The (Unnoticed?) Contradictory Overlapping of International and Domestic Rules on FDI: Getting the Legal Facts Right

31 Pages Posted: 25 Jun 2012

Date Written: June 25, 2012

Abstract

This intends to be a very “empirical” paper. We want to let the facts (legal facts, but facts nevertheless) speak by themselves. We simply present them in an organized way and limit to the minimum our own comments. The overall objective is to show, “by getting the legal facts right”, “the (unnoticed?) contradictory overlapping of international and domestic rules on foreign direct investment (FDI)”.

The paper is structured in three main sections: the first deals with the regulation of the nationality of juridical persons, taking into account general international law and different particular international rules; the second, with the generalized violation of Most Favoured Nation Treatment (MFN) and National Treatment obligations in the area of FDI; and the third, with the current confusion between movements of capitals and right of establishment, showing how the development of EC/EU law has blurred the clear distinction between them initially established in the Treaty of Rome.

In our opinion, at least one main conclusion stems from the analysis of the legal facts. The present state of the international legal framework of foreign direct investment is not satisfactory, because, among other reasons:

a) There is a flagrant lack of adequate articulation between general international law and the different specific multilateral, regional and bilateral treaties and agreements.

b) The contradiction between the BITs and the GATS cannot go any longer unnoticed and should be addressed; and it seems unacceptable that, in application of existing EU law, EU Member States violate systematically and permanently the BITs to which they are Parties.

c) A revision of the approach followed both by the EU legislator and the ECJ seems perfectly well justified in order to allow Member States to regulate the conditions of establishment without having to assume that such a regulation is, in principle, contrary to EU law.

Keywords: Bilateral investment treaties, Capital movements, Commercial presence, Diplomatic protection, European Union law, Foreign direct investment, General Agreement on Trade in Services, General international law, Most favoured nation treatment National treatment, Nationality of juridical persons

JEL Classification: F02, F10, F20, F30, F40

Suggested Citation

Fernandez-Pons, Xavier and Torrent, Ramon, The (Unnoticed?) Contradictory Overlapping of International and Domestic Rules on FDI: Getting the Legal Facts Right (June 25, 2012). Society of International Economic Law (SIEL), 3rd Biennial Global Conference. Available at SSRN: https://ssrn.com/abstract=2091211 or http://dx.doi.org/10.2139/ssrn.2091211

Xavier Fernandez-Pons

University of Barcelona ( email )

Gran Via de les Corts Catalanes, 585
Barcelona, 08007
Spain

Ramon Torrent (Contact Author)

University of Barcelona ( email )

Gran Via de les Corts Catalanes, 585
Barcelona, 08007
Spain

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