Encouraging Capital Flows and Viable Dispute Settlement Frameworks Under the Monterrey Consensus

Abstract

In this article, the author focuses on the interplay between a legal infrastructure and dispute resolution mechanisms to resolve investment disputes and contends that the judicial system and alternate dispute resolution are reconcilable, rather than conflicting, methods of investment dispute resolution.

The article reflects on the potential impact of the Monterrey Consensus on the creation of a favorable climate for foreign direct investment, with a special emphasis on both a robust and stable banking law infrastructure and an effective domestic judicial system in developing countries to resolve investment disputes and to attract foreign investors. The author also analyzes the mobilization of domestic and international resources necessary to foster economic growth and development, as well as the dispositions relating to the creation of an "effective supervisory mechanism, supported by a solid central bank," as these may relate to the issue of capital flow and broader capital market development.

The study of these various issues leads to the focal point of the article – effective dispute resolution. The author raises key points on this topic, including: 1) the importance of associating arbitration with a suitable legal infrastructure that contains a competent, predictable, and unbiased domestic judiciary system and 2) the necessity, from a developmental perspective, to adopt more effective measures regarding dispute settlement procedures between firms and governments, such as more comprehensive bilateral investment treaties prescribing convenient locations for international arbitration and significant reductions in the cost of arbitration. The article concludes with an overview of the need to encourage public-private partnerships to promote economic growth and alleviate poverty in developing countries.

Keywords: financial regulation, investment disputes, foreign capital flows, foreign direct investment, Monterrey Consensus, alternate dispute resolution, ADR, investment dispute settlements, banking infrastructure, banking regulation, banking supervision, public-private partnerships