Integrating Sustainable Development into International Investment Agreements

A Guide for Developing Country Negotiators

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As International Investment Agreements (IIAs) continue to evolve and become increasingly complex, a key challenge for developing countries is how to maintain coherent investment obligations that are consistent across any overlapping treaty provisions. An even greater challenge is the effective negotiation of trade in services and investment commitments in Preferential Trade Agreements to make foreign investment supportive of development.

This guide is designed to assist developing countries to negotiate IIAs that are more effective in promoting their sustainable development. It identifies and consolidates emerging best practices from existing treaty models, evaluating the costs and benefits of different approaches; suggesting new and innovative provisions to encourage foreign investment flows; and outlining how states can achieve coherence among their IIAs.

A useful reference tool for developing country negotiators and interested parties, including investment promotion agencies, policy-makers, legislative drafters and officials in government legal departments.



Dispute Settlement

Historically, only a party state had standing to make a claim that another party state had not complied with its obligations under an IIA, even if it was the state’s investor that had suffered a loss as a result. Often, the only direct recourse that foreign investors had when they were unhappy about something a host state had done was through domestic courts or other institutions in the host state under domestic law or, if the dispute related to a contract between the investor and the host state, through any dispute settlement procedure provided in the contract. Most IIAs now give an investor of one party state the right to claim compensation directly against the other party state in binding arbitration if the other party state breaches the substantive standards of investor protection set out in the agreement and cause a loss to the investor.1,2 While investor–state arbitration has some benefits for investors and host states, it also raises a number of serious concerns for host states.


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