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EduFixersLawRisk and Challenges in Foreign Investment Environment

Risk and Challenges in Foreign Investment Environment

Subject: Law
Pages: 30
Words: 9693
Reading time:
35 min
Study level: College

Introduction

Right after the colonial era, there was a tremendous increase in risks and challenges to foreign investments. During the colonial period, there was an absolute protection for any investor coming from an imperial state provided that he was transferring his assets to the colonies. However, after independence, this ceased to be the case since many countries adopted governments with different viewpoints and objectives1.

The protection to these investments was attained through diplomacy. More often, the diplomatic means involved different home states from which the investors came from coming together to collectively exert pressure through both the economic sanctions as well as threat of force. Due to outlawing through use of force by the U.N charter and the increasing likelihood of rising of condemning states, the gun-boat diplomacy was greatly reduced. The rise of condemning states impacted aggression among foreign investors in an effort towards maintaining their strongly held positions within the world Investment and even trade.

Contemporarily, the protection of investors through the military power is no longer there and consequently, risks to foreign investments in the world are on an increase. Further, the search for legal ways in which the conferring of protection upon the investors from foreign countries is being beefed up2.

According to scholars, the principal challenges as well as risks to foreign investors originate from, not only specific but also from clearly identifiable forces. These forces, when present, have two effects. They either cause a change in the regime or cause a significant change to the existing policies with regard to politics and economy of the host country.

These changes have been found by several researchers as challenges3. According to them, the changes exist as threat to foreign investments. While a state can change its economic policy, the ever increasing number of global investments and trade treaties to which countries are becoming part of as parties are making the right to become circumscribed. The right to change either political or economic among other policies remains as an element of sovereignty of states, unless so circumscribed.

Indeed, this right is recognized by the International Law on the part in which the cooperation among countries as well as Friendly Relations is quoted4. As such, there is a declaration on the principles contained therein, and according to this declaration; it is a right of each and every country to freely make a choice and take initiatives to develop, not only its cultural and social systems but also its political and economic systems.

The economic policies and the governance system, which any given country wish to adopt, are matters identified by industrial analysts as exclusively for the country. This right was identified and spelled out by the International Court of Justice during a certain case in Nicaragua. In this particular case, it was stated that; any prohibited intervention ought to be, accordingly, one that bears on the matters, which countries have been permitted by the principle concerning the state sovereignty in an effort towards deciding in a free and fair manner5.

Among these choices are; foreign policy formulation, political choice, economic choice, social and cultural systems among other choices. Intervention, according to researchers, is usually as a wrong or a crime when it involves the use of coercion, considering such choices. As such, these choices must stand and remain free6.

By a country adopting a decision such that; it implements changes on its economic policies, there is likelihood that this change will be perceived as a threat by foreign investors. Before examining with regard to whether the right of effecting changes can be, in any way, limited or restricted, it is essential that an understanding of the looming effects to a country intending to effect such changes is enhanced7.

Ideological Hostility

According to Esty and Mendelson, the communist ideology is not only opposed to private production means but also private capital. In the past, the communism force had a great impact but immediately after the Soviet Union disintegration, this situation changed as the communism force became dented8.

Contemporarily, several states, among them being Vietnam and China, still adopt the traditional communism force9. These countries experiment several systems, which permit the foreign investors influx even into both major and minor sectors within the economy controlled entirely by the state entities where a joint venture established by the foreign investors in conjunction with these state owned entities exists10.

Despite the fact that socialism is a distinct force as compared to communism, it is said to be averse to rights of properties and as such, it remains as a potent force with regard to the political aspect in many countries. If a country decides to adopt sociology ideologies, there arise threats to both the private capital as well as to foreign investors11.

In a country where foreign investments are being encouraged for the first time in their history, political forces, which are said to be antagonistic, suppress the will of prospective foreign investors to invest in that country. The reason why politicians in the developing world are referred to as antagonistic is because; they are either socialist or they largely resent the idea of the host country’s business sectors being controlled by foreign controls12.

In a situation where several groups holding ideological beliefs, which can be identified as opposed to foreign investments, are elected to take over the governance, the foreign investors will be faced with a definite threat. In most cases, the newly elected government will seek to reverse the previous regime’s held attitudes concerning the foreign investors.

