Inter-law-chapter4(1)

1、2021-12-291Chapter FourForeign Investment Law Lectured by Jonathan ZHONG2021-12-292Foreign investment lawExplaining foreign investmentRelationships between foreign investment and host countryForms of foreign investmentInternational legal framework for foreign investmentThe WTO and foreign investment

2、Means for protection of foreign investmentInternational Court of Justice and and foreign investment2021-12-293Background 1Nationalisation and appropriation by local governments became a common practice in the 1950s and early 1960s in many host countries; in particular, in many newly independent coun

3、tries in Africa, Asia and Latin America. This led to the conclusion of the Washington Convention on the settlement of Investment disputes 1965. The International Centre for Settlement of Foreign Investment Disputes (ICSID) was established to deal with disputes arising from nationalization or appropr

4、iation of foreign investment by local government. 2021-12-294Background 2World politics experienced dramatic changes in the 1980s. Foreign investment became a powerful vehicle to develop the new market of the former socialist countries.The popularity of foreign investment in the twentieth century is

5、 probably attributable to three decisive factors:the comparative advantages of countries in their natural, human and financial resources;the continuous and insurmountable existence of barriers of trade protectionism; and 1.the increased activities of transnational (or multinational) corporations. 20

6、21-12-295Background 3The rapid development of foreign investment activities across the world demands the development of an adequate set of rules governing international foreign investment.A number of international organizations, such as the OECD, UNCTAD, the IMF, MIGA and the WTO have been active in

7、 developing universal rules for foreign investment or the basic principles which provide a foundation for the future development of international investment law. 2021-12-296Explaining foreign investment 1Foreign investment is commonly classified into two categories: foreign direct investment (FDI) o

8、r foreign portfolio investment (FPI). At least this is the popular classification adopted by world countries today. FDI (which may also be referred to as DFI, or direct foreign investment) is category of international investment in which a resident entity in one economy obtains a lasting interest in

9、 an enterprise resident in another. A lasting interest implies the existence of a long-term relationship between the direct investor and enterprise and a significant degree of influence by the investor on the management of the enterprise. 2021-12-297Explaining foreign investment 2Foreign investment

10、in international commercial law refers to FDI and FPI as well as any other form, such as transfer of technology or countertrade, which has not amounted to the control of any lasting interest in the local enterprise, made by a foreign person, either natural or legal, within the territory of a host co

11、untry.There are two essential features of a foreign investment:the investor is not a citizen of the country where the investment is made,1.the investment activity is not a mere act of sale of goods, or supply of services, between parties from different countries, A foreign investment must involve on

12、going operations, in the form of either FDI or FPI, in a foreign country.2021-12-298Relationships between foreign investment and host countryThe nature of foreign investmentThe host countrys attitudes towards the foreign investmentThe effects of foreign investmentThe relationships between foreign in

13、vestment and host country東道國2021-12-299The nature of foreign investment Foreign investment law is a complex area of international commercial law. It involves conflict of interests between host states and local industries (local party) on the one hand, and the foreign investors and foreign government

14、s (foreign party) on the other, because of the disparity between the economic powers of the foreign party and the local party as well as increase struggles between them to gain the power to control local economies in order to increase security for their own future. 2021-12-2910The host countrys atti

15、tudes towards the foreign investmentThe notion of free market hangs on a very fine balance of local restrictions on foreign investment within the context of foreign investment.No country has offered totally free or totally unrestricted access to foreign investors, who are capable of destroying, mani

16、pulating or controlling a local economy as much as they are capable of building or strengthening a local economy. No politician will place the fate of a country at the mercy of powerful foreign investors. The policy of trade protectionism is, in most circumstances, based on concern for the growth of

17、 local industries and employment, although sometimes a government protects a local industry merely for strategic considerations, whether economic, political or military. 2021-12-2911The effects of foreign investmentThe advantages of foreign investment are the rational bases for a host country to acc

18、ept foreign investment. Foreign investment also has detrimental effects on a local economy, foreign investment is both welcome and restricted in all countries, although the levels of restrictions vary depending on the individual need for foreign investment. 2021-12-2912The relationships between fore

19、ign investment and host countryforeign investment is a means of overcoming trade barriers existing between the investing and invested countries; foreign investment often provides finance and advanced technology urgently needed by the host country, which may have to take the risk of allowing foreign

20、control of certain domestic industries;foreign investment may improve a local industrys international competitiveness by injecting foreign capital and technology, but may also destroy local competition in the domestic market by using its financial and technological advantages;foreign investment may

21、strengthen local industries and increase local employment, but may also take control of local economies, which would be regarded as a risk by most countries for strategic and political reasons; foreign investment may make positive contributions to a local economy, but may also put the future of the

