For the most of the last 150 years, the substantive content of international investment law has largely been shaped by capital-exporting States in Western Europe and North America.Footnote 1 This is unsurprising given the dominant economic position held by those States during that period, which resulted in outflows of foreign direct investment largely into developing States which were less successful in influencing the process and outcomes of trade and investment treaty negotiations; and that did not have the institutional capacity to impartially settle complex investment disputes.Footnote 2 However, this dynamic has been gradually changing, with the significance of Asia coming increasingly to the fore. This is consistent with projections that Asia would ‘regain the dominant economic position it held some 300 years ago, before the industrial revolution’ by 2050.Footnote 3 Asia has indeed cemented its position as a global growth engine in recent years. It has for instance been estimated that by 2050, Asia could count for half of global production, trade and investment.Footnote 4 The economies of China and India are predicted to grow at a rate of 6.3 per cent in 2020, and the economies of the Association of Southeast Asian Nations (ASEAN) are expected to grow at a rate of 5.0 per cent in 2020, both well above the expected global average of 3.6 per cent.Footnote 5 China, as one of the top prospective FDI destinations, has become the second highest recipient of FDI inflows in the world (with USD 139 billion in 2018); when combined with Hong Kong, China receives the most FDI in the world, with USD 255 billion, compared with the United States, which received USD 252 billion in 2018.Footnote 6 The same picture also emerges with respect to FDI outflows: China is in second place in 2018, with USD 130 billion, and when combined with Hong Kong, accounts for USD 215 billion, which easily surpasses Japan, which was responsible for capital exports of USD 143 billion.Footnote 7 Further to this, ASEAN is now the third largest trading bloc in the world after the European Union (EU) and the North American Free Trade Area.Footnote 8 If the ten-member regional bloc were a single country, it would be the fifth largest economy in the world, with a combined economy of USD 2.8 trillion in 2018.Footnote 9 And Australia, being geographically proximate to Asia, is one of the world’s top eight host economies, with USD 60 billion worth of FDI inflows into the country in 2018.Footnote 10
It can therefore be said – as has been remarked by Stephan Schill – that recent years have witnessed a marked shift in the geography of international investment law from a ‘transatlantic to a transpacific core’, and that Asia is becoming a focal point ‘in rule-making in international investment law’.Footnote 11 Indeed, Asia has been at the epicentre of negotiations for novel and exciting mega-regional investment agreements. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is, despite the need for it to be renegotiated after the United States’ decision to withdraw from its predecessor, the Trans-Pacific Partnership (TPP),Footnote 12 still a triumph for the Asia Pacific region as it promotes a new trend of multiregional trade and investment in the twenty-first century through economic connectivity, and creates global value chains. Notwithstanding the United States’ withdrawal from the TPP, the ongoing negotiations of the US–China bilateral investment treaty (BIT) illustrates the importance that Washington, DC, places on investment flows with Asia.Footnote 13 Asia’s prominent role is also evidenced by the recent successful conclusion of the Regional Comprehensive Economic Partnership Agreement (RCEP), which includes the ten ASEAN States and the five of the six States with which ASEAN has existing FTAs (namely, Australia, China, Japan, Korea and New Zealand; India has decided for the time being not to sign the RCEP.)Footnote 14 On 4 November 2019, these States announced that the negotiation of twenty substantive chapters of the RCEP had been completed, and that most market access commitments on goods, service and investment had been substantially agreed. The States agreed that they would work towards the rapid conclusion of the RCEP, and on 15 November 2020, it was signed by Ministers from 15 countries.Footnote 15 And outside the space of international investment law, the signing in August 2019 of the Singapore Convention on International Settlement Agreements Resulting from Mediation also saw Asia located at the centre of developments in international commercial law.Footnote 16
