Trade and Investment
Over the past ten years there has been an explosion of regional trade agreements and bilateral investment treaties (BITs) designed to afford protection to foreign investors and their investments. Likewise, during the last decade, foreign investors have increasingly used investor-to-state dispute settlement to sue host state for damages before unaccountable arbitral tribunals. Many stakeholders are apprehensive about investment rules and arbitration, including environmental groups, labor groups, development organizations, local governments, and more. These concerns stem from the ambiguous or unbalanced character of the rules governing investments, as well as from the democratic deficits apparent in the arbitral mechanism utilized to resolve investment disputes. Please visit CIEL's web page regarding concerns on governance, development, and environment for further information.

As currently designed, BITs and other investment agreements are frustrating the transition towards sustainable development. In many cases, investors have aggressively used investment rules to gain compensation at the expense of local environmental, safety, and human rights laws, rendering local democratic institutions unable to protect their citizens from the negative impacts of unsustainable investments. This ability to run roughshod over important local laws is one of the main reasons CIEL is concerned about the investment provisions found in many treaties today. CIEL and many other civil society organizations feel that the far- reaching rights enjoyed by transnational corporations should be reigned in and balanced by rules and specific obligations to encourage better environmental and human rights practices.

International agreements for the protection of investments are proliferating at the bilateral, regional, and global levels. A couple initiatives to further expand investment protections have failed, however. For example, in 1998 the Organization for Economic Co-operation and Development (OECD) attempted to negotiate a comprehensive charter of corporate privileges behind closed doors, but failed after a global civil society campaign. More recently in 2003, the European Communities and others attempted to further expand the World Trade Organization (WTO) to encompass investment, but failed due to the opposition of developing countries and organized civil society. See more about our work with the WTO below.

In 1994, the North American Free Trade Agreement (NAFTA) was signed by Canada, Mexico and the United States. NAFTA includes a chapter on investment, Chapter 11, that protects investors of Canada, Mexico and the U.S. when they invest in one of the other NAFTA countries. This provision allows an investor to lodge a complaint against the host government with an arbitral tribunal if they feel they have for some reason been treated unfairly as an investor. The investor can bring such claims at any time, thus completely by-passing democratic judicial systems. Moreover, the investor appoints one of the tribunal's members and determines the underlying procedural rules that will govern the arbitration.

Despite its apparent democratic deficits, the NAFTA model has been replicated in a number of other, more recent bilateral free trade agreements, including the U.S.-Singapore, U.S.-Chile, Central America Free Trade Agreement (CAFTA), and others. Similar provisions can be found in the Energy Charter Treaty and in the over two thousand BITs in force worldwide. Since the 1990's alone, over 1800 BITs have been negotiated. The United States has recently revised its model BIT, incorporating minor changes to the rules, in order to constrain extensive interpretations. These changes are welcome but remain insufficient. Please see comments on the draft model BIT submitted by CIEL and other groups.

The international legal framework on investment law not only includes treaties but also contracts between host states and foreign investors, referred to as host government agreements (HGAs) or State contracts. One example of a host government agreement is the agreement negotiated for the Baku-Tblisi-Ceyhan (BTC) Pipeline Project. CIEL is particularly concerned with the legal, environmental, and social ramifications of the proposed pipeline project, as the project's legal regime is an example of a trend in investment liberalization and protection that undermines democratic structures of governance and the rule of law.

  • CIEL has played an important role in actual disputes by providing legal assistance to affected communities, including the Methanex and Bechtel/Cochabamba cases that we are involved with currently.


  • CIEL has also had the opportunity to participate in a variety of fora that have featured investment as a specific theme. These include:

    INTERNATIONAL MEETINGS:
    - Trade Information Project
    - World Summit on Sustainable Development
    - 3rd World Social Forum
    - Environment for Europe

    U.S. FORUMS:
    - Trade Promotion Authority
    - U.S. Model Bilateral Investment Treaty
    - Department of State Subcommittee on Investment

    REGIONAL TRADE AGREEMENTS:
    - North American Free Trade Agreement (NAFTA)
    - Free Trade Area of the Americas (FTAA)
    - Central American Free Trade Agreement (CAFTA)

    FREE TRADE AGREEMENTS:
    - U.S.- Chile Free Trade Agreement
    - U.S.- Australia Free Trade Agreement

    STATE CONTRACTS:
    - Baku-Tblisi-Ceyhan (BTC)

    WORLD TRADE ORGANIZATION (WTO)

    ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT (OECD)

    Detailed information on these items is currently available on CIEL's Trade & Investment: Conferences and other Fora page.

For additional information, please contact Marcos Orellana.

 

This page last modified on 16 Feburary 2005