the Sloan Research Fellowship Program Committee;co-editor of NAJ Economics]
“Against Intellectual Monopoly” January 2, 2008 [EG] <accessed 19/01/09> http://www.dklevine.com/papers/imbookfinalall.pdf
“In fact the evidence shows that the invention of marvelous machines, drugs and ideas does not require the spur
of patents. If anything, the evidence shows, it is the other way around: patents protection is not the source of
innovation, but rather the unwelcome consequence that, eventually, tames it.”
Michele Boldrin & David Levin 08: Patents would have stifled software innovation (prior to 1981)
Michele Boldrin PhD [Professor of economics; fellow of the Econometric Society; research associate of the Center for Economic Policy Research in London and for FEDEA in
Madrid.] David K. Levine PhD [John H. Biggs Distinguished Professor of Economics at Washington University in St. Louis; President of the Society for Economic Dyamics;
fellow of the Econometric Society; research associate of the NBER; member of the Sloan Research Fellowship Program Committee;co-editor of NAJ Economics]
“Against Intellectual Monopoly” January 2, 2008 [EG] <accessed 19/01/09> http://www.dklevine.com/papers/imbookfinalall.pdf
“Each and every one of these key innovations occurred prior to 1981 and so occurred without the benefit of
patent protection. Not only that, had all these bits and pieces of computer programs been patented, as they
certainly would have in the current regime, far from being enhanced, progress in the software industry would
never have taken place. According to Bill Gates – hardly your radical communist or utopist – “If people had understood how
patents would be granted when most of today's ideas were invented, and had taken out patents, the industry
would be at a complete standstill today.” 2”
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C. XT – Research Blocked
Boldrin & Levine 08 – Patents do not have a helpful role in pharmaceutical innovation
Michele Boldrin PhD [Professor of economics; fellow of the Econometric Society; research associate of the Center for Economic Policy
Research in London and for FEDEA in Madrid.] David K. Levine PhD [John H. Biggs Distinguished Professor of Economics at Washington
University in St. Louis; President of the Society for Economic Dyamics; fellow of the Econometric Society; research associate of the
NBER; member of the Sloan Research Fellowship Program Committee;co-editor of NAJ Economics] “Against Intellectual Monopoly”
January 2, 2008 [EG] <accessed 19/01/09> http://www.dklevine.com/papers/imbookfinalall.pdf
patents do not play a helpful role in pharmaceutical innovation. Far from encouraging great
“That said, we have seen that
new health and life-saving products, the system instead produces too much innovation and expense of the wrong
kind – “me-too” drugs to get around others’ patents and get a share of a lucrative monopoly, and all the
advertising and marketing expenses attendant upon monopoly power.45 In the play that is life, health is the
ultimate commodity – we all want to live longer and stay healthier. As we have just seen, patents do not have a useful
role in this play.”
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Boldrin & Levine 08 – Italy had a thriving pharmaceutical industry without patents; No innovation has
improved since Italy’s adoption of patents; if anything, patents hurt Italy instead of helping
Michele Boldrin PhD [Professor of economics; fellow of the Econometric Society; research associate of the Center for Economic Policy
Research in London and for FEDEA in Madrid.] David K. Levine PhD [John H. Biggs Distinguished Professor of Economics at Washington
University in St. Louis; President of the Society for Economic Dyamics; fellow of the Econometric Society; research associate of the
NBER; member of the Sloan Research Fellowship Program Committee;co-editor of NAJ Economics] “Against Intellectual Monopoly”
January 2, 2008 [EG] <accessed 19/01/09> http://www.dklevine.com/papers/imbookfinalall.pdf
“In other words, a thriving pharmaceutical industry had existed in Italy for more than a century, in the complete
absence of patents. That is point one. Point two is that neither the size, nor the innovative output, nor the
economic performances of that industry have improved, to any measurable extent, during the thirty years since
patents were adopted. Every indicator one can look at suggests that, if anything, the Italian pharmaceutical
industry was hurt, not helped, by the adoption of patents, and every expert that has looked the matter has
reached this same conclusion.”
