The importance of being … a “protected investment”.

Although Oscar Wilde cannot certainly have been aware of the developments which International Investment Law would follow a century after his death, his The Importance of Being Earnest comes to mind every time an arbitral award emphasizes that a dispute involving an actual investment is indeed necessary for an investment treaty to be enforced by an investment tribunal… So is the case with the award recently rendered on the dispute between Grupo Francisco Hernando Contreras and the Equatorial Republic.

In effect, before analysing the substantial legal issues which arise from a given case, arbitral tribunals must proceed to asses if they have jurisdiction to judge it; that is to say, if they have been legally given the power to “say the law” (jurisdictio) in that specific case. If the evaluation of jurisdiction is composed of several elements, the existence of a real investment is obviously fundamental. 

However, the very notion of investment or “protected investment” has proven highly problematic in the ICSID case law throughout the last decades. Even though a 2001 tribunal tried to lay out a fourfold test (which would require a financial contribution, a certain duration of it, the taking of risk and a contribution to the host country’s development) whose conditions should be met in order to be qualified as a “protected investment”, and which has since been known as the “Salini test”, the issue remains thorny. Whereas some tribunals, such as the one in the Phoenix Action case, have extended those criteria to up to 6 (thus including conformity to the internal law and good faith on the investor’s side), others, such as the one in the Saba Fakes dispute, have considered that the first 3 (therefore excluding the development condition) were largely sufficient and even overlapped.

The present case came to be known by a tribunal constituted outside ICSID framework, since Equatorial Guinea has not signed the Washington Convention that created it. The case arose from a dispute regarding a real estate project, confronting Equatorial Guinea to a Spanish investor who invoked that the government of that country had breached the Spain-Equatorial Guinea Bilateral Investment Treaty (BIT). Much to the investor’s dismay, the tribunal declined its jurisdiction precisely on the grounds that the economic operation at stake did not constitute a “protected investment”, both because the company was not appropriately incorporated, if incorporated at all, according to the internal law of Equatorial Guinea, and because it did not have “enough magnitude” to be considered as such.

At least two lessons can therefore be drawn from this case. Firstly, the debate on the appropriate perspective and the specific conditions according to which investment tribunals address what is an investment or a “protected investment” remains open. Secondly, the fact that this dispute was settled outside the ICSID legal framework shows that this discussion is a general one and its effects might thus spill out of the specific context of the concept of the “investment” referred to in the article 25(1) of the Washington Convention.

Nevertheless, it must be noted that one of the three members of the tribunal dissented from his colleagues’ view, as he considered that there actually was an investment whose specific size and details should have been dealt with while addressing the substantial issues involved, that is to say after having accepted the tribunals jurisdiction.

Both the award and the dissenting opinion can be found here.

European stakeholders increasingly reluctant as China’s MES deadline approaches

China-EU trade looked like this in 2010

Divisions might arise everywhere in the European Union (EU) as december 2016 approaches, and with it the need of solving the thorny question of granting (or not) market economy status (MES) to China 15 years after it became a member of World Trade Organisation (WTO). At that time, the accession protocol of the Asian country included some special methods to calculate dumping, whose future must be settled by the last month of this year. These tensions have grown not only between states, with the northern ones exposing their willingness accept such a status and those more involved in competition with China -Italy, for instance- showing their strong opposition, but also among other actors such as European businesses, some of which have already voiced their concern about the consequences of the WTO this could entail.

Among other effects, China gaining MES status would substantially restrain the margin of the European Union to launch anti-dumping procedures against Chinese businesses. Some European industries, increasingly jeopardized by competitors, fear that such a limitation on EU’s trade policy could entail very important job losses, as Borderlex.eu informs.

If a coordinated EU response should not be expected before several months, internal negotiations have already begun in order to achieve a unified position, which might be determined not only by that internal inter-state equilibrium, but also by the need to handle relations with the United States of America and China itself, with which bilateral trade and investment treaties are been negotiated.

The discussions engaged by the Commission with both the European Parliament and the Council in order to asses how anti-dumping investigations should evolve after december 2016 must be placed in this context.

Japanese beverages flying from Europe to Colombia? A new WTO case concerning national treatment

As this post from the International Centre for Trade and Sustainable Development has pointed out some days ago, the European Union (EU) filed a World Trade Organization (WTO) challenge against Colombia in the beginning of January. According to the European Commission’s presse release, European businesses of spirits could be facing an infringement of the WTO’s national treatment provisions, which hold that no taxes or regulations shall be imposed to the commercialisation of foreign products as long as local products are not equally subject to them.

