Over the years, international investment agreements (IIAs) have become a crucial tool for promoting foreign investment and protecting the interests of investors across borders. These agreements, which are negotiated between countries, define the terms and conditions under which foreign investors can operate in the host country and enjoy legal protection against discriminatory treatment. However, with the emergence of a new generation of IIAs, some features that were once commonplace in earlier agreements have disappeared. In this article, we will explore what these missing features are and why they are no longer present in the new generation of IIAs.
1. Investor-State Dispute Settlement (ISDS) Mechanisms
One of the most controversial features of earlier IIAs was the inclusion of ISDS mechanisms. These provisions granted foreign investors the right to sue host countries in international arbitration tribunals for any perceived violations of their rights, including expropriation without compensation, discriminatory treatment, and breaches of contractual obligations. However, while ISDS mechanisms were once a standard feature of IIAs, they have now largely fallen out of favor. Many countries, especially in the Global South, view ISDS as a tool of corporate power that undermines their sovereignty and undermines their ability to regulate in the public interest. As a result, the new generation of IIAs tends to leave out ISDS provisions or limit their scope.
2. Investment Protection Provisions
Another missing feature in the new generation of IIAs is comprehensive investment protection provisions. Earlier IIAs included provisions that protected investors from expropriation without compensation, guaranteed fair and equitable treatment, and provided for compensation in case of losses due to political risks or force majeure events. However, these provisions were often criticized for being overly broad and providing investors with excessive protection at the expense of host countries` regulatory sovereignty. In response, the new generation of IIAs tends to limit investment protection provisions to the minimum necessary to provide a stable and predictable regulatory environment for investors.
3. National Treatment and Most-Favored-Nation (MFN) Clauses
National treatment and MFN clauses were once standard features of IIAs. These clauses required host countries to treat foreign investors no less favorably than domestic investors and to extend to them the same treatment that they provided to investors from other countries. However, these clauses have given rise to some of the most controversial ISDS cases, as investors have used them to challenge a wide range of domestic regulatory measures, such as environmental and public health laws, claiming that they violate their rights to national treatment and MFN treatment. As a result, the new generation of IIAs tends to exclude these clauses or limit their scope.
In conclusion, the new generation of IIAs represents a departure from earlier agreements in many respects. While the specific features of these agreements may vary depending on the negotiating parties` interests and priorities, many of the traditional features that were once considered standard have disappeared or been limited. This reflects a growing recognition that IIAs should balance the need to promote foreign investment and protect investors` interests with the need to safeguard host countries` regulatory sovereignty and ability to regulate in the public interest.