Dominic Dagbanja
Dominic Dagbanja
Dominic Dagbanja
Lecturer in Law, The University of Western Australia Law School; BA (Hons), University of
Ghana, 2000; LLB (Hons), University of Ghana, 2003; BL, Ghana School of Law; LLM,
University of the Pacific; LLM, The George Washington University; PhD. I would like to thank
Professor Jane Kelsey very much her detailed and critical feedback towards the completion of
this article.
145 University of Western Australia Law Review Vol 44(2): 1
I I NTRODUCTION
1
Marek Jeżewski, There Is No Freedom Without Solidarity : Towards A New Definition of
Investment In International Economic Law, Society of International Economic Law Inaugural
146 University of Western Australia Law Review Vol 44(2): 1
In spite of the fact that states enter into IIAs to attract foreign
investment for development3 as shown in Part II below, investment
tribunals and scholars are divided as to whether an investment’s
contribution to development is an element in the definition of the concept
of investment. They are consequently not agreed on whether an
investment should be entitled to protection under an IIA if it does not make
any contribution to the development of the host state. As Dr Diane
Desierto stated4:
Conference, Geneva, July 15-17, 2008 Online Proceedings, Working Paper No. 51/08)
<http://www.ssrn.com/link/SIEL-Inaugural-
Conference.html>, 27-28.
2
Hans Morgenthau, ‘What Is the National Interest of the United States?’ (1952) 282 The
Annals of the American Academy of Political and Social Science 1.
3
M Sornarajah, Resistance and Change in the International Law on Foreign Investment
(Cambridge University Press, 2015); M Sornarajah, The International Law on Foreign
Investment (3edn Cambridge University Press, 2010); Jeswald W Salacuse, The Law of
Investment Treaties (Oxford University Press, 2010); and Andrew T Guzman, ‘Why LDCs Sign
Treaties that Hurt Them: Explaining the Popularity of Bilateral Investment Treaties’ (1997) 38
Virginia Journal of International Law 639.
4
Diane A. Desierto, ‘Deciding International Investment Agreement Applicability: The
Development Argument in Investment’ in Freya Baetebs (ed), Investment Law within
International Law: Integrationist Perspectives (Cambridge University Press, 2013) 240, 240-
241.
147 University of Western Australia Law Review Vol 44(2): 1
5
Sornarajah, Resistance and Change, above n 3, 162.
6
Jeżewsk, above n 1.
148 University of Western Australia Law Review Vol 44(2): 1
for the contribution an investment will make to development for the host
states. Therefore, contribution to development or lack of it must be taken
into consideration in deciding whether the investment should be entitled to
protection if it is a stated objective of the applicable IIA. I point out the
centrality of development as one of the purposes for the making of IIAs
and the need for that purpose to be factored into investment dispute
settlement. I make a purposive case for an approach to dispute resolution
that takes into account the rights of private business and commercial
parties to the dispute without compromising any of the purposes of the
governing legal text and the autonomy of states to regulate generally to
promote development.
7
Nitish Monebhurrun, ‘The Political Use of the Economic Development Criterion in Defining
Investments in International Investment Arbitration’ (2012) 29(5) Journal of International
Arbitration 567, 573.
8
Omar E. García-Bolívar, Defining an ICSID Investment: Why Economic Development Should
be the Core Element (International Institute for Sustainable Development, 13 April 2012)
<https://www.iisd.org/itn/2012/04/13/defining-an-icsid-investment-why-economic-development-
should-be-the-core-element/> 1; Aniruddha Rajput, ‘Definition “Investment” – A Developmental
Perspective’ (2013) 2(1) Indian Journal of Arbitration Law 12; and Prabhas Ranjan, ‘Definition
of Investment in Bilateral Investment Treaties of South Asian Countries and Regulatory
Discretion’ 26(2) Journal of International Arbitration 217 However see Alex Grabowski ‘The
Definition of Investment under the ICSID Convention: A Defense of Salini” (2014) 6(1) Chicago
Journal of International Law 287 for some textual analysis.
149 University of Western Australia Law Review Vol 44(2): 1
9
Laurens JE Timmer, “The Meaning of ‘Investment’ as a Requirement for Jurisdiction Ratione
Materiae of ICSID Centre” (2012) 29(4) Journal of International Arbitration 363, 368-372.
10
Jeżewski, above n 1; Mary E. Hiscock, ‘The Emerging Legal Concept of Investment’ (2009)
27(3) Penn State International Law Review 765; Mavluda Sattorova, ‘Defining Investment
Under the ICSID Convention and BITs: Of Ordinary Meaning, Telos, and Beyond’ 2 Asian
Journal of International Law 267; Engela C. Schlemmer, ‘Investment, Investor, Nationality, and
Shareholders’ in Peter Muchlinski, Federico Ortino, and Christoph Schreuer (ed), The Oxford
Handbook of International Investment Law (Oxford University Press 2008) 50; and OECD,
International Investment Law: Understanding Concepts and Tracking Innovations (17 March
2008) Chap 1.
