{"id":9167,"date":"2023-04-02T08:54:15","date_gmt":"2023-04-02T06:54:15","guid":{"rendered":"https:\/\/cf.iisd.net\/itn\/?p=9167"},"modified":"2024-08-09T18:32:48","modified_gmt":"2024-08-09T16:32:48","slug":"looking-for-sustainable-development-and-sustainable-investment-in-the-wto-draft-investment-facilitation-for-development-agreement","status":"publish","type":"post","link":"https:\/\/www.iisd.org\/itn\/2023\/04\/02\/looking-for-sustainable-development-and-sustainable-investment-in-the-wto-draft-investment-facilitation-for-development-agreement\/","title":{"rendered":"Looking for Sustainable Development and Sustainable Investment in the WTO Draft Investment Facilitation for Development Agreement"},"content":{"rendered":"

On December 16, 2022, the co-coordinators of the WTO<\/span> Structured Discussions on Investment Facilitation for Development circulated a new negotiating text to WTO members participating in the initiative, the Draft IFD Agreement (\u201cDraft IFDA\u201d).[2]<\/sup><\/a> The Draft IFDA is a \u201cconvergence\u201d text covering the seven principal sections to be included in a future agreement.[3]<\/sup><\/a> As described by the co-coordinators, the Draft IFDA represents \u201ca major milestone towards concluding a WTO Agreement on Investment Facilitation for Development\u201d[4]<\/sup><\/a> that will \u201chelp Members attract, retain, and expand foreign direct investment flows to achieve sustainable development.\u201d[5]<\/sup><\/a> With the Draft IFDA now at a highly advanced stage, the goal of the co-coordinators is to finalize the text in the first half of 2023 with an eye toward adopting the agreement at the February 2024 WTO Ministerial Conference.[6]<\/sup><\/a><\/p>\n

The Draft IFDA and Sustainable Development<\/h2>\n

WTO members participating in the initiative have indicated repeatedly throughout the past 5 years of discussions that the goal of their work is not to promote investment facilitation as such but rather to promote investment for development and, specifically, sustainable development. Sustainable development has never been defined in the negotiations, although presumably negotiators will have had in mind something along the lines of the definition used by the UN: \u201cdevelopment that meets the needs of the present without compromising the ability of future generations to meet their own needs\u201d[7]<\/sup><\/a> and which seeks to strike a balance between \u201c[e]conomic development, social development, and environmental protection.\u201d[8]<\/sup><\/a><\/p>\n

Given the stated goal of producing an agreement aimed at sustainable development, suggestions have been made during the negotiations that an investment facilitation agreement should include provisions targeted specifically at investment for sustainable development.[9]<\/sup><\/a> The negotiations, however, have not followed this approach. In the current Draft IFDA there are no operative provisions targeted at the facilitation of investment for sustainable development.[10]<\/sup><\/a> Instead, the Draft IFDA establishes a framework of facilitation obligations that apply to all FDI<\/span>, regardless of whether it tends to promote sustainable development or not. In this respect, the Draft IFDA does not differ from previous drafts produced in the negotiations.<\/p>\n

In the absence of provisions aimed at facilitating sustainable investment per se<\/em>, it seems that whether and how states might prioritize or target the facilitation of investment for sustainable development is left for individual states to decide, subject to the Draft IFDA\u2019s general obligations. This approach thus begs the question as to whether the Draft IFDA\u2019s obligations leave states with sufficient policy-making space to prioritize the facilitation of investment for sustainable development as a matter of domestic policy.<\/p>\n

Most of the Draft IFDA\u2019s disciplines address procedural aspects of the legal environment for investment, such as the publication of information relevant to investment and streamlining administrative procedures, rather than substantive policy choices (e.g., government procurement and preferential subsidy programs are not covered).[11]<\/sup><\/a> Furthermore, most of the disciplines created are subject to significant qualification; that is, they are mandatory only \u201cto the extent practicable\u201d or to the extent that they are consistent with the state\u2019s legal system,[12]<\/sup><\/a> or members are only required to \u201cendeavour\u201d to achieve a certain facilitation outcome, or, in some cases, merely \u201cencouraged\u201d to consider adopting certain facilitation measures.[13]<\/sup><\/a><\/p>\n

