Trade Hot Topics Issue#72: A Commonwealth Guide on International Investment Agreement Provisions Promoting Sustainable Development

International investment law consists primarily of a dense web of more than 3,000 international investment agreements (IIAs) involving 170 countries. While many of the ‘core obligations’ in these agreements have changed relatively little over time, some states have recently begun to rethink what obligations an IIA should include.

Traditionally, IIAs have been negotiated between developed and developing countries. Developed country parties have been primarily concerned about protecting their investors from discriminatory or unfair treatment by host developing countries. In contrast, developing countries have entered IIAs with the hope that in-bound foreign investment from developed country partners will be encouraged because the investor protection provisions in these treaties guarantee certainty and predictability in host state domestic regimes, especially when backed up by the right of investors from the other party state to seek relief through investor-state dispute arbitration if the host state fails to provide the mandated protection. The prospect of increased investment inflows in practice, however, is only an incidental and uncertain result of protecting investors. As well, attracting investment is not an end in itself. To be desirable, investment should contribute positively to host country development. Most existing IIAs are not designed to achieve development outcomes. Studies attempting to find a clear link between foreign investment and development have been inconclusive.