150 University of Western Australia Law Review Vol 44(2): 1
the making of IIAs, which includes states’ search for development through
foreign investment. Part V develops basic arguments that need to be
taken into consideration in interpreting IIAs. It is also normative. The
normative position proposes a reform of the content of IIAs through the
integration of development concerns in the substantive terms of IIAs and
the imposition of positive obligations on foreign investors to ensure that
their investments make contribution to the development of their host
states. Part VI, which is the conclusion, reiterates the centrality of
development an objective in the making of IIAs and the need for that
objective to be taken into consideration in the interpretation of IIAs.
11
On trade and development see: UNCTAD, World Investment Report 2013: Global Value
Changes: Investment and Trade for Development (United Nations 2013) ; D Irwin, Against the
Tide : An Intellectual History of Free Trade (Princeton University Press, 1996); Mervyn Martin,
WTO Dispute Settlement Understanding and Development (Brill, 2013); M Cordonier Segger,
M Gehring and A Newcombe (eds.), Sustainable Development in World Investment Law,
(Kluwer Law International 2011); John H Dunning, Re-evaluating the Benefits of Foreign Direct
Investment (1994) 3 Transnational Corporations 23; Kojo Yelpaala, Costs and Benefits of
Foreign Direct Investment: A Study of Ghana (1980-1981) 2 New York University Journal of
International and Comparative Law 72; Emily Lydgate, “Sustainable Development in the WTO:
From Mutual Supportiveness to Balancing” (2012) 11(4) World Trade Review 621; Carlos
Pomareda and Carlos Murillo, The Relationship between Trade and Sustainable Development
of Agriculture in Central America (International Institute for Sustainable Development, 2003),
<https://ase.tufts.edu/gdae/Pubs/rp/tkn_trade_sd_agi_sum.pdf>; World Trade Organisation
Harnessing Trade for Sustainable Development and a Green Economy,
https://www.wto.org/english/res_e/publications_e/brochure_rio_20_e.pdf; and International
Trade and Sustainable Development Policy (International Centre for Trade and Sustainable
Development, Brief June
2014)<https://www.google.com.au/?gfe_rd=cr&ei=3gPnWIHLGJHrugT_nInIBg#q=international
+trade+and+sustainable+development+pd>
152 University of Western Australia Law Review Vol 44(2): 1
12
Sornarajah, Resistance and Change, above n 3, 107-108; Jane Kelsey, The Fire Economy:
New Zealand’s Reckoning (Bridget William Books, 2015), 121-149; Jane Kelsey, Reclaiming
the Future: New Zealand the Global Economy (Bridget Williams Books, 2000), 200.
13
Sornarajah, Resistance and Change, above n 3, 107-108.
153 University of Western Australia Law Review Vol 44(2): 1
14
Kofi Annan, ‘Foreword’ in UNCTAD, World Investment Report 2003: FDI Policies for
Development: National and International Perspectives (United Nations, 2003) iii.
15
Ibid.
16
Terutomo Ozawa, ‘Foreign Direct Investment and Economic Development’ (1992) 1
Transnational Corporations 27
154 University of Western Australia Law Review Vol 44(2): 1
country serious about raising living standards “must open its economy so
as to avail itself of opportunities to trade, interact with and learn from the
already advanced.”17 This is because the advanced countries are not only
“the rich reservoirs of industrial technology, information and experiences
which the followers can tap,”18 “[t]hey also provide the promising export
markets from which the less developed can earn precious hard
currencies.”19 Thus, as summed up by Professor Sornarajah , the
“premise on which investment treaties are made is that foreign investment
leads to economic development and that foreign investment treaties lead
to greater flows of foreign investment.”20 However, in theory and practice
this is not always so.21 Professor Ozawa’s claim as to technology transfer
arising from trade and investment is quite exaggerated to the extent that
international agreements (such as Commission Regulation (EU) No
316/2014) restrict or limit technology transfer.22 To the extent that
investment and trade are not the sole panaceas or sufficient conditions for
development, the terms of IIAs to promote and protect investment and
trade must make room for the adoption of general policies that equally
promote development.
17
Ibid 27.
18
Ibid.
19
Ibid.
