A growing number of policy-makers are concerned about their countries\u2019 national investment laws. Many developing countries rewrote their investment laws between 1980 and 2010, often in ways that aligned them more closely with outdated IIAs. As a result, such laws pose many of the same legal risks and policy concerns as old-style IIAs. Some laws include especially risky provisions, such as<\/p>\n
Beyond concerns about risky provisions, investment laws warrant reconsideration because they are versatile policy tools. In the past, they were redesigned to meet new challenges and opportunities, and they can once again be redesigned as powerful tools for governments seeking to align their investment policy with sustainable development or other policy goals. For instance, investment laws can be instrumental in implementing new norms or policies in business and human rights, climate finance, and the global minimum tax. This paper makes two recommendations for policy-makers concerned about investment laws and seeking to rethink them in order to address their countries\u2019 challenges.<\/p>\n
First, clarify what functions an investment law is intended to perform and how these functions relate to its broader objectives.<\/strong> A crucial first step in any reform process is to identify the high-level policy objectives that an investment law intends to achieve, for example, promoting sustainable development.<\/p>\n Investment laws currently perform a variety of functions<\/a>, including<\/p>\n However, investment laws should not necessarily seek to perform all these functions. Some functions, such as the conferral of investment incentives, are more appropriately governed by general tax codes, as argued above, and are better omitted from investment laws entirely. Whether other functions should be performed by the investment law or by laws of general application, supplemented by sector-specific regulations, depends on the country context and policy-makers\u2019 objectives. The key is to recognize that investment laws can perform many different functions, clarify the functions the law in question is intended to perform, and ensure that the performance of selected functions aligns with the law\u2019s higher-order objectives.<\/p>\n Second, ensuring that the content of investment laws is consistent with their objectives and functions<\/strong>. <\/em>After policy-makers have decided on the objectives and functions the law should serve, the crucial question is: How to design the law\u2019s content to best perform the given functions? For instance, general language requiring MNEs to conduct themselves sustainably has not been as effective as reiterating that any MNEs\u2019 business activity is directly subject to relevant environmental laws and approval processes, including the environmental and social impact assessment regime contained in other domestic law instruments.<\/p>\n Several countries have decided not to have an investment law. Policy-makers who decide to have an investment law may wish to consider a series of questions as they (re)design their laws. For instance, \u201cHow will this law interface with our laws of general application?\u201d and \u201cWhat is the best institutional structure for the administration or enforcement of the investment law?\u201d The questions we suggest<\/a> policy-makers ask and answer are the same across countries, but the answers may vary, as there is no single best-practice model for an investment law.<\/p>\n In conclusion, poorly designed investment laws can pose risks to governments, while well-designed ones can serve as powerful tools for governments to align their investment policies with their national sustainable development objectives.<\/p>\n Authors<\/strong><\/p>\n Jonathan Bonnitcha (j.bonnitcha@unsw.edu.au) is Associate Professor at the University of New South Wales and a Senior Associate with the International Institute for Sustainable Development (IISD<\/span>).<\/p>\n Suzy Niki\u00e9ma (snikiema@IISD<\/span>.org) is Director of Sustainable Investment at IISD, and lecturer at Universit\u00e9 Saint Thomas d\u2019Aquin and Universit\u00e9 Aune Nouvelle in Burkina Faso.<\/p>\n Taylor St John (taylor.stjohn@st-andrews.ac.uk) is Assistant Professor, University of St Andrews, and Researcher, Faculty of Law, University of Oslo.<\/p>\n The authors wish to thank Martin Dietrich Brauch for helpful peer review.<\/p>\n <\/p>\n\n
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