A BRIEF ANALYSIS OF TRANSPARENCY REGULATIONS (SECTION II) UNDER THE INVESTMENT FACILITATION DRAFT 2022

[By Sanket Das & Shrey Srivastav]

The authors are students at National Law University Odisha.

Introduction

Successful investment facilitation strategies are built on a solid foundation of transparency and information. By transparency, it is meant that the investors should have knowledge about the pertinent laws which influence their investment decisions. [1] Further, investors should also be apprised of the administrative procedures of the nation they are going to invest in. [2]

The survey found transparency and information to be “very significant” in their role as an investor. The vast majority of respondents ranked “very significant” the publication of relevant laws and regulations influencing foreign direct investment, such as those provided on an Institute for Portfolio Alternatives (IPA) website[3]. The people who took the survey analysed that investment application timelines and expenses must be made public[4].

According to information on investment facilitation measures at the country level, the majority of the 86 countries included in the Investment Facilitation Draft have implemented measures relating to the disclosure (publication of laws and regulations), accessibility of measures , the lack of fees for information access, and specifics on authorisation processes & payments[5].

Transparency as a component under Investment Facilitation Draft

Transparency and information are fundamental to easing the process of making investments. In order to make an informed investment decision, investors need access to knowledge about administrative procedures, laws and other issues that could affect their enterprise.

Transparency of investment incentives

Members must be transparent about the laws, regulations, policies, and processes that control investment incentives. Information on all investment incentives must be published regularly (preferably in English) and made publicly available without prejudice. Investment incentives facilitate Investments in a nation and induces to increased stability and reduced  possibility of rent-seeking. Small and medium-sized enterprises (SMEs) who may have fewer resources for internationalisation and fewer resources to find information will find this material particularly useful. Incentives inventories are being published online by many economies to attract investment. Providing incentives for people to work toward Sustainable Development Goals (SDGs) can be quite helpful.

Dispute between International Investment Agreement (IIA) & Investment Facilitation for Development Agreement (IFD)

Each dispute settlement mechanism used to implement an IFD Agreement and an IIA is distinctive. Given the likelihood of an IFD Agreement being a multilateral or plurilateral agreement under WTO, the disputes under these agreements shall be subject to the exclusive and compulsory jurisdiction of WTO as mentioned under the Dispute Settlement Understanding[6]. The consensus among nations on a certain issue may be indicated by how frequently it appears in IIAs.

However, Investor-State Arbitration (ISA) is permitted in many IIAs. It is now the most common route to an Investor-State Dispute Settlement (ISDS). About one thousand ISA lawsuits have been filed with the International Centre for Settlement of Investment Disputes (ICSID) so far. Given the similarities between an IFD Agreement and an IIA, a state regulatory measure on investment facilitation might fall under both purviews. Thus, parties alleging different treaties could file the same matter to ISA dispute settlement, WTO dispute settlement, or both. As things stand, a number of possibilities exist[7].

Dispute scenarios

For instance, a relief claim is filed with ISA under the IIA and the IFD Agreement. In this hypothetical, we explore if and how an ISA tribunal may handle a challenge brought before the WTO. The well-known instance which best demonstrates this is of Philip Morris Asia vs. Australia.[8] Tobacco Plain Packaging Act was passed in Australia in 2011 to reduce tobacco use for public health reasons. Several lawsuits were filed against Australia after the Act was passed.

The investor argued that Australia should uphold its commitments under the Australia-Hong Kong BIT Model and  the Paris Convention for the Protection of Industrial Property, the Agreement on TRIPS, and the Agreement on Technical Barriers to Trade (TBT). WTO accords include both TRIPS and the TBT pact.

Australia first argued that to import obligations owed by Australia to other states under other treaties the BIT’s umbrella clause could not be used and then argued that the BIT’s dispute settlement provision cannot assert “roving jurisdiction” that would allow a BIT tribunal to start making a broad series of determinations that could conflict with the determinations of the agreed dispute settlement bodies under the nominated multilateral treaty. This is especially true when those organisations have sole authority.