20
Sornarajah, Law on Foreign Investment, above n 3, 229. For further readings on why states
sign investment treaties see: Sornarajah, Resistance and Change, above n 3, 78-135 and
136-190; in Chester Brown and Kate Miles (eds) Evolution in Investment Treaty Law and
Arbitration (Cambridge University Press, Cambridge 2011) 271; Kate Miles, The Origins of
International Investment Law: Empire, Environment and the Safeguarding of Capital
Cambridge University Press, 2013); Antony Anghie, Imperialism, Sovereignty and the Making
of International Law (Cambridge University Press, 2005) 445; Kojo Yelpaala “Fundamentalism
in public health and safety in bilateral investment treaties [Part I]” (2008) 3(1) Asian Journal of
WTO and International Health Law and Policy 242 at 249; and Dominic N Dagbanja, “The
Limitation on Sovereign Regulatory Autonomy and Internationalization of Investment Protection
by Treaty: An African Perspective” (2015) 60(1) Journal of African Law 1
21
M Sornarajah and Leo Trakman, “A Polemic: The Cases for and Against Investment
Liberalization” in Leon A Trakman and Nicola W Ranieri (eds) , in Leon A Trakman and Nicola
W Ranieri (eds), Regionalism in International Investment Law (Oxford University Press, 2013)
499, 504
22
Commission Regulation (EU) No 316/2014 of 21 March 2014 < http://eur-
lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32014R0316&from=EN>
155 University of Western Australia Law Review Vol 44(2): 1
The stated premise of the first IIA, reached between Germany and
Pakistan in 1959, was the states’ conviction that it was likely to promote
investment, encourage private industrial and financial enterprise and
increase the prosperity of both states.27 The Convention on the Settlement
of Investment Disputes between States and Nationals of Other States of
the International Centre for the Settlement of Investment Disputes (ICSID
23
M Sornarajah, Resistance and Change, above n 3, 81-86; Lauge N. Skovgaard Poulsen,
Bounded Rationality and Economic Diplomacy: The Politics of Investment Treaties in
Developing Countries (Cambridge University Press, 2015); Lauge N Skovgaard Poulsen,
‘Bounded Rationality and the Diffusion of Modern Investment Treaties’ (2014) 58(1)
International Studies Quarterly 1; and Lauge N Skovgaard Poulsen and Emma Aisbett, ‘When
the Claim Hits: Bilateral Investment Treaties and Bounded Rational Learning’ (2013) 65(2)
World Politics 273
24
Sornarajah, Resistance and Change, above n 3, 81, 107-108; Sornarajah, Law on Foreign
Investment, above n 3, 82-88; Guzman, “Why LDCs Sign Treaties that Hurt Them” above n 3;
Salacuse, above n 3; Kenneth J Vandevelde, Bilateral Investment Treaties: History, Policy,
and Interpretation (Oxford University Press, 2010); Rudolf Dolzer and Christoph Schreuer,
Principles of International Investment Law (Oxford University Press, 2008) and Reinisch
August (ed), Standards of Investment Protection (Oxford University Press, 2008).
25
Dominic N Dagbanja, “The Investment Treaty Regime and Development Policy in Ghana:
Analysis in Constitutionalism and General International Law” in Andrea K Bjorklund (ed),
Yearbook on International Investment Law and Policy 2014-2015 (Oxford University Press
2016) 405
26
UNCTAD, Investment Policy Monitor (No 19, March 2018)
<http://unctad.org/en/PublicationsLibrary/diaepcb2018d1_en.pdf> ; See also UNCTAD, World
Investment Report 2016: Investor Nationality: Policy Challenges (United Nations Publication,
2016) xii and 104 for 2016 figure.
27
Pakistan and Federal Republic of Germany Treaty for the Promotion and Protection of
Investments, signed at Bonn, on 25 November 1959.
156 University of Western Australia Law Review Vol 44(2): 1
Convention)28 expresses the idea that there was a need for international
cooperation and private international investment for the attainment of
economic development. The obligations to protect foreign investment in
these international conventions were thus linked to role that foreign
investment was expected to play in the host countries. The IIAs, it is
claimed, can attract foreign investment by establishing standards of
investment protection such as fair and equitable treatment, full protection
and security, national treatment, most-favoured-nation treatment,
repatriation of investment returns and prohibition against direct and
indirect expropriation.29
T HE R ELEVANCE O F C ONTRIBUTION O F
III
I NVESTMENT T O D EVELOPMENT I N I NVESTOR -S TATE
D ISPUTE S ETTLEMENT
28
Convention on the Settlement of Investment Disputes between States and Nationals of Other
States entry into force on 14 October 1966.
29
Sornarajah, Resistance and Change, above n 3, 78-135; Ignaz Seidl-Hohenveldern ‘The
ABS-Shawcross Draft Convention to Protect Private Foreign Investment: Comments on the
Round Table’ (1961) 10 Journal of Public Law 100; Salacuse, above n 3, 87-141; Vandevelde,
above 24, 19-74; Leon E Trakman and Nicola W Ranieri “ Foreign Direct Investment: A
Historical Perspective” in Ranieri, Regionalism in International Investment Law, above n 21, 14-
26; and Andreas F Lowenfeld International Economic Law (2edn, Oxford University Press,
2008) 465-591.
30
Christopher Dugan et al, Investor-State Arbitration (Oxford University Press, Oxford, 2008);
and Dodge, William S, ‘Investment Treaties between Developed States: The Dilemma of
Dispute Resolution’ in Rogers, Catherine A, and Alford, Roger P (eds), The Future of
Investment Arbitration (Oxford University Press: New York, 2009) 165; Sornarajah, Resistance
and Change, above n 3, 136-190; M Sornarajah, ‘Evolution or Revolution in International
Investment Arbitration’ in Brown and Miles, Evolution in Investment Treaty Law, above n 20,
631; and M Sornarajah, The Settlement of Foreign Investment Disputes (Kluwer Law
International, 2000).
157 University of Western Australia Law Review Vol 44(2): 1
This Part is primary concerned with finding out the importance that
investment treaty arbitration attaches to contribution to development in
settling investor-state disputes. The analysis reveals the predominant
focus on whether contribution is an element of investment as a condition
for decision whether the investment is entitled to protection and the
consequent neglect of interpreting the applicable IIAs in light of their
objects. The point to be made here is that, since states enter into IIAs to
promote a number of objectives including development yet development
an objective is not central in investment arbitral decision-making, states
need to reconsider whether investment treaties and investment arbitration
are the appropriate mechanisms to advance their development goals.
