Criticizing the field of international investment law: A simple story made complex

The system of international investment law is often criticised by civil society organizations and legal academics. The Guardian recently described this system as a “legal weapon that gives corporations the edge on government”; it emphasized that there is a “growing concern among legal experts” that the investment regime “favours corporations over the public interest, puts sovereignty at stake, is chronically lacking in transparency and accountability and has been mis-sold to many developing countries that only realize exactly what they have signed up for when they get sued.”[1]

A Public Statement on the International Investment Regime, signed by a group of forty eight academics from around the world, has added, “We have a shared concern for the harm done to the public welfare by the international investment regime, as currently structured, especially its hampering of the ability of governments to act for their people in response to the concerns of human development and environmental sustainability”. [2] It argues, inter alia, that investment treaty arbitrations are unfair and unbalanced,[3] and that states should withdraw from investment treaties.[4] International investment law has even been described by a distinguished academic as “a law of greed”.[5]

Although perhaps somewhat exaggerated, these critiques are certainly not baseless. Several recent developments, most notably the disputes between tobacco giant Philip-Morris and the governments of Australia and Uruguay, indeed demonstrate how foreign investors can…

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Taxing Banks for Risky Investments

As governments around the world broke open their piggy banks to bail out most of major financial institutions, it comes as no surprise that these governments are feeling a bit strapped for cash. In looking for a way to recoup capital spent on these institutions because of their risky investment practices, a popular proposal is the taxing of banks for such risky investments.

Numbers that the Americans are debating include a levy at 0.15% for 10 years on all financial institutions with more than $50 billion in consolidated assets.

With Germany and England ready to take action and implement similar levies, and with Obama seeking to push the US to do the same, it’s unclear what kind of overall effect these levies would have on banking if they are carried out on a piecemeal, domestic basis. These financial institutions are international in character. Their activities transcend national borders, and thus any attempt at regulation will need to account for the cross-border transactions and international nature of the institutions. Will domestic regulation really solve the inherent problem of big banks making big investments without thinking about the potentially big (and devastating) consequences?  Probably not.  So then what’s the point?

Edwin M. Truman, Senior Fellow at the Peterson Institution for International Economics in Washington, proposes a different analysis. He says, “There are two dimensions — paying for the past and paying…

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Global financial tax – taxation in the next generation?

The hot topic on the minds of world leaders is the potential for a global tax on financial transactions.  The idea seems to have emerged from the French, who saw the tax as a potential way to generate financial development aid. The tax would be a form of Tobin tax, although instead of being at stabilization of a currency, the primary goal would be to raise international funds to deal with crises.

The idea was subsequently picked up by UK PM Gordon Brown and presented to the G20 at their meeting in St Andrews, Scotland on Nov 7th.  Brown presented the tax as an instrument to fund future bank bailouts.  Moreover, he sees the tax as increasing accountability in the financial sector.   However, the idea was not received as well as had been hoped.  The USA has rejected the idea, and Canadian Finance Minister Jim Flaherty also came out against the tax.

While things looked dismal for the tax proposal following the G20, it seems that at least as far as the US is concerned, the idea in principle may still be kicking around Congress.  U.S. House of Representatives Speaker Nancy Pelosi has spoken out in favor of a similar proposal, affectionately named the Wall Street tax, from which funds would be used for job-creating legislation sought to be passed in December.  The Democratic proposals…

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Stepping Back from Trade Protectionism: the Time is Right

International trade law is often considered one of the more successful areas of international law since it benefits from robust enforcement and dispute mechanisms. However, international trade law faces its own challenges, and a new one may be imminent: the elimination of protectionist sentiment and measures that governments around the world have adopted in response to the global financial crisis. Governments, particularly the G20[1], have acknowledged the issue of rising protectionism.[2] However, in light of several reports examining the measures adopted by G20 governments, the G20 leaders’ commitments following their most recent meeting in September demonstrate that they are not moving fast enough, or far enough, to reign in protectionist tendencies.

As we are all well aware, the international credit crisis, which came to the fore in 2008, resulted in the collapse or near-collapse of financial institutions and sources of credit for businesses around the world – causing trade levels, investment and global output to plummet, and thousands of jobs to disappear. In the fall of 2008, there were fears that a depression similar in intensity to the Great Depression of the 1930s was looming. In response, many states announced significant injections of capital into troubled financial institutions and industrial sectors to avoid their collapse, and to facilitate access to credit by industry. They also adopted measures to stimulate domestic demand.

Global leaders, particularly those representing the G20…

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