On 18 January 2024, Steptoe and the British Institute of International and Comparative Law (BIICL) held a launch event for their joint empirical study on performance requirement prohibitions (PRPs) in international investment agreements (IIAs) (recording and publication available here).

The main focus of this empirical study is PRPs.  PRPs are a distinct type of treaty provisions that appear in many IIAs and that seek to curtail States’ ability to impose performance requirements.

According to UNCTAD, performance requirements are “stipulations, imposed on investors, requiring them to meet certain specified goals with respect to their operations in the host country”.  Performance requirements come in the guise of either: (i) conditions precedent to that State’s authorisation for an investor to make, expand or operate an investment in its territory; or (ii) conditions for an investor receiving a State advantage (e.g., a tax credit, a subsidy or other form incentive).  Some of the most common forms of performance requirements include local content requirements, local sourcing requirements, export performance requirements, import restrictions, export controls/restrictions, and technology transfer, licensing and/or local R&D requirements.Continue Reading Industrial Policy Is Making a Comeback – With Some Investment Treaty Protections Standing in Its Way

On 23 October 2023, the Council of the European Union adopted a regulation known as the Anti-Coercion Instrument (ACI), a new trade instrument which will enable the European Union (EU) and its Member States to respond to so-called ‘economic blackmail’ from foreign countries that seek to influence or coerce the EU or a particular Member State to adopt or to decline a specific policy.  The European Parliament had already approved the regulation earlier this month by a margin of 578 votes to 24 and only 19 abstentions.

The ACI breaks new ground in the EU’s arsenal of trade defences in the midst of escalating geopolitical tensions.  It is designed to deter perceived economic coercion primarily through diplomacy and, if necessary, with countermeasures in a wide range of fields, including international trade, investment, and funding.  It is also aimed to secure ‘reparation’ for the injury caused by a third country’s conduct.  The ACI is expected to enter into force before the end of 2023 and will take the form of a regulation binding in its entirety and directly applicable to all Member States.Continue Reading European Parliament and Council Adopt New Trade Instrument to Defend European Interests from Economic Coercion

On August 9, 2023, the Biden administration issued a much-anticipated Executive Order establishing a new regime to limit certain U.S. investments in key Chinese technology sectors to prevent the financing of Chinese military advancement. The order, once implemented via regulation, will prohibit U.S. persons from investing in, or engaging in certain other transactions with, Chinese companies engaged in specified conduct involving semiconductors and microelectronics, quantum information technologies, and artificial intelligence. The regulations will likely come into force in 2024 after multiple rounds of public comment, including an initial 45-day comment period that is now underway on an advanced notice of proposed rulemaking (“ANPRM”) issued by the U.S. Department of the Treasury (“Treasury”).

The regulations will prohibit some investments altogether, while others will be subject only to official notification requirements. Treasury, which will implement and enforce the restrictions, stated that it anticipates exempting “certain transactions, including potentially those in publicly traded instruments and intracompany transfers from U.S. parents to subsidiaries.”Continue Reading Amid Growing Trade Tensions, U.S. Imposes Unprecedented Restrictions on Outbound Investments to China

On 7 July 2023 the European Commission published a formal proposal for the withdrawal of the European Union (EU) from the Energy Charter Treaty (ECT or the Treaty).  The move comes after many years of intensive efforts (notably by the EU) to modernize the ECT, in response to concerns that the Treaty prevented ECT Contracting States from meeting their climate change mitigation obligations as set out in the Paris Agreement.  The European Commission’s current proposal leaves much to be desired in terms of clarity and legal certainty.  Energy companies covered by the ECT should therefore be well-advised to explore alternative sources of protection to ensure that their investments enjoy adequate coverage in case of disputes.Continue Reading We’ll always have Paris? European Commission formally proposes the withdrawal of the European Union from the Energy Charter Treaty, invoking the Paris Agreement

On April 28, 2023, the Secretariats of the International Centre for Settlement of Investment Disputes (ICSID) and the United Nations Commission on International Trade Law (UNCITRAL) published the final draft of the Code of Conduct for Arbitrators in International Investment Disputes (the Code of Conduct). The draft concludes nearly six years of heated debates concerning two primary issues: disclosure obligations for arbitrators sitting on investment treaty tribunals; and “double-hatting,” (i.e., where a lawyer sits as arbitrator while at the same time acting as counsel in other investment treaty matters).