In addition to this, the newly elected government may seek to dismantle the foreign investments, which had previously been permitted to invest in the country by the previous regime. It may follow that the incoming government will perceive the terms that dictated and guided the entry of the foreign investments as too much favourable for the foreign investor and as such, the new government will affect changes on those terms13.

Such aspects as a change of regimes are seen by foreign investors as problems. In most cases, multinational corporations become engaged in the politics of the host country and as such, this involvement forestalls the likelihood of there being changes in regimes, which are in most cases unfavourable14. This involvement has adverse effects as it usually gives rise to several adverse problems. For example, if a new government, which the foreign investors are opposed to, takes office, additional grounds from which the new government will interfere with the running of the foreign investments are increased15.

Nationalism

Nationalism is a term commonly used to refer to a political ideology whereby; a collection of individuals is strongly identified with a certain country. In nationalism, there usually exist nationalistic sentiments. These sentiments are perceived as posing a threat to foreign investors especially in a situation where the host country is declining16.

As such, the investors, who are identified as prosperous due to the amount of their asset base, seemingly control the host country’s economy and upon achieving the set target, they repatriate the profits. Such investors, during the state decline period, become targets with regard to xenophobic nationalism. In addition to this, the opportunistic politicians in the host countries see these foreign investments as easy targets and as such, they take advantage of the prevalence of such a situation and thereby changing the governance system17.

Much identical to nationalism is religious fundamentalism. During the Iranian revolution which ensued in the late 1970s, both aspects were present. After the Iranian revolution, the US business interests were taken over18. Such a situation is a perfect example of futile political manoeuvring in an effort towards protecting the foreign investors.

During the early 1950s, Mossedegh government resulted to making the assets owned by foreign investors national. As a result, both the United Kingdom as well as the United States joined hands and overthrew the then reigning Iranian Government. Since the governing seat was left vacant, the monarchy that had previously been encouraging the presence of foreign capital in Iran was reinstated19.

However, a few years later, the Iranian nationalism stood up strong and opposed the American stance20 The U.S businesses were driven out of Iran following the installation of Ayatollah Khomeini. Consequently, the Iran-US Tribunal was set up and given the mandate to establish the validity of claims made by the US companies, which had been adversely affected by the revolutions in Iran21.

According to researchers, nationalistic feelings can give rise to foreign investment disputes. This is evidenced by the arbitration between Southern Pacific Properties limited and Egypt. This occurred during the era of Sadat when he was the president of Egypt. A few years after taking office, his government eased the complications involved with regard to the admission of foreign investors to his country22. He promoted investments within the Egyptian tourism trade and as such, Southern Pacific Properties Limited seized this opportunity to agree with the government’s tourism ministry.

As such, a tourist complex was to be put up by a Southern Pacific Properties Limited near the pyramids. When the project became underway, several groups joined hands to oppose the project. These groups publicly declared that it was not wise for the government to establish a project near the pyramids since it would tarnish the pyramids’ status as historic monuments23. This matter took a serious turn when it was presented and discussed in the Egyptian House of Representatives. It became a renowned issue and as such, it became a basis from which President Sadat’s government could be confronted24.

Later on, President Sadat was murdered and President Mubarak took over. He saw it noble to stop the continuing complex construction25. Therefore, since Southern Pacific Properties limited did not have the abilities to wish President Mubarak’s government otherwise, the company had to give up with the construction26. This was indeed a dispute and several groups saw the need of there being arbitration to solve the underlying issue. The government heard these outcries and hence protracted arbitration before several tribunals27.

Ethnicity As A Factor

Just like the nationalistic factors, the ethnic structure of the host country is contemporarily being perceived as a center of attention as it too plays a significant role in the foreign investments environment28. As compared to the situation that prevails within developed states such as the U.S and other major power houses, the institutions of the free market as well as democracy within developing or third world countries are not mediated in an effective manner29.

Consequently, the potentiality of challenges as well as risks to the foreign investors in these countries becomes enhanced. However, if effective mechanisms ensuring that the needs as well as the demands of the largest ethnic concerning their share of the economic benefits arising from the presence of foreign investments are met are put in place, the case is usually different30.

It is worth noting that; when market liberalization takes control, some foreign investors become prosperous and, according to Pattison, they are in the same state as the ethnic minority groups with regard to economical dominance31. However, the scholar indicates that these prosperous foreign inventors become targets immediately nationalism is adopted by the governing body32.

