A comprehensive investment facilitation framework is necessary to create favourable conditions for FDI to benefit host economies and societies. Sustainable Investment Facilitation Agreements (SIFA), such as the one concluded by the EU with Angola in late 2023, could be useful tools to promote facilitation practices and mutually beneficial investments between parties. This Report aims at informing the EU and interested countries of the Southern Neighbourhood region (Algeria, Egypt, Jordan, Morocco and Tunisia) on the potential and opportunity of future SIFA negotiations. This introductory chapter sets the context, structure and key findings of the Report on investment facilitation practices in the Southern Neighbourhood countries and their alignment with key provisions of the EU-Angola SIFA.
Towards More Sustainable Investment Frameworks
1. Context, structure and key findings
Abstract
Context
Foreign direct investment (FDI) can be an important contributor to enhance economic growth and innovation, create quality jobs and develop human capital, including for women, and raise living standards and environmental sustainability in host economies (OECD, 2022[1]). By linking domestic firms – especially small and medium-sized enterprises (SMEs) – to multinational enterprises (MNEs), it can also encourage technology spillovers and be a conduit for domestic firms to access international markets and integrate global value chains (OECD, 2023[2]).1 The OECD FDI Qualities Policy Toolkit provides policy guidance to governments to leverage the catalytic role of FDI in financing Sustainable Development Goals (SDGs), fulfil their commitments made under the Paris Agreement, and optimise the strength and quality of post-crisis recovery.
However, recent geopolitical and geoeconomic tensions that follow a longer period of stagnant or even declining global FDI flows which began with the Global Financial Crisis of 2008/2009 have significantly disrupted global trade and investment flows. Several events with global implications have contributed to such disruptions: the COVID-19 pandemic, which exacerbated the vulnerabilities of global supply chains to external shocks (OECD, 2021[3]), Russia’s war of aggression against Ukraine, which impacted energy and food security and the clean energy transition, and the conflict in the Middle East, whose long-term implications are yet to be assessed (OECD, 2022[4]). In this context, enterprises are re-evaluating the implications of their supply chains, and some seek to re-shore or near-shore the sources of their inputs. These factors had and continue to have implications for FDI.
The overall economic environment remains challenging, and increased concerns about the sustainability and resilience of supply chains continue shaping investment policymaking around the world, including that of the EU. Such concerns are reflected in the EU’s Trade Policy Review prepared by the European Commission in 2021, which called for a new trade strategy for the Union based on a more “open, sustainable and assertive trade policy” (European Commission, 2021[5]). In this context, the EU’s new Global Gateway strategy aims at creating opportunities for smart investments by the EU Member States’ private sectors in sustainable and quality infrastructure in partner countries, whilst ensuring their positive contribution to local communities and the enforcement of high environmental and labour standards. The strategy is underpinned by several core principles, including the need to foster ‘equal partnerships’ through projects driven by local needs and opportunities as well as the EU’s own strategic interests in five key sectors, which include digitalisation, health, climate and energy, transport, as well as in education and research (European Commission, 2021[6]).
To harness investment for inclusive and sustainable economic growth, a comprehensive investment facilitation framework is necessary to guide government actions and align more closely investment policy with sustainability objectives. Host economies may also miss out on the positive benefits of FDI to advance their SDGs if investors regularly face hurdles and practical impediments in establishing, operating or expanding their projects in a country. Specifically tailored policies aimed at improving local investment climates are thus required to create favourable conditions for FDI to contribute positively to host economies.
