U.S. Investment Treaties: Working For Investors and Government
Lisa J. Kubiske
Deputy Assistant Secretary for International Finance and Development, Bureau of Economic and Business Affairs
OECD Conference Center
March 16, 2015
I thank the OECD for hosting this workshop on international investment agreements and treaties, and am pleased to share the U.S. experience with you. I’ll make three points.
The first is that we use our international investment agreements both to promote fair treatment for investors, and to leverage investment to support economic growth.
Taking the latter (growth) first, we know that investment is vital to the global economy. OECD research shows that multinational enterprises employ nearly 80 million people worldwide and their global sales are roughly double world exports. A third of global trade is intra-firm trade. Approximately 18 percent of U.S. merchandise exports are sent by U.S. parent companies to their foreign affiliates.
Investment also supports sustainable development. I am involved in the US Government’s preparation for the UN Financing for Development conference in Addis Ababa in July. A key focus will be mobilizing international resources for development, including foreign direct investment and other private investment flows. This is critical, because official development assistance alone cannot meet all the challenges facing the developing world.
Strong investment agreements help create a healthy investment environment. They contain core investor protections that help countries compete for foreign direct investment by supporting transparency, predictability, and openness to investment. Businessmen tell us they consider these factors when deciding where and how much to invest. This healthy environment creates opportunity and broadly shared prosperity. Remember the 80 million jobs?
Also, in our experience, investment agreements often complement countries’ efforts toward economic reform.
A key aspect of ensuring the fair treatment of investors is having strong investor-State Dispute Settlement (ISDS) provisions, which allows for the fair and efficient resolution of disputes. In the days before BITs, disputes frequently became tense bilateral diplomatic issues. ISDS has served to depoliticize investment disputes.
The United States now has 50 investment agreements in place, and we are actively negotiating new ones, including a BIT with China, and investment chapters in TPP and TTIP.
My second point is that it is possible to strike a balance in investment agreements between investor interests and governments’ regulatory ones.
Stakeholders have raised some valid concerns with certain provisions of some BITs.
We have held extensive public consultations to develop our current – 2012 – model BIT. These consultations were further informed by the experiences of our U.S. investors abroad, our efforts to attract investment into the United States, and what we have learned to date as a State defending ourselves against arbitration claims.
Our current model includes several important innovations that help improve the ISDS process and avoid inappropriate claims. For example:
We provide greater clarification of key obligations, such as “fair & equitable treatment” and “expropriation;”
We build in mechanisms to dismiss frivolous claims early in the process;
There also are mechanisms for the Parties to help ensure that tribunals interpret the treaty correctly;
We provide for full transparency of ISDS proceedings, requiring public documents and open hearings, and affording the opportunity for outside parties to submit amicus curiae submissions.
These advancements are intended to create a process that investors can rely on, and also one that is transparent and not subject to abuse.
Third and final point: there are various ways to manage the existing network of investment treaties/agreements to ensure that both investor and government interests are preserved. We can, for example:
Improve countries’ capacity to meet their international obligations,
Monitor developments in investor-State arbitration, and
Foster dialogue and mutual understanding on key issues.
We value open, inclusive, and multilateral dialogue on investment rules – such as we are having today.