1. Second Annual Forum of Developing Country Investment Negotiators 2-4 November 2008 “Linkages Between Investment Treaties and Host Government Agreements” Howard Mann Senior International Law Advisor International Institute for Sustainable Development h.mann@sympatico.ca Tel: +1 613 286 5383 www.iisd.org/investment

2. Agenda How treaties can bring in HGAs How treaties can bring in HGAs Will tribunals respect other court reviews of contracts? Will tribunals respect other court reviews of contracts? Substantive impact on interpretation of treaties Substantive impact on interpretation of treaties

3. How treaties can bring in HGAs Contract as an investment Contract as an investment “Umbrella” clause “Umbrella” clause Investor can claim a breach of a contract is also a breach of the treaty: Investor can claim a breach of a contract is also a breach of the treaty: Expropriation of contract rights Expropriation of contract rights Breach of fair and equitable treatment standard Breach of fair and equitable treatment standard “reasonable expectation of the investors” “reasonable expectation of the investors”

4. Will tribunals respect other court reviews of contracts? Investors can often use multiple legal approaches Investors can often use multiple legal approaches Investor-state tribunals may respect decisions of other tribunals Investor-state tribunals may respect decisions of other tribunals National courts decisions are subject to review and disagreement National courts decisions are subject to review and disagreement National judicial process is also subject to standards of conduct of the treaty National judicial process is also subject to standards of conduct of the treaty Arbitrations over contracts Arbitrations over contracts Tribunals not bound to follow or respect prior contract arbitrations Tribunals not bound to follow or respect prior contract arbitrations Biwater v. Tanzania: consider but not bound Biwater v. Tanzania: consider but not bound Secrecy of other processes a factor Secrecy of other processes a factor

5. Impact on substantive interpretations Methanex and expropriation: Methanex and expropriation: “[A]s a matter of general international law, a non- discriminatory regulation for a public purpose, which is enacted in accordance with due process and, which affects, inter alios, a foreign investor or investment is not deemed expropriatory and compensable unless specific commitments had been given by the regulating government to the then putative foreign investor contemplating investment that the government would refrain from such regulation.

6. Impact on substantive interpretations Parkerings on fair and equitable treatment: Parkerings on fair and equitable treatment: It is each State’s undeniable right and privilege to exercise its sovereign legislative power. A State has the right to enact, modify or cancel a law at its own discretion. Save for the existence of an agreement, in the form of a stabilization clause or otherwise, there is nothing objectionable to the amendments brought to the regulatory framework existing at the time an investor made its investment.

7. Impact on substantive interpretations Conclusions: Conclusions: Contracts are relevant to interpretation and application of BITs Contracts are relevant to interpretation and application of BITs Treaties can be used to enforce contracts and override choice of law clause in contracts Treaties can be used to enforce contracts and override choice of law clause in contracts Most favourable decisions towards the state right to regulate can be reversed in the face of a host government agreement. Most favourable decisions towards the state right to regulate can be reversed in the face of a host government agreement.