WTO CHAIRS PROGRAMME

ASSESSMENT
1. Introduction to “International Investment law”, “International Investment” and
“Investors” by Dr. Rosmy Joan.

International Investment Law is a complex field that revolves around the agreements
between states known as Bilateral Investment Treaties (BITs). These agreements allow
parties to define the scope of "investment." Some opt for an asset-based definition,
including various assets like shares, property, and intellectual property.

BITs typically follow a general structure. They fall under the broader umbrella of
International Investment Law, a set of rules and principles that govern the interactions
between foreign investors and the host state. These rules are shaped primarily through
treaties, and they apply through international investment arbitrators, various tribunals,
and forums.

The very first BIT was established between Pakistan and Germany in 1959, and there
are approximately 2,000 such treaties worldwide. To study this subject effectively, it's
essential to identify commonalities between these treaties and understand their subject
matter.

BITs are designed for specific situations, aiming to protect and promote the interests of
foreign investors in a host state. Investors can enjoy various privileges, and these
treaties often have a remedial purpose for investors if their rights are violated.

A BIT typically involves two states and offers reciprocal promotion of investment. It
allows individuals from one state to invest in another, with the home state (the capital-
exporting state) where the investor originates.

The primary purposes of BITs are regulation, economic liberalization, production, and
protection. Most protections in BITs serve the purpose of safeguarding the interests of
investors. However, while some provisions deal with liberalization, there are generally
no specific provisions for promotion; protection is often an effect or corollary of
promotion. This means that from a regulatory perspective, it is crucial to ensure that the
BITs are designed adequately, giving due importance to regulation, as any gaps may be
decided in favor of the investors due to the privileges they are accorded.

In terms of protection, BITs offer both absolute and relative protection. They are further
divided into general and specific situations. In specific situations, there are provisions
related to expropriation, compensation standards, and dispute settlement mechanisms.

BITs also include dispute settlement provisions, including investor-state dispute

settlement for breaches of protections and state-state dispute settlement. Termination
standards are outlined in the BITs as well.

General protection provisions within BITs encompass the principles of fair and
equitable treatment, full protection and security, and non-discrimination between
domestic and foreign individuals.

Security protections are included to safeguard the interests of investors.

The history of BITs can be traced back to the period between the 1820s and 1914 when
international trade began to develop. It was the end of the Napoleonic wars and the
onset of the Industrial Revolution. During this time, states started forming alliances and
signing treaties to enhance commerce, trade, and navigation.

The Drago Doctrine emerged during this period, addressing the circumstances under
which military force would be used in response to non-fulfillment of debts.

The concept of international immunity, the role of municipal courts in each state, the
role of foreign courts, the host state (where the investment is located), and the home
state (where the investor originates) are all crucial aspects to consider when dealing
with BITs.

Foreign investors are often given the remedy to bring suit against the host state before
a tribunal, not a court. This process serves as a private dispute resolution mechanism.
Determining what qualifies as an investment in the context of BITs involves
considering five factors: the economic development of the host state, the duration of
 the project, the level of risk involved, technological advancement, and the regularity of
profit returns. Principles of international law are used to determine the nationality of a
person, which is relevant to making claims under BITs.

International Investment Arbitration is a public-private process, involving one state

party and private investors. The Treaty law is applicable, and arbitrators decide disputes
between the parties.

On the other hand, International Commercial Arbitration focuses on disputes between

private parties and allows for more specific choices in governing laws.

In summary, Bilateral Investment Treaties play a crucial role in international investment

law, providing protections and incentives for foreign investors. Understanding the
structure, provisions, and history of these treaties is essential for anyone involved in
cross-border investments.

2. Differentiate between Direct and Indirect expropriation.

Direct Expropriation:
Direct expropriation is a straightforward and explicit action by a host state in which it
takes physical possession or ownership of an investor's property or assets. This could
include nationalization, confiscation, or forced transfer of ownership.
Direct expropriation involves a clear and unambiguous act by the host state.
It results in the immediate and complete deprivation of an investor's property or assets.
The investor's property rights are transferred to the state, and the state becomes the new
owner.
It usually applies to tangible assets, such as land, factories, equipment, or physical
infrastructure.
It often resembles the exercise of eminent domain, where the state takes private
property for public use.
International law generally obliges the host state to provide immediate, full, and
adequate compensation to the affected investor for the expropriated assets.
The standard for compensation is typically well-defined and relatively straightforward.
Indirect Expropriation:
Indirect expropriation is a more subtle and gradual process in which the host state's
actions or policies do not involve a direct taking of assets but substantially and
effectively deprive the investor of the economic benefits or value of their investment.
It often involves a series of measures and is more complex to identify than direct
expropriation.
It does not result in an immediate loss of assets but gradually diminishes the
investment's value, profitability, or usefulness.
It often pertains to intangible assets, such as licenses, permits, contractual rights, or the
investor's ability to operate and make a profit in the host state.
Indirect expropriation is frequently linked to regulatory measures, such as changes in
laws, regulations, or government policies.
Under international investment treaties, indirect expropriation may also require
compensation, although the standard and criteria for compensation can be more
complex and fact-specific.
The standard for compensation in cases of indirect expropriation is often couched in
terms like "fair and equitable treatment." This requires a more nuanced assessment of
the impact on the investor.

In summary, the key differentiation between direct and indirect expropriation lies in the
manner and impact of the state's actions. Direct expropriation is characterized by
immediate and explicit state action, often involving tangible assets, and obligates the
host state to provide clear and immediate compensation. In contrast, indirect
expropriation results from a series of gradual, regulatory measures that collectively
substantially diminish the value of the investment, often involving intangible assets,
and may require compensation under a "fair and equitable" standard, with a more
complex assessment of the impact on the investor. Both types of expropriation can lead
to claims by foreign investors against the host state under the protections offered in
bilateral investment treaties or other international agreements.