Just a quick line about a report published ten days ago in an Indian online newspaper regarding Indian’s plans to abandon international arbitration in investment disputes.

Everything is here: India seeks treaty revisions to deal with corporate suits – Indian Express.

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Adding up to our posts on foreign direct investments in agriculture, the Surrey International Law Centre and the Environmental Regulatory Research Group just published a fact-finding report on the so-called ‘land-grab’ which will be used as a basis for a more in-depth piece of research.

The abstract reads as follows, and the full document can be found here.

Following the 2008 world food crisis, many international investors have engaged in a race for land acquisition and food production. This new form of Foreign Direct Investment (FDI) is increasingly criticised in the public sphere, which commonly refers to it as a ‘land grab’.

In the absence of consequent primary sources relating to the subject matter, however, this working document provides an overview of what the authors describe as an ‘agri-FDI’ trend, based on the cross analysis of secondary sources. It first draws a geographical map of the trend as a means to emphasise who invests and where. Second, it considers the origins of the trend are, including the 2008 food crises and the impact of increased demand for biofuel. This document, overall, constitutes the basis of a forthcoming paper which, in turn, will formulate hypotheses and questions as to whether agriculture-oriented investments differ from traditional FDI.

A. Martin and M. Ayalew, Acquiring Land Abroad for Agricultural Purposes: ‘Land Grab’ or Agri-Fdi? Report of the Surrey International Law Centre and Environmental Regulatory Research Group (March 2011). Surrey Law Working Papers – 08/2011 Available on SSRN at http://ssrn.com/abstract=1788948

We are happy to annouce the publication of an peer-reviewed article taking into consideration the issue of investors’ nationality in foreign direct investments, or more specifically, the issue of abuses of corporate structures in transnational investment deals. The article compares the facts in two ICSID cases, Tokios Tokelés v Ukraine and TSA Spectrum v Argentina, where ICSID tribunals had to choose between the place of incorporation of the entity and the controling nationality of the investors (corporate veil piercing) to establish ‘foreign control’ and the Centre’s jurisdiction. The Phoenix Action v Czech Republic is also cited because of its insights on “bona fide” investments. 

A. Martin, International investment dipsutes, nationality and corporate veil: some insights from Tokios Tokeles and TSA Spectrum de Argentina, Transnational Dispute Management, Volume.8 Issue.1 February 2011

Although many commentators consider that the steps taken by capital-importing states to attract foreign investors as submission gestures, I just read a fascinating article describing how the Brazilian government’s FDI (Foreign Direct Investment) policies actually succeeded in this undertaking.

Here are small abstracts of the article ‘Private Equity in Brazil: Entering a New Era’ by Daniel de Souza, Porter Leslie, José Luis González Pastor and Carol Strulovic.

Key Regulatory Modifications

Several major changes in legislation have increased the country’s attractiveness for both local and foreign PE investors. One of the most important improvements for PE investment in Brazil occurred in 2003, when the government passed several laws to legally adopt the registration of PE funds, to regulate such establishments, and to address their formal obligations in a method similar to that of the Limited Partner (LP) structure of funds in the U.S. and Europe. In the past, the funds had no clear legal framework on which to base their activity beyond acting as an offshore investor. This changed in 2003 with the introduction of FIPs (Fundos de Investimentos em Participações), investment vehicles that benefit from tax exemptions on capital gains, as found in other developed PE markets.

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By Antoine Martin.
The Treaty on the Functioning of the European Union (TFEU) establishes the European Union’s exclusive competence on trade (Article 206) and foreign direct investment (Article 207), as part of the common commercial policy under Article 3(1)(e) TFEU. EU FDI, however, are currently regulated through 1200 Bilateral Investment protection Treaties (BITs), creating various standards of treatment and a certain degree of legal uncertainty at the EU level.

As a result, and although BITs remain binding on the Member States under public international law, the Commission recently adopted a proposal for a Regulation as to how the BITs adopted between Member States and third countries might be handled in a close future.[1] The proposed Regulation would deal with the transitional consequences of the EU’s new competence on investment, maintain the status quo by authorising the continuation of the existing agreements entered into by EU Member States (Chapter 2 and Article 3 of the proposed Regulation) and suggest procedures as to the development of new agreements in time.

Member States, in addition, would be required to “take the necessary measures to eliminate incompatibilities, where they exist, with the law of the Union contained in Bilateral Investment Treaties concluded between them and third states” (Proposed Preamble at 8).

Overall, the Commission acting in the light of the exclusive competence of the EU regarding the common commercial policy would be involved at every stage of the negotiations by the Member States pursuant to Article 218(2) of the Treaty (“The Council shall authorise the opening of negotiations, adopt negotiating directives, authorise the signing of agreements and conclude them”), although States might require a certain degree of confidentiality to be maintained (Article 14).

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 Many papers have elaborated on the existence or inexistence of a Race to the Bottom doctrine. In short, the doctrine finds that investors, as greedy entities, have the ability to shop from one country to the other for the poorest regulations to cut-costs.

The counter-argument, in turn, is that investors rather need long-term stability and security in order to settle in a foreign country. The institutional environment of the host-state, as a result. appears to constitute a determinant factor of FDI.

This Note does not intend to provide an elaborated discussion on the Race to the Bottom theory, but simply highlights that the Official Webpage of The Democratic People’s Republic of Korea (DPRK) provides an interesting illustration of the debate as the following shows:

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