Boldrin & Levine 08 – Italy did not achieve any significant increase in the discovery of innovative drugs after it
enacted patent protection laws
Michele Boldrin PhD [Professor of economics; fellow of the Econometric Society; research associate of the Center for Economic Policy
Research in London and for FEDEA in Madrid.] David K. Levine PhD [John H. Biggs Distinguished Professor of Economics at Washington
University in St. Louis; President of the Society for Economic Dyamics; fellow of the Econometric Society; research associate of the
NBER; member of the Sloan Research Fellowship Program Committee;co-editor of NAJ Economics] “Against Intellectual Monopoly”
January 2, 2008 [EG] <accessed 19/01/09> http://www.dklevine.com/papers/imbookfinalall.pdf
“During the period 1961-1980 a total of 1282 new active chemical compounds was discovered around the world.
Of these, a total of 119 came from Italy (9.28%). During the period 1980-1983 a total of 108 compounds were
discovered. Of these, 8 came from Italy (7.5%).20 While we do not have data covering the most recent decades,
the very clear impression of the informed observer is that innovations have decreased. Professors Scherer and
Weisburst, in fact, took pains to carefully study the evolution of the Italian pharmaceutical industry after the
adoption of patents. Here is the summary verdict, in Scherer’s own words ‘Research by Sandy Weisburst and mentored by me showed, for example, that Italy, with a
vibrant generic drug industry, did not achieve any significant increase in the discovery of innovative drugs during
the first decade after the Italian Supreme Court mandated the issue of pharmaceutical product patents.’”
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Boldrin & Levine 08 – Without patent protection, Italy was the fifth world producers or pharmaceuticals and
the seventh exporter
Michele Boldrin PhD [Professor of economics; fellow of the Econometric Society; research associate of the Center for Economic Policy
Research in London and for FEDEA in Madrid.] David K. Levine PhD [John H. Biggs Distinguished Professor of Economics at Washington
University in St. Louis; President of the Society for Economic Dyamics; fellow of the Econometric Society; research associate of the
NBER; member of the Sloan Research Fellowship Program Committee;co-editor of NAJ Economics] “Against Intellectual Monopoly”
January 2, 2008 [EG] <accessed 19/01/09> http://www.dklevine.com/papers/imbookfinalall.pdf
“In Italy, pharmaceutical patents were prohibited until 1978, when the Supreme Court ruled in favor of eighteen
pharmaceutical companies, all foreign, requesting the enforcement of foreign patents on medical products in
Italy. Despite this complete lack of any patent protection, Italy had developed a strong pharmaceutical industry:
by the end of the 1970s it was the fifth world producer of pharmaceuticals and the seventh exporter.”
Boldrin & Levine 08 – If patent protection was a requirement for pharmaceutical innovation, history should tell
a diametrically different tale than it does
Michele Boldrin PhD [Professor of economics; fellow of the Econometric Society; research associate of the Center for Economic Policy
Research in London and for FEDEA in Madrid.] David K. Levine PhD [John H. Biggs Distinguished Professor of Economics at Washington
University in St. Louis; President of the Society for Economic Dyamics; fellow of the Econometric Society; research associate of the
NBER; member of the Sloan Research Fellowship Program Committee;co-editor of NAJ Economics] “Against Intellectual Monopoly”
January 2, 2008 [EG] <accessed 19/01/09> http://www.dklevine.com/papers/imbookfinalall.pdf
if patents were a necessary
“You may wonder why we are offering all these details about specific countries, patenting of chemical processes, and pharmaceutical products. For a very simple reason:
requirement for pharmaceutical innovation as claimed by their supporters, the large historical and cross country
variations in the patent protection of medical products should have had a dramatic impact on national
pharmaceutical industries. In particular, at least between 1850 and 1980, most drugs and medical products
should have been invented and produced in the United States and the United Kingdom, and very little if anything
in continental Europe. Further, countries such as Italy, Switzerland and, to a lesser extent, Germany, should have
been the laggards of the pharmaceutical industry until recently. Instead the opposite was true for longer than a
century.”
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of the millstone of monopolization – grew by leaps and bounds as employees left to start new firms, rejoined old
firms and generally spread socially useful knowledge far and wide.”
