1 1Rahim Moloo, B.Sc. (Queen's University, First Class Honors), LL.B. (University of British Columbia), LL.M. (New York University School of Law) is a Special Legal Consultant in the International Arbitration Group at White & Case LLP in Washington, D.C. The author can be contacted at email@example.com. Alex Khachaturian, B.A. (University of Michigan, with distinction), M.S. (Suffolk University), J.D. (University of Connecticut School of Law, with honors) is an Associate in the Litigation & International Arbitration Groups at White & Case LLP in Washington, D.C. The author can be contacted at firstname.lastname@example.org. The views expressed in this article are those of the authors and not of the Firm. This article was presented at the 2009 Annual Conference of the British Institute of International and Comparative Law on 5 June 2009.
2 2Rahim Moloo, B.Sc. (Queen's University, First Class Honors), LL.B. (University of British Columbia), LL.M. (New York University School of Law) is a Special Legal Consultant in the International Arbitration Group at White & Case LLP in Washington, D.C. The author can be contacted at email@example.com. Alex Khachaturian, B.A. (University of Michigan, with distinction), M.S. (Suffolk University), J.D. (University of Connecticut School of Law, with honors) is an Associate in the Litigation & International Arbitration Groups at White & Case LLP in Washington, D.C. The author can be contacted at firstname.lastname@example.org. The views expressed in this article are those of the authors and not of the Firm. This article was presented at the 2009 Annual Conference of the British Institute of International and Comparative Law on 5 June 2009.
This paper refers to post-conflict states in general terms, that is, states which have begun rebuilding from prolonged civil, armed conflict between at least two parties, one of which is (or affiliated with) the government of a state. 2 RUDOLPH DOLZER & CHRISTOPH SCHREUER, PRINCIPLES OF INTERNATIONAL INVESTMENT LAW 3 (2008). 3MeasurestoAttractFm:InvestmentPromotion,IncentivesandPolicyIntervention, ECONOMIC AND POLITICAL WEEKLY, at 1, available at http://w-ww.ips.org.sg/pub/pa kishen_Mcasurcs%20to%2OAttract%20FDI.pdf Uan. 3, 2004). 4Id. at 1.Seealso Policy Framework for Investment, OECD (2006) at 7 (noting that "[p]rivate investment expands an economy's productive capacity, drives job creation and income growth, and in the case of international investment, is a conduit for the local diffusion of technological and enterprise expertise and spurs domestic investment, including through the creation of local supplier linkages."); MIGA in Post-Conflict Affected Countries 7 (April 2003), availableat http://www.miga.org/documents/post conflict.pdf (noting that "FDI brings three main benefits: (1) attracting needed capital, spurring production, and generating employment in local industries; (2) providing a powerful "demonstration effect," encouraging private investors to remain, rather than flee and also sending a strong signal to global investors that the country is a suitable investment destination; (3) transferring new skills and technology from foreign companies to the local populace."); Speech by U.T. Isayev, General Director, Foreign Investment Agency of the Kyrgyz Republic, at Challenges to Economies in Transition Stabilization, Growth, and Governance International Conference in Honor of the Fifth Anniversary of the Kyrgyz Som "Session VII: Foreign Investment During the Transition: How to Attract It, and How to Make the Best Use of It," (May 27, 1998) availableat http://www.imf.org/extemal/np/eu2/kyrgyz/pdf/isayev.pdf.
