Article: Investment Treaties and Transition from Authoritarian Rule

in The Journal of World Investment & Trade
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Following recent events in Egypt, Libya, Myanmar (Burma) and Tunisia, foreign investors have lodged international claims under investment treaties. Several of these cases follow a common fact pattern. They concern foreign investments acquired from authoritarian governments substantially below market value through transactions that were not arms’ length. Subsequently, new governments sought to renegotiate these contracts and concessions, or to change the regulatory arrangements that govern them. The investors then invoked the protections of an investment treaty.

This article draws on political science scholarship on transition. It argues that investment treaties risk constraining the ability of incoming democratic regimes to consolidate their position, and questions the normative justifications for applying the principle of full market value compensation to situations in which investments were not acquired on a full market value basis. These conclusions are relevant to wider debates about the tension between legal stability and political change in international law.

Article: Investment Treaties and Transition from Authoritarian Rule

in The Journal of World Investment & Trade

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References

29

Teitelsupra note 15 p. 5; O’Donnell and Schmitter supra note 2 p. 7.

30

Carotherssupra note 27 pp. 18–9.

31

Teitelsupra note 13 p. 5; O’Donnell and Schmitter supra note 2 p. 3.

34

O’Donnellsupra note 26 p. 40.

38

O’Donnell and Schmittersupra note 2 p. 3; Robert Dahl Polyarchy: Participation and Opposition (Yale University Press 1971) 20–31.

40

O’Donnell and Schmittersupra note 2 p. 46.

42

O’Donnell and Schmittersupra note 2 p. 38.

43

O’Donnell and Schmittersupra note 2 pp. 15–7; similarly Adam Przeworski Democracy and the Market: Political and Economic Reforms in Eastern Europe and Latin America (cup 1991) 51–94.

44

O’Donnell and Schmittersupra note 2 p. 40; McFaul supra note 24 p. 216.

49

Haggard and Kaufmansupra note 41 pp. 267–8.

50

Haggard and Kaufmansupra note 48 p. 37; Haggard and Kaufman supra note 41 p. 277.

55

McFaulsupra note 24 p. 213.

56

McFaulsupra note 24 p. 244; Carothers supra note 27 p. 20.

58

O’Donnell and Schmittersupra note 2 pp. 37–9.

59

Acemoglu and Robinsonsupra note 45 p. 153; Haggard and Kaufman supra note 41 p. 277.

60

O’Donnell and Schmittersupra note 2 p. 69; Daniel Rubinfeld and Robert Bridges ‘Understanding the Democratic Transition in South Africa’ (2013) 15 Am. L. and Econ. Rev. 2 34.

62

Haggard and Kaufmansupra note 48 p. 29; Hector Schamis ‘Distributional Coalitions and the Politics of Economic Reform in Latin America’ (1999) 51 World Politics 236 239.

63

Haggard and Kaufmansupra note 48 p. 30.

68

O’Donnell and Schmittersupra note 2 pp. 45–7; Benhabib and Przeworski supra note 67 p. 272.

72

Haggard and Kaufmansupra note 48 p. 62.

76

Luke Eric Peterson‘French Company, Veolia, Launches Claim Against Egypt over Terminated Waste Contract and Labor wage Stabilization Promises’ia Reporter 27 June 2012.

77

Sebastian Perry‘Egypt Faces Claim over Textile Factory’Global Arb. Rev 6 December 2011.

81

David Eldward‘Egypt Face Backlash from Dubai Investor’Global Arb. Rev 26 May 2011.

83

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84

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85

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86

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87

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88

Seamus Martov‘Myitsone Dam Prroject on Hold, but Far From Dead’The Irrawaddy 6 November 2013.

89

Yun Sensupra note 66 p. 8; cf. Brian Spegele ‘China Warns of Legal Action over Myanmar Dam’ Wall Street Journal 3 October 2011.

90

Haggard and Kaufmansupra note 48 p. 30; Thomas Pepinsky Economic Crises and the Breakdown of Authoritarian Regimes: Indonesia and Malaysia in Comparative Perspective (cup 2009) 266–7. For a definition of cronyism see Naresh Khatri Eric Tsang and Thomas Begley ‘Cronyism: a Cross-cultural Analysis’ (2006) 36 J. Int’l. Bus. Stud. 61 62 defining cronyism as: “a reciprocal exchange transaction where party A shows favor to party B based on shared membership in a social network at the expense of party C’s equal or superior claim to the valued resource.”

92

Crawfordsupra note 21 p. 97.

96

Crawfordsupra note 21 p. 97; Malcolm Shaw International Law (6th ed. cup 2008) 957.

100

Pahujasupra note 98 p. 148.

102

Pahujasupra note 98 p. 160.

105

Abi-Saabsupra note 101 p. 599; Pahuja supra note 98 pp. 127–8.

116

Crawfordsupra note 21 p. 97; Malcolm Shaw International Law (6th ed. cup 2008) 957.

122

Gelpernsupra note 121 p. 407; Udaibir Das Michael Papaioannou and Christoph Trebesch ‘Sovereign Debt Restructurings 1950–2010: Literature Survey Data and Stylized Facts’ imf Working Paper wp/12/203 <www.imf.org/external/pubs/ft/wp/2012/wp12203.pdf> (23 February 2013); cf. Cheng supra note 121 p. 40.

123

Chengsupra note 118 p. 50.

125

Crawfordsupra note 21 p. 97.

130

Kingsupra note 128 p. 647.

137

Kingsupra note 128 pp. 632–3.

152

Schillsupra note 150 p. 317.

165

Dolzer and Schreuersupra note 12 p. 130; Andrew Newcombe and Lluis Paradell Law and Practice of Investment Treaties (Kluwer Law International 2009) 255.

168

Dolzer and Schreuersupra note 12 p. 130; similarly Lucy Reed and Daina Bray ‘Fair and Equitable Treatment’ in A. Rovine (ed.) Contemporary Issues in International Arbitration and Mediation (Martinus Nijhoff 2008) 15.

177

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190

Marboesupra note 183 p. 238; Chevron v. Ecuador (I) Partial Award on the Merits 30 March 2010 para. 374.

192

Ripinsky and Williamssupra note 181 p. 118.

195

Chengsupra note 118 p. 50.

196

Sornarajahsupra note 110 pp. 209–13.

197

Sloanesupra note 126 p. 1312.

198

Teitelsupra note 13 p. 67.

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