31
Société Générale v. Dominican Republic, LCIA Case No UN 7927, UNCITRAL Arbitration
Rules, Award on Preliminary Objections to Jurisdiction 19 September 2008.
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Thus, in finding that the investor had made an investment, the Tribunal
held that the principal objective of the transaction was the potential
profitability of the investment in the hope that the electricity sector in the
Dominican Republic would become financially viable since the investors
were involved financial services and investment funs.36 Finally, the
Tribunal held that the “issue of specific contribution made to the local
economy by a transaction of this kind might not be as easy to identify …
but this of course does not disqualify financial investments from
protection”37 under the treaty.
36
Ibid [34].
37
Ibid [35].
38
Ibid [31].
39
Ibid [31].
40
Ibid [32].
160 University of Western Australia Law Review Vol 44(2): 1
their objects. Thus to the extent that a treat’s object is stated in its
preamble the substantive terms of the treaty must be interpreted in
reference to the object as contained in the preamble because the context
of a treaty includes its preamble. So preambles will always be necessary
to refer to so long as they contain the objects of the applicable treaties. In
this case, the Tribunal focused on the definition of the investment and not
the objects of the IIA in deciding whether the investment was entitled to
protection. Yet, the issue whether contribution is an element of the
investment could only be appropriately interpreted contextually, that is if
the definition of investment were considered in reference to the objects of
the IIA.
41
Consorzio Groupement LESI-DIPENTA v Algeria, ICSID Case No ARB/03/08, Award (10
January 2005).
42
Agreement on the Promotion and Reciprocal Protection of Investments between Algeria and
Italy, entry into on 26 force November 1993.
161 University of Western Australia Law Review Vol 44(2): 1
43
Consorzio Groupement LESI-DIPENTA v. Algeria, above n 41 [13)(iv)].
44
Ceskoslovenska Obchodni Banka AS v Slovak Republic, ICSID Case No ARB/97/4,
(Decision of the Tribunal on Objections to Jurisdiction, 24 May 1999 [64].
45
Ibid.
46
Ibid at [66].
47
Agreement between the Government of the Slovak Republic and the Government of the
Czech Republic Regarding the Promotion and Reciprocal Protection of Investments signed on
23 November 1992, entered into force on January 1993
162 University of Western Australia Law Review Vol 44(2): 1
48
Ceskoslovenska v Slovak Republic, above n 44 [68].
49
Electrabel SA v Republic of Hungary, ICSID Case No. ARB/07/19, Decision on Jurisdiction,
Applicable Law and Liability (30 November 2012).
50
Ibid [5.43].
51
Saba Fakes v Turkey, ICSID Case No. ARB/07/20 [97] (emphasis added).
52
Ibid.
163 University of Western Australia Law Review Vol 44(2): 1
53
Sornarajah, Resistance and Change, above n 3, 156.
164 University of Western Australia Law Review Vol 44(2): 1
There are other cases that hold the contrary view that the contribution of
an investment to the development is an element of the concept of
investment and should be taken into consideration in making decision
whether such an investment is entitled to legal protection under the
applicable treaty. The argument is that IIAs are intended to protect
investments that promote the economic development of the host state. 54
The cases that adopt this argument follow the same route as those
rejecting contribution to development as an essential element of
investment analyzed above. They decided whether an investment is
entitled to protection by focusing on whether contribution to development
was an element of investment of investment and not whether it was an
objective of the applicable IIAs. This article is an alternative to that
approach.
54
Ibid 153
165 University of Western Australia Law Review Vol 44(2): 1
55
Fedax NV v Republic of Venezuela, ICSID Case No ARB/96/3, Decision of the Tribunal on
Objection to Jurisdiction (11 July 1997).
56
Agreement on Encouragement and Reciprocal Protection of Investments between the
Kingdom of the Netherlands and the Republic of Venezuela entered into force 1 November
1993 art 3.
57
Fedax v Venezuela, above n 55 [43].
58
Ibid.
166 University of Western Australia Law Review Vol 44(2): 1
59
Salini Costruttori SpA & Italstrade SpA v Morocco, ICSID Case No ARB/00/4, Decision on
Jurisdiction (23 July 2001).
60
Ibid at [52].
61
Ibid.
62
Ibid at [57].
63
Patrick Mitchell v The Democratic Republic of Congo, Case No. ARB/99/7, Decision on the
Application for Annulment of the Award, 1 November 2006, at [33] (emphasis added). Among
the cases Malaysian Historical Salvors Sdn, BHD v. Malaysia, ICSID Case No. ARB/05/10,
Award on Jurisdiction, 17 May 2007, at [143] seem to have made a bold departure by holding
that there was the need for a transaction to make substantial contribution to the host country’s
development to qualify as an investment. This decision was subsequently annulled Malaysian
Historical Salvors Sdn, BHD v Malaysia, ICSID Case No ARB/05/10, Decision on an
Application for Annulment, 16 April 2009 [61] and [80].