Transparency, simplifying & expediting of administration procedures

There should be a push to streamline and speed up the application and approval processes for investment projects at all levels of government. Members should also think about instituting silent consent administrative processes to make investments easier. Where the competent authority fails to act within the time period needed under its laws and regulations, authorization is automatically granted to investors under the idea of “silent consent”, unless investors have been advised otherwise.[9] Investments with little risk can be approved with minimal scrutiny, while those with higher risk require more time and attention from the administration.

Section II: Transparency of Investment Measures of Investment Facilitation Draft 2022.

Publication and availability of measures and information

In order to make investors, interested parties, and other members become familiar with any relevant general application measures linked to matters falling within its scope, each member is required to disclose or make it readily accessible. The member state is obligated to publish any international agreements to which it is a party.[10] However, this provision can be waived in the case of an emergency situation.

Once a member publishes the text of a law or regulations, there should be a reasonable amount of time before investors to comply.[11] The member shall make every effort to announce in advance the aim and objective of a new legislation or regulation or amendments that are relevant with the legal framework for adopting measures.[12] The Member shall maintain electronically accessible information for investors.[13]

Information relevant to investing in its domain includes the laws and regulations pertaining to FDI[14], details regarding which sectors are open, limited, or prohibited, and any other such data[15]. The information on how to start a company and get it registered, as well as how to procure basic utilities & construction permits, pay taxes, transfer money between investors and resolve insolvency.[16] The information should provide contact details of the relevant authorities.[17] A Member should refrain from disclosing confidential information that would hinder the safety of the public or legitimate business interests of public or private entities.[18]

Information to be made publicly available if an authorization is required for an investment

Suppose a member needs an approval for investment within its territory; In that case, it must make that information publicly available in written form via electronic means, and information up to date with the standards and procedures for procuring, sustaining, amending, and renewing it. This information could concern the technical standards and procedures that are relevant to the investment under consideration.[19]

The form, procedures, timelines for filing an application, licensing fees, public involvement opportunities, application review & compliance procedures, and contact information of the necessary authorities should also be made public.[20] The information must be made freely available in one of the official Word Trade Organization (WTO) languages.[21]

Single information portal

Through a single information portal, a member is encouraged to make the measures and information available by sharing the relevant web links to electronic publications.[22] There won’t be any fees levied for access to the measures and information on investors or those wishing to invest in their territory.[23]

Publication in advance and opportunity to comment on proposed measures

A member should beforehand publish the laws, regulations and documents that have broad application in relation to investments. [24].  A Member is urged to use recommended guidelines and administrative decisions with broad application in connection with issues falling under its purview.[25] A Member must also ensure investors, interested parties, and other Members a chance to provide feedback on the published materials or proposed measures.[26]

Notification to the WTO

A Member must report to the committee regarding any new laws or regulations of broad application, official places where the measures have been accepted for publication and websites.[27]

Conclusion

In investment, transparency and information play an important role. The investor might need a certain sort of knowledge in order to make investment. Through the above-mentioned strategies, investors easily access knowledge that helps them make investment decisions. Information related to investment incentives is also published, which attracts good stability & reduces dependency. The processes of resolving disputes under IIA’s & IFD agreements are completely different. The investor must be obliged to follow the procedures mentioned above. The administration is planning to include silent consent in order to make administration procedures transparent & simple. Lastly, the investment facilitation draft 2022 has some clarity regarding information related to investment transparency and is not ambiguous in nature.

[1]  WTO, “Structured discussions on investment facilitation for development move into negotiating mode”, PRESS RELEASE GENEVA: WTO, (Nov. 26, 2022, 12:39 PM),  https://www.wto.org/english/news_e/news20_e/infac_25sep20_e.htm.