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B) Internal Links
i. Indigenous Rights Implicated
Intl Ctr for HRs & Dem Dev 09 – Policies designed to protect privileges of indigenous peoples or minorities may
conflict with investment treaty protections; exception clauses are rare
Luke Eric Peterson [International investment arbitration reporter and consultant and has reported on investor-state arbitration for The
Financial Times, The Economist and The American Lawyer; Affiliate, Investment Law Project, NYU Law School.] “Human Rights and
Bilateral Investment Treaties: Mapping the role of human rights law within investor-state arbitration” (2009) INTERNATIONAL CENTRE
FOR HUMAN RIGHTS AND DEMOCRATIC DEVELOPMENT <accessed August 31, 2010> http://www.dd-
rd.ca/site/_PDF/publications/globalization/HIRA-volume3-ENG.pdf (EG)
“Often governments may introduce policy measures or preferences which are designed to boost the prospects of
certain marginalized or disadvantaged persons or groups whether they be indigenous persons, ethnic minorities
(or majorities), women, or others. On the face of it, such policies could come into friction with investment treaty protections
accorded to foreign investors, particularly where certain duties or obligations are to be borne by foreign investors
or foreign-owned companies, or where certain benefits or preferences are denied to foreign investors. Nonetheless, it
is unusual for governments to make reservations or exceptions to investment treaty protections in this context.
On rare occasions, some treaties include exceptions to ensure that positive discrimination measures taken in
favor of designated groups cannot be challenged by foreign investors as a violation of the investment treaty guarantees of
nondiscrimination (or national treatment).130 In other words, where special programs or policies are put in place to provide benefits or preferences to a targeted group
or minority, a foreign investor would not be able to invoke his own entitlement to “national treatment” in an effort to obtain the same preferences or benefits meted out
to these groups. However, such exception clauses do not appear in all treaties.”
Intl Ctr for HRs & Dem Dev 09 – General excpetion clauses are exceedingly rare (New Zealand-Thailand ex.)
Luke Eric Peterson [International investment arbitration reporter and consultant and has reported on investor-state arbitration for The
Financial Times, The Economist and The American Lawyer; Affiliate, Investment Law Project, NYU Law School.] “Human Rights and
Bilateral Investment Treaties: Mapping the role of human rights law within investor-state arbitration” (2009) INTERNATIONAL CENTRE
FOR HUMAN RIGHTS AND DEMOCRATIC DEVELOPMENT <accessed August 31, 2010> http://www.dd-
rd.ca/site/_PDF/publications/globalization/HIRA-volume3-ENG.pdf (EG) [Emphasis in Original]
“It is exceedingly rare for a government to insert a general exception into an investment agreement so that none
of the investment protection provisions may be invoked in an effort to challenge special preferences or policies
for historically disadvantaged groups. Notably, the New Zealand Government in an agreement with Thailand includes such a
sweeping general exception, thus making clear that none of the investor protections will override the government’s capacity to accord
special or more favorable treatment to the indigenous Maori people. 131”
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Intl Ctr for HRs & Dem Dev 09 – European investors challenging South African policies to eradicate the effects
of apartheid
Luke Eric Peterson [International investment arbitration reporter and consultant and has reported on investor-state arbitration for The
Financial Times, The Economist and The American Lawyer; Affiliate, Investment Law Project, NYU Law School.] “Human Rights and
Bilateral Investment Treaties: Mapping the role of human rights law within investor-state arbitration” (2009) INTERNATIONAL CENTRE
FOR HUMAN RIGHTS AND DEMOCRATIC DEVELOPMENT <accessed August 31, 2010> http://www.dd-
rd.ca/site/_PDF/publications/globalization/HIRA-volume3-ENG.pdf (EG)
“Such matters are not of mere hypothetical interest. For years, controversy has swirled around the Black
Economic Empowerment (BEE) policies being developed by the South African Government in an effort to
ameliorate the lingering effects of the Apartheid system.132 BEE policies include a range of measures targeted at Historically Disadvantaged
South Africans (HDSAs), including employment equity schemes, preferential access to government contracts and licenses, and divestment policies which oblige businesses
to sell shareholdings to HDSA partners. While well-intended, the policies have attracted criticism both from those who say that the policies impose too great a burden on
business, as well as those who complain that the BEE policies benefit only a layer of well-connected wealthier HDSAs.133 In response to such criticisms, the South African
Government has adapted its BEE policies over time—both as an effort to water down proposals for larger scale share divestments, as well as to ensure that the benefits of
such policies are “broad-based” and beneficial for poorer, disadvantaged persons. Some foreign businesses have responded warily to BEE, with the policies widely viewed
as having contributed to the deadlock of major trade negotiations between South Africa and the United States. Meanwhile, some countries with whom South Africa has
concluded economic agreements have expressed the view that the imposition of BEE measures on foreign enterprises may contravene South Africa’s international
economic commitments.134 Recently,
a group of European investors in the South African mining sector took the
unprecedented move of filing a legal claim against South Africa, alleging that various BEE requirements violate
the terms of investment protection treaties with Italy and Luxembourg. The investors own several South African mining companies,
and held various mining rights which were subject to a mandatory “conversion” process, whereby all South African mineral resources are to be brought under state
control and re-licensed to miners for fixed periods of time. As part of this conversion process, companies are assessed on their progress towards social, labour, and
development objectives, including the hiring of HDSA managers and provision of special programs and benefits for HDSA workers. In the view of the investors, these BEE-
inspired policies impose significant costs on company operations and amount to an “expropriation” of the companies’ preexisting mining rights, as well as “unfair” and
In their request for arbitration filed in 2006—which was
“inequitable” treatment, contrary to the terms of South Africa’s investment protection treaties.