Investment facilitation – understood broadly as a “combination of tools, policies and processes that foster a transparent, predictable and efficient regulatory and administrative framework for investment that maximises the benefits to the host economy” (Novik and de Crombrugghe, 2018[7])2 – allows host economies to cut down investors’ transaction costs, reduce complex administrative burdens, and increase legal predictability and certainty for investors which could drive further investment opportunities (OECD, 2015[8]). Facilitation policies can also promote investments by smaller firms which generally enjoy fewer resources than larger MNEs to establish and operate in foreign markets. The OECD’s work on investment facilitation and the OECD Council Recommendation on FDI Qualities for Sustainable Development adopted at Ministerial level in June 2022 calls for Adherents to take steps to ensure that their domestic policy, legal, and regulatory frameworks support positive impacts of investment on sustainable development, and to facilitate and promote investment for sustainable development opportunities by addressing information failures and administrative barriers.3
Investment Facilitation Agreements, such as those negotiated by the EU, could be a useful tool to harness the positive effects of FDI and promote mutually beneficial investments. Investment facilitation has historically received significantly less policy consideration in comparison to other domains of investment policy, such as investment protection or, to a lesser extent, investment liberalisation. International Investment Agreements (IIAs) – especially early generation IIAs – have primarily focused on investment protection, although they may have included standard language on the facilitation of investments, especially within their preambles.4 At the same time, investor protection standards are not entirely disconnected or impermeable to investment facilitation objectives.5 Some investment protection standards typically included in IIAs, such as the obligation to accord ‘fair’ and ‘equitable’ treatment (FET) to qualifying investments, may be supported or strengthened by facilitation efforts.6 Inversely, an absence or lack of measures seeking to facilitate investment may – in some cases and depending on the specific design and scope of a given IIA’s standard of treatment – entail a state’s liability under its international commitments.7 Extensive interpretative practices by arbitral tribunals may further increase the probability of such a scenario, especially in cases where protection standards are vaguely worded in the stock of earlier generation investment treaties currently into force.8
Investment facilitation has only recently emerged as a policy priority in global investment governance, especially since 2017 with discussions over a plurilateral “Investment Facilitation for Development (IFD) Agreement” being hosted by the World Trade Organization (WTO).9 The launch of discussions over a plurilateral WTO IFD Agreement follows a perceptible shift in global investment governance priorities, as more recent IIAs – whether investment chapters of FTAs or bilateral/regional investment agreements –10 have increasingly included a wider range of investment facilitation provisions,11 especially relating to the transparency of domestic investment frameworks, and to a lesser extent, the streamlining of administrative processes;12 and regional initiatives had led to the adoption of framework agreements recommending good practices to facilitate investment.13 The maturation of the EU’s investment policy also led to the incorporation of investment facilitation as a policy priority within future Economic Partnership Agreements (EPAs) with the EU’s economic partners of the African, Caribbean and Pacific regions. The EPAs’ negotiating directives now refer to the need to establish a framework with relevant partners based on principles of non-discrimination, openness, transparency and stability to “facilitate, enhance and stimulate mutually beneficial sustainable investment between them”.14 In November 2023, the EU and Angola concluded a Sustainable Investment Facilitation Agreement (SIFA), which represents the first bilateral agreement of its kind negotiated by the Union that reflects such priorities.
The EU-Angola SIFA shows an ambitious approach to investment facilitation and sustainable development, similar to that observed in more recent investment facilitation agreements. The Agreement’s overarching objectives state, similar to other investment facilitation agreements, that it aims at “facilitating the attraction, expansion and retention of FDI between the Parties for the purposes of economic diversification and sustainable development”. However, its real innovation resides not only in developing more detailed provisions on key investment facilitation principles, but also in its Chapter 5 which exemplifies the Agreement’s approach to investment and sustainable development. The Agreement goes beyond just formulating recommendations to create favourable conditions for FDI to contribute to SDGs, which would be the result of ‘broad’ investment facilitation efforts. It also encourages Parties to align their domestic legal frameworks with international labour and environmental standards as well as responsible business conduct principles (RBC) to maximise the benefits of FDI; and calls for Parties to use FDI itself as a lever to advance their SDGs by promoting and facilitating investment projects with sustainable outcomes.
Southern Neighbourhood countries could be strategic partners for SIFA negotiations, in light of the EU’s priorities to deepen its cooperation with its regional partners and promote and encourage mutually beneficial investments. The EU’s new Agenda for the Mediterranean calls for the strengthening of the Union’s ties with its southern neighbours as being a strategic imperative, especially in areas of investment facilitation and sustainable development (European Commission, 2021[9]).
The EU has maintained strong economic ties with its Southern Neighbours: it is the first origin of inward FDI in Southern Mediterranean countries, holding in average a third of their respective inward FDI stocks in 2021, followed by countries of the MENA region Figure 1.1, Panel A). EU member states are often within the top five jurisdictions of origin of inward FDI stock in Southern Mediterranean countries, among which France, Italy and Spain (Figure 1.1, Panel B).
Figure 1.1. Inward FDI stock in the selected Southern Neighbourhood countries
Note: Year of latest available data for individual countries. FDI stock data for Tunisia excludes the energy sector.
Source: OECD elaboration from IMF (Coordinated Direct Investment Survey and International Investment Positions), World Bank (World Development Indicators) and data reported by national authorities.
