Int’l Trade Agreements to Be Fulfilled Despite Crisis

Despite the global financial and economic crisis, countries continue to rely on the conclusion of international investment agreements (IIAs) as a means of promoting foreign investment and attendant benefits, UNCTAD’s latest IIA (International Investment Agreement) Monitor reports. The first six months of 2009 saw the conclusion of 25 bilateral investment treaties (BITs) and six other international agreements with investment provisions — a development that further strengthens and expands the current international investment regime. This is line with the last year’s trend, when the network of IIAs continued to expand, with the number of newly concluded double taxation treaties (DTTs) (75) and other IIAs (16) exceeding those for 2007 (69 and 13, respectively).

With 59 new agreements, the number of BITs concluded in 2008 also was significant. This suggests that there may be a role for the international investment regime to play in responding to the global economic and financial crisis. Among other things, IIAs may be a way of effectively promoting foreign direct investment (FDI) — this is particularly the case for agreements that contain effective and operational provisions on investment promotion — and by stemming the rising tide of protectionist dangers during the financial crisis. To play such a role, the IIA Monitor says, numerous substantive and procedural questions should be dealt with, including how to ensure a balance in IIAs that grants policy makers sufficient flexibility to respond to the financial cri sis and how to ensure that investorState dispute settlements involving crisis-response measures can be handled in a manner responsive to their particular challenges.

The report says that at a broader level, key systemic considerations also need to be addressed regarding the interaction between the global financial system and the international investment regime, with a need for coherence between the two regimes, regulating the interwoven and inter-related global long-term and short-term capital movements.