still confidential at the time of this writing— the investors allege that they may suffer upwards of $350 million (US) in damages,
depending upon the final effects of the BEE mandates introduced by the South African Government. In 2007, an arbitration panel was
convened to hear the dispute, however progress to date has been slow; written arguments in the case will play out over 2008 and 2009, with hearings expected to be held
At this stage, any legal arguments tabled in the case remain confidential. However, already, it is clear
later in 2009.
that human rights policies are implicated in the dispute.”
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Intl Ctr for HRs & Dem Dev 09 – Argentina referenced the right to water in its BIT case against Aguas Argentinas
[Background Knowledge or Evidence]
Luke Eric Peterson [International investment arbitration reporter and consultant and has reported on investor-state arbitration for The
Financial Times, The Economist and The American Lawyer; Affiliate, Investment Law Project, NYU Law School.] “Human Rights and
Bilateral Investment Treaties: Mapping the role of human rights law within investor-state arbitration” (2009) INTERNATIONAL CENTRE
FOR HUMAN RIGHTS AND DEMOCRATIC DEVELOPMENT <accessed August 31, 2010> http://www.dd-
rd.ca/site/_PDF/publications/globalization/HIRA-volume3-ENG.pdf (EG)
“Argentina has insisted that its BIT obligations must not be interpreted in a vacuum divorced from the rest of
international law. In particular, Argentina stresses that the BIT “must be construed in a manner which does not
affect the fulfillment of other international obligations between the states signatory of such BITs.” 67 According to
Argentina, such an approach would ensure that BIT obligations would be read in light of other rules of
international law linking Argentina, the United Kingdom, France and Spain, including “any treaty on human rights
contemplating the human right to water”.68 Second, after arguing for the applicability of human rights law,
Argentina insists that its treatment of the claimants in the Aguas Argentinas arbitration was motivated by various
business failings on the part of Aguas Argentinas, coupled with an overriding obligation on Argentina’s part to
protect the population’s right to water.69 In Argentina’s view, these shortcomings by Aguas Argentinas compelled
the Argentine authorities to intercede so as to ensure that the right to water was not undermined by third
parties.70”
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Intl Ctr for HRs & Dem Dev 09 – Treaties are typically silent on how to reconcile freedom of assembly and right
to security leaving room for governments to feel legally obligated to smooth the path for FDI projects
Luke Eric Peterson [International investment arbitration reporter and consultant and has reported on investor-state arbitration for The
Financial Times, The Economist and The American Lawyer; Affiliate, Investment Law Project, NYU Law School.] “Human Rights and
Bilateral Investment Treaties: Mapping the role of human rights law within investor-state arbitration” (2009) INTERNATIONAL CENTRE
FOR HUMAN RIGHTS AND DEMOCRATIC DEVELOPMENT <accessed August 31, 2010> http://www.dd-
rd.ca/site/_PDF/publications/globalization/HIRA-volume3-ENG.pdf (EG)
“At the best of times, governments may walk a tight-rope in balancing legitimate rights of protest, while offering
basic police protection to FDI projects. From a human rights perspective, great sensitivity is called for in such situations where protestors
are objecting to a foreign investor’s activities, as there is ample evidence of overzealous use of force by police and security forces in
relation to the protection of foreign investments in the developing world.100 Indeed, there is some anecdotal evidence to suggest
that governments feel under varying degrees of legal compulsion to smooth the path for FDI projects. For example,
the government of Guatemala has professed to being torn between its duties to provide security for a highly controversial foreign-owned gold and
silver mine in the country’s western region and the government’s obligations to uphold the rights of citizens and indigenous groups to assemble and
protest the mining operation. As has been widely reported in the mainstream news media, public opposition to the project ultimately tipped over into
violence as locals and security forces clashed over efforts by protestors to blockade roadways and impede further mining activity at the mining site.101
Media coverage of these events has alluded to the government’s feeling under legal duties to ensure that protests do not derail the investment in