s For example, a host state may be in breach of a stabilization clause contained in a contract with a foreign investor if the host state seeks to later enact environmental regulations which adversely affects the foreign investor. 6 Policy Framework for Investment, supra note 4 (discussing, in the context of promoting investment, investment policy; investment promotion and facilitation; trade policy; competition policy; tax policy; corporate governance; policies for promoting responsible business conduct; human resource development; infrastructure and financial sector development, and; public governance). 7 John Hewko, ForeignDirectInvestmentinTransitionalEconomies:DoestheRuleof LawMatter?, EAST EuRO. CONST. REV. (Fall 2002/Winter 2003) at 73, availableat http://www.law.nyu.edu/eecr/voll 1_12num4_1/special/ hewko.pdf
8 Id.9 Id. at 76. 10 Roshan, availableat http://www.roshan.af. 11 ShiningaLight, ECONOMIST, March 8, 2007. About Roshan, availableat http://www.roshan.aflweb/?page_id=2. SeealsoShiningaLight,supra note 11. 13 ShiningaLight,supra note 11. r^ Telecommunications and Internet Policy (Final Working Draft), Islamic Transitional Government of Afghanistan, Ministry of Communications, November 2003, availableat http://www.mcit.gov.af/Documents/ PoliciesandLaws/ Afghanistan%20Telecom%20poIicy-English.pdf Seealso Jim Phelps etal., Middle Eastern Law, 38 INT'L LAW. 703, 708 (2004) (stating "One of the most successful commercial ventures in post-conflict Afghanistan has been the area of wireless communications.... The Afghan government, with the assistance of the World Bank, enacted a new telecommunications policy and has been reforming this area of law and regulation to attract new wireless and landline carriers."). 15 Phelps, supra note 14, at 708. 16 shiningaLight,supra note 11. 1 . 17 MICA in Post-Conflict Affected Countries, supra note 4, at 9.
18 Id. 11 See Hewko, supra note 7, at 74-75. 20Id. at 76. 21 Hcwko, supra note 7, at 78. 22 MK;A in Post-Conflict Affected Countries, supra note 4, at 7. 23 See generally, } an PAULSSON, DENIAL OF Justice IN INTERNATIONAL LAW (2005). 24 See Kenneth Vandevelde, ThePoliticalEconomyofa BilateralInvestmentTreaty, 92 AJ.I.L. 621, 631 (1998). For information on BITS generally, see R1JDOLF DC7LZER & MARGRETE STEVENS, BILATERAL INVESTMENT TREATIES (1995).
zs Vandevelde, supra note 24, at 631. 26 Seeinfra for discussion on Iraq's investment law and constitution providing such protections. 27See,e.g.,AguaytiaEnergyLLCv.Peru, ICSID Case No. ARB/06/13, Award (Nov. 28, 2008) § 72, availableat http://www.investmentclaims.com (in which the Tribunal decided that pursuant to the arbitration agreement contained in the relevant contract and the ICSID Convention, the applicable rules of law were those of Peru and "such rules of international law as applicable."). However, for the purposes of the dispute in Aguaytia the Tribunal found that because Peruvian law and international law led to the same conclusions "for the resolution of this dispute [the Tribunal] need not look beyond Peruvian law." Id, § 74. SeealsoDukeEnergyInternationalPeruInvestmentsNoI,Ltdv.Peru, ICSID Case No. ARB/03/28, Award (July 25, 2008) § 144, availableat http://www.investmentclaims.com (in which the Tribunal decided a contractual dispute where Peruvian law was the law chosen by the parties. The Tribunal noted that international law was also applicable pursuant to rule 42(1) of the ICSID Convention.) The Tribunal decided that "it does not need to address the thorny issue of the content of the minimum standard of treatment" in customary international law, because "the elements that Claimant has argued are part of the international law principles that should be implied as independent guarantees into the DEi Bermuda LSA overlap entirely, in the Tribunal's view, with the protections provided to Claimant under the DEI Bermuda LSA as interpreted under Article 42(1) of the ICSID Convention." Id., § 280. 28 For example Judge Schwebel notes: "The phenomenon of how and when provisions of treaties binding only on the parties to those treaties may seep into general international law and thus bind the international community as a whole is subtle and elusive. It is nevertheless a process known to international law. It is the process of which some 2,200 bilateral investment treaties are the contemporary exemplar." Stephen M. Schwebel, TheReshapingoftheInternationalLawofForeignInvestmentbyConcordantBilateralInvestmentTreaties, in LAW IN THE SERVICE OF HUMAN DIGNITY: ESSAYS IN HONOUR OF FLORENTINO FELICIANO (Steve Chamovitz, Debra Steger
