International legal agreements as a way to attract foreign capital



This article discusses the role of international legal treaties in international investment activity. Within the framework of the article, we are talking about the beginning of the emergence of international legal regulation of investment activity and the concluded agreements regulating this sphere. Article notes the role of each agreement, which provides a legal guarantee for the protection of investment capital.

Keywords: foreign investments, bilateral investment agreements, multilateral investment agreements, international investment law, international legal agreements in the field of investments.

The growth of the interdependence of states, which characterizes the post-war development of the world community, went through three stages. The first of them, occurring in the 50s and 60s, was characterized by the development of trade and the destruction of protectionism, which was associated with the creation and intensification of the General Agreement on Trade and Tariffs (GATT). In the 70s, the world community faced three financial crises, as a result of which the next stage of strengthening the interdependence of states began, the distinctive feature of which was financial integration. Its growth was associated with the processes of deregulation and privatization, which were actively taking place in the UK and the USA in the 80s.The modern stage, which began in the 90s, is characterized by the globalization of world processes, a new wave of direct and portfolio investments. The need to develop and adopt special legislative acts regulating foreign investment is dictated by the interest of the State receiving foreign investment. The adoption of a special act may be based on the desire of the legislator to regulate economic relations in the country and, above all, foreign economic relations. Regardless of the differences in the conceptual approach to solving the problem of regulating foreign investment, one common and characteristic principle remains for the legislation of any country in this area of relations: the regulation of foreign investment is the regulation of entrepreneurial activity carried out in the conditions of a foreign state. The vulnerability of a foreign investor operating in a foreign country is due to his subordination to the jurisdiction of the State receiving the investment. The publication of norms regulating foreign investments is necessary so that a foreign investor can calculate in advance the possible losses that may arise as a result of the adoption of certain measures by the authorities of the state receiving foreign investments. And correlating with the opportunities to profit from activities in the same state, make an informed decision about the prospects and a reasonable share of the risk of investing capital in the economy of a particular state.

Any investor who has plans to carry out investment activities in a foreign country should be sure that his investments will high-quality legal protection. International investment relations are regulated by multilateral, bilateral and regional international treaties. The main purpose of which was to ensure the freedom of capital movement within the global system and the inflow of foreign investment to developing countries, as well as to ensure the protection of investments, primarily from political risks.

One of the most important economic tasks of the state is to attract foreign investment. To solve it, it is necessary to develop and improve the national legislation of the country, and to expand international legal mechanisms. The most important part of which are international treaties between states and aimed at protecting investor rights. The legal basis for the domestic investment legislation of the country is the international legal agreements described above. Moreover, this process doesn’t take place by removing relevant internal principles and norms from the current national legislation and replacing them with international legal contractual norms. This process take place by harmonizing joint legal regulation in the course of providing legal guarantees for foreign investments. In modern practice, the role of an international treaty, which is the source of international law, is increasing. The active involvement of countries in the international investment process leads to closer interaction of national and international law. And the development of their legal system and national investment legislation will be the fruit of their joint work. The close interaction of national and international law, as well as the absence of ambivalent interpretation, is one of the factors that shows the favorability of the country's investment regime.

Domestic forms and methods of regulating foreign investments are not always sufficient. Therefore, the most important element of this system is an international treaty. Currently, this method seems to be very important, since, unlike domestic acts, an international treaty covers at least two subjects of international law.

The Washington Convention of 1965 on the Procedure for Resolving Investment Disputes can be attributed to general international treaties in the field of investment. This Convention created a special body — the International Center for Settlement of Investment Disputes. Prior to the adoption of the convention, in the event of an investment dispute, it would have been sent to the national court of the State. The emergence of the method of international settlement of investment disputes, of course, became an important guarantee of the rights of foreign investors, as it provided them with an independent and impartial consideration of disputes between the state and a private investor. The Convention provides for the settlement of investment disputes between Contracting States and persons of other Contracting States through conciliation and arbitration. The conciliation procedure is not mandatory; in contrast, the arbitration award becomes binding on the parties and cannot be appealed. The jurisdiction of the Center for Settlement of Investment Disputes can be based only on a written agreement between the investor and the State receiving the investment, or on the provisions of bilateral agreements on the promotion and mutual protection of investments.

Another multilateral international treaty in the field of investment relations is the Seoul Convention of 1985 on the Establishment of a Multilateral Investment Guarantee Agency (entered into force in April 1988). This document established the Multilateral Investment Guarantee Agency (MIGA), which has the status of a legal entity and is a branch of the International Bank for Reconstruction and Development.