22、local economy in doubt by remitting large profits overseas and manipulating the local market in accordance with its needs, a point which has been made constantly by nationalists against foreign control of the local economy. 2021-12-2913Forms of foreign investmentForms of foreign investment can be cl

23、assified under different criteria.Forms of foreign investment in this chapter means the forms or vehicles by which a foreign investment is carried out or made. Forms of foreign investment:Multinational corporationsJoint venturesSole foreign venturesLicensing agreements and counter-tradeBuild-Operate

24、-Transfer projectsForeign takeovers or acquisitions1.Foreign direct investment and portfolio investment2021-12-2914Multinational corporations (1)They refer to all enterprises which control assets factories, mines, sales offices and the like in two or more countries. The key indicator of a multinatio

25、nal corporation is its ability to control its subsidiaries in various countries. If a company is able to control, either directly or indirectly, its subsidiaries in different countries, it can be regarded as a multinational company. Direct control is when the overseas subsidiaries do not have autono

26、my or independent decision-making power. 1.Indirect control of a local company by a multinational company is when the local company exists in its own right but is wholly or substantially controlled by the multinational company. CNTD2021-12-2915Multinational corporations (2)The multinational company

27、is a popular form of foreign investment because of the advantages deriving from this type of business operation. Bearing in mind that two important purposes of foreign investment are to infiltrate foreign markets and utilise foreign resources, a multinational company in as ideal vehicle for such pur

28、poses. This is because, first, a multinational company is able to provide the much needed capital and technology to establish a competitive position in a given market; and second, a multinational company is able to rationalize the use of any given market by its established global marketing power. Th

29、e multinational company has become a dominant form of foreign investment today. 2021-12-2916Joint ventures Joint venture means that the invested project is jointly owned by foreign and local investors. A joint venture may take a suitable business form, such as a company, a partnership, a trust or a

30、cooperative contract, depending on the intention of the parties and the relevant domestic low.A venture whose ownership is jointly held by several foreign investors is regarded as a sole foreign investment by the host country if there is no local interest joint refers not to the fact that there is m

31、ore than one owner, but that there is local and foreign participation in the venture. Joint venture and multinational company may be overlapping concepts. 2021-12-2917Sole foreign venturesSole foreign venture and wholly foreign-owned enterprise refer to the same thing. A sole foreign venture is a fo

32、rm of foreign investment in which one or several foreign investors are allowed to carry out the invested project in their own right. 2021-12-2918Licensing agreements and counter-tradeLicensing agreements and counter-trade are independent categories of foreign investment, but none of them has acquire

33、d a precise definition in law.Counter-trade is an arrangement which either enables one party to fulfil his or her obligations to the other by the provision of specific goods or permits both the contracting parties to set off against each others contractual obligations by mutual supply of goods and t

34、echnology.Both licensing agreement and counter-trade can be means of international trade, if the purpose of the agreement is to sell an industrial property right or the like. Both are regarded as forms of foreign investment if the holder of the industrial property right uses the right as in investme

35、nt. 2021-12-2919Counter-trade agreementA counter-trade agreement is a feasible form of foreign investment, because it enables the holder of an industrial property to invest his or her right in a joint venture as a partner to the venture. In most countries, a sale of industrial property rights is sub

36、ject to contract law, but an investment of the same right is subject to foreign investment law or the law governing joint ventures. The two sets of law may render substantially different privileges and benefits to the provider of the industrial property rights in certain countries. The UNCITRAL Lega

37、l Guide on International Countertrade Transactions is the only international document intended to set out uniform rules for international trading activities based on countertrade as a means of foreign investment specifically. 2021-12-2920Build-Operate-Transfer projectsBOT involves a series of activi

38、ties or arrangements, comprising roughly three stages; investment, recoupment of investment and transfer of the investment project to another party. BOT is a contractual arrangement by nature. In most cases, one party to a BOT project is the government and the other is a consortium of investors. Som

39、etimes, one party can be a private party which has acquired a specific concession or privilege to carry on a large project from a government, and the other party is the consortium.BOT is commonly used for large sized infrastructure projects, such as building highways, harbours, bridges, telecommunic

40、ations networks and other public facilities. It can also be used to build smaller projects, such as a power plant or factory construction.2021-12-2921BOT riskThe future non-commercial risk is a serious problem for a BOT project. The commercial risk lies on the part of the investors, but the governme

41、nt must provide assurance which is free of political risks the major concern of investors engaged in BOT projects.Presently, a BOT project is subject to the relevant domestic law, or the Washington Convention on the Settlement of Investment Disputes 1965, if the convention is applicable. The major i

