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    UncategorizedSouth-South Bilateral Investment Treaty (BIT): a missed opportunity?

    South-South Bilateral Investment Treaty (BIT): a missed opportunity?

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    The Western prototype BIT templates are made to fully reflect the interest of capital exporting (global north) countries. Thus, the South-South Cooperation (SSC) path to South-South Bilateral Investment Treaties (SSBITs) missed the God-Sent opportunity to counter the hegemonic BIT bite, writes Yohannes Eneyew Ayalew.

    “The 21st C won’t be a bipolar world, it won’t be unipolar. It will be multipolar. Africa will be an important geographic, economic and social pole. And South America will be too. South-south cooperation is the beginning of the salvation of our people.”

    Hugo Rafael Chávez, Ex- Venezuelan President Speech, Margarita Island, Venezuela Sep 2009

    South-South Bilateral Investment Treaties (SSBITs) are investment treaties concluded by countries in the global south. SSBIT is the result of South-South Cooperation (SSC). SSC is a term used by policymakers, think-tanks and academics to describe the exchange of resources, technology and knowledge between developing countries found in the Global South.

    The foundation of SSC can be traced to the Asian–African Conference that took place in Bandung, Indonesia, in 1955 which is also known as the Bandung Conference. The conference has been basically viewed as a milestone for SSC cooperation and also attended by Ethiopia along with 33 newly independent countries. The Bandung Conference dubbed as the first major instance of the global south collective resistance to counter Western hegemony since it has had lofty hopes from fighting colonialism to developmental investment cooperation.

    In 1978, UN has established the Unit for SSC to promote South–South trade and collaboration within its agencies. Albeit, the direct involvement of UN with SSC is indeed criticized of being replacing the intended goal of SSC under the shawl of development and reintroducing western capitalists manifesto in the works of SSC.

    The SSC is praised for its success stories in decreasing dependence on the carrot-akin aid programs of developed countries and in creating a shift in the international balance of power. The SSC is now intensified in many fields including to improving economic ties in areas such as joint investment, free trade areas and a common bank.

    The SSC should also work to counter the camouflage of Western institutions such as IMF and World Bank, to this end; the launch of two new ‘South–South banks’ is really promising and alternative to unipolar institutions. These are Brazil, Russia, India, China and South Africa (BRICS) Development Bank and Asian Infrastructure Investment Bank.

    Traditionally, investment is presumed to be made between capital exporting (developed countries/Global North) and Capital importing (developing countries/global south). However such presumption is currently taken as blemished. SSBITs refer a BIT framework for collaboration among countries of the south in investment domains. According to United Nation Commission on Trade and Development (UNCTAD) report, the number of BITs between developing countries has grown. The first SSBIT was signed between Kuwait and Iraq in 1964. The trend of South-South BITs results in interesting relationships between Latin American, Asian and African countries.

    Under international law, the contribution of global south in initiating alternative theories and principles was significant later such ideals diminished by Western Capitalist hegemonic bait.

    The fight for economic sovereignty is traced back to Carlos Calvo’s thesis in 1868. The Argentine jurist vehemently opposed special treatment of aliens. He submitted in his study that nation states have economic sovereignty over their natural resources and no special treatment for foreigners.

    Again after the demise of colonialism, newly independent countries claimed economic sovereignty over their natural resources. As a result, they used forums such as UN General Assembly to express their interests via resolutions. Thus, the 1962 UNGA Res/1803 officially proclaimed ‘sovereignty over natural resources’ including expropriation with ‘appropriate compensation’. In the global south, states sought to rely on economic sovereignty originating from the UN reaffirmation of sovereign equality of States under article 2(1) of the Charter enabling them to claim permanent sovereignty over their natural resources, which would in turn let them negotiate their way out of the old agreements and concessions. This was not an attempt to rewrite the law, but an attempt to give a new direction to foreign investment law on the basis of certain rules of public international law, including economic sovereignty and the right to self-determination of states.

    Later the UN General Assembly in 1974 adopted a Declaration on the Establishment of a New International Economic Order on 1 May 1974 through Resolution 3201 (S-VI) and a program of Action on the Implementation of the Declaration through Resolution 3202 (S-VI) which called for full permanent sovereignty of every State over its natural resources and all economic activities including also nationalization and expropriation. The Declaration further stressed the need to regulate and supervise the activities of transnational corporations (TNCs) by taking measures in the interest of the host countries.

    In all above moves, the role of the global south was remarkable in terms of suggesting option and alternatives governing foreign investment and TNCs. At that moment, seemingly the relationship between developing and developed world were bellicose. Albeit one can argues that the UN General Assembly resolutions despite having no legally binding effect, reflects customary international law.

    In ensuing years, different attempts have been made with a view to come up with comprehensive international instrument in which large number of countries would be on board. Such attempts have been made by organizations like OECD, the World Bank Group, and WTO. In general, some of them proved to have little success while others had caught up with fiasco.

    For instance, OECD proposal of multilateral treaty having haughty hopes of compromising the interest of global north and global south in the late 1990’s yet it was failed in 1998 because it faced intense opposition from NGOs on the grounds that it would weaken the regulatory capacity of host States in favor of investor protections and internal disagreement between OECD Countries such as Canada, USA and EU.

    Parallel to global efforts, the western capitalist were actively engaging in bilateral negotiation to regulate foreign investment. As a result, the first BIT was concluded between Germany and Pakistan in 1959. The rationale behind for conclusion of the first BIT was the fact that Germany had lost the majority of its foreign investments in negotiated settlement after 1949 with a view to repairing in part the damage it had brought about when starting World War II in violation of international law. Later Germany continued to negotiate more such BITs and soon other European and developed nations followed suit. Equally important, even after the collapse of socialism and post 1990’s there was a major shift of attitude coming from global south/developing states and have signed various BITs with global north as well as inter se.

    Against the background of Calvo doctrine, UN GA Resolution 1803/1962 and Hugo Chávez speech, South-South BITs failed to incorporate historic claims and bargains of the global south.

    Haphazardly, South-South BITs have directly replicated from the western capitalist BIT templates despite enormous optimisms and hopes were initially made to counter the capitalist BIT bite. Thus, South-South BITs never repeated the historical legacy of SSC and voices of millions living in the global south.

    The only typical feature of South-South BITs is the inclusion of restrictions to their national treatment and transfer of capital in all other BIT standards including MFN, umbrella clause, Expropriation claims, fair and equitable treatment however they are directly simulated from Western BIT templates.

    Therefore, I argue that the Western prototype BIT templates are made to fully reflect the interest of capital exporting (global north) countries. Thus, the SSC path to SSBITs missed the God-Sent opportunity to counter the hegemonic BIT bite. I submitted that SSC such as BRICS might counter via multilateral framework and also through enhancing regulatory space of host states otherwise the unipolar capitalist-led world left us without any alternatives.

    Ed.’s Note: Yohannes Eneyew Ayalew is a lecturer of Law at the School of Law, Samara University. He is interested in International Law, Human Rights, Investment and Construction Law. The views expressed in this article do not necessarily reflect the views of The Reporter. He can be reached at [email protected]

     

    Contributed by Yohannes Eneyew Ayalew

     

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