Trade and Investment Rules for Energy
II. Promoting Energy-related Investments
Guidance in formulating investment protection criteria pertinent to the energy sector can be gleaned from several international precedents. Some are relatively recent; others go back many years. Some of the more prominent include the following.
The North American Free Trade Agreement (NAFTA) and the Energy Charter Treaty (ECT) each contain investment protection and dispute settlement provisions applied on a region-wide basis. Each is noteworthy in recognizing the right of private investors to invoke binding arbitration directly with host States.
The 1993 Colonia Protocol, concluded under the umbrella of Mercusor, extends protection to investors from Mercusor member States. The 1994 Buenos Aires Protocol further expands these safeguards by adopting provisions similar to the investment protection provisions of NAFTA.
ASEAN members adopted a Framework Agreement on the ASEAN Investment Area (AIA) in 1998. The AIA seeks to liberalize investment flows among ASEAN members and, to that end, obliges governments to apply rules of non-discrimination, transparency, and open investment markets, subject to some important exceptions and reservations in favour of host States.
The 1966 Convention for the Settlement of Investment Disputes (ICSID) is a multilateral treaty under the auspices of the World Bank. It facilitates investment dispute resolution through recourse to the ICSID arbitration process. ICSID arbitration awards provide an important body of jurisprudence in this area.
The WTO Agreement on Trade-Related Investment Measures (TRIMS Agreement), the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), and the General Agreement on Trade in Services (GATS) contain investment-type provisions, although limited to the specific subject matter of those agreements. There are, however, no over-arching rules governing treatment of foreign investment in the WTO Agreement.
Together with these multilateral precedents, over 2,500 Bilateral Investment Treaties (BIT) and Foreign Investment Protection Agreements (FIPA) are in force around the globe. These take many forms and contain a variety of provisions but, at the same time, contain common elements that can also help inform future work in this area.
The OECD attempted to draft a Multilateral Agreement on Investment (MAI) in the 1990s. The initiative encountered vocal opposition from representatives of NGOs and other civil society bodies, and eventually was suspended. Nevertheless, the OECD deliberations and draft MAI texts offer useful source material.
Other sources are found in policy guidelines and voluntary standards formulated by international governmental bodies, such as the OECD cited above. A number of NGO studies on international investment issues can also assist in the task. These various materials will help in devising principles governing investment protection that can be harnessed for the energy sector.