167 University of Western Australia Law Review Vol 44(2): 1
In effect, some of the foregoing cases are authorities for the legal
proposition that contribution to a host country’s development is an element
of the concept of investment and that the legal obligation to protect an
investment does not subsist if an investment does not make contribution
to development. This later group of cases seeks to balance investors’ right
of protection under IIAs with states’ right to benefit from covered
investments. Yet, other tribunals, as stated, are of the view they are not
under any obligation to make a finding that a particular investment has to
contribute to a host country’s development. It is sufficient for the purpose
of determining whether a transaction constitutes an investment and is
entitled to investment treaty protection if the transaction is important,
significant or has the potential to contribute to the host country’s
development. A finding that a transaction has actually contributed to a
country’s development is not relevant in determining whether the
64
Mitchell v Congo, above n 63 [27-41].
65
Malaysian Historical Salvors v Malaysia, Award on Jurisdiction, above n 63. However,
Malaysian Historical Salvors v Malaysia, Annulment, above n 63, [56-61] found the same
contract to be an investment without reference to the need for contribution to development.
66
Alex Genin Eastern Credit Ltd Inc v The Republic of Estonia, Case No. ARB/99/2, Award,
25 June 2001, [348].
67
Pantechniki S.A. Contractors & Engineers (Greece) v The Republic of Albania, ICSID Case
No ARB/07/21, Award, 30 July 2009 [81-82].
68
Amoco Asia Corporation v Republic of Indonesia, ICSID Case No. ARB/06/18, Decision on
Jurisdiction and Liability,25 September 1983[23].
69
Joseph Charles Lemire v Ukraine, ICSID Case No. ARB/O6/18, Decision on Jurisdiction and
Liability, 14 January 2010 [272-273].
168 University of Western Australia Law Review Vol 44(2): 1
70
Sornarajah, Resistance and Change, above n 3, 159.
169 University of Western Australia Law Review Vol 44(2): 1
71
Ibid 162.
72
Société Générale v Dominican Republic, above n 31.
73
Malaysian Historical Salvors Sv Malaysia, Annulment, above n 63, Dissenting Opinion of
Judge Mohamed Shahabuddeen [21]
170 University of Western Australia Law Review Vol 44(2): 1
74
Continental Casualty Company v. Argentina, ICSID Case No ARB/03/9, Award, 5 September
2008; LG & E Energy Corporation v Argentina, Decision on Liability, ICSID Case No ARB
02/1, 3 October 2006; Enron Corporation v Argentina ICSID Case No. ARB/01/3, Award, 22
May 2007.
75
Salacuse, above n 3, 45.
171 University of Western Australia Law Review Vol 44(2): 1
76
Ibid 45
77
Ibid.
78
Agreement between the Government of the United Kingdom of Great Britain and Northern
Ireland and the Government of the Republic of Ghana for the Promotion and Protection of
Investments (signed 22 March1989, entered into force 25 October 1991 (“Ghana-United
Kingdom Investment Treat”).
79
Ibid.
80
Ibid.
81
Agreement on Encouragement and Reciprocal Protection of Investments between the
Kingdom of the Netherlands and the Republic of Ghana (signed 31 March 1989, entered into
force 1 July 1991 (“Ghana-Netherlands investment Treaty” ).
82
Ibid preamble.
83
Ibid.
172 University of Western Australia Law Review Vol 44(2): 1
84
Agreement between the Government of the Republic of Ghana and the Government of
Malaysia for the Promotion and Protection of Investments (signed on 8 November 1996,
entered into force18 April 1997 (“Ghana-Malaysia Investment Treaty”).
85
Ibid. preamble.
86
Ibid preamble.
87
Agreement between the People’s Republic of China and the Government of the Republic of
Ghana Concerning the Encouragement and Reciprocal Protection of Investments (signed 12
October 1989, entered into force on 22 November 1991(“Ghana-China Investment Treaty).
88
Ibid preamble.
89
Ibid.
90
Dagbanja, Treaty Regime and Development Policy, above 25, 419-429.
173 University of Western Australia Law Review Vol 44(2): 1
91
Agreement Establishing the World Trade Organisation, Marrakesh, 15 April 1994,
https://www.wto.org/english/docs_e/legal_e/04-wto.pdf. See also Mervyn. Martin, WTO Dispute
Settlement Understanding and Development (Brill, 2013), 19.
92
Pascal Lamy, The WTO Path to Sustainable Development and the Green Economy (Speech
at the Rio+20 Earth Summit on 20 June 2012),
https://www.wto.org/english/news_e/sppl_e/sppl237_e.htm. A useful reading on the various in
which development might be defined within the WTO system is
174 University of Western Australia Law Review Vol 44(2): 1
It is clear from the preamble that the WTO places first priority on advancing
economic growth, preferable through a sustainable and equitable manner in
each participating economy. International trade, especially freer trade, is
perceived to play a most beneficial role in enhancing national productivity and
increasing an economy’s exposure to advanced technology. The ultimate goal
of development, at any time, must be carefully distinguished from the means of
maximizing trade.