Moreover, with respect to the Draft IFDA\u2019s \u201chard\u201d obligations, in some instances, the text is framed so as to reaffirm members\u2019 rights to make investment facilitation policy choices that could include favouring investments for sustainable development. Thus, for example, Article 13, which sets out the general requirement that investment authorization procedures shall not \u201cunduly complicate or delay investment activities\u201d and requires that measures regarding authorizations be \u201cbased on objective and transparent criteria,\u201d also includes a footnote clarifying that such criteria may include the investor\u2019s ability to operate \u201cin a manner consistent with a Member\u2019s regulatory requirements, such as health and environmental requirements.\u201d[14]<\/sup><\/a> On the other hand, Article 12, which broadly requires that \u201call measures of general application\u201d addressing FDI shall be \u201cadministered in a reasonable, objective and impartial manner,\u201d contains no similar clarification regarding the appropriateness of taking account of health and environmental requirements in fulfillment of that discipline. This lack of parallelism may leave open questions with respect to the future interpretation and application of certain provisions in the IFDA.<\/p>\n

Similarly, the MFN<\/span> provision in Article 4 leaves unclear whether the determination of \u201clike circumstances\u201d may take into account the relative sustainability of different investments. In this regard, the text of the Draft IFDA might have taken a lesson from recent practice in some investment protection treaties, which make clear that \u201c[w]hether treatment is accorded in like circumstances depends on the totality of the circumstances, including whether the relevant treatment distinguishes between investors or investments on the basis of legitimate public policy objectives.\u201d[15]<\/sup><\/a><\/p>\n

The Draft IFDA and Sustainable Investment<\/h2>\n

Although the Draft IFDA contains no provisions addressing the facilitation of investment for sustainable development, the draft does address the concept of \u201csustainable investment\u201d directly in two provisions in Section VI. As with \u201csustainable development,\u201d however, the Draft IFDA does not define \u201csustainable investment.\u201d[16]<\/sup><\/a><\/p>\n

The first provision addressing sustainable development is Article 30, in which members commit \u201cto encourage\u201d investors operating in their territory \u201cto voluntarily incorporate\u201d internationally recognized principles, standards, and guidelines of responsible business conduct \u201cthat have been endorsed or are supported by that Member.\u201d[17]<\/sup><\/a> The second provision is Article 31, in which members commit to \u201censure\u201d that measures are taken to prevent and fight corruption \u201cin accordance with its legal system.\u201d[18]<\/sup><\/a> These provisions impose minimum obligations with respect to sustainable investment, and, notably with respect to \u201cresponsible business conduct,\u201d the obligation is directed only at the host state of the investment. In other words, investor home states have no obligations with respect to the conduct of their investors abroad. Finally, it warrants noting that even though these provisions appear to impose minimum obligations on members, Article 35.4 expressly excludes them from the Draft IFDA\u2019s dispute settlement provisions. They are the only provisions of the Draft IFDA so excluded.<\/p>\n

Conclusion<\/h2>\n

The Draft IFDA\u2019s lack of operational provisions targeted at specifically facilitating investment for sustainable development and the absence of hard obligations for members with respect to sustainable investment is consistent with prior draft texts produced during the negotiations.[19]<\/sup><\/a> Given the advanced stage of the negotiations, it is highly unlikely that this will change. Instead, it seems that even once the future IFDA comes into force, it will remain a matter of individual state choice as to whether\u2014and, if so, how\u2014to prioritize or target the facilitation of investment for sustainable development, subject to the Draft IFDA\u2019s general obligations. Accordingly, the final scrub of the negotiating text will need to carefully ensure that the text does not constrain the ability of members to prioritize investment for sustainable development for themselves.<\/p>\n

\n

Authors<\/h3>\n

N. Jansen Calamita[1]<\/sup><\/a>*.<\/sup><\/p>\n

\n

Notes<\/h3>\n

[1]<\/a>*<\/sup> Head, Investment Law & Policy, Centre for International Law, National University of Singapore; Research Associate Professor, Faculty of Law, National University of Singapore<\/p>\n

[2]<\/a> WTO Structured Discussions on Investment Facilitation for Development: Draft IFD Agreement, INF\/IFD\/RD\/124 (16 Dec. 2022).<\/p>\n

[3]<\/a> WTO Structured Discussions on Investment Facilitation for Development, Statement by the Co-Coordinators<\/a>, INF\/IFD\/W\/46 (16 Dec. 2022), para. 4: (I) \u201cScope and General Principles\u201d; (II) \u201cTransparency of Investment Measures”; (III) \u201cStreamlining and Speeding up Administrative Procedures\u201d; (IV) \u201cFocal Points, Domestic Regulatory Coherence and Cross-border Cooperation\u201d; (V) \u201cSpecial and Differential Treatment for Developing and Least-Developed Members\u201d; (VI) \u201cSustainable investment\u201d; and (VII) \u201cInstitutional Arrangements and Final Provisions.\u201d<\/p>\n