When market liberalization is used to promote the foreign investors, it may follow that the problems originating from ethnic nationalism are emphasized. The reason behind this is that; the foreign investors join up with the economic elites from the minority groups and thereby allying.

When such measures as privatization of the local companies are implemented through corruption, the wealth held by these minority groups is enhanced and as such, the situation is perceived by industrial analysts as promoting instability33. Contemporarily, states such as Malaysia and most recently South Africa have resorted to dealing with this kind of a problem where they utilize their constitutions in efforts towards ensuring that the community with the greatest number of people has the opportunity to share the economic cake according to the size. This, according to Gentry, is a noble idea as it results into success34.

Whenever such countries enter into treaties concerning investments protection, it follows that the internal laws, which does not encompass any instance of discrimination, are preserved. This means that they cannot become subjects for obligations involved in treaties. In some countries, such accommodations have not yet been worked out and as such, the inherent instabilities in such situation are perceived as threats to the foreign investors35.

This is because; the alliance formed between the entrepreneurial minorities groups as well as the foreign investors assume a dominance nature and as such, it becomes a subject of political animosity. In such circumstances, it follows that foreign investments become nationalized.

Changes In The Industrial Patterns

Sometimes, it may be that countries across the world make certain changes to a particular industry36. Such changes are likely to have an adverse effect to the interests of the foreign investors across the globe. For instance, in the early 1970s, there arose oil crisis, which was perceived to have originated from concerted effort of the oil producing countries whereby; they wanted to take control of the oil industries in their respective states37.

In addition to this, they wanted to seize the responsibility of fixing the oil prices. Just before this crisis, the major oil companies within Europe as well as the United States had resorted to controlling the oil production in the oil producing countries38. The foreign investors entered into the oil producing countries through legal instruments, that is, through concession agreement. As such, the foreign investors had to part with a considerable amount of finances as royalty. The royalty received was equivalent to the oil extracted in the host country39.

Consequently, substantial changes took effect within the oil industry. In many countries, representative governments began taking offices replacing the authoritarian governments40. The authoritarian governments were said to rely much on the imperialistic powers in an effort towards ensuring that they continued ruling. Politicians stood strong and demanded that the concession agreements are cancelled and as such, these demands became strident41.

Internationally, concerted efforts were established by the former colonies whereby, creation of doctrines was advocated for. The doctrines would justify the act of cancelling the concession agreements. The permanent sovereignty doctrine concerning the natural resources of a country was proclaimed through a resolution made by the national assembly. Later, this doctrine became a means in which the effectiveness of this transformation would be enhanced by law.

The military pressure, which was introduced in an effort towards forcing the host countries resort into abiding to obligations as provided in the concession agreements, became non-feasible42. This was because, with such aims, the use of force would result to the International community scrutinizing the policies established. The measures established by the oil rich countries to change the rules governing the oil industry as well as fixation of the selling price of the oil succeeded43.

The success of these measures was facilitated by the formation of the Organization of the Petroleum Exporting Countries44. The concession agreements that had been entered into previously could not cope up with these changes. Therefore, there was need to replace them with other more viable agreements.

The major agreement that took effect was the product-sharing agreement which was carved out by Pertamina. Thereafter, this agreement became widely used within the oil industry thus replacing the old concession agreement. This indeed reflected the changes that had been implemented in the industry. Product-sharing agreement passed the risk as well as the challenge of exploitation of oil by the foreign investors. In addition to this, this agreement eased how the national oil company would regulate the oil exploitation.

Sometimes, a foreign investor may achieve windfall profits and as such, there is a likelihood that the host country will intervene in an effort towards seeking change with regard to the terms of the original contract. This intervention is even more likely where the windfall profits accumulate, not due to the skills that the foreign investor holds but due to external events45.

Both Canada and the United Kingdom, during this time, also had to reform or restructure the existing contracts in an effort towards obtaining benefits arising from the production of oil. This transpired after it dawned on these two countries that the oil being produced was exceeding their expectations46.

At the time when the high profits were being experienced by the foreign investors in Venezuela, the Venezuelan government resorted to restructuring the oil industry within the country. Consequently, several disputes arose despite the fact that the foreign investments complied to these changes.