and Peter van den Bosche eds. 2005). Similarly, but more explicitly, Andreas Lowenfeld argues that "[g]iven the large web or BITS covering every continent and countries from the First, Second, and the Third World, a fair inference might be drawn that, taken together, the Bilateral Investment Treaties are now evidence of Customary International Law, applicable even when a given situation or controversy is not explicitly governed by a treaty." ANDREAS LOWENFELD, INTERNATIONAL ECONOMIC LAW 486 (2002). On the other hand, Dolzer and Schreuer have been hesitant to state that the law is settled on this point: "one doctrinal issue that has arisen in discussion pertains to the impact of more than 2,500 treaties on the evolution of customary international law .... [Gliven the vagaries of international economic relations, the reference to customary law in some treaties and the patchwork of the current net of treaties with its remaining gaps, it would be entirely premature to declare that the ongoing controversies on the state of customary law will not occupy foreign offices, judges, and arbitrators in the future." DOLZER & SCHREUER, supra note 2, at 17. 29 See,e.g.,RepublicofGuineav.DemocraticRepublicofCongo, Icj, Preliminary Objections (May 24, 2007), availableat http://www.icj-cij.org/docket/files/103/13856.pdf. The scope of investors that a state can protect through exercising diplomatic protection is more limited than those investors that are often covered under BITS. For example, in BarcelonaTraction,LightandPowerCompany,Limited(NewApplication:1962)(Belgiumv.Spain), IC.J. Rep. 1970, Judgment (Feb. 5, 1970), the Court refused to allow Belgium to make a claim on behalf of Belgian nationals who owned shares in a Canadian company (Barcelona Traction, Light and Power Company Limited) against Spain, the country alleged to have done damage to the company. These concerns relating to standing would not likely have been an issue if the shareholders had direct recourse against Spain under an applicable BIT. See,e.g.,AzurixCorp.v.ArgentineRepublic, Decision on Jurisdiction, ICSID Case No. ARB/Ol/12, 43 I.L.M. 259 (December 8, 2003); CAMGasTransmissionCompanyv.TlieRepublicof Argentina, ICSID Case No. Arab/01/8, Decision of the Tribunal on Objections to Jurisdiction, 42 I.L.M. 788 (July 17, 2003). j° Optic, DoingBusinessWitbUs,availa6leat http://www.opic.gov. 3t Multilateral Investment Guarantee Agency, availableat http://www.miga.org/. 32 Alex Khachaturian, Note, "AreWeInGoodHands?"7 heAdeguacyof AmericanandMultilateralPoliticalRiskInsuranceProgramsinFosteringInternationalDevelopment, 38 CONN. L. REV. 1041, 1062 (2006). Additionally, the premiums for private insurance tend to be much higher while not inspiring the level of confidence of protection that MIGA offers.
11 Id. at 1043. 11 Paul E. Comcaux & N. Stephen Kinsella, ReducingPoliticalRisk inDevelopingCountries:BilateralInvestmentTreaties,StabilizationClauses,andMicA&Opic InvestmentInsurance, 1 N.Y.L. Sctl. J. INT'L & Comp. L. 1, 4 (1994). 3s Convention Establishing the Multilateral Investment Guarantee Agency, donent Seoul on Oct. 11, 1985, enteredinto force Apr. 12, 1988, Art. 11, 1508 U.N.T.S. 99, availableat http://www.miga.org/ (hereinafter "MIGA Convention"). Seealso Rod Morris, TakingtheRisk:ProtectingYourClientswitltPoliticalRiskInsuranceandtheOverseasPrivateInvestmentCorporation, Inns.]., May 17, 2004, http://www.insurancejournal.com/magazines/west/ 2004/05/017 /fcatures/ 42711.htm; MIC;A Guarantees Overview, MIGA Websitc, availableat http://www.miga.org/ guarantecs/index sv.cfin. 30 MIGA Convention, supra note 35, Art. 12. Id. Arts. 14, 15. 3" MIGA in Post-Conflict Affected Countries, supra note 4, at 3. 3v Id. 40 MlGA Convention, supra note 35, Art. 23 (a). 41 rid. Art. 23(a) (i)-(iii). QzId. Art. 23(b) (i)-(iii). ;3 Afghanistan Investment Guarantee Facility, MIGA Website, availableat http://www.miga.org/documents/ IGGafghan.pdf. 44 Id.
