CARICOM AGREEMENTS ON
      INVESTMENT:

   POTENTIAL TREATY SHOPPING
     AND CONSISTENCY ISSUES


            Dr Chantal...
Overview

Potential for ‘treaty shopping’ in relation to CARICOM
agreements on investment
Incoherence within CARICOM count...
Potential for Treaty Shopping
Foreign investors may shop for a ‘home country of
convenience’, i.e. seek home countries tha...
Potential for Treaty Shopping
However, some CARICOM agreements extend benefits only
to investors that have a substantial l...
Incoherence within the Network of IIAs

Given that CARICOM countries typically do not have a
model agreement that constitu...
Incoherence between IIAs

The same country may have IIAs that protect only
established investment and others that also gra...
Incoherence between IIAs

Some CARICOM bilateral trade agreements contain
investment protection chapters while others cont...
Incoherence between IIAs

There are differences with respect to how IIAs address
the same issue
 Jamaica’s BIT with the US...
Incoherence between Overlapping Agreements

The parties’ BIT may be limited to protection of
established investments while...
Incoherence between Overlapping Agreements

Provisions in overlapping agreements may be
contradictory
 Jamaica’s BIT with ...
Significance of Policy Incoherence

Differences in treatment embodied in different IIAs may
not be reflected in underlying...
Approaches to addressing Policy Incoherence

Encouraging greater coherence through individual IIA
negotiations
  The effec...
Approaches to addressing Policy Incoherence

Recourse to the rules of the Vienna Convention on the Law of
Treaties on the ...
THANK YOU
chantal.ononaiwu@crnm.org
       www.crnm.org
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C. Ononaiwu - CARICOM Agreements On Investment - Treaty Shopping & Consistency Issues (OAS-CRNM-CARICOM Workshop - June 2008)

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C. Ononaiwu - CARICOM Agreements On Investment - Treaty Shopping & Consistency Issues (OAS-CRNM-CARICOM Workshop - June 2008)

  1. 1. CARICOM AGREEMENTS ON INVESTMENT: POTENTIAL TREATY SHOPPING AND CONSISTENCY ISSUES Dr Chantal Ononaiwu Trade Policy & Legal Specialist Caribbean Regional Negotiating Machinery OAS/CRNM/CARICOM WORKSHOP “NEGOTIATING CARICOM INVESTMENT AGREEMENTS: STATE OF PLAY AND WAY FORWARD” GRENADA REX RESORT HOTEL, GRENADA, 22-25 JUNE 2009
  2. 2. Overview Potential for ‘treaty shopping’ in relation to CARICOM agreements on investment Incoherence within CARICOM countries’ network of IIAs Incoherence between the IIAs of CARICOM countries Overlapping agreements between the same contracting parties Significance of policy incoherence Approaches to addressing incoherence within the network of IIAs
  3. 3. Potential for Treaty Shopping Foreign investors may shop for a ‘home country of convenience’, i.e. seek home countries that have treaties with host countries where investments are to be made. The potential for such treaty-shopping exists in relation to many CARICOM agreements on investment because they do not contain a ‘denial of benefits’ clause. Most agreements that exclude a ‘denial of benefits’ clause guarantee only protection of investment after establishment. However, some BITs that grant access rights do not include a ‘denial of benefits’ clause. Barbados’ and Trinidad & Tobago’s BITs with Canada
  4. 4. Potential for Treaty Shopping However, some CARICOM agreements extend benefits only to investors that have a substantial link to the home country. Under the Revised Treaty of Chaguaramas, legal entities constituted under the laws of a Member State enjoy the right of establishment only if they carry on “substantial business activity” within CARICOM and are substantially owned and effectively controlled by CARICOM nationals. BITs with the US allow a Party to deny the benefits of the treaty to companies that have no “substantial business activities” in the other Party. Under the CARIFORUM-EC EPA, an entity set up under the laws of an EU Member State or a CARIFORUM State qualifies as an investor of that State only if it engages in “substantive business operations” in that State.
  5. 5. Incoherence within the Network of IIAs Given that CARICOM countries typically do not have a model agreement that constitutes the basis for negotiation of their investment agreements, there is incoherence between the IIAs that they have concluded. A single CARICOM country may be bound by several investment agreements concluded with the same treaty partner at the bilateral level, as part of a regional grouping, or at the multilateral level. There are some inconsistencies between these overlapping agreements
  6. 6. Incoherence between IIAs The same country may have IIAs that protect only established investment and others that also grant access rights Trinidad & Tobago’s BITs with the US and Canada liberalize investment while its BITs with the UK and Germany include only guarantees of protection after investment is established Some IIAs utilize a “top down” approach to investment liberalization, while others utilize a gradual “bottom up” approach Under the BITs that grant access rights, a “top down” approach is used. Under the EPA, CARIFORUM States used a “bottom up” approach to scheduling market access and national treatment commitments on commercial presence in services activities
  7. 7. Incoherence between IIAs Some CARICOM bilateral trade agreements contain investment protection chapters while others contain only framework provisions on investment CARICOM’s FTAs with Costa Rica and the Dominican Republic include investment chapters and CARICOM and Cuba have concluded an agreement on the reciprocal promotion and protection of investment CARICOM’s agreements with Colombia and Venezuela include only framework provisions
  8. 8. Incoherence between IIAs There are differences with respect to how IIAs address the same issue Jamaica’s BIT with the US prohibits the imposition of certain performance requirements on investors while its BITs with European countries and China do not include specific provisions on performance requirements Trinidad & Tobago’s BITs with Canada, China, Germany and the US include provisions on the temporary entry of persons in connection with an investment, while its BITs with Korea, Mexico and the UK do not.
  9. 9. Incoherence between Overlapping Agreements The parties’ BIT may be limited to protection of established investments while their FTA may include market access guarantees for foreign investors Jamaica’s BITs with EU Member States guarantee protection of investment after establishment. The EPA includes market access commitments for commercial presences and investors The EPA includes obligations concerning the behaviour of investors and the maintenance of environmental and social standards that are absent from the BITS between CARICOM countries and EU Member States
  10. 10. Incoherence between Overlapping Agreements Provisions in overlapping agreements may be contradictory Jamaica’s BIT with Germany includes an unconditional guarantee of the free transfer of payments in connection with an investment. However, the EPA allows the host state to impose temporary transfer restrictions under certain circumstances. Multiple dispute settlement provisions may apply to the same dispute Under the CARICOM-Cuba investment agreement, ISDS is available in relation to disputes concerning the obligation not to impose performance requirements prohibited by the TRIMS Agreement. Under the TRIMS Agreement, only State-to-State dispute settlement is available.
  11. 11. Significance of Policy Incoherence Differences in treatment embodied in different IIAs may not be reflected in underlying domestic legislation National laws tend to treat foreign investors equally, irrespective of their nationality Those charged with implementing the agreements may be unaware of the inconsistencies among the agreements
  12. 12. Approaches to addressing Policy Incoherence Encouraging greater coherence through individual IIA negotiations The effectiveness of this approach will depend on the bargaining strength of CARICOM countries in the negotiations ‘Preservation of rights’ clauses or clauses that resolve inconsistencies The scope of such clauses in CARICOM IIAs varies Some cover provisions of international law, the host country’s domestic law and agreements between the investor and host country. Others are limited to some of those categories
  13. 13. Approaches to addressing Policy Incoherence Recourse to the rules of the Vienna Convention on the Law of Treaties on the application of successive treaties relating to the same subject-matter
  14. 14. THANK YOU chantal.ononaiwu@crnm.org www.crnm.org

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