No.626 Understanding Asian Investment Regime Complexity:What to Do About It?
by Julien Chaisse and Shintaro Hamanaka
This study examines the evolving international regime for investment. It focuses on the Asian experience, which has not been extensively studied thus far unlike trade agreements. Existing studies mainly focus on the interpretation and application of international investment agreements (IIAs) in which the rules are given. In contrast, this study focuses on the development of rules, including investment protection. The noodle bowl syndrome of IIAs is potentially a serious problem. While trade disputes are state-to-state, an investment dispute involves investors who try to protect their investment using IIAs, such as the well-known case of Philip Morris, which launched proceedings against Australia via an Asian subsidiary using the Hong Kong–Australia Bilateral Investment Treaty. Furthermore, each IIA can conveniently import "better" provisions from other IIAs using its MFN clause, which significantly complicates the interpretation of IIAs. Because three factors affect the magnitude of noodle bowl problems of investment, there are three ways to mitigate the problem. First, the scope of MFNs should be carefully drafted to limit the "mobility" of provisions, e.g., MFN treatment does not apply to investor–state dispute provisions or older IIAs. Second, while investors are mobile and tend to relocate their base to seek convenient IIA protection, there should be some discipline on such relocations. Just to fight against the policy in question, IIAs should not create an incentive for relocation after it is decided. Third, the mobility of countries should be enhanced, which means that countries should be able to accede to IIAs favorable to their investors through accession. An appropriate balance among the "mobility" of these three factors is important.
Keywords: Investment treaties, BIT, FTA, noodle bowl, treaty shopping, Trans-Pacific Partnership (TPP)
Please note that discussion papers are works in various stages of progress and most have not been edited and proofread and may contain errors of fact or judgment. Revised versions of these papers may subsequently appear in more formal publication series. The views expressed in this publication are those of the author(s). The IDE does not guarantee the accuracy of the data included and accepts no responsibility for any consequences arising from its use.