In addition to the ambitious mega-regional agreements, individual ASEAN States have also been busy negotiating bilateral FTAs with the EU. As things stand, the European Union has signed an Economic Partnership Agreement with Japan in June 2016 (which entered into force in February 2019),Footnote 17 and it has also signed a bilateral free trade agreement (FTA) and separate investment protection agreement with Singapore in October 2018 and with Vietnam in June 2019 (neither of which is in force).Footnote 18 The EU has also commenced negotiations with Malaysia, Thailand, the Philippines, Indonesia, India, Myanmar, Australia and New Zealand.Footnote 19
Elsewhere in Asia we have witnessed Sri Lanka’s ‘Look East’ strategy to ‘court ASEAN’ manifesting itself.Footnote 20 Sri Lanka’s most recently concluded IIA, the Sri Lanka–Singapore FTA, was signed in January 2018 and can be considered as being Sri Lanka’s first modern and comprehensive FTA. Were Sri Lanka to join the RCEP, it would stand to gain the benefit of ‘simultaneous access to an enormous regional market and dynamic Asian FDI’.Footnote 21
Instinctively, one would anticipate that the perceived ‘shift’ in the geography of international investment law from West to East would result in an increase in Asian participation in investment arbitrations, being the predominant ISDS mechanism in IIAs. In general, the resort to investor–State dispute settlement (ISDS) continues to be popular: in 2018 alone, seventy-one new ISDS cases were launched, which continues a general upward trend in the annual number of new cases in recent years, and thirty-one new claims were started in the first seven months of 2019.Footnote 22 But the involvement of Asia remains comparatively limited, with the statistics instead indicating that the number of cases involving States from South Asia and the Asia Pacific remains relatively low.Footnote 23 Nonetheless, it has been suggested that a number of considerations suggest that there will be an increase of investor–State arbitration in the region.Footnote 24 In particular, several considerations feature prominently in this book; these include the modernization in ASEAN States, the trends that point towards increase in the number of investor–State disputes in future, and the bringing together of different stakeholders in the ASEAN region.
Another current issue in international investment law is the proposed reform of ISDS. In this respect, many States and other stakeholders have expressed dissatisfaction with the current regime, particularly as regards the perceived imbalance of rights and obligations of investors and States under IIAs, as well as the ISDS mechanism contained within these treaties.Footnote 25 Certain States, in particular the EU and its Member States, have in fact stepped away from negotiating traditional ISDS provisions in their IIAs, and have instead proposed the creation of a permanent tribunal for the resolution of investor–State disputes, with the addition of an appellate body. These efforts which were made in the context of bilateral negotiations (including with Canada, Singapore and Vietnam) have led to UNCITRAL’s attention being turned to a possible multilateral reform agenda. In April 2017, the UNCITRAL Secretariat published a Note, ‘Possible future work in the Field of Dispute Settlement: Reform of Investor-State Dispute Settlement (ISDS)’, which identified certain concerns, such as a perceived lack of consistency and predictability in decisions and awards, and the lack of a code of conduct for arbitrators.Footnote 26 In July 2017, UNCITRAL charged Working Group III with ‘a broad mandate to work on the possible reform of investor–State dispute settlement (ISDS)’.Footnote 27 In discharging its mandate, Working Group III was to ensure that its deliberations, ‘while benefiting from the widest possible breadth of available expertise from all stakeholders, would be government-led with high-level input from all governments, consensus-based and fully transparent’.Footnote 28 The approach followed by Working Group III was that it would proceed in three stages: first, it would ‘identify and consider concerns regarding ISDS’; secondly, it would ‘consider whether reform was desirable in light of any identified concerns’; and thirdly, ‘if the Working Group were to conclude that reform was desirable, develop any relevant solutions to be recommended to the Commission’.Footnote 29
As of the time of writing, Working Group III has now reached the third of these phases, having already identified and considered concerns regarding ISDS, and having concluded that reform was desirable in light of those concerns. States remain divided on what the appropriate reforms should be, with States being loosely grouped into (a) those States which favour systemic reform (such as the creation of a permanent multilateral investment court (MIC) and/or an appellate mechanism; (b) those States which favour incremental reform, which would involve improvements to the existence ad hoc system of ISDS; (c) those States which are implacably opposed to any form of ISDS, whether before a permanent MIC or ad hoc tribunals;Footnote 30 and (d) those States which are yet to settle on a position.