Generally, where windfall profits occur, especially within the industries characterized by extraction aspects, governments usually perceive them as benefits since there is no inherent merit with regard to the foreign investor’s part. The governments may become willing to nationalize such kind of industries to seize the opportunity of securing all the profits emanating from the industry especially where they feel that they have the confidence to run these businesses47.

Another option available for these governments is that they may resort to seeking other various forms of contracts whereby, by adopting them, a little amount of profits is repatriated by foreign companies while most remain within the host country48.

Contracts Entered By The Previous Regimes

The first thing that incoming regimes do is change the contracts entered into by the previous governments and the foreign investors especially if there were allegations of corruption during the time these contacts were entered into49. In addition to this, the incoming regime may cancel the contracts where the previous government’s legitimacy is a subject to doubt based on the established objectives by the succeeding governing body50.

Several instances of disputes exist and as such, they have given rise to a new country established in a geographical area where the contract was entered into and needed to be performed. However, the newly created country refuses to accept the succession of obligations, which was undertaken by the previous regime controlling that geographic area at the time the contracts were being entered into. In such a circumstance, since the rule related to the succession of the duties assumed by individuals is not available, the International Law does not provide a remedy for the circumstance51.

In some cases, a foreign investor may enter into a contract with an unrepresentative government to invest in the host country. In such a case, if a new governing body, which has democratic attributes, is elected, it may exercise its right to rescind the contracts entered into by the previous unrepresentative regime. It does this by doubting the legitimacy of the previous regime as well the contracts it entered into52.

The newly elected democratic government has the credibility to take this course of action. This credibility may be greater if it becomes evident that the terms as well as the conditions of the contracts are disadvantageous to the country53. According to several international lawyers, International Law has taken a path whereby, it recognizes the governance perceived as democratic.

In reality, if this is the true cause, the uniform application of this kind of a view must be extended into contracts entered into by investors from other countries with the unrepresentative governments54. It is also important that the decision to confine the rule in an effort towards justifying by intervening using the military in the undemocratic countries’ operations be abhorred55. As such, the issue would give rise into instances such as the post-Saddam Iraq where the validity of the contracts entered into by the post-Saddam administration concerning the oil became questionable56.

The post-Saddam administration was put up by the U.S government and as such, it was not legitimate since the United Nations was neither involved nor was it consulted. According many industrial analysts, the contracts that Iraq entered into within the oil industry will become victims of instability. According to them, the validity of those oil contracts is questionable57.

Another source of problems is the contracts entered into by the military regimes. These problems are not only unrepresentative but also determined taking into account the preferences of the junta, which has taken over the Iraqi governance system.

When a newly elected government assumes office, it may declare that the contracts entered into by the military regime do not bind the government58. It is contemporarily being perceived that the extent to which the self determinations as well as democracy are normative factors capable of affecting how the governments exercise power during the time the contracts are being concluded is not yet settled59.

Industrial analysts assert that foreign investors who entered into agreements with totalitarian government were conscious of the risks involved. As such, they were aware that the agreement’s validity was contentious especially where a democratic government was concerned and as such, protection of the agreement was not necessary. Yet, the incoming government was a democratic one and thus, it did derive the benefits obtained from the foreign investments.

The incoming government would protect the investments guided by the International Law especially in such instances where foreign investments have proved to be of great benefit to the country.

With reference to the businesses involved with the extraction, the instance of contract invalidity may be perceived as great. This is because; the unrepresentative government is usually unable to act on behalf of the individuals from whom the natural resources’ sovereignty is vested under the law governing businesses internationally60.

Onerous Contracts

The contracts involving the foreign investors are perceived as too onerous to perform and as such, they face risks of government intervention. Where a government gets in between the contracts, the loss that otherwise could have been suffered by a state agency or even the state itself by getting in between the contracts by use of legislative power is greatly mitigated. The best example to illustrate this is the facts extracted from the case of Settebello V.S Banco Totta Acores.

A shipyard in Portugal, which was owned by the state, had entered into a contract such that, it would build a large oil tanker. In the terms and conditions of the contract, it was indicated that, in case of late performances, there would be a penalty imposed61. The shipyard company was unable to beat the deadline as specified and as such, it became immersed in dangers of having to incur a considerable amount62.

However, the Portuguese government, through the legislative power, intervened and thereby altering the provisions of penalty as stipulated in the contract. The other party to the contract sought to seek remedy with regard to this situation, first within Portugal and then outside Portugal when it seemed that the remedy was not forthcoming. However, even though the company decided to seek the remedy outside, all the efforts were futile63.

