Why do states continue to negotiate investment treaties? Today, the more relevant question is not whether such treaties should exist, but how they are designed, how they interact within broader treaty networks, and what role they play within a country\u2019s overall strategy for attracting sustainable foreign investment. As the international investment regime evolves, attention has increasingly shifted from the mere existence of treaties to their function, coherence, and practical operation within wider regulatory and policy frameworks that shape the investment environment.<\/p>\n
From the perspective of the negotiation process, outcomes of modern investment treaties are shaped by a combination of political considerations, reciprocal investment interests, constitutional and regulatory constraints, and the overall balance of the negotiation.<\/p>\n
Against this background, UNCTAD<\/span>\u2019s overview of the state of play of investment treaty reform<\/a> confirms that states are increasingly adopting differentiated approaches, adapting their treaty design to specific public policy objectives and negotiating partners. Chile\u2019s experience illustrates this gradual evolution. While first-generation international investment treaties still account for a significant share of those currently in force, they are progressively being replaced by modern investment agreements, most often in the form of investment chapters within free trade agreements. This broader perspective also underscores that, where investment chapters are included in broader treaties, their interpretation and application cannot be approached in isolation. They must be read systematically alongside other relevant chapters, such as those on financial services, transparency, or cooperation, which directly affect the investment environment and the practical operation of treaty commitments.<\/p>\n Within this evolving treaty landscape, comparative practice plays an important, though not determinative, role. Information on the treaty practice and ISDS<\/span> experience of other states provides valuable strategic insight, helping negotiators assess areas of convergence, identify sensitivities, and understand what types of solutions may be acceptable to a counterpart.<\/p>\n In this context, databases compiling treaty texts and investment disputes, including those maintained by UNCTAD\u2019s IIA<\/span> Navigator<\/a>, provide useful context and comparative perspective. Their value lies in supporting informed decision making, rather than replacing the central role of policy judgment and negotiation strategy.<\/p>\n Within this broader understanding, and informed by global reform trends, Chile has preserved core investment protection standards while introducing targeted adjustments aimed at enhancing predictability and clarifying the scope of its obligations, particularly in response to concerns about overly broad interpretations in the context of ISDS.<\/p>\n This approach is reflected, for example, in the formulation of fair and equitable treatment primarily as the customary international law minimum standard of treatment and, in more limited cases, as an autonomous standard, narrowly defined through an exhaustive list of measures constituting a breach of the treaty.<\/p>\n At the same time, Chile has consistently incorporated treaty language aimed at clarifying the scope of its obligations, while preserving regulatory space for the adoption of measures pursuing legitimate public welfare objectives. Provisions on indirect expropriation explicitly recognize that certain non-discriminatory regulatory measures adopted for such legitimate public welfare objectives do not constitute treaty breaches. Similar clarifications have been introduced regarding national treatment and most-favoured-nation treatment, where the assessment of \u201clike circumstances\u201d is expressly linked to the totality of the circumstances, including whether differential treatment is grounded in legitimate public welfare objectives.<\/p>\n Alongside these clarifications in its modern investment treaties, Chile consistently approaches negotiations within clearly defined parameters derived from constitutional constraints, domestic regulatory frameworks, and long-standing policy choices.<\/p>\n Consistent with this overall approach, Chile remains a highly open economy in terms of investment liberalization, with very few restrictions on the establishment and operation of foreign investment. Where commitments have been undertaken under a negative list approach, reservations have been applied consistently. These reservations are grounded in existing legislation or clearly identified public policy priorities and have remained stable over time.<\/p>\n This consistency is also reflected in sector-specific commitments. In the current context, marked by growing interest in critical minerals for the energy transition, the treatment of lithium has gained particular relevance. Lithium is excluded from certain liberalization commitments, notably national treatment and the prohibition of performance requirements. As a strategic resource subject to an existing constitutional and legal framework, Chile has not undertaken international commitments in this area. This uniform treatment across Chile\u2019s treaty network reflects how existing domestic regulatory limits are carried through systematically and consistently into Chile\u2019s international investment commitments, offering a clear reference for treaty practice.