Good Governance and International Investment Law: The Challenges of Lack of Transparency and Corruption

Abstract

This paper examines the role of International Investment Law in national and international governance. It addresses the questions: How can IIL promote good governance at the global and national levels? Does it need to? How can it do it more effectively? It focuses on issues of transparency and corruption.

Protecting investors and promoting good governance are not contradictory. International Investment law can more effectively protect investors if it also promotes good governance. This requires regulating home governments and investors, and not just host governments and entails recognizing international duties. It also requires consistency in international law, whereby national good governance standards of transparency, accountability, rule of law and participation need to be paired with similar good governance standards for international institutions. Because the international and national dimensions are both relevant, I refer to Colombia for examples and concrete situations and to examine some of the national instruments in light of the contributions international investment law can make to support or complement them. Finally, corruption and other governance problems are too complex; this paper doesn’t aim at one-go solutions but to make the legal and policy contributions that can help illustrate ways forward.

Part I defines governance and good governance; examining the challenges of lack of transparency, and corruption in regard to foreign investment; describing the connection between good governance and investment climate and delineating the elements of the role International Investment Law has in regard to global and national good governance. Part II analyzes how international legal instruments have reacted to these challenges and analyses trends using the framework established in Part I. Finally, the conclusions address the initial question on the basis of the analysis undertaken: how can international investment law best perform its role of providing adequate protection to foreign investors by contributing to global and national good governance?

Presented at the SIEL 2010 Conference in Barcelona.

Keywords: corruption, transparency, foreign direct investment, international law, international investment law, investment promotion, good governance, global governance, investment arbitration, international arbitration

JEL Classification: F02, F20, F21, F22, F23, F33