Seema Sapra, “Development: Its Place, Treatment, and Meaning at the WTO” (29 March – 1
April 2006) 100 Proceedings of the Annual Meeting (American Society of International Law)
223-226
93
Juan He, The WTO and Infant Industry Promotion in Developing Countries: Perspectives on
the Chines Large Civil Aircraft Industry (Routledge, 2015) 49-50.
94
Agreement on Trade-Related Investment Measures,
https://www.wto.org/english/docs_e/legal_e/18-trims.pdf.
175 University of Western Australia Law Review Vol 44(2): 1
An analysis of the preamble to the WTO and other IIAs thus points to
the centrality of development their objective. The substantive terms of IIAs
designed to promote trade and investment including fair and equitable
treatment, national treatment, most-favour national treatment,
expropriation and rules on tariffs and non-tariff barriers are agreed to not
just to protect trade and investment as ends in and of themselves or just
for the sake of traders and investors alone but ultimately to advance the
development of states parties to these agreements.98 It means that
dispute settlement mechanisms under both trade and investment legal
95
Trans-Pacific Partnership Agreement <http://dfat.gov.au/trade/agreements/tpp/official-
documents/Pages/official-documents.aspx> (emphasis added)
96
Peter Van den Bosche and Werner Zdouc, The Law and Policy of World Trade Organization
(3edn, Cambridge University Press, 2013) 30.
97
Ibid 33 (emphasis original).
98
García-Bolívar, Defining an ICSID Investment, above n 8.
176 University of Western Australia Law Review Vol 44(2): 1
99
Francis Bennion, Bennion on Statutory Interpretation: A Code (5edn, LexisNexis, 2008) 944
and 732.
100
Imperial Tobacco Ltd v Attorney-General [1979] QB 555, 575; Olivier v Buttigieg [1967] AC
115, 128; and Hollinrake v Truswell (1894) 3 ChD 420, 427.
101
Mathew v State of Trinidad and Tobago [2005] UKPC 33, [2005] 1 AC 433 [46]. Bennion,
above n 99, 732.
102
Dagbanja, Treaties and Development Policy, above n 25, 453.
103
Campbell McLachlan, “Investment Treaties and General International Law” (2008) 57
International and Comparative Law Quarterly 361; and Campbell McLachlan, “The Principle of
Systematic Integration and Article 31(3)(c) of the Vienna Convention” (2005) 54 International
and Comparative Law Quarterly 279
178 University of Western Australia Law Review Vol 44(2): 1
The context for the purpose of the interpretation of a treaty shall comprise, in
addition to the text, including its preamble and annexes.
107
LG&E Energy Corp v The Argentine Republic, ICSID Case No ARB/02/1, Decision on
Liability, 3 October 2006, [124]; and Saluka Investments BV (The Netherlands) v Czech
Republic, Partial Award, 17 March 2006, [298]
108
European Communities - EC Measures Concerning Meat and Meat Products (Hormones),
WT/DS26/AB/R, WT/DS48/AB/R, (adopted 16 January 1998) [181]; and India - Patent
Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS50/AB/R (19
December 1997) [45].
109
A detailed account of the role of preambles in treaty interpretation is Max H Hulme,
‘Preambles in Treaty Interpretation’ (2016) University of Pennsylvania Law Review 1281.
110
For example: Rights of Nationals of the United States of America in Morocco (Fr. v. U.S.),
Judgment, 1952 ICJ Rep. 176, 196-98 (Aug. 27); Territorial and Maritime Dispute (Nicaragua v.
Colombia), Judgment, ICJ Reports 2012, 624 [126]; and Sovereignty over Pulau Ligitan and
Pulau Sipadan (Indonessia v. Malaysia), Judgment, 2002 ICJ 625 [51]
180 University of Western Australia Law Review Vol 44(2): 1
The principles of interpretation that are set out in Articles 31 and 32 are to be
followed in a holistic fashion. The interpretative exercise is engaged so as to
yield an interpretation that is harmonious and coherent and fits comfortably in
the treaty as a whole so as to render the treaty provision legally effective. A
word or term may have more than one meaning or shade of meaning, but the
identification of such meanings in isolation only commences the process of
interpretation, it does not conclude it. Nor do multiple meanings of a word or
term automatically constitute ‘permissible’ interpretations within the meaning of
111
Isabelle Van Damme, ‘Treaty Interpretation by the WTO Appellate Body’ (2010) 21(3) The
European Journal of International Law 605, 619.
112
Ibid 619-620. See also Hormones, above n 108 and Pharmaceutical and Agricultural
Chemical Products, above n 108.
113
United States-Continued Existence and Application of Zeroing Methodology,
WT/DS350/AB/R
(adopted 4 February 2009) [268]
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114
Bennion, above n 99, 944. See also Fothergill v Monarch Airlines Ltd [1981] AC 151, 272;
and Sweet v Parsley [1970] AC 132, 165.