The approach of many Asian States with respect to ISDS Reform largely remains to be seen. It is significant, however, that certain States have already declared their hand. For instance, China has come out in support of the development of an appellate mechanism for ISDS disputes.Footnote 31 Thailand, for its part, appears to favour incremental reform, and has expressed support for the drafting of new UNCITRAL Rules for ISDS disputes, the drafting of guidelines on dispute prevention, the establishment of an Advisory Centre on Investment Law, and the drafting of model substantive clauses for IIAs.Footnote 32 Japan also favours incremental reform, and it has also submitted joint papers with Chile and Israel,Footnote 33 as well as with Mexico and Peru,Footnote 34 in which they have proposed the negotiation of a multilateral instrument which would enable States to opt in with respect to a ‘suite’ of various reforms.Footnote 35 As they explain, this ‘suite’ approach aims to provide a solution which allows for ‘maximum flexibility to develop a menu of relevant solutions, which may vary in form, and that member States can choose to adopt, based on their specific needs and interests, including those of developing countries’.Footnote 36
The two proposed systemic reform options – namely the creation of a permanent MIC providing direct access to private parties and States parties alike for investment-related matters, and the creation of an appellate mechanism for investor–State arbitral awards – has long been championed by the EU, and successfully negotiated the inclusion of such provisions in the investment chapter of its FTA with Canada (‘the Comprehensive Economic Trade Agreement’),Footnote 37 as well as in the EU–Vietnam Investment Protection Agreement,Footnote 38 and the EU–Singapore Investment Protection Agreement.Footnote 39
Against this background, it is evident that the ISDS regime is at a crossroads. At this important juncture, arguably more than ever before, Asian States find themselves well positioned to assist in shaping the next phase of international investment law. Asia is the next bastion of economic activity, providing growth opportunities for States in Europe, the Americas, Africa and beyond.Footnote 40 Given Asia’s newly found position of potential influence, this raises the question whether it can be said that there is an ‘Asian’ approach to international investment law? To locate an answer to this question, it is evident that the Asian response to international investment law is a variegated one, which goes beyond the various reform options which have been proposed by UNCTAD, States and other stakeholders. To use a culinary analogy, although all Asian States may be dining at the same table of international investment law, each State comes with different preferences, different experiences and a different way of conducting its affairs – bringing a different dish to the table. And just as the decision-making process of each guest at the Asian dinner table as to which dishes to select will depend on a range of factors, so the approach of each Asian State when it comes to negotiating terms in their IIAs will take into account the very unique preferences and circumstances of each State, shaped by history, culture and other contextual factors.
Over twenty-two chapters, this book strives to present a picture of what individual Asian States bring to the table and how as a region they are already, and will continue, to drive the IIA regime forward. It also brings together some of the pertinent issues that the Asian States have to grapple with as they move forward in their treaty negotiations. Readers are invited to explore what the ‘Asian approach’ is, which may lead to a more layered understanding of whether Asian States are ‘rule takers’ or ‘rule makers’ and whether Asia as a region is well-poised to take the lead in ISDS reform.
This volume proceeds as follows. After this introduction, the collection starts by considering various national approaches within Asia to the regulation and protection of foreign investment (Part II). Mahdev Mohan begins by observing that at a time of global uncertainty in trade and investment regimes, Singapore’s policymakers and legal advisers have been involved in negotiating ‘next generation’ amendments to the Singapore–Australia Free Trade Agreement, while also working to resurrect a familiar international economic law framework– that is, bifurcating EU–Singapore trade and investment commitments into two separate agreements. Singapore courts are now also prepared, as he notes, to review the scope of an arbitral tribunal’s jurisdiction afresh by interpreting the underlying investment treaty.Footnote 41 Prabhash Ranjan then considers a particular issue facing India, which is the interface between intellectual property rights and international investment law; he discusses whether foreign investors, specifically pharmaceutical companies, are empowered to challenge regulatory measures that may be introduced by the Indian government and that impact the investor’s patents under the investment chapters of India’s BITs and FTAs.Footnote 42 Ei Ei Aung, Mahdev Mohan and Aziah Hussin then examine Myanmar’s approach to international investment protection in the form of the Myanmar Investment Law, 2016.Footnote 43 Sheng Zhang then provides an examination of the different levels of development that have characterized China’s BIT practice, and suggests this is a microcosm of China’s growing participation in the international legal order.Footnote 44 In Jie (Jeanne) Huang’s chapter, readers find a consideration of China’s experience in upgrading its BITs; this chapter categorizes the modernization of Chinese BITs into five models, consistent with UNCTAD’s recommendations for reform.Footnote 45
