However, the ICSID Convention does not contain any provision which has the effect of derogating from the law of a host Member State with regard to its right to State immunity. Parties entering into investment contracts should ensure that they benefit from a waiver of the sovereign immunity of the host State. In any event, there are few examples of successful awards against States. In some cases, States have voluntarily awarded compensation, but there are significant practical obstacles to law enforcement. The identification of state property outside the state itself is problematic. When such assets are identified, issues of sovereign immunity are often raised to oppose the execution of State assets abroad. An investor can conclude an investment contract with a host country. Examples of such contracts in the extractive industries are concession contracts and production sharing contracts, where investors enjoy some protection so that they can invest in the exploitation of a state`s natural resources. The investment contract can protect investors from changes in law or regulation that harm their interests. However, the effectiveness of these clauses in the light of State measures may vary.
Caution should be exercised when considering how investment arbitral tribunals have taken into account the higher clauses. The wording of the framework clauses is different and one investment contract may contain very different provisions from another. In any event, the decisions of the arbitral tribunals were not uniform. In one case, a court refused to elevate a breach of contract to a breach of the investment agreement because the consequences of such a scale would be “so far-reaching and so automatic, so unlimited and so extensive in their operation [and] so onerous in their potential impact on a party.” The Court concluded that clear and convincing evidence was necessary to demonstrate that the intention of the investment contract was to result in breaches.2 However, another court concluded that a framework clause in another investment agreement would be meaningless if it did not result in the breach in question being elevated to the status of breach of contract.3 Critics argued that: that the ICSID system places too much emphasis on safeguarding commercial interests. to the detriment of the public interest. For example, Philip Morris` crackdown on Australia in connection with the introduction of plain packaging laws has drawn public attention to the direct conflict between commercial and public interests arising from investment agreements. As a result, many treaties now explicitly exclude measures in the field of public health and the environment. Japan has a BIT or TIP (or both) with each ASEAN-6 country (in particular, Japan`s EPA with Indonesia remains in force) as well as with Cambodia and Laos, all of which contain (i) a guarantee that investors and their investments will not be treated less favourably by the host state than the host state`s own investors or investors from other states, (ii) a guarantee to protect investments against expropriation without compensation, and (iii) the requirement that the host State provide full protection and security for Japanese investments. With the exception of the Japan-Philippines EPA, each of these IIAs also contains isdS provisions.
With regard to the Philippines, a simple remedy could be to structure investment so that it benefits from the ASEAN Comprehensive Investment Agreement. Despite this potential to generate development benefits, the evolving complexity of the IIA system can also lead to challenges. Among other things, the complexity of the current IIA network makes it difficult for countries to maintain policy coherence. Provisions agreed in one IIA may be inconsistent with the provisions of another IIA. For developing countries with less capacity to participate in the global IIA system, this complexity of the IIA framework is particularly difficult to manage. Other challenges arise from the need to ensure coherence between a country`s national and international investment laws and the objective of designing an investment policy that best supports a country`s specific development objectives. Protection under BITs and MIT exists independently of the contractual rights that investors may have vis-à-vis the host State. An issue often raised in investment treaty law is whether breaches of contract law result in claims arising from investment agreements. The State`s obligation to provide adequate compensation in the event of direct and often indirect expropriation is another important safeguard.
Direct expropriation involves the complete physical seizure of property, while indirect expropriation involves measures that do not lie in the physical acquisition of the property, but permanently destroy the economic value of the investment or deprive the owner of his ability to manage, use or control the property. .