The category of international treaties regulating international investment relations includes the GATT/WTO Agreements, agreements underlying the creation of regional economic unions of states (the European Union, NAFTA, the South American Common Market), the Energy Charter Treaty. Documents developed by international economic organizations have a great impact on the formation of substantive norms of private international law.

In 1947, the General Agreement on Tariffs and Trade (GATT) an agreement in the field of international trade was adopted. For the first time in the history of international relations, the GATT regulated multilateral rules in the field of international trade. The GATT existed until the entry into force of the charter of another international institution — the World Trade Organization (WTO), i.e. until January 1, 1995, after which it became an integral and important part of the WTO legal system.

Before the creation of the WTO in 1995, the GATT system included 125 states, which accounted for about 90 % of world trade turnover. Of the major countries, only Russia, which joined in 2012, and China were outside its framework. Today, 153 states are members of the WTO. The WTO's activities are based on numerous international trade agreements, of which the basic ones are the General Agreement on Tariffs and Trade (GATT), the General Agreement on Trade in Services (GATS), the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), the Investment Agreement (TRIMS).

Another international act that plays an important role in regulating investments and is the only one in the energy sector is the Energy Charter Treaty, adopted in Lisbon on December 17, 1994. Fundamentally, many of the rights and obligations provided for in the Treaty are in the nature of «hard law» provisions, the implementation of which is provided for through legally binding arbitration or through dispute resolution procedures similar to those used under the GATT. However, there are also a number of obligations that are in the nature of «aspirations» or obligations from among the so-called soft law.

According to Yu. S. Selivanova, the Agreement provides foreign investors with a number of fundamental rights in relation to their investments in the host country. Foreign investors are protected from the most serious political risks, such as discrimination, expropriation and nationalization, violation of certain investment agreements, damage as a result of war or similar events, unreasonable restrictions on the transfer of funds. The provisions of the Dispute Settlement Agreement, which cover both interstate arbitration and dispute resolution between the investor and the State, enshrine these rights of investors. Also, a special place among the international treaties concluded between States is occupied by bilateral agreements on the promotion and mutual protection of investments or bilateral investment agreements.

Historically, in the 1960s, bilateral investment protection agreements were given the role of a declaration by a contracting State of its readiness to accept investments from another contracting State on the basis of the most favorable treatment for the investor. Then, with the development of international economic cooperation, no less importance was given to bilateral agreements on the promotion and mutual protection of investments.

According to N. G. Doronina and N. G. Semilutina, currently bilateral agreements on the promotion and protection of foreign investments are given the importance of a kind of general agreement of the recipient State of investments with investors of the contracting State on the conditions for investment. Since agreements always contain a condition according to which it is possible to use various dispute resolution mechanisms, they have come to be regarded as a pre-received consent of the State party to the dispute to submit to the arbitration decision specified in the agreement. Considering them as a general agreement with investors of a contracting State on the terms of investment, some authors began to attach to these international agreements the significance of a special kind of contracts having the nature of concession agreements and containing the so-called arbitration clause.

In many States, and above all in the investor States (in the States of origin of investments), the basis of actually concluded bilateral investment agreements is a model agreement on the promotion and mutual protection of investments approved by the executive authorities of the State. Model agreements of the USA, Germany and other countries, as a rule, reflect the state policy of the states participating in the treaty. The regulations approving the model agreement are periodically reviewed and brought into line with the changing conditions of international cooperation. Thus, international legal treaties play an important role in investment activities.

References:

1. Doronina N. G., Semilyutina N. G., Legal regulation of foreign investments in Russia and abroad. — Moscow: Finstatinform, 1993. — 128 p. (In Russian)
2. Boguslavsky M. M., Foreign investments: legal regulation. Moscow: Publishing House BEC, 1996. — 462 p. (In Russian)
3. Selivanova, Yu. S. Regulation of energy by the rules of the World Trade Organization and the Energy Charter Treaty: Opportunities for Russia / Yu. S. Selivanova // WTO Law. — 2012. — No. 2. — pp. 16–23. (In Russian)
4. Mironova I. V., International agreements in the field of investment relations with the participation of the Russian Federation. Bulletin of the Baltic Federal University. Kant. 2015. Issue 3, pp. 131–139. (In Russian)
5. Danelyan, A. A. International legal regime of foreign investments: specialty 12.00.10 «International law; European law»: abstract of the dissertation for the degree of Doctor of Law / Danelyan Andrey Andreevich. — Moscow, 2016. — 22 p. (In Russian)
6. Danelyan. A.A., Farkhutdinov I. Z., International investment Arbitration: Textbook. — M.; St. Petersburg, Center for Humanitarian Initiatives, 2013. — 356 p. (In Russian)