Regulation Of The Economy

Despite the fact that the contemporary countries adhere to the open economy, industrial analysts claim that they are constituted of regulatory mechanisms through which the economy is controlled64. With reference to the third world or the developing countries, the adherence to the open economy intensifies the regulatory controls65.

Immediately after global financial crisis together with liberalization retreat took effect, an increment in the regulations that govern the foreign investors, especially within the established countries such as the United States became evident. Investment protectionism, according to Addo, is a phenomenon increasingly being exercised by many countries66.

This is because, it acts as a witness to imposition of controls over the foreign investor’s entry into a country not only through the laws already in place or merges but also through the national security or even through adoption of newly established investment control methods. The industrial analysts assert that, such invest controls have been there in developing countries and they may be on an increase as a viable measure to respond to economic crisis67.

The question concerning when the regulations are perceived as permissible as well as when they assume an exploratory nature in an effort towards becoming compensable is widely put under consideration. With regard to the environmental field, it is, according to Muchlinski, Fortino and Schreuer, the source of major disputes is use of intervention power through legislation68.

An example of such disputes is whether the intervention by use of regulations could amount to standards of treatment violation or expropriation with regard to investment treaties. Such a dispute will always be there before opting to arbitral tribunals. As a result, a more refinement scope with regard to situations where expropriation would be perceived as regulatory will crop up.

Human Rights And Environmental Concerns

In the entire world, such activities as human rights as well a protection of the environment are burgeoning and as such, they lead to the creation of instability within the law especially where foreign investment protection is spelled out. According to Pilgrim, the creation of objective, which can be identified as competing, pertaining to protection of human rights as well as the environment usually follows that; a recognition of the right to intervene in situations where the foreign investor abuses the rights of the humans whether explicitly or privately, is resulted to69.

In addition to this, such creation also causes damage to the environment. According to Peters, the increasing nature right to regulations will lead to the objectives of the protection of the foreign investments being greatly undermined70. As such, the recognition of a country as having the right to get in the middle of the operations of the investments, which are perceived as abusing the rights of the humans as well as posing a danger to the environment within which it operates, is required71.

Where justice perceived as poetic is adopted, the disputes that highlight the issues arising out of the environmental protection surface take into account the foreign investments made within the context of the provisions on investments with regard to NAFTA72. As such, the allegations made regarding the abuse of the environment by a developed country aimed at going against a foreign investment from another developed country are involved. In most of these situations, intervention by a regulation aimed at promoting the interests concerning the environment could amount to the taking of a property and as such, it remains an issue which ought to be raised73.

It is worth noting that the competing concerns involved with regard to the foreign investments as well as the human rights protection could indeed result into the trumping of the interests of foreign investment protection with regard to certain circumstances74.

The emphasis put on the foreign investors’ protection has acted in such a way that it has excluded other factors, which have stood unnoticed until the beginning of the 20th century. However, according to a research conducted by Stephens, such emphasis may cease and therefore, not extend into the future75. This, according to Rood, is due to the fact that, such kind of an approach is inconsistent, taking the trends within the International Law into account76.

It is clear that, the treaties concerning investments are spelled out in the International Law and as such, in the context of such law, these treaties have to be interpreted. Further, it is a noble thing that these investment treaties continue being interpreted without consulting the wider law governing the international community77. In addition to this, the interpretation must be made taking commercial interests into account78.

The development commonly identified as lying at the contemporary International Law roots is of great value as, according to Schwelb, it not only represents the economic considerations but also several other issues, which include; the environment as well as the rights of the humans79.

The international development system is currently described as facing dissent, but if such values would be incorporated within the law, such instance would not surface. Some rights associated with humans are said to be ‘ius cogens’ and as such, they will seemingly continue overriding the investment protection principles, which are identified as inconsistent80.

The Law And Order Situation

Instability within the law as well as order within a country occurs rarely and when it does, it is perceived as a threat to the foreign investors as well as their investments81. In such situations where the prevalence of political interests foment animosity aimed at the foreign investors as well as their investments, difficulties are destined to arise. Such situations surface where the reigning government faces difficulties in controlling and containing of the marauding criminal gangs as well as mobs. In addition to this, the situation is made to be due to fomenting of the uprisings aimed against foreign investors by the government.

