Developing countries are vulnerable to a number of economic problems; they have struggled with relatively extreme poverty and are likely to suffer from the effects of the current financial crisis globally. To minimize the cost of poverty developing countries need to develop vibrant strategies to increase living standards of their people. In order to achieve high living standards of their citizens and to increase the level of the economy, the government has to liaise with foreign investors especially from developed countries. It has been proofed that foreign direct investment plays a key role by providing the finance that could not be accessed by the country.
As it is the rule, any foreign investment between nations should be able to meet particular legal framework. Through the economic and legal framework, the deal between the nations is bonded. In the recent past, the number of economic investment treaties has tripled. Currently, many countries have signed to one or more bilateral investment treaties (Wenhua, 28). Because having bilateral treaties between the nation and the foreign investors, is to offer a sequence of economic rights including the rights to and procedure of dealing with investment disputes between the investor and the state. Having proper legislation and legal framework in place pertaining the investment will provide security and in turn attracts more investors to the country.
Over the last decade, the view of the international investment law has changed drastically due to ever-increasing percentage of disputes resulting from over foreign investment. It is recommended that disputes between the foreign investors and the country should be resolved by international arbitration contrary or opposed to domestic lawsuits or diplomatic intervention. The driving force causing this change has been attributed to the proliferation of the existence of a bilateral investment treaty (Wenhua, 31). Bilateral treaty is an agreement between the country and the foreign investors that govern the operation of the investment as well as the procedure of resolving conflicts. The treaty serves as respect, understanding and gives favorable environment for the investors by giving them wide investment rights and providing flexibility in the way investment disputes are resolved.
The international investment legal framework comprises of several investment treaties, which include bilateral investment treaties between regional conventions and investment protection provisions in free commercial agreements between two or more states. In essence, the prime driver for these instruments has from history the desire developed, capital-exporting nations to make sure that their nations are legally and financially protected in the process of investing in developing, and capital-importing nations like our country.
Consequently, the main investment treaties occur between developing countries and developed countries but this changing slowly. Our country is not exempted, we need to create favorable investment environment as well as support international established bilateral investment laws in order to ensure that foreign investors get attracted to invest in our country.
The treaties that we are to sign are not so friendly diplomatic instruments, initially some countries had expected but these treaties set out hard-complicated legal obligations for the country hosting the investment and the rights that can be enforced to the investors (Shan, 15). A larger proportion of the investment treaties still consist of potentially vague and broad standards, giving little legal certainty as well as permitting tribunals to describe the standard in simple ways that significantly hinder the government's regulatory powers. It will be, therefore, paramount that we ensure that there are proper strategies in place, strategies that are in line with the international investment laws.
However, one of the more contentious issues that have come up in arbitration is the suitable construction of the well-known umbrella clause. In which a provision in several bilateral investment treaties that impose a need on any contracting party or state to oversee all investment obligations agreed with the foreign investors from the country (Lévesque, 23). The importance this application is that the international arbitration tribunal contained under the bilateral investment treaty, which will thereby have authority over breach-of contract claims because an investment convention breach is also said to be the breach of the umbrella clause. In essence, it means that the investor can request redress of a breach of the investment treaty between it and the country by means of international arbitration, which is under the bilateral investment treaty.
It is clear from history that, foreign investment capital moves from developed country to developing countries. In that case, a good proportion of bilateral investment treaty does happen between developing countries and developed countries. Basing on our country, which is the host country we welcome foreign investors.
In summary, the wider perspective of the umbrella clause advocates a divisive doubt to the explanation of the umbrella clauses that are suggested. By favoring the foreign investor, the explanation parties with the develop-ed country, as opposed to developing country with less bargaining power in trying to negotiate bilateral investment treaty. By entering into agreements with foreign investors, the country will help. That the economic and legal framework should be able to concur with the international investment laws rather than using local or domestic legislation. The country will, benefit from the foreign investment because there are adequate strategies to guard and guide the investment treaty.
De, M A., and C. Lévesque. Improving international investment agreements. Abingdon, Oxon: Routledge, 2013.
Sader, F. Attracting foreign direct investment into infrastructure: Why is it so difficult?. Washington, DC: World Bank, 2000.
Shan, Wenhua. The Legal Protection of Foreign Investment: A Comparative Study. Oxford: Hart Pub, 2012.
United States. Bilateral investment treaties, Treaty docs. 99-14 and 101-18: Hearing before the Committee on Foreign Relations, United States Senate, One Hundred First Congress, second session, September 18, 1990. Washington: U.S. G.P.O, 1990.