Gary Hufbauer and Sherry Stephenson propose the following mutilateral investment agreement:
... Following its achievements at the 9th Ministerial Conference in Bali, Indonesia, the World Trade Organization (WTO) should launch negotiations to draft a 21st century Investment Framework Agreement (IFA).
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The IFA should start life as a plurilateral agreement. While the WTO has 159 member countries and customs territories (think of Hong Kong), only willing nations would be signatories of the agreement. Initially, only IFA members would be entitled to IFA rights—in other words, the most-favored-nation (MFN) principle would not apply to WTO members that are not signatories. Over time, the great majority of WTO members might join the IFA and, at some point, all IFA rights might be extended on an unconditional basis to all WTO members, including the holdouts.
The IFA would not supersede bilateral investment treaties (BITs) or investment chapters in free trade agreements (FTAs)—they would coexist. In disputes, complainants could seek remedies under whichever agreement was most favorable. Quite often, as between pairs of countries, their BIT or FTA rights would be more extensive than their IFA rights. But complainants should not be allowed to “forum shop,” for example, by bringing a case first under the IFA, and then under an FTA.
Like BITs and most FTAs, the IFA should provide for state-to-state dispute settlement. In addition, as a voluntary sub-chapter, willing signatories to the IFA could agree to investor-state arbitration. All arbitration and dispute-settlement decisions should be published, adding to the body of customary international law in the FDI realm.
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... , we believe that the IFA should include the following substantive provisions:
· Both investors and covered investments should be afforded national treatment and MFN treatment in all phases of the investment cycle: establishment or acquisition, management, operation, expansion, and disposition.
· Justifiable reasons for expropriation should be limited, and “prompt, adequate and effective compensation” should be paid when expropriation occurs.
· Investment-related funds should be transferable across borders, without delay and using a market rate of exchange.
· Performance requirements should be prohibited or restricted. However, the least developed countries might be allowed a reasonable period of time (such as a decade) to phase out their performance requirements.
· Foreign firms should be guaranteed the right to employ top managerial personnel, regardless of their nationality.
· Proposed laws and regulations that affect investment should be published in advance, with firms given an opportunity to comment.
Some key substantive takeaways: investor-state would be optional, and there is no "fair and equitable treatment" obligation.
