1. International Investment Agreements: Recent Trends in Investor-State Case Law and Treaty Negotiation Roberto Echandi Taipei, March, 2011 Other issues: Exceptions, Precluded Measures, State of necessity

2. Exceptions Article 16.02 General Exceptions ( FTA Taiwan- El Salvador/Honduras, FTA with Guatemala and Panama) 1. Article XX of GATT 1994 and its interpretative notes are incorporated into and made an integral part of this Agreement, for purposes of: (a) Part Two (Trade in Goods), except to the extent that any of its provisions apply to services and investment; and (b) Part Three (Trade Barriers), except to the extent that any of its provisions apply to services and investment. 2. Subparagraphs (a), (b) and (c) of Article XIV of the GATS, are incorporated into and made an integral part of this Agreement, for purposes of: (a) Part Two (Trade in Goods), to the extent that any of its provisions apply to services; (b) Part Three (Trade Barriers), to the extent that any of its provisions apply to services; and (c) Part Four (Investment, Services and Related Matters). FTA with Nicaragua does not contain this exception At least some BITs negotiated by Taiwan also lack this exception Exception not self-judging

3. GATS Article XIV: General Exception Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where like conditions prevail, or a disguised restriction on trade in services, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any Member of measures: (a) necessary to protect public morals or to maintain public order; (b) necessary to protect human, animal or plant life or health; (c) necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement including those relating to: (i) the prevention of deceptive and fraudulent practices or to deal with the effects of a default on services contracts; (ii) the protection of the privacy of individuals in relation to the processing and dissemination of personal data and the protection of confidentiality of individual records and accounts; (iii) safety; The public order exception may be invoked only where a genuine and sufficiently serious threat is posed to one of the fundamental interests of society.

4. Precluded Measures Article 16.03 National Security (Taiwan’s FTAs) Nothing in this Agreement shall be construed: (a) to require a Party to furnish or allow access to any information the disclosure of which it determines to be contrary to its essential security interests; (b) to prevent a Party from taking any actions that it considers necessary for the protection of its essential security interests: (i) relating to the traffic in arms, ammunitions and implements of war and to such traffic and transactions in other goods, materials, services and technology undertaking directly or indirectly for the purposes of supplying a military or other security establishment; (ii) taken in time of war or other emergency in international relations; or (iii) relating to the implementation of national policies or international agreements respecting the non-proliferation of nuclear weapons or other nuclear explosive devices; or (c) to prevent a Party from taking action in pursuance of its obligations under the United Nations Charter for the Maintenance of International Peace and Security.

5. State of Necessity Customary International Law State of necessity is subordinated to four cummulative conditions –Measure has to be only way for the State to safeguard an essential interest against a grave and imminent peril –Action taken must not seriously impair an essential interest of the State or States towards which the obligation exists, or of the international community as a whole. –International obligation in question does not exclude the possibility of invoking necessity –State has not contributed to the situation of necessity Application –Cases against Argentina: CMS, Enron, Sempra, LG &E –Precludes responsibility of the State given the existence of a violation of the Treaty –Violation of the Treaty is then a requirement to invoke the rule –There is no violation if an exception included in the Treaty applies.

6. International Investment Agreements: Recent Trends in Investor-State Case Law and Treaty Negotiation Roberto Echandi Taipei, March, 2011 Other issues: Labor and Environment

7. Investment and labor: the underlying tension At least 80 percent of humanity lives with less than $10 a day The poorest 40 percent of the world’s population accounts for 5 percent of global income. The richest 20 percent accounts for three-quarters of world income Recent experiences of trade and investment liberalization in India and Peoples’ Republic of China evidence role of investment in development and poverty reduction Promotion of greater FDI flows generate tension in home countries due to high unemployment rates ( at national and regional level)

8. Investment and labor: Approaches in IIAs Legal trade sanctions –Advocated by certain groups in the U.S. Legal sanctions –Monetary fines for cooperation fund –Recent U.S. FTAs Side agreements –NAFTA Framework to allow civil society exert direct pressure –European approach Cooperative intra-governmental approach –Some EU FTAs, Taiwan-Nicaragua FTA

9. Investment and labor Treatment of the issue under different IIAs Preambles –Agreement that investment promotion can be achieved without relaxing regulations on labour Specific clauses in IIAs –BIT Belgium-Luxemboug with Ethiopia (2003) –BIT United States with Uruguay (2005) FTAs with specific chapters –FTAs negotiated by the United States and the European Union –FTA Taiwan-Nicaragua

10. Investment and labor FTA with Nicaragua, Chapter on Labor: Elements Statement of share commitment Enforcement of labour laws Procedural guarantees and public awarness Institutional arrangements Labour affairs committee Labour and capacity building mechanism Principles of corporate stewardship Cooperative labour consultations

11. Investment and environment: Some Key Policy Questions The debate –Notion of «environmental dumping» –Different variables: Cost of green productive methods tend to be higher in capital exporting countries Need to avoid contradictory incentives «Polluter pays» principle Legal coherence with environmental agreements –Clean development mechanisms (CDMs) In 2009, projected annual reductions in emissions through CDM projects amount to 270 million tons. In 2003, global carbon emissions were 26 billion tons. CDMs have played small role in emission reduction –How to foster green FDI? Standards Liberalization of organic and «green technology» goods Liberalization of environmental services TRIPs Rules of origin –This debate has not yet seriously started…

12. Investment and environment: Approaches in IIAs Legal trade sanctions –Advocated by certain groups in the U.S. Legal sanctions –Monetary fines for cooperation fund –Recent U.S. FTAs Side agreements –NAFTA Framework to allow civil society exert direct pressure –European approach Cooperative intra-governmental approach –Some EU FTAs, Taiwan-Nicaragua FTA

13. Investment and Environment Treatment of the issue under different IIAs Preambles –Agreement that investment promotion can be achieved without relaxing environmental protection standards Clauses on investment chapters or IIAs –Taiwan FTAs –US BITs and FTAs FTAs with specific chapters –FTAs negotiated by the United States and the European Union –FTA Taiwan-Nicaragua

14. Investment and Environment Taiwan-Panama FTA Investment Chapter Article 10.15 Environmental Measures 1.Nothing in this Chapter shall be construed to prevent a Party from adopting, maintaining or enforcing any measure otherwise consistent with this Chapter that it considers appropriate to ensure that investment activity in its territory is undertaken under its ecological or environmental laws. 2.The Parties recognize that it is inappropriate to encourage investment by relaxing domestic health, safety or environmental measures. Accordingly, a Party shall not waive or otherwise derogate from, or offer to waive or otherwise derogate from, such measures as an encouragement for the establishment, acquisition, expansion or retention in its territory of an investment of an investor. If a Party considers that the other Party has offered such an encouragement, it may request consultations with the other Party.

15. Investment and Environment Taiwan-Nicaragua FTA Chapter on Environment: Elements Levels of Protection Enforcement of Environmental Laws Procedural Matters Voluntary Mechanisms to Enhance Environmental Performance Principles of Corporate Stewardship Environmental Affairs Committee Opportunities for Public Participation Environmental Cooperation Environmental Consultations Relationship to Environmental Agreements

16. Thank you for your attention roberto.echandi@wti.org