115
Richard K Gardiner, Treaty Interpretation (2edn, Oxford University Press, 2015); Anthony
Aust, Modern Treaty Law and Practice (Cambridge University Press, 2007); Arnold D. McNair,
The Law of Treaties (Clarendon, 1986); Ian Sinclair, The Vienna Convention on the Law of
Treaties. 2edn, Manchester University Press, 1984); Maarten Bos, ‘Theory and Practice of
Treaty Interpretation” (1980a) 27(1) Netherlands International Law Review 3; Maarten Bos,
‘Theory and Practice of Treaty Interpretation” (1980b) 27(1) Netherlands International Law
Review 135; Donald McRae, ‘Treaty Interpretation and the Development of International Trade
Law by the WTO Appellate Body’ in Sacerdoti, Yanovich and Bohanes (eds) The WTO at 10:
The Contribution of the Dispute Settlement System Cambridge University Press, 2006) 360;
and Donald McRae, ‘Approaches to the Interpretation of Treaties: The European Court of
Human Rights and the WTO Appellate Body’ in Stephan Breitenmoser et al (eds), Human
Rights, Democracy and the Rule of Law: Liber amicorum Luzius Wildhaber (2007) 1407.
182 University of Western Australia Law Review Vol 44(2): 1
This is a more subtle and balanced statement of the Treaty’s aims than is
sometimes appreciated. The protection of foreign investments is not the sole
aim of the Treaty, but rather a necessary element alongside the overall aim of
encouraging foreign investment and extending and intensifying the parties’
economic relations. That in turn calls for a balanced approach to the
interpretation of the Treaty’s substantive provisions for the protection of
investments, since an interpretation which exaggerates the protection to be
accorded to foreign investments may serve to dissuade host States from
admitting foreign investments and so undermine the overall aim of extending
and intensifying the parties’ mutual economic relations.
The challenge is how to define and quantify contribution to the
development of the host state. It might be argued that the concept of
‘development’ is amorphous and very broad since it can contain many
elements. This situation can make it difficult for investment tribunals to
define and measure development and the contribution of an investment to
the development of the host state. Salini Costruttori SpA & Italstrade SpA
v. Morocco118 said so, and it has been argued that that there is no shared
understanding of the concept of (economic) development so contribution
to the development of the host state as an element of investment “is
vulnerable to various interpretations.”119 Moreover, it would be difficult to
116
Saluka v Czech Republic, above n 107 [299].
117
Ibid [300].
118
Salini, above n 59.
119
A R Sureda, “Development Considerations in Defining Investment” in M Cordonier Segger,
M Gehring and A Newcombe (eds.), Sustainable Development in World Investment Law,
(Kluwer Law International 2011) 211, 229.
183 University of Western Australia Law Review Vol 44(2): 1
120
Ibid.
121
Annan, above n 14.
122
Ibid.
123
Rahim Moloo,’ Evidentiary Issues Arising in an Investment Arbitration’ in Chiara Giorgetti
(ed), Litigating International Investment Disputes: A Practitioner’s Guide (Brill Nijhoff 2014) 287.
184 University of Western Australia Law Review Vol 44(2): 1
tribunal “may not bring in a finding of non liquet on the ground of silence or
obscurity of the law” (whether IIA or other source of law).
124
Omar E García-Bolívar, ‘Economic development at the core of the International Investment
Regime’ in Brown and Miles, Evolution in Investment Treaty Law, above n 20, 603.
125
Ibid 595.
126
See Christoph H. Schreuer, The ICSID Convention: A Commentary (2edn, Cambridge
University Press, 2009).
185 University of Western Australia Law Review Vol 44(2): 1
127
See Richard Craswell, “Offer, Acceptance and Efficient Reliance” (1996) 48 Stanford Law
Review 481
186 University of Western Australia Law Review Vol 44(2): 1
case, the investor should only enjoy legal protection under the investment
treaty if its investment will contribute to the development of the host state.
The benefit or expected outcome of the investment to the host state, not
the investment itself, is the consideration for the offer to protect made by
the state.128 Thus, investment treaty law and arbitration cannot be
sustained in such a case if its practical implementation is lopsided, where
it focuses solely on the offer by imposing damages or penalties on the
state for failing to fulfill the legal obligation to protect without considering
whether the investor has fulfilled its part of the bargain to an investment
that brings benefits to the host state.129
128
See J. Cumberbatch, “Of Bargains, Gifts and Extortion: An Essay on the Function of
Consideration in the Law of Contract” (1990) 19(3) 19 Anglo-American Law Review 239; K O
Shatwell, “The Doctrine of Consideration in the Modem Law” (1953-4) 1 Sydney Law Review
789; John Swan, “Consideration and the Reasons for Enforcing contracts” (1976) 15 University
of Western Ontario Law Review 83.
129
Stephan W. Schill, Reforming Investor-State Dispute Settlement (ISDS): Conceptual
Framework and Options for the Way Forward (International Centre for Trade and Sustainable
Development, July 2015), <http://e15initiative.org/wp-content/uploads/2015/07/E15-Investment-
Schill-FINAL.pdf> at 4 and 6
130
Sornarah, Resistance and Change, above n 3, 163.