At the same time, SIFAs with the selected Southern Neighbourhood countries could help create favourable conditions to attract more and better investments as their overall FDI performance has been stagnating since the turn of the 2010 decade in light of the global financial crisis of 2008/2009 and the political and social instability resulting from the Arab Spring movements of 2010-2011. Whilst all of the selected Southern Neighbourhood countries had showed promising signs of post-crisis recovery from the twin shocks of 2008 and 2011, FDI flows in the region do not appear to have regained their pre-crisis levels, as the Covid-19 pandemic further strained such recovery efforts (Figure 1.2, Panel A).
In this context, the efforts to attract more and better FDI are important. Political shocks of the last decade have skewed the sectoral composition of FDI in the Southern Neighbourhood towards their extractive industries which have shown to be relatively impervious to political instability (OECD, 2021[10]; Burger, Ianchovichina and Rijkers, 2013[11]). However, there has been a positive shift in the region the last years towards sectors and activities that are more aligned with the achievement of SDGs, with renewable energy projects significantly outweighing fossil fuels in the share of announced greenfield FDI in the MENA region from 2019 onwards (OECD, 2023[12]) (Figure 1.2, Panel B).
Figure 1.2. Recent FDI inflows trends in Southern Neighbourhood countries
Note: The important increase in 2018 of the share of FDI inflows into the five Southern Neighbourhood countries in proportion to global FDI inflows (Panel A) appears to have been driven by a sharp decrease in global FDI inflows in that year due to large repatriations of earnings by US parent companies in response to tax reforms in the United States (see OECD, FDI in Figures – October 2018). Percentages in Panel B represent shares of capital expenditure (capex) of announced greenfield FDI projects.
Source: OECD elaboration from IMF BOP/IIP statistics, World Bank (Panel A) and the FT’s fDi Markets database (Panel B).
Over the last years, all of the selected five Southern Neighbourhood countries have directed important resources to enhance their legal and regulatory frameworks for investment and made notable improvements to streamline regulations for investors or ease administrative procedures to reduce discretionary application of rules. Despite recent improvements, investment conditions in the five selected Southern Neighbourhood countries remain challenging in some respects. The outsized role of privileged firms – such as some state-owned enterprises or politically-connected private-sector firms – benefitting from special regulatory treatment and selective enforcement of rules has often been pointed out as a key challenge hampering competitive markets in many Southern Neighbourhood countries (OECD, 2021[10]). Along with other cross-cutting factors, such practices have limited the potential for higher levels of growth and investment, and more inclusive development in the region. Further policies aimed at improving the overall transparency and predictability of investment-related rules and procedures in the focus countries would allow Southern Neighbourhood countries to bolster the development of their private sectors and create favourable conditions for investment to contribute to more inclusive and sustainable development. Other organisations, such as the International Monetary Fund (IMF), have also called for the need to implement structural reforms in Middle East and North Africa (MENA) countries – such as those aimed at making their private sectors more ‘investment-friendly’ and lifting bureaucratic red tape – to raise their potential for growth in the context of tight monetary and fiscal policies that were recently put in place (IMF, 2023[13]).
The European Commission has called upon the OECD to assess the extent to which the legal, regulatory and institutional frameworks for investment in selected Southern Neighbourhood countries,15 are aligned with the objectives, requirements and key investment facilitation standards enshrined in the EU-Angola SIFA. By providing a gap analysis of investment facilitation shortcomings in the selected Southern Neighbourhood, this aims at guiding the European Commission and the Southern Neighbourhood partners on potential future SIFA negotiations.
Structure
The present report is organised in two main sections:
Section 2 provides a stocktaking of investment facilitation practices within the selected Southern Neighbourhood countries benchmarked against the standards laid out in the EU-Angola SIFA, especially relating to regulatory transparency and predictability (Chapter 2 of the Agreement), the streamlining of investment authorisation procedures (Chapter 3) and their frameworks aimed at promoting and encouraging investments with sustainable outcomes (Chapter 5).16
Section 3 outlines a country-by-country assessment of each of the selected Southern Neighbourhood countries’ domestic frameworks and their current level of alignment with the above-cited standards and requirements, with a view to guide the EU Commission on future key partners for SIFA negotiations. The assessment considers in which instances the existing domestic frameworks of the selected countries go further than how these standards are articulated in the EU-Angola SIFA, and in which instances these standards appear too distant from the existing domestic frameworks of the selected countries.