45Id. In the case of loans, MIGA may insure up to 95% of the principal plus an additional 135% of the initial principal amount to cover interest. For other forms of equity investment, MIGA may insure up to 90% of the total value of the investment. Id. ^� "Iraq signs MIGA Convention," MIGA Websitc, availableat http://www.miga.org/news/index_sv. cfm?aid= 1625. 4�Id. To become a member of MIGA, Iraq must complete the ratification process and make an initial capital contribution to MIGA. Id.4aSee generally, LOUIS T. WELLS ANI) RAFIQ AHMEI), MAKINC: INVESTMENT SAFE (2007), for a discussion of case studies, particularly in Indonesia, where investments went awry due to physical insecurity. av Measures to Attract FIJI, supra note 3, at 14. 5°TheOtherIraq, FOREIGN Direct INVESTMENT MAGAZINE, availableat http://www.fdimagazine.com/ news/fullstory.php/aid/1554. s' MIGA in Post-Conflict Affected Countries, supra note 4, at 5. 52 Id. at 5, 7. 53Id. at 7. 54Id. at 9. 55 Id.
(,7Id. 68 Transparency International 2008 Corruption Perceptions Index, availableat http://www.transparency.org/ news_room/in_focus/2008/cpi2008/cpi 2008_table. 69KabulSeeksForeignFundstoTakeonCorruption, FINANCIAL Ttrvt>a, Oct. 12, 2008. 70Id. 71 Bert Denolf, 'TheImpactof CorruptiononForeignDirectInvestment, 9 J. WOttLD INVEST. & TRADE 249, 254 (June 2008). �=Id. at 261-262 (summarizing several studies done on this point). Seealso Shang-Jin Wci, HowTaxinqisCorruptiononInternationalInvestors?, 82 Rev. ECON. AND STAT. 82, 1 (2000); Beata K. Smarzynska and Shang-Jin Wei, CorruptionandCross-BorderInvestment:Firm-LevelEiidetice, Brookings Institution Working Paper, availableat http://www.brookings.edu/ - / media/Files/rclpapersI2002/0816macroeconomics - wei/20020816. pdf; Joel Hellman, Geraint Jones, & Daniel Kaufmann, AreForeignInvestorsandMultinationalsEngaginginCorruptPracticesinTransitionEconomies?, TRANSITION, May-July 2000 at 4. �3 Denolf, supra note 71, at 262. 74Id. �5 Madalene O'Donnell, Corruption:ARuleof LawAgenda?,in CIVIL WARS AND THE RULE OF LAW 225, 228 (Agnes Hurwitz and Rcyko Huang eds. 2008).
TheOtherIraq,supra note 50. Seegenerally, Colette Rausch & Vivienne O'Connor, ModelCodes:LayingtheFoundationsof theRuleof Law,in CIVIL WARS AND THE RULE OF LAW 115 (Agn25 Hurwitz & Reyko Huang eds. 2008). 78 O'Donnell, supra note 75 at 229. Id. It should be noted that "(AJdministrative law governs all agencies typically operating under the executive and charged with the 'day-to-day minutiae of governing.'" Id. at 229 (quoting WILLIAM Fox, UNDERSTANDING Administrative LAW 6 (4th ed. 2000)). 80 O'Donnell, supra note 75, at 239. 81 Id. at 245. s2 United Nations Convention against Corruption, doneat New York on Oct. 31, 2003, enteredintoforce Dec. 14, 2005), G.A. res. 58/4, UN Doc. A/58/422 (2003). Seealso OECD Doc. No. DAFFE/IME/BR(97)20 (Dec. 17, 1997); Council ofEurope Criminal Law Convention on Corruption, doneat Strasbourg on Jan. 27, 1999, enteredintoforce Jan. 7, 2002, CETS No. 173; Council for Europe Civil Law Convention on Corruption, doneat Strasbourg on Apr. 11, 1999, entered into force Jan. 11, 2003, CETS No. 174; The Inter-American Convention against Corruption, doneat Caracas on Mar. 29, 1996, enteredintoforce Mar. 6, 1997, availableat http://www.oas.org/ juridico/english/Treaties/b-58.html. a3 Foreign Corrupt Practices Act of 1977, 15 U.S.C. § 78dd-2 (2007). It should be noted that foreign firms and persons who take any act in furtherance of a corrupt payment to a foreign official while in the United States can also be held liable under the FcFA, § 78dd-3.