A real life example is in the case of Zimbabwe where President Mugabe encouraged the formation of uprisings to drive out the white investors. This is when his government developed a feeling that; it is being put under threat, politically. With regard to such circumstances, there is a provision within the International Law. This is usually through rule which, according to a research conducted by Rowat, engages the responsibility mandated onto the state concerning the failure to offer protection to the foreigners’ interests with regard to the anticipated attacks on him, his personal properties or his investments82.

However, according to the findings of the research conducted by Reich, the foreign investor could be in contention as one of the major reasons why discontent arises83. The dispute that prevailed among Ogoni region within Nigeria best illustrates this. In this situation, Reed has come to establish that the Ogoni people make an allegation that they are forced to bear environmental degradation, which arises out of the exploitations made on the soils within their region and yet the government takes all the attained profits84.

Similarly, there are problems identical to these arising within the mining industry as well as within other investments established within the ancestral lands of the people of the aboriginal society85.

Conclusion

From this analysis, it is clear that a country holds significant powers to control the foreign investments, which, from the findings of a research conducted by Rothger, arise from the country’s sovereignty86. The foreign investments do operate within the boundaries of the host country and as such, it is the duty as well as the prerogative of the host country to treat the foreign investments as it sees right. However, the foreign investors do not perceive this notion as viable to them87.

This is because; the home states as well as the foreign investors are the basis on which the power, which is identified as considerable, through which the interest of ensuring that the foreign investment is protected is obtained

According to Verhoosel, it should not be considered that all the countries that oppose the establishment of norms within the International Law imports capital from the countries from the developing world category88. If the formative stage of the International Law failed to take off, it would have followed that the world became divided into two; that is, capital exporting countries in the developed countries category and the capital importing countries within the developing countries category. As compared to the situation in the past, this division, if any, is not evident or established in the modern times.

The findings of the study conducted by Staker were that; the United States is not only the most significant capital exporter but also the largest importer89. In addition to this, this nation is perceived as having the most wistful, powerful as well as largest multinational corporations exporting capital to various countries around the world. Contemporarily, the interests that any given country ought to consider are diverse in nature.

Shihata established in his research that a country has the mandate to give protection to its national economy90. As such, most of the countries around the world, especially in the developed countries, do this based on intense notions said to be sovereign centered. Countries ought to further the multinational organization’s interests91.

Countries do this by seeking to create norms such that they protect the foreign investors as well as their investments as long as they are valid. Such a situation is evident across the world as it applies in many countries, especially in developing countries including China as well as India92. However, factors are existing internally within these countries and as such, they make these countries opposed to the international norms93.

The foreign investor’s interests as well as ideas are always in a constant change and therefore, they are not predictable94. During the late 1970s all through to the mid 1980s, cohesion was adequate among the third world countries. The realization of the cohesion among the third world countries would not have been established if the recent separation from the colonial bondage in an effort towards pressing for the establishment of new rules with regard to the foreign investors and their investments was not forced through95. This separation resulted to resolutions, which related to International Economic Order. However, a major thing happened in the mid 1990s when the Soviet Union was dismantled96

The Soviet Union for many years existed as a bloc leader and, according to Williams; the state had established and maintained a hostile attitude towards the properties owned exclusively by individuals97. Before the Union collapsed, its existence was enough to ensure that the views of the developing countries were being maintained despite the fact that they were perceived as not so extreme as compared to the views of the communist countries98.

When the Soviet Union collapsed, newly formed forces were released. It is indicated in the findings of the research by Zemanek that, ideologically, the liberalization of the economy would be said to have been triumphant99. The researcher further asserts that the free market was explicitly declared that it was a universal remedy to development. The conclusion of the research by Verdross indicated that the measures established to liberalize the capital movement were set running100.

During this period when the Soviet Union was falling, most countries that were being considered as belonging to the third world category lost their old cohesion101.

Van Aaken established, that most of the countries within the developing world category did not have adequate funds facilitate development and as a result, they began to seek foreign investments, which at this time were few, therefore had to scramble for them102.

The reason why these countries decided to take this course of action was because; the foreign investments were the only available options to ensure that develop was taking effect. Countries could not just obtain funds from both the International Monetary Funds as well as World Bank at will. This is because, there were several specified conditions which had to be satisfied before obtaining a loan and as such, this scared off most of the developing countries103.