It is complemented by two Annexes:
Annex A sets out the domestic legal frameworks for investment of each of the selected Southern Neighbourhood countries, which outline the findings of extensive desk-based research and analysis into their legal, regulatory and institutional investment frameworks. The Report’s benchmarking, gap analysis rely on the findings outlined in this Annex.
Annex B informs the potential for future SIFA negotiations with the five selected Southern Neighbourhood countries, specifically with respect to investment into renewable energy and green hydrogen sectors.
Key findings
The Report’s key summary findings include the following:
From an institutional perspective, approaches as to how facilitation standards and mechanisms have been incorporated into domestic investment frameworks vary significantly. Some countries have adopted a decentralised, region-based approach to investment facilitation, whereas others feature centralised, nation-wide investment promotion agencies (IPA or IPAs) and/or one-stop shops (OSS). Further, while some countries feature a single IPA, others operate several IPAs with either sector-specific jurisdictions or investor-specific mandates; the same observation goes for OSS. The institutional foundations of IPAs themselves vary from framework to framework: some countries operate IPAs that are independent administrative agencies, while others have entrusted IPA-related mandates and functions to government ministries.
The selected Southern Neighbourhood countries’ respective OSS act as focal points, providing information and assistance to investors on establishment and operation procedures and administrative authorisations. Their mandates are primarily defined by reference to their membership, i.e., competent authority representatives either entrusted with processing and issuing authorisations that fall within their jurisdiction or acting as points of contact between investors and their respective authorities. Enhanced transparency on OSS membership would clarify their effective mandates and enhance the predictability of domestic investment frameworks.
The EU-Angola SIFA features a number of standards geared towards enhancing the transparency and predictability of domestic investment frameworks. These are reflected into the domestic frameworks of each of the selected Southern Neighbourhood countries in different manners:
All five selected Southern Neighbourhood countries have to varying degrees formalised arrangements for the publication of investment-related measures legislation, or effectively do so in practice without specific reference to any institutional or legislative requirement. The availability of regulatory material (including specifically investment-related material) remains uneven across the countries, as access to investor-relevant regulatory material is at times hampered in practice (e.g., website user-friendliness and/or paywall considerations; issues in accessing consolidated and up-to-date regulatory material). Measures and arrangements seeking to ensure easy and free access to relevant and up-to-date investment-related laws and regulations would further enhance the transparency and predictability of domestic investment frameworks.
Participative policymaking arrangements (advance publication of investment-related legislation, opportunity to comment to investors and stakeholders) are formalised by way of legislation or carried out on an ad hoc, informal basis, or in some instances inexistent. Some practical considerations hinder access to draft legislation (e.g., websites for online publication are not regularly updated and/or comprehensive). Formalised participative policymaking arrangements would further enhance the transparency and predictability of domestic investment frameworks.
The overall transparency of each of the five countries’ domestic investment frameworks is positive and encouraging but uneven across the selected Southern Neighbourhood Countries. All five countries operate single portals: these generally provide sufficient information relating to investment laws and regulations and relevant contact information, but the availability of comprehensive and easily accessible information on FDI restrictions and practical information on business operation is uneven. Arrangements to enhance the transparency of investment incentives is similarly inconsistent. Most but not all the selected countries provide a general overview of the different incentives offered to investors, either through their IPAs’ websites or their OSS, but the granularity of this information (e.g., with respect to application procedures and requirements, institutional arrangements and relevant contact information) varies. Similarly, information on domestic suppliers with a view to establish host economy linkages is available in varying degrees of transparency and depth. Further efforts to ensure easy access to core information on the countries’ investment frameworks would improve their transparency and predictability.
The EU-Angola SIFA also features a number of standards geared towards streamlining authorisation procedures relevant to domestic investment frameworks. These are reflected into the domestic frameworks of each of the selected Southern Neighbourhood countries in different manners:
Two complementary approaches to streamlining are observed in practice: an underlying – and encouraged – “whole-of-government” approach to achieve overall administrative efficiency, and a complementary approach to facilitate specific investment-related procedures. Investment-specific streamlining solutions across selected Southern Neighbourhood countries include a variety of measures, e.g.: establishment of dedicated OSS to guide and assist investors in respect of investment-related authorisations; bestowing OSS the powers to directly process some or all administrative investment-related authorisation requests or facilitate their obtention; and clarifying authorisation application processes and eligibility criteria.