The ICSID and UNCITRAL Secretariats developed the Code of Conduct jointly, with substantive efforts led by Working Group III—UNCITRAL’s task force mandated to consider possible reforms to investor-State dispute settlement (ISDS). A separate Code of Conduct for Judges in International Investment Dispute Resolution was also published for judges who would sit on the prospective Multilateral Investment Court proposed by the European Commission.

On March 27-31, 2023, Working Group III finalized its revisions to the Code of Conduct during its forty-fifth session at the United Nations Headquarters in New York City, with representatives of more than ninety-five State delegations and fifty international organizations in attendance. The primary objective of the Code of Conduct is to provide principles and provisions that clarify the duties of international arbitrators—including impartiality, independence, and the conduct of proceedings with integrity, fairness, efficiency, and civility.

The final drafts of both the Code of Conduct for Arbitrators and the Code of Conduct for Judges will now be presented to UNCITRAL for formal adoption during its fifty-sixth annual session in Vienna on July 3-21, 2023.Continue Reading A New Code of Conduct for Arbitrators May Soon Be Available to Parties in Investor-State Disputes—But No Ban on Double-Hatting

The United Kingdom’s (U.K.) accession to the Comprehensive and Progressive Agreement for Trans‑Pacific Partnership (CPTPP) might have been a bumpy ride, but it will soon come to fruition.  While all eyes are on the trade implications of the CPTPP, another component of the CPTPP that is getting comparatively little attention – the CPTPP treaty provisions on investment – may turn out to have a much greater impact for the United Kingdom.Continue Reading Coming to a Country Near You: The U.K. Announces Imminent Accession to the CPTPP – Including Its Investment Chapter

On February 21, 2023, the Comprehensive and Progressive Agreement for Trans‑Pacific Partnership (CPTPP) formally entered into force for Chile, after undergoing an intense, four-year legislative process.  The CPTPP covers the full range of modern trade agreements, including market access for goods and services, public procurement disciplines, temporary entry, and investment protection, among others.  Despite the CPTPP’s entry into force, the future of investor-State dispute settlement (ISDS) in Chile remains a point of controversy.Continue Reading The CPTPP Enters into Force for Chile – but Mind the Fine Print

Canadian, Mexican and United States investors considering bringing a claim under the North American Free Trade Agreement (NAFTA) against a NAFTA State Party should be aware that the three-year window for notifying their claim will soon come to an end.  They must therefore take quick action to notify their claim by the end of March 2023 to be in a position to submit their request for arbitration before July 1, 2023, the final deadline for the submission of legacy NAFTA investment claims.

The NAFTA was terminated on July 1, 2020, with the entry into force on that same date of the United States-Mexico-Canada Agreement (USMCA). The USMCA Parties recognized the importance of a smooth transition from the NAFTA to the USMCA, particularly with regard to investors who had invested on the understanding that NAFTA’s Chapter Eleven (Investment) protections would be in place.  Annex 14-C of the USMCA therefore maintains NAFTA provisions on the protection and promotion of legacy investments for a period of three years post entry into force of the new agreement.  These provisions are consistent with the practice of Canada, the United States, and Mexico to provide a sunset period for investment protection under their bilateral investment agreements. Continue Reading The Window for Putting a USMCA State Party on Notice of a NAFTA Legacy Investment Claim Closes at the End of March

In 2021, the United Kingdom (UK) exited the EU’s legal regime to become an independent entity for trade purposes – given this, the year witnessed the operation of the Trade and Cooperation Agreement (TCA) which governs the relationship between the UK and the European Union (EU), the negotiation of at least two other free trade agreements (FTAs) ( the UK-Australia FTA and the UK-New Zealand FTA), an application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) along with the establishment of the Trade Remedies Authority (TRA) and the issuance of its first decisions.  The present note summarises these key developments (and more) in UK trade over the past year.
Continue Reading UK Trade: A Summary of Developments in 2021