<\/p>\n A similar logic of coherence can be observed in the area of international dispute settlement, where a number of states have opted to exclude or suspend ISDS, relying instead on state-to-state mechanisms or introducing limitations to prevent overlapping treaty regimes. Chile has selectively followed this practice. Under the CPTPP<\/span>, ISDS between Chile and New Zealand is suspended. Likewise, under the Pacific Alliance\u2013Singapore Free Trade Agreement, ISDS between Chile and Singapore is suspended, with the CPTPP ISDS mechanism remaining applicable in order to avoid parallel dispute settlement regimes. The latter example reflects a broader trend toward more strategic management of dispute settlement mechanisms, aimed at reducing duplication and normative fragmentation.<\/p>\n Beyond individual treaty provisions, coherence concerns also extend to the structure of the treaty network as a whole. As recognized in UNCTAD\u2019s 2023 World Investment Report<\/a>, overlapping treaty commitments between the same states remain a frequent feature of the international investment landscape, raising challenges in terms of coherence and application. In this context, Chile has also prioritized the negotiation of modern instruments that expressly replace earlier agreements, with the aim of reducing the coexistence of treaties from different generations. This approach reflects a stable treaty practice replicated across multiple agreements, while observed experience in ISDS has underscored the practical relevance of explicit transition and replacement mechanisms.<\/p>\n A recent and significant example is the Advanced Framework Agreement between Chile and the European Union. Upon its entry into force, 15 first-generation bilateral investment treaties between Chile and 16 EU<\/span> member states will be terminated by mutual consent, one of which was concluded jointly with Belgium and Luxembourg.<\/p>\n Aligned with global trends, Chile has expanded the scope of its investment treaties by incorporating commitments beyond protection standards. These include commitments on investment promotion and facilitation, as well as provisions on sustainable development and the right to regulate. In some cases, treaty design has placed greater emphasis on facilitation, shifting the focus from post-establishment protection toward the functioning of the regulatory environment. The investment cooperation and facilitation chapter of the Chile\u2013Brazil Free Trade Agreement provides a clear illustration of this approach.<\/p>\n Taken together, these developments reflect a shared objective: redefining the role of investment treaties in light of the factors that genuinely influence investment decisions. Treaties form part of a broader regulatory ecosystem and, on their own, do not guarantee the attraction of sustainable foreign investment.<\/p>\n It is in this context that investment facilitation has emerged as a pragmatic and forward-looking agenda for states, most clearly reflected in the Agreement on Investment Facilitation for Development (IFD) of the World Trade Organization. Although not yet in force, the IFD has consolidated itself as a key international reference in this field, with a strong emphasis on domestic implementation. Chile has participated actively in the initiative from its outset, with a coordinating role, signalling an early and consistent commitment to facilitation.<\/p>\n Beyond the IFD, bilateral and regional initiatives on investment facilitation are also emerging. While valuable, the coexistence of facilitation commitments across bilateral, regional, and plurilateral instruments highlights the complexity of the current landscape. In this context, consolidated information on facilitation-related commitments across a country\u2019s IIA network, including through tools such as UNCTAD\u2019S IIA Facilitation Mapping<\/a>, helps provide an overview of existing obligations.<\/p>\n Investment facilitation, however, is neither automatic nor limited to the international level. It depends on domestic administrative arrangements and institutional coordination, with key challenges often concentrated in permitting systems. Domestic regulatory and institutional frameworks governing investment-related procedures are a central element of investment facilitation, as reflected in UNCTAD\u2019s Investment Policy Monitor<\/a>. In Chile, a recent reform to the sectoral permits framework<\/a> illustrates the domestic context in which facilitation-related commitments are implemented at a domestic level.<\/p>\n Taken together, these elements point to a broader reassessment of the role of investment treaties. Their negotiation remains relevant insofar as it forms part of a coherent strategy aligned with each country\u2019s needs and capacities. Comparative information on treaty practice and investment disputes provides valuable context for this process, helping to inform policy choices and support coherence across a treaty network, while preserving domestic strategic priorities and policy choices.<\/p>\n Mariana Pinto Schmidt<\/strong> is Legal Advisor, Investment, Services and Digital Economy Department Undersecretariat of International Economic Affairs of Chile.<\/p>\n Disclaimer: The views and analyses expressed in this article are made in a personal capacity and should not be understood as representing the official position of the Government of Chile or any of its authorities or institutions.<\/em><\/p>\n
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