While most domestic frameworks feature arrangements that centralise single-authorisations applications, this is not carried out in a uniform manner across selected Southern Neighbourhood countries. OSS either act as focal points, pointing investors towards competent authorities, or are themselves mandated to directly grant or facilitate the obtention of investment-related authorisations. Depending on the frameworks, multiple processes of applications may be required for single authorisations and/or authorisation applications may or may not be submitted electronically, for example. This may bring about burdensome authorisation procedures. The adoption of complementary measures to ensure that applications across sectors and types of projects are centralised, either via an OSS or other government agency, with a view to connect investors to competent authorities via a single portal, would further strengthen streamlining mechanisms.
Most selected Southern Neighbourhood countries feature standardised measures for the processing of investment authorisation applications, e.g., capped timeframes for the processing of authorisation applications, tacit approval mechanisms, measures to swiftly address incomplete investor applications, including recourse mechanisms. Formalised and harmonised requirements – whether whole-of-government or investment-specific – could further enhance the streamlining of authorisation applications. Further, enhanced transparency on such requirements and authorisation processes and related fees (e.g., via a comprehensive negative list enshrined by way of regulation or sector-specific licensing guides) would help further streamline investment frameworks.
While FDI has had generally positive spillovers in the four SDG areas considered by the OECD FDI Qualities Indicators, the five countries of the Southern Neighbourhood are harnessing these benefits unevenly and at different paces, whether it be in terms of productivity and innovation, creating quality jobs, advancing gender equality principles or advancing decarbonisation goals.
Strengthening Southern Neighbourhood’s investment facilitation frameworks could help countries not only attract more FDI, but also harness its potential positive benefits. The Report hence identifies potential room for improvement in the five selected Southern Neighbourhood countries and underlines the extent to which each of their domestic frameworks align with the EU-Angola SIFA’s key facilitation standards, with a view to guide the EU Commission and interested partners in the region on potential future SIFA negotiations.
References
[11] Burger, M., E. Ianchovichina and B. Rijkers (2013), Risky Business: Political Instability and Greenfield Foreign Direct Investment in the Arab World, Policy Research Working Paper, http://documents.worldbank.org/curated/en/450971468110956873/Risky-business-political-instability-and-greenfield-foreign-direct-investment-in-the-Arab-world.
[5] European Commission (2021), Communication From the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: Trade Policy Review - An Open, Sustainable and Assertive Trade Policy, COM(2021) 66 final, https://eur-lex.europa.eu/resource.html?uri=cellar:5bf4e9d0-71d2-11eb-9ac9-01aa75ed71a1.0001.02/DOC_1&format=PDF.
[9] European Commission (2021), Joint Communication to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on a Renewed partnership with the Southern Neighbourhood, https://www.eeas.europa.eu/sites/default/files/joint_communication_renewed_partnership_southern_neighbourhood.pdf.
[6] European Commission (2021), Joint Communication to the European Parliament, the Council, the European Economic and Social Committee, the Committee of the Regions and the European Investment Bank, JOIN/2021/30 final, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52021JC0030&qid=1653525883495.
[14] European Commission (2021), Joint Communication to the European Parliament, the Council, the European Economic and Social Committee, the Committee of the Regions and the European Investment Bank: The Global Gateway, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52021JC0030&qid=1653525883495.
[13] IMF (2023), Safeguarding Macroeconomic Stability amid Continued Uncertainty: Regional Economic Outlook of the Middle East and Central Asia, https://www.imf.org/en/Publications/REO/MECA/Issues/2023/04/13/regional-economic-outlook-mcd-april-2023.
[7] Novik, A. and A. de Crombrugghe (2018), Towards an international framework for investment facilitation, OECD Investment Insights, https://www.oecd.org/investment/Towards-an-international-framework-for-investment-facilitation.pdf.
[12] OECD (2023), FDI Qualities in the Middle East and North Africa: A mapping of policies and institutions that can strengthen sustainable investment, Background document for the regional seminar on sustainable investment in the MENA region, 19 and 20 June 2023, OECD Istanbul Centre, Türkiye, https://www.oecd.org/mena/eu-oecd-mediterranean-investment/FDI-Qualities-MENA.pdf.
[2] OECD (2023), Policy Toolkit for Strengthening FDI and SME Linkages, OECD Publishing, Paris, https://doi.org/10.1787/688bde9a-en.
[1] OECD (2022), FDI Qualities Indicators 2022, OECD Publishing, Paris, https://www.oecd.org/en/topics/investment.html.
[4] OECD (2022), International investment implications of Russia’s war against Ukraine, OECD Publishing, Paris, https://doi.org/10.1787/a24af3d7-