[2] G Sebastian, “Investment Facilitation for development: a new route to global investment governance” DIE BRIEFING PAPER NO. 5/2019, (Nov. 26, 2022, 12:39 PM), https://www.die-gdi.de/en/briefing-paper/article/investment-facilitation-for-development-a-new-route-to-global-investment-governance/.

[3] AR Freitas, “Multilateral Framework of Investment Facilitation at the WTO: Initiatives and Perspectives from the Global South”, CONTEXTO INTERNACIONAL, (Nov. 26, 2022, 12:39 PM), https://www.scielo.br/j/cint/a/73pWMfHRxsHtXP9SZJp5ZKr.

[4] J Zhang, “Investment Facilitation: Making Sense of Concepts, Discussions and Processes Background Note to the IISD Investment Law and Policy Webinar on Investment Facilitation”  (Nov. 26, 2022, 2:39 PM), https://www.iisd.org/system/files/publications/investment-facilitation-webinar-background.pdf.

[5] K Singh, “Do We Need a Multilateral Instrument on Investment Facilitation?” (Nov. 26, 2022, 2:39 PM),  https://www.madhyam.org.in/wp-content/uploads/2017/05/Briefing-Paper-on-MIIF.pdf

[6] K. P Sauvant,  “Insulating a WTO Investment Facilitation Framework from ISDS”, COLUMBIA FDI PERSPECTIVES No.286, (Nov. 26, 2022, 4:39 PM),  http://ccsi.columbia.edu/files/2018/10/No-286-Bermann-Calamita-Chi-and-Sauvant-FINAL.pdf.

[7] S Li, “Convergence of WTO dispute settlement and investor-state arbitration: A closer look at umbrella clauses”, CJIL, 19(1), 189-232 (Nov. 27, 2022, 6:39 PM),  https://chicagounbound.uchicago.edu/cgi/viewcontent.cgi?article=1740&context=cjil

[8] Philip Morris Asia Limited v. The Commonwealth of Australia, UNCITRAL, PCA Case No. 2012-12, Notice of Arbitration, para.7.15-7.17. (Nov. 27, 2022, 8:09 PM),  https://www.italaw.com/sites/default/files/case-documents/ita0665.pdf

[9] Matthew Stephenson, “Digital FDI: Policies, Regulations and Measures to Attract FDI in the Digital Economy”, WORLD ECONOMIC FORUM WHITE PAPER, (Nov. 27, 2022, 9:29 PM), https://www3.weforum.org/docs/WEF_Digital_FDI_2020.pdf.

[10] Investment Facilitation Draft, 2022, § II, Paragraph 5.1.

[11] Investment Facilitation Draft, 2022, § II, Paragraph 5.2.

[12] Investment Facilitation Draft, 2022, § II, Paragraph 5.3.

[13] Investment Facilitation Draft, 2022, § II, Paragraph 5.4.

[14] Investment Facilitation Draft, 2022, § II, Paragraph 5.4 (a).

[15] Investment Facilitation Draft, 2022, § II, Paragraph 5.4 (b).

[16] Investment Facilitation Draft, 2022, § II, Paragraph 5.4 (c).

[17] Investment Facilitation Draft, 2022, § II, Paragraph 5.4 (d).

[18] Investment Facilitation Draft, 2022, § II, Paragraph 11.1.

[19] Investment Facilitation Draft, 2022, § II, Paragraph 6.1.

[20] Investment Facilitation Draft, 2022, § II, Paragraph 6.1.

[21] Investment Facilitation Draft, 2022, § II, Paragraph 6.2.

[22] Investment Facilitation Draft, 2022, § II, Paragraph 7.1.

[23] Investment Facilitation Draft, 2022, § II, Paragraph 8.1.

[24] Investment Facilitation Draft, 2022, § II, Paragraph 9.1.

[25] Investment Facilitation Draft, 2022, § II, Paragraph 9.2.

[26] Investment Facilitation Draft, 2022, § II, Paragraph 9.3.

[27] Investment Facilitation Draft, 2022, § II, Paragraph 10.1.

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