Later, the International Law was set such that it assumed a new course. Both the bilateral as well as the regional treaties became proliferated. Moves within the OECD were initiated in an effort towards the establishment of the multilateral agreement on Investment commonly identified as MAI. However, the effectiveness of MAI failed and due to this, efforts aimed towards the transferring of the project, which is to the WTO, were established. However, this picture was to transform rapidly. As such, liberalization became increasingly disappointing and due to this, globalization took effect in a rapid way104

Clashes that ensued in Seattle were perceived as demonstrating a situation where the civil society was increasingly becoming disenchanted with regard to the idea concerning the big investments’ profits at the expense of both the degradation of the environment as well as global poverty105.

The political pressure applied by groups is contemporary facing the effects of having diverted International Law’s attention on the investments owned by the foreigners from the protection of investments that existed in the past into the new areas, which include the corporate responsibility with regard to the degradation of the environment as well as the violation of the human rights106. As such, these newly founded issues are perceived by scholars as in the near future cause an impact on how law functions. This is because; they are identified, by being addressed through the norms provided for by the International Law107.

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Footnotes

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  2. L Tshuma, ‘The Political Economy of the World Bank’s Legal Framework for Development’, Social and Legal Studies, vol. 8, no. 6, 1999, pp. 75-77.
  3. Bretton Woods Project, Drowning by Numbers, Bretton Woods Project London, 1998, p. 32.
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  5. D Vagts, Protecting Foreign Investment: An International Law Perspective: Foreign Investment in the 1990s. Cengage Learning, Oklahoma, 2008, p. 43.
  6. J Adams, ‘Foreign Direct Investment and the Environment: The Role of Voluntary Corporate Environmenta Management’, Foreign Direct Investment and the Environment, vol. 4, no. 2, 2009, pp. 28-29.
  7. JR Barton, Environmental Regulations, Globalisation of Production and Technological Change in the Iron and Steel Sector, Cengage Learning, Belmont, 2009, p. 56.
  8. DC Esty & R Mendelson, Powering China: The Environmental Implications of China’s Economic Growth, Yale Centre for Environmental Law and Policy, New Haven,1995, p. 90.
  9. SM Schwebel, ‘The Story of the UN’s Declaration of Permanent Sovereignty over Natural Resources’, American Bar Association Journal, vol. 49, no. 7, 2003, pp. 463-557.
  10. SW Schill, ‘International Investment Law and the Host State’s Power to Handle Economic Crises’, Journal of International Arbitration, vol. 24, no. 7, 2007, pp. 26-35.
  11. JF Williams, ‘Foreign Investments and Risks’, British Yearbook of International Law, vol. 4, no. 1, 2008, pp.14.
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  15. S Seck, ‘Home State Responsibility and Local Communities: The Case of Global Mining’, Yale Human Rights and Development Law Journal, vol. 11, no. 9, 2008, pp. 177-199.
  16. JE Ziman, ’The Social and Environmental Costs of Oil Company Divestment from US Refineries’, Multinational Monitor, vol. 18, no. 5, 2007, pp. 24-78.
  17. OECD, Open Markets Matter: the Benefits of Trade and Investment Liberalisation, OECD, Paris,1998, p. 88
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  25. G Verhoosel, ‘Foreign Direct Investment and Legal Constraints on Domestic Environmental Policies: Striking a Reasonable Balance Between Stability and Change’, Law and Policy in International Business, vol. 29, 1998, p. 451
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  27. Mining Policy Institute, Trade Liberalisation, Mining Investment and the Impacts on the Environment and Related Social Issues , MPI, Sydney, 1998, p. 9
  28. R Sanchez,’ Challenges and environmental risks of the Maquilidora in Mexicali’, Natural Resources Journal, Vol. 30. No. 3, 2000, pp, 87-124.
  29. D Weissbrodt, & M Hoffmann, ‘The Global Economy and Human Rights: A Selective Bibliography’, Minnesota Journal of Global Trade, vol. 6, no. 2, 1997, pp. 189-191.
  30. JT Odegard, Leather tanning in Norway, University of Oslo, Oslo, 2005, p. 43
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  38. FP Waite & MR Goldberg, ‘National Security Review of Foreign Investment in the United States’, Florida Journal of International Law, vol. 6, 1991, p.191
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