X4 Ice Case No. 3916, in SIGVARD JAPVIN & YVES DEPAINS, COLLECTION OF Ice APBITRAL AWARDS 1974-1985, 507, 511 (1994) (where the Tribunal stated "Even if, in certain countries or during certain times, the corruption of public officials is a generally accepted practice in business relations; if one takes the point of vicw of good government or that of commercial ethics it would be impossible to close one's eyes to the destructive effect of such damaging practices."). as yvorldDutyFreeCompanyLtd.v.Republicof Kenya, ICSID Case No. Alts/00/7, Award (Oct. 4, 2006), available at http://ita.law.uvic.ca/. ab Id., § 157. Seealso Ice Case No. 1110, ARe. INT'I, Vol. 10, No. 3, (1994) at 294 (confirming the existence of a transnational public policy against corruption). a� Toby Dodge, StaleCollapseandtheRiseof IdentityPolitics,in IRAQ: PKEVENTINC: A NEW GENERATION C)F CoNELICT (Markus E. Bouillon, et al. eds. 2007) 26, 29. 88 Id. at 29. X9 Id.
9o Id.Id. at 30. vz Abdel Salam Sidahmed, Islamism,Nationalism,andSectarianism,in IRAQ: PREVENTING A NEW GENERATION OF CONFLICT (Markus E. Bouillon et al. eds. 2007) 79. Additionally, the Coalition Provisional Authority ("CPA") contributed to the "sectarianization" of Iraqi politics by: (1) initiating the de-Baathification process, which wiped out an entire managerial class and (2) adopting sectarian criteria to fill political posts. Id. y3 Id. at 82. y4 Dodge, supra note 87 at 31, 32; Sidahmed, supra note 92, at 77 (stating that the Iraqi insurgency is a response to a series of "Western offensives" against the Arab-Islamic world). 95 Sidahmed, supra note 92 at 78. 96 Nicholas "Fink" Haysom, ForginganInclusiveandEnduringSocialContract, in IRAQ: PREVENTING A NEW GENERATION OF CoNELICr (Markus E. Bouillon, David M. Malone & Ben Rowswell eds. 2007) 150. Ronald D. Rotunda, Irag,OilandDemocracy, Cato Institute (Apr. 23, 2004), availableat http://www.cato.org/pub display.php?pub id=2623. 9a Rouala Khalaf and Steve Negus, ForbiddenFields:OilGroupsCirclethePrizeofIraq'sVastReserves, FINANCIAL TIMES, Mar. 19, 2008. wId. Ioo Richard A. Oppel, Jr., AftertheWar:TheOccupation;LJ.S.SeekingForeignInvestment forIraq, N.Y. TIMES, Aug. 28, 2003.