question. In April of 2005, the Associated Press noted that “(t)he government said it had to honor the mining concession, or risk a huge lawsuit by the
and large however, investment protection treaties are typically silent on the obligations of states to
company.”102 By
respect human rights to expression and assembly much less the complex challenges inherent in balancing and
reconciling such human rights obligations with the policing and provision of security of FDI projects. For instance,
exactly what degree of disruption of business activities must be borne by foreign investors facing citizen protests? Protestors might blockade roadways
or facilities for a period of hours in order to conduct a protest march. Conversely, protest activities might shut down business activity for a period of
weeks or even months. Similarly, labour unrest could lead to losses or disruption on the part of foreign owned businesses, either through picketing, sit-
investment treaties offer no guidance to arbitrators as to how to reconcile —in concrete
ins or other activities. However,
circumstances—a state’shuman rights obligations and its security obligations to foreign investors. A review of known
investment treaty arbitration disputes finds that in several legal disputes, foreign investors have sued states and
alleged that citizen or worker protests lead to a breach of the host state’s “protection and security” obligations
towards the affected investor.”
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C) XT – Non-Transparent System
Intl Ctr for HRs & Dem Dev 09 – Treaties fail to mandate transparency and thus defects to traditional
confidentiality considerations
Luke Eric Peterson [International investment arbitration reporter and consultant and has reported on investor-state arbitration for The
Financial Times, The Economist and The American Lawyer; Affiliate, Investment Law Project, NYU Law School.] “Human Rights and
Bilateral Investment Treaties: Mapping the role of human rights law within investor-state arbitration” (2009) INTERNATIONAL CENTRE
FOR HUMAN RIGHTS AND DEMOCRATIC DEVELOPMENT <accessed August 31, 2010> http://www.dd-
rd.ca/site/_PDF/publications/globalization/HIRA-volume3-ENG.pdf (EG)
“There are two factors which accommodate this confidentiality. First, the treaties themselves rarely stipulate that
investor state arbitrations be open to public scrutiny. Although Canada and the United States have embraced a move towards openness in their
recent investment treaties, many other governments have not followed suit. Thus, it often falls to the given procedural rules that govern a given dispute—for example,
To a considerable degree, these
the World Bank’s ICSID rules or the United Nation’s ad-hoc UNCITRAL rules —to stipulate how open the proceedings shall be.
procedural rules have not been designed with transparency or openness in mind. Indeed, in the case of the
UNCITRAL [United Nations Commission on International Trade Law] rules, and the rules of certain Chambers of
Commerce, these rules were tailored to private commercial arbitration between two parties, where
confidentiality has long been a major consideration.”
Intl Ctr for HRs & Dem Dev 09 – Absent procedural reforms, resolution of investor-state disputes will happen in
the shadows
Luke Eric Peterson [International investment arbitration reporter and consultant and has reported on investor-state arbitration for The
Financial Times, The Economist and The American Lawyer; Affiliate, Investment Law Project, NYU Law School.] “Human Rights and
Bilateral Investment Treaties: Mapping the role of human rights law within investor-state arbitration” (2009) INTERNATIONAL CENTRE
FOR HUMAN RIGHTS AND DEMOCRATIC DEVELOPMENT <accessed August 31, 2010> http://www.dd-
rd.ca/site/_PDF/publications/globalization/HIRA-volume3-ENG.pdf (EG)
“Although the ICSID [International Centre for Settlement of Investment Disputes] system offers the greatest level
of transparency thanks to a public docket listing all cases being arbitrated at the Centre, ICSID proceedings are
themselves closed to the public unless both parties desire openness. What’s more, a move several years ago to bring
greater transparency to ICSID proceedings was watered down in the face of objections from many ICSID
stakeholders. To the extent that governments continue to negotiate investment treaties which draw upon
procedural rules that provide for scant levels of transparency, the resolution of investor-state disputes will
continue to take place (to varying degrees) in the shadows.”
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