[4]<\/a> Ibid., para. 2.<\/p>\n

[5]<\/a> Ibid., para. 6.<\/p>\n

[6]<\/a> Ibid., para. 10.<\/p>\n

[7]<\/a> UN General Assembly. (1987). Report of the World Commission on Environment and Development<\/em> (A\/RES\/42\/187). http:\/\/un-documents.net\/a42r187.htm<\/a>, para. 27.<\/p>\n

[8]<\/a> UN General Assembly. (1997. Programme for the further implementation of Agenda 21<\/em> (A\/RES\/S-19\/2). https:\/\/documents-dds-ny.un.org\/doc\/UNDOC\/GEN\/N97\/774\/73\/PDF\/N9777473.pdf?OpenElement<\/a>, para. 23.<\/p>\n

[9]<\/a> For example, for example, provisions designed to \u201cfacilitate[], on a priority basis, \u2018sustainable FDI\u2019, that is, FDI that has certain \u2018FDI sustainability characteristics.\u2019\u201d See Sauvant, K. P. & Mann, H. (2019). Making FDI more sustainable: Towards an indicative list of FDI sustainability characteristics. Journal of World Investment & Trade<\/em>, 20, 916\u2013952. See also Jansen Calamita, N. (2020). Multilateralizing investment facilitation at the WTO: Looking for the added value. Journal of International Economic Law<\/em>, 23<\/em> 973\u2013988.<\/p>\n

[10]<\/a> Sustainable development is only addressed in connection with the object and purpose of the Draft IFDA and its context. See, for example, Art. 1.1: describing the obligations created \u201cas a means of facilitating the flow of foreign direct investment between Members, particularly to developing and least developed country Members, with the aim of fostering sustainable development.\u201d See also the Preamble; \u201crecognising\u201d the importance of investment to, inter alia<\/em>, \u201cthe promotion of promotion of sustainable development\u201d and \u201cachievement of the United Nations 2030 Sustainable Development Goals.\u201d<\/p>\n

[11]<\/a> Art. 2.5.<\/p>\n

[12]<\/a> See, for example, Art. 5.2: \u201cIn publishing a new law or regulation. . . or change thereto, or in advance of such publication, to the extent practicable and in a manner consistent with its legal system<\/em> for adopting measures, a Member shall endeavour <\/em>to explain the purpose and rationale of the law or regulation\u201d (emphasis added).<\/p>\n

[13]<\/a> See, for example, Art. 20.2: \u201cEach Member is encouraged<\/em> to periodically review its authorization fees with a view to reducing their number and diversity\u201d (emphasis added).<\/p>\n

[14]<\/a> See Art. 13.2(a), n. 14.<\/p>\n

[15]<\/a> Canada Model Agreement for the Promotion and Protection of Investments (2021), Art. 6.3.<\/p>\n

[16]<\/a> In general terms, sustainable investment may be thought of as a commercially viable investment that contributes to sustained economic growth that is socially inclusive, environmentally sustainable, follows responsible business practices, and contributes to sustainable development. See Jansen Calamita, N. & Schacherer, S. (2022). Investment facilitation for sustainable development within the context of the Regional Comprehensive Economic Partnership (RCEP<\/span>), the ASEAN<\/span> Investment Facilitation Framework (AIFF) and the WTO Draft Investment Facilitation Framework for Development<\/em> (UNESCAP Studies in Trade, Investment and Innovation No. 96), 9\u201310. https:\/\/www.unescap.org\/kp\/2022\/investment-facilitation-sustainable-development-within-context-regional-comprehensive<\/a><\/p>\n

[17]<\/a> Draft IFDA, Art. 30.1. See also Art. 30.2, which notes that Members \u201cshould encourage\u201d investors to engage in \u201cengagement and dialogue\u201d with Indigenous peoples and local communities in accordance with principles of responsible business conduct \u201cthat have been endorsed or are supported by that Member\u201d and \u201cto the extent it is consistent with its legal system.\u201d<\/p>\n

[18]<\/a> Draft IFDA, Art. 31.1.<\/p>\n

[19]<\/a> See, for example, WTO Structured Discussions on Investment Facilitation for Development: Informal Consolidated Text, INF\/IFD\/RD\/50 (22 April 2020).<\/p>\n