Inter-law-chapter4.ppt

1、2020/8/3,1,Chapter FourForeign Investment Law,Lectured by Jonathan ZHONG,2020/8/3,2,Foreign investment law,Explaining foreign investment Relationships between foreign investment and host country Forms of foreign investment International legal framework for foreign investment The WTO and foreign inve

2、stment Means for protection of foreign investment International Court of Justice and and foreign investment,2020/8/3,3,Background 1,Nationalisation and appropriation by local governments became a common practice in the 1950s and early 1960s in many host countries; in particular, in many newly indepe

3、ndent countries 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

4、or appropriation of foreign investment by local government.,2020/8/3,4,Background 2,World 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 twentiet

5、h century is 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 the increased activities of transnational (or multinational) corp

6、orations.,2020/8/3,5,Background 3,The 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

7、been active in developing universal rules for foreign investment or the basic principles which provide a foundation for the future development of international investment law.,2020/8/3,6,Explaining foreign investment 1,Foreign investment is commonly classified into two categories: foreign direct inv

8、estment (FDI) or 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 last

9、ing interest in 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.,2020/8/3,7,Explaining foreign investment 2,For

10、eign investment 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 territ

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

12、t must involve ongoing operations, in the form of either FDI or FPI, in a foreign country.,2020/8/3,8,Relationships between foreign investment and host country,The nature of foreign investment The host countrys attitudes towards the foreign investment The effects of foreign investment The relationsh

13、ips between foreign investment and host country东道国,2020/8/3,9,The 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

14、 and foreign governments (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.,2020/8/3,10

15、,The host countrys attitudes towards the foreign investment,The 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 ca

16、pable of destroying, manipulating 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

17、concern for the growth of local industries and employment, although sometimes a government protects a local industry merely for strategic considerations, whether economic, political or military.,2020/8/3,11,The effects of foreign investment,The advantages of foreign investment are the rational bases

18、 for a host country to accept 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.,2020/8/3,12,The

19、relationships between foreign investment and host country,foreign 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 th

20、e risk of allowing foreign 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 advant

21、ages; foreign investment may 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 ma

22、y also put the future of the 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.,2020/8/3,13,Forms of foreign investment,Forms o

23、f foreign investment can be classified 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 corporations Joint ventures Sole foreign ventures Licensing agreem

24、ents and counter-trade Build-Operate-Transfer projects Foreign takeovers or acquisitions Foreign direct investment and portfolio investment,2020/8/3,14,Multinational corporations (1),They refer to all enterprises which control assets factories, mines, sales offices and the like in two or more countr

25、ies. The key indicator of a multinational 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 ov

26、erseas subsidiaries do not have autonomy or independent decision-making power. 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. CNTD,2020/8/3,15,Multinational corpo

27、rations (2),The multinational company 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 co

28、mpany in as ideal vehicle for such purposes. 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

29、established global marketing power. The multinational company has become a dominant form of foreign investment today.,2020/8/3,16,Joint 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

30、 company, a partnership, a trust or a 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

31、 refers not to the fact that there is more than one owner, but that there is local and foreign participation in the venture. Joint venture and multinational company may be overlapping concepts.,2020/8/3,17,Sole foreign ventures,Sole foreign venture and wholly foreign-owned enterprise refer to the sa

32、me thing. A sole foreign venture is a form of foreign investment in which one or several foreign investors are allowed to carry out the invested project in their own right.,2020/8/3,18,Licensing agreements and counter-trade,Licensing agreements and counter-trade are independent categories of foreign

33、 investment, but none of them has acquired 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 o

34、bligations by mutual supply of goods and technology. 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 p

35、roperty right uses the right as in investment.,2020/8/3,19,Counter-trade agreement,A 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,

36、 a sale of industrial property rights is subject 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 ri

37、ghts in certain countries. The UNCITRAL Legal 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.,2020/8/3,20,Build-Operate-Tran

38、sfer projects,BOT involves a series of activities 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 an

39、d the other is a consortium of investors. Sometimes, 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 buil

40、ding highways, harbours, bridges, telecommunications networks and other public facilities. It can also be used to build smaller projects, such as a power plant or factory construction.,2020/8/3,21,BOT risk,The future non-commercial risk is a serious problem for a BOT project. The commercial risk lie

41、s on the part of the investors, but the government 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 1

42、965, if the convention is applicable. The major issues relating to BOT involve the obligation of the relevant government to perform a BOT contract.,2020/8/3,22,EPC,EPC stands for Engineering, procurement and construct, 是指一种包括设计、设备采购、施工、安装和调试，直至竣工移交的总承包模式。,2020/8/3,23,Foreign takeovers or acquisition

43、s,The expression foreign takeover or acquisition means that foreign investors take over or acquire interests in local companies, which have been owned or controlled by either local or foreign interests.,2020/8/3,24,Foreign direct investment and portfolio investment,If a foreign investor obtains cont

44、rol of the target company as a result of the investment, 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

45、 over the company.,2020/8/3,25,International legal framework for foreign investment,The 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 cou

46、ntry may feel the need to protect its nationals interests for the purpose of promoting its overseas investment and trade. 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

47、 applied by the parties. The Agreement on Trade-Related Investment Measures, established by the GATT members in the 1993 Uruguay Round negotiations, is binding between the members of the WTO.,2020/8/3,26,The OECD Declaration,Structure of the OECD Declaration The OECD Guidelines for Multinational Ent

48、erprises The general considerations and practical approaches Decisions of the council The multilateral agreement on investment The legal guide on international countertrade transactions Multilateral investment guarantee agency,2020/8/3,27,Structure of the OECD Declaration 1,The Organisation for Econ

49、omic Cooperation and development (OECD) presently has 29 members. 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

50、organization, OECD has been the leader in the regulation of foreign 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.,2020/8/3,28,Structure of the OECD Declarati

51、on 2,The OECD Declaration on International Investment and Multinational 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 Cons

52、iderations and Practical approaches concerning Conflicting Requirements Imposed on Multinational Enterprises.,2020/8/3,29,Status of a declaration,A declaration in international law is different from an international treaty or agreement, in that it may or may not impose legal obligations upon the par

53、ties to the declaration. Generally speaking, a declaration is often 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

54、 with the principles of the declaration. It has binding force if the parties state so expressly. It may also give the parties an option as to whether or not to accept the principles so declared.,2020/8/3,30,Principles of the OECDE Declaration,The OECD Declares a number of principles as follows: Guid

55、elines for multinational enterprises: National treatment: Conflicting requirements: International investment incentives and disincentive: Consultation Procedures: Review (the above matters periodically),2020/8/3,31,The OECD Guidelines for Multinational Enterprises,The major obligations of the Guidel

56、ines follows: General policy: They require MNEs to take fully into account the established policies of the countries in which they operate, and to consider the views to other stakeholders. Disclosure of information Employment and industrial relations Environmental protection Combating bribery Consum

57、er interests Science and technology Competition Taxation,2020/8/3,32,The general considerations 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 provid

58、es guidelines for the members of the Declaration to avoid conflicts between laws made 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

59、 foreign investment in its law. CNTD,2020/8/3,33,The general considerations and practical approaches 2,The 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 member is obliged to comply with all requirements set out in the Declaration.,2020/8/3,34,Decisions of the council,The Decisions of the Council presently consist of four decisions: the decision on national contact p