101 2007 Investment Climate Statement- Iraq, U.S. Department of State, availableat http://www.statc.gov/e/ eeb/ifd/2007/80708.htm. 102 Oppel, supra note 100. 103 Rotunda, supra note 97. '°^ 2007 Investment Clirnate Statement - Iraq, supra note 101. Foreign investment in oil is excluded from this law. Timothy B. Mills, President, American Chamber of Commerce, Presentation at Rebuild Iraq Conference in Amman, Jordan, Rebuild Iraq 2007: Iraq Trade and Commerce: Exploring the Future, Capturing the Opportunities?, availableat www.rebuild-iraq-expo.com/ppt/dayl/04.lra.LTrade_and - Commerce.ppt. 105Id. Foreign investment in oil is excluded from this law. '06 Council of Ministers - Oil and Energy Committee, Republic oflraq, Draft Iraq Oil and Gas Law, Feb. 15, 2007, available at http://www.iraqrevenuewatch.org/documents/oil_law_cnglish_20070306.pdf. Under the Draft Law, the Federal Oil & Gas Council is responsible for: enacting Federal petroleum policies and exploration plans, creating designs for developing field and pipeline plans, and ensuring that petroleum resources are discovered and developed. But this law has not yet been finalized. Steven Mufson, IraqStrugglestoFinishOilLaw, WASH. POST, Jan. 24, 2007, availableat http://www.washingtonpost.corn/wp-dyn/contcnt/articlc/2007/Ol/23/ AR2007012301534.heml. 107 2007 Investment Climate Statement - Iraq, supra note 101. lOXId. 109 Id.tooId. -
111 Id.n2Id. t Id. � Arab Convention on Commercial Arbitration, doneat Amman on Apr. 14, 1987, enteredil1toforceJune 25, 1992, in INTERNATIONAL, HANDBOOK ON COMMERCIAL ARBITRATION, Suppl. 17 O. Paulsson, ed. Jan. 1994). 111 Id. Art. 2. 116 Riyadh Arab Convention on Judicial Cooperation, doneat Riyadh on Apr. 6, 1983, enteredintoforce Oct. 30, 1985, in ABDUL HAMID EL-AF117AB, ARBITAATION WITH THE ARAB COUNTRIES (2nd ed. Dec. 1998). 117 Id. Art. 37. 1)8 Id. Art. 37 (e). m Convention on Recognition and Enforcement of Foreign Arbitral Awards, doneat New York on June 10, 1958, enteredintoforce June 7, 1959, availableat http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/ NYConvention.httnl. t2° Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, doneat Washington D.C. on Mar. 18, 1965, enteredinto force Oct. 14, 1966, availableat http://icsid.worldbank.org. tzt Protocol Between the Government of the State of Kuwait and the Republic of Iraq on the Promotion of the Movement of Capital and Investment Between the Two Countries, doneat Kuwait on Oct. 25, 1964. This Treaty does however require that disputes relating to the interpretation of the Treaty that cannot be resolved by negotiation between the contracting parties be referred to arbitration. Id. Art. 7(1). 122 Iraq, The Investment Law No. (13) of 2006; Saleh Majid, IraqArbitrationLaw,availableat http://www.iraqilawconsultant.com/downloads/Iraq%20Arbitration%20Law%20 - 2006.pdf.
tzs Iraq, supra note 122, Art. 27; Majid, supra note 122, at 3, 11. 124 Majid, supra note 122, at 3. tzs Id. at 3-4. Article 704 of the Iraqi Civil Code of 1951 describes matters which are capable of being compromised as those "capable of being disposed of for valuable consideration, and they must be defined or known." Id. at 4. Public policy or criminal matters are not arbitrable, but disputes related to financial consequences or damages may be subject to arbitration. Id. 126 Id. at 4. 127 Id. at 4. tza Id. at 6-7. tz9 Id. at 7. t3° Id. at 8-9. tst 2007 Investment Climate Statemcnt - Iraq, supra note 101. In addition, Kurdistan's investment law treats foreign and domestic investors the same. Law no. (4) of 2006, Law of Investment in Kurdistan Region - Iraq, Art. (3), http://www.ekrp.org/files/docs/InvestmentLaw en.pdf. 132 Id.133Id.tsaId.
Iraqi Constitution, Art. 111, http://www.uniraq.org/documents/iraqi_constitution.pdf; Brendan O'Leary, FederalizingNaturalResources,117 IRAC2: PREVENTINC: A NEW GENERATION OF CONFLICT (Markus E. Bouillon, David M. Malone & Ben Rowswell eds. 2007) 194. 136 Iraqi Constitution, supra note 135, Arts. 110, 115; O'Leary, supra note 135, at 194. 137Id. 138 O'Leary, supra note 135, at 195. 139 Khalaf & Negus, supra note 98. 140Id.mId. 142 Id.143Id.144Id.
145 Id. 146 Iraqi Constitution, supra note 135, Art. 111. 147Id., Art. 112. 148 O'Leary, supra note 135, at 195.