131
A R Sureda, “Development Considerations in Defining Investment” in M Cordonier Segger,
M Gehring and A Newcombe (eds.), Sustainable Development in World Investment Law,
(Kluwer Law International 2011) 211, 235 and Jeżewski, above n 1, 31
187 University of Western Australia Law Review Vol 44(2): 1
132
See Report of the World Commission on Environment and Development: Our Common
Future (1987) available at <http://www.un-documents.net/wced-ocf.htm>
133
See Kojo Yelpaala ‘The Efficacy of Tax Incentives within the Framework of the Neoclassical
Theory of Foreign Direct Investment: A Legislative Policy Analysis’ (1984) 19 Texas
International Law Journal 365, 372.
134
See Kojo Yelpaala ‘In Search for Effective Policies for Foreign Direct Investment:
Alternatives to Tax Incentive Policies’ (1985) 7 Northwestern Journal of International Law and
Business 208, 377.
135
Ibid 221-22
136
Ibid 220-221
137
Ibid 224-225.
138
Ibid 255.
139
Peter Muchlinski Multinational Enterprises and the Law (2edn, Oxford University Press,
Oxford, 2007).
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140
Ibid 32.
141
Damme, above n 111, 620.
189 University of Western Australia Law Review Vol 44(2): 1
1. One of the reasons states enter into IIAs is to attract investment that
will contribute to their development and not necessarily to attract
and protect foreign investment as ends in and of themselves.
Therefore, the obligation to protect foreign is an offer in return for
the consideration, that is, contribution the investment will make to
the development of the host state.
2. Treaties, including IIAs, are to be interpreted in context and in light
of their object and purposes.
3. Unless expressly excluded as not being a constituent element of the
concept of investment in IIA, contribution to development is an
essential element of investment to the extent that an IIA stipulates
of attainment of development as an objective for the making and
coming into being of the IIA.
4. Where contribution to development is a stated objective of an IIA,
an investor that makes an investment and seeks protection under
the IIA undertakes an obligation to ensure its investment makes
such contribution to development in return for the legal protections
available to it under an IIA.
5. Given that IIAs are to be interpreted in light of their context and
object, even if contribution to development is not capable of being
treated as an essential element of investment, the resolution of the
issue whether an investment should be entitled to protection for
want of contribution to the development of the host state should be
dependent on whether such contribution can manifestly be said to
be an objective of the IIA in light of the preparatory materials of the
IIA.
6. If an investment’s contribution to development is an objective of an
IIA it is an element of investment and the investment should not be
entitled to protection under the IIA if it does not make such
contribution unless there is another overriding stated objective.
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In this regard, there is the need to modernise the IIA regime in at least
four aspects. First of all, there is the need to be explicit in the substantive
terms of IIAs about the role that an investment must play to the
development of the host state if such investment is to enjoy legal
protection under the applicable IIA. While recent IIAs (such as TPPA
Articles 9.8 and 9.16) tend to make exceptions for public interest
regulation such as environmental protection, labour rights and limiting the
scope of expropriation standard, those exceptions are commonly qualified
191 University of Western Australia Law Review Vol 44(2): 1
in terms that limit their potency to practically give states the scope they
need to regulate in the public interest. Thus, the specific contribution of an
investment to development must be stated as a positive obligation that
investors must observe. Investors must have an express obligation to
ensure that their investment operations contribute to the development of
the host state.
VI C ONCLUSION
States enter into investment treaties to promote their investment and not
just to protect investment as an end in itself. This is very well settled and is
empirically reflected in the preambles to investment treaties, and most
recently in their substantive terms as contained in chapter 9 of TPPA. In
light of the fact that states conclude investment treaties to protect foreign
investment in order to promote their development by ensuring that foreign
investors are protected from non-commercial risks associated with
regulation in particular, it is important, as Dr Garćia-Bolívar argues:142
to consider in the interpretation of IIAs the intention of the States when entering
into those agreements. In some cases, that interpretation is relatively
straightforward as the IIA itself identifies the intentions of the State Parties, and
sets out the object and purpose of the agreement. But in other instances, the
States’ intentions are not expressly stated. Where this is the case, it is
suggested that the approach adopted by the arbitrators should be one of
looking at all the surrounding circumstances, not only at the preamble and
preparatory work, but also at the raison d’être of the States themselves as well
142
Garćia-Bolívar, above n 124, 588 and 589-590.
193 University of Western Australia Law Review Vol 44(2): 1
as the reasons for entering into the agreement – in order words the promotion
of the welfare and development of communities within the host State.
143
Michael Waibel et al (eds), The Backlash against Investment Arbitration: Perceptions and
Reality (Kluwer Law International, 2010); Suzanne A Spears, “Making Way for the Public
Interest in International Investment Agreements” in Chester Brown and Miles, Evolution in
Investment Treaty Law, p 271; Suzanne A Spears , “The Quest for Policy Space in a New
Generation of International Investment Agreements” (2005) 13(4), Journal of International
Economic Law 1037; and Asha Kaushal, “Revisiting History: How the Past Matters for the
Present Backlash against the Foreign Investment Regime” (2009) 50 Harvard International Law
Journal 491.
194 University of Western Australia Law Review Vol 44(2): 1
144
Biwater Gauff (Tanzania) Ltd v Unit.ed Republic of Tanzania, ICSID CASE NO. ARB/05/22,
Award. 24 July 2008, at [380].