In Part III, the contributions consider the tensions that are at play in the ISDS regime more generally, particularly as States are increasingly finding that they are having to defend investor–State claims, in striking the correct balance between regulatory space and investor protection. The Japanese approach to striking this balance is discussed by Shotaro Hamamoto. In comparing Japan’s ‘old generation’ treaties against the ‘new generation’ ones, the author illustrates how Japan is shifting the balance in a way that will better preserve the regulatory space of the host State.Footnote 46 In the following chapter, Antony Crockett provides a thorough overview of the investment treaty regime in Indonesia, and provides insight into how the government is trying to preserve its regulatory space, whilst providing foreign investments better protection and fair treatment.Footnote 47 The next chapter, by Shreyas Jayasimha and Abhimanyu George Jain, sheds light on India’s experience in responding to the increased use of ISDS against it, and its development of the Model BIT of 2015.Footnote 48 Naazima Kamardeen and Dinush Panditaratne then bring readers through the Sri Lankan experience of FDI, especially in light of its ‘first modern and comprehensive’ FTA with Singapore in January 2018.Footnote 49
The contributions in Part IV of this volume take a step back for a broader survey of multilateral rule-making in Asia on trade and investment, that is, how Asian States and the ASEAN bloc as a whole are building, strengthening or revising relationships with other regional blocs. This is done through examining the recent mega-regional agreements that have been at the centre of talks of IIA for the past few years, in particular, the CPTPP, TPP and the RCEP, amongst others. Chester Brown and Henry Winter begin with an analysis of ASEAN’s legal framework for free trade and the promotion and protection of foreign investment.Footnote 50 In the next chapter, Nguyen Manh Dzung and Dang Vu Minh Ha examine Vietnam’s role as a ‘rule-taker’ in having accepted the EU’s proposed ISDS mechanism in the EU–Vietnam Free Trade Agreement.Footnote 51 Julien Chaisse and Xu Jian’s chapter on investment rule-making in Asia–European Union relations provides a macro-analysis of Asian rule-making and then delves into the evolving international regime for investment in Asia, coming at a crucial time for the EU when it is increasing the number of treaty negotiations with Asian members.Footnote 52 Lastly, Chin Leng Lim discusses the rebalancing of investor and investment protection in light of the regulatory concerns of the original twelve signatory countries to TPP’s investment chapter.Footnote 53
Part V then turns to consider emerging trends and seeks to situate Asia in relation to these novel developments. Thus, Aloysius Llamzon and Jessica Beess und Chrostin discuss the leading cases on investor wrongdoing in international investment arbitration, including a focus on the obligations of foreign investors to exercise diligence when making foreign investment decisions.Footnote 54 Robert McCorquodale and Mark Mangan then discuss the responses by ASEAN Member States to transboundary haze pollution, and analyse whether the responsibility of States to prevent transboundary pollution and to protect the human rights of those within their jurisdiction as well as those residing in neighbouring States can be enforced under investment treaties.Footnote 55 The next chapter, by N Jansen Calamita and Ewa Zelazna, outlines the drivers of change regarding transparency in investor–State arbitration and asks critically about the role of Asian States in this process, particularly in light of the considerable doubts expressed by Asian States in the UNCITRAL negotiations about both the need for the Rules on Transparency and the Mauritius Convention.Footnote 56 Next, Ingrid Coinquet and Siraj Shaik Aziz write about how third party funding has gained a foothold in Asia through Hong Kong and Singapore.Footnote 57 Following from this, Jaemin Lee reviews recent initiatives which embrace the use of mediation for the resolution of ISDS cases, and reflects further on the significance of the recent conclusion of the Singapore Convention in this respect.Footnote 58 In the last chapter of this part, Nadja Alexander and Shouyu Chong consider the origins of the Singapore Convention on Mediation and how it may impact upon ISDS, going forward.Footnote 59
Finally, the contributions in Part VI discuss future trajectory for investment law in the region. In Surya P Subedi QC’s chapter, ‘Reconciling Public Interests with Private Interests in ISDS: Securing Effective Remedy for Investment-Related Human Rights Violations’, he considers the particular issue of ‘land grabbing’ in the region and highlights the practice of certain developing countries in responding to the position of the developed countries with which they enter into IIAs.Footnote 60 And Luke Nottage’s chapter provides a holistic assessment of Asian practices and trends for future agreements.Footnote 61
The contents of this volume amply demonstrate that Asian States have learned that flexibility and being able to adapt to the international geopolitics is essential to continued cooperation, continued foreign investment flows and economic growth. This is also appreciated by investors, non-governmental organizations, members of civil society and other stakeholders in the Asian region. We hope that readers will find this book a buffet of information that tantalises and delights the mind.
