A Study On Foreign Divestment System In International Investment Agreement

Foreign Divestment is the voluntary or forced withdrawal of investment by a foreign investor from a host country.Since the global economy is still recovering from the 2008 crisis,global FDI inflow fell by 16 percent in 2014,part of the reason was that new investments were offset by some large divestments.At the same time,arbitral claims brought by investors related to divestment activities has also increased.Through this process,the lack of balance between the investors' property right and the public welfare endorsed by the design of the foreign divestment system in IIAs has drew much attention from the public.The potential negative impact contained in the system not only worries the developing countries,but also alerted the developed ones.Under this stress,the US,the EU and the ASEAN has adopted new theory and practice to the foreign divestment system in IIAs,makinging the articles more complex and more balanced,with a merging trend in the treaty design.This situation might also be gestating a possibility of reinitiating the negotiation of an MAI.The thesis contains eight chapter,apart from the forward and the conclusion,six chapters are listed as follows:The second chapter analysis the foreign divestment from the IIA prospective,and constructed the IIA foreign divestment system,pointing out the system is a legal system that serves the purpose of regulating the foreign divestment activity in international investment,created by related article commonly contained in IIAs,which should by obeyed by both the investor and the host country.The basic elements of the system is the voluntary withdrawal of foreign investment,forced divestment of foreign investment,and the dispute resolution system.This chapter also shows the main defect of the current IIAs' foreign divestment system is the unsolved conflict of benefit between the investor and the host country.The third chapter mainly discusses the protection and limitation of the voluntary divestment of foreign investments.This chapter first analyzed the protection and limitation contained in free transfer clauses in IIAs toward voluntary divestment.After combining the new practices of the western countries and developing countries in this area with the interpretation made by arbitration tribunals regarding the free transfer clause,it pointed out that BoP safeguard clause can play an important role in balancing the benefits of the investor and the host country.After analyzing the relationship between the BoP clause and other exception clauses relating to free transfers,it also pointed out that combining the general financial management exception clause with BoP safeguard clause harmonized with IMF regulations would produce a better result in balancing benefits.The fourth chapter mainly discusses the recognition and compensation of forced divestment.This chapter first shed some light on the four commonly recognized elements of a legitimate expropriation,and revealed that the controversy over “Hull Formula” and “appropriate compensation” is a continuance of the conflict between the right to regulate of the host state and the property right of the investor.The followed discussion over the recognition of indirect expropriation shows that the balanced approach in determining whether a government measure is tantamount to expropriation should be adopted.The fifth chapter mainly discusses the defects and cure of the current ISDS mechanism.This chapter first points out that the main defects in ISDS mechanism in the IIA foreign divestment system are the inconsistency in recognizing whether a government measure consist of an expropriation,the emphasis of contractual rights over public welfare of the host state,and the tendency of expanding the jurisdiction of the tribunal.After analyzing the different approaches of the developed and developing countries trying to mitigate such defect,it pointed out that trying to limit ICSID jurisdiction by denouncing the Convention,trying to procure consistency by adding appellate mechanism to investment arbitration and trying to substitute investment arbitration with international court all has their limits,while designing the substantial articles of the IIAs in a balanced way may provide a better solution.The sixth chapter summarizes the new trend showed in the recent developments of the IIAs' foreign divestment system,and gives a prospect of the future development of the system.This chapter first shows that the recent development of the IIAs' foreign divestment system showed a tendency of complexity and balance,and the pushing forces behind it are the rise of new economic powers from the developing countries' group and the impact generated from the concept of sustainable development.This chapter further shows that a perfect foreign divestment system in IIAs should be constructed under the principle of balance of benefits and proportionality,with the method of design systematic exceptions clauses.Finally,this chapter regards that the merging trend of treaty designing in this area brings the hope of reinitiating the negotiatin of an MAI.The seventh chapter mainly discusses the practice of China in this area.After analyzing China's current practice on the foreign divestment system in IIAs,this paper gives suggestions on the future design of the relevant articles of the system.It also suggests that China should be aware of the possibility of a new MAI negotiation,and be prepared for it.