The EU argues that Colombia’s additional tax on beverages whose alcohol dose exceeds 35 percent is directly related to the fact that Colombian-made spirits are usually below that threshold,

World Trade Organisation’s headquarters in Geneva, Switzerland.

whereas imported European beverages tend to have higher levels of alcohol. Therefore, a regulation which would seem neutral prima facie would entail a indirect discrimination against imported products, in outright violation of WTO law.

Even though the consultations request of the EU leads to negotiations which must last no less than 60 days, wasn’t the dispute to be settled through this amicable way, the WTO’s Dispute Settlement Body’s (DSB) case-law would prove essential in trying to work out the dispute’s result.

In this sense, the 1998 “Japan – Taxes on Alcoholic Beverages” case must be very much taken into account in order to predict a possible outcome. At that time, the DSB condemned Japan’s practices consisting in taxing imported whisky and cognac stronger that the local Shochu drink. To understand the DSB’s ruling, it must be stressed that the national treatment principle forbids any discriminatory treatment not only against identical imported products but also against those which are substitutable in the analysed market. In the present case, the EU precisely holds that Colombia’s practices lead to “unjustified imposition of a higher fiscal burden on like or directly competitive and substitutable imported spirits than the one applied on domestically produced spirits“.

Notwithstanding that some of the present case’s details could calle for a more nuanced approach, the DSB’s 1998 decision could anyway prove decisive to the EU-Colombia dispute’s outcome.

Essays in undertanding: the origins of “The Origins of Totalitarianism”

Even though Hannah Arendt’s legacy as a political scientist or a philosopher (term which she rejected for herself) is better known for the two books that shaped the common vision of her academic career (i.e., The Origins of Totalitarianism and Eichmann in Jerusalem), these lesser known Essays in Understanding, gathered by some scholars consecrated to her life and work, offer a quite enlightening insight to both her early life and her intellectual inquiries into the ever disturbing subject of totalitarianism, as well as a glance to some writings devoted to other historial or literary issues.

Hannah Arendt

In effect, the delicious pages concerning existentialism, some of which were written at the very moment Camus or Sartre were operating their radical innovation of the philosophical panorama in France and Europe, together with a very suggestive interpretation of Kafka’s work or a brief text on the emancipation of women, make of these Essays a work of a varied nature, but do not conceal the overwhelming attention given to the subject which was to always remain the main object of study of Arendt: that is, totalitarianism in its various (political, social, philosophical) approaches.

All throughout these texts, Arendt underlines the responsibility of her discipline, political science, in, rather than withdrawing itself to the comfort-zone of the already known categories (tyranny, dictatorship, one-party regimes) of political thought, trying to carry out an accurate description of the functioning mechanisms and the very nature of totalitarianism, which, in its radical novelty, threatened (and still threatens, for that matter) the very foundations of liberal societies. The germs of the various reflections she would later enrich and widen in The origins of totalitarianism already lie in many of these Essays.

Essays in Understanding by Hannah Arendt

In this sense, Arendt displays in these works a rather admirable ability: that of consciously rejecting the temptation of trapping herself in sterile and empty denunciations of Nazi atrocities, for instead jumping into the much more troubling, though also much more fruitful, land of investigating the subtle processes and tendencies, both political and social, which may lead to the formation of totalitarian mentalities and totalitarian regimes such as those which reigned in Nazi Germany and Stalinist Soviet Union.

While delighting themselves with these pages, the readers cannot but consider that the acute insightfulness of the perceptions and ideas set out by Arendt concerning totalitarianism may be profoundly complemented and enriched, in that silent and implicit collaboration which fiction and non-fiction very usually carry out for the better understanding of reality, by the reading of Life and destiny by Vassili Grossman, for the novel’s almost clinical analysis of the mechanisms and instruments of a totalitarian society are of a immense value to grasp some of the situations and ideas about which Arendt warns so enthusiastically.

In any case, the essence of the studies developed in these essays may paradoxically be summed up by a reference not to a work of Arendt herself, but to an essay she reviews in one of these texts:

“whether one agrees with Denis de Rougemont or not, he belongs to those who, in his own words, “are all in the sinking ship, and at the same time… are all in the ship that has launched the torpedo”. Those who know this, who do not want to get away from this not very comfortable position, are not numerous, and they are the only ones who matter”

In effect, Rougemont’s assertion concerning the very disturbing point of suspecting, or even outright knowing, that the seeds of a totalitarian society lie, in one way or another, on each and all of us, condenses the state of mind the reader of these Essays may retain after finishing them; it is in fact a recognition of crude facts which does not obviously offer an easy way out of the danger of totalitarianism, but may nevertheless prove useful in the necessary reflections which should precede every fight against it.