42、ssues relating to BOT involve the obligation of the relevant government to perform a BOT contract. 2021-12-2922EPCEPC stands for Engineering, procurement and construct, 是指一種包括設(shè)計、設(shè)備采購、施工、安裝和調(diào)試，直至竣工移交的總承包模式。2021-12-2923Foreign takeovers or acquisitionsThe expression foreign takeover or acquisition mea

43、ns that foreign investors take over or acquire interests in local companies, which have been owned or controlled by either local or foreign interests. 2021-12-2924Foreign direct investment and portfolio investmentIf a foreign investor obtains control of the target company as a result of the investme

44、nt, the investment is a direct investment. If the investor invests only in preference shares, the investment would be regarded as a portfolio investment.Portfolio investment in ordinary shares, which, however, is too small to exercise any control over the company. 2021-12-2925International legal fra

45、mework for foreign investmentThe major legal issues arising from the operation of this type of foreign investment are as follows:a host country may feel the need to regulate the conduct of multinational corporations; but a capital-exporting country may feel the need to protect its nationals interest

46、s for the purpose of promoting its overseas investment and trade.1.The major documents representing the great efforts were introduced by International Organizations. But most of these documents are guide lines, which are accepted and voluntarily applied by the parties. The Agreement on Trade-Related

47、 Investment Measures, established by the GATT members in the 1993 Uruguay Round negotiations, is binding between the members of the WTO.2021-12-2926The OECD DeclarationStructure of the OECD DeclarationThe OECD Guidelines for Multinational EnterprisesThe general considerations and practical approache

48、sDecisions of the councilThe multilateral agreement on investmentThe legal guide on international countertrade transactions Multilateral investment guarantee agency2021-12-2927Structure of the OECD Declaration 1 The Organisation for Economic Cooperation and development (OECD) presently has 29 member

49、s. It was established in 1960 for the purpose of promoting policies designed to achieve the highest sustainable economic growth and employment and a rising standard of living of the population. In comparison with any other international organization, OECD has been the leader in the regulation of for

50、eign investment through international cooperation between countries. It has also been a pioneer in testing feasible approaches to the regulation of foreign investment at an international level.2021-12-2928Structure of the OECD Declaration 2The OECD Declaration on International Investment and Multina

51、tional Enterprises was first adopted in 1976. The present version of the Declaration was adopted on 27 June 2000. Presently, the Declaration consists of two major parts: the Guidelines for Multinational Enterprises and the General Considerations and Practical approaches concerning Conflicting Requir

52、ements Imposed on Multinational Enterprises.2021-12-2929Status of a declarationA declaration in international law is different from an international treaty or agreement, in that it may or may not impose legal obligations upon the parties to the declaration. Generally speaking, a declaration is often

53、 used to declare principles, rather than specified rules, governing a particular matter. It imposes broadly legal or moral obligations upon the parties and declares the parties intention to deal with a particular matter in accordance with the principles of the declaration. It has binding force if th

54、e parties state so expressly. It may also give the parties an option as to whether or not to accept the principles so declared. 2021-12-2930Principles of the OECDE DeclarationThe OECD Declares a number of principles as follows:Guidelines for multinational enterprises:National treatment:Conflicting r

55、equirements:International investment incentives and disincentive:Consultation Procedures:Review (the above matters periodically)2021-12-2931The OECD Guidelines for Multinational EnterprisesThe major obligations of the Guidelines follows:General policy: They require MNEs to take fully into account th

56、e established policies of the countries in which they operate, and to consider the views to other stakeholders. Disclosure of informationEmployment and industrial relationsEnvironmental protectionCombating briberyConsumer interestsScience and technologyCompetition1.Taxation2021-12-2932The general co

57、nsiderations and practical approaches 1 The General Considerations and Practical Approaches Concerning Conflicting Requirements Imposed On Multinational Enterprises comprises annex 2 to the OECD Declaration. It provides guidelines for the members of the Declaration to avoid conflicts between laws ma

58、de for the purpose of implementing the Declaration and regulating multinational enterprises in their domestic law. The so-called general considerations are the principles a member is expected to follow when regulating foreign investment in its law. CNTD2021-12-2933The general considerations and prac

59、tical approaches 2The general considerations are meant to improve cooperation between the members and avoid multinational enterprises being placed under conflicting requirements imposed by different members, which make the operation of the enterprises impossible. By signing the OECD Declaration, a m

60、ember is obliged to comply with all requirements set out in the Declaration. 2021-12-2934Decisions of the council The Decisions of the Council presently consist of four decisions: the decision on national contact points; the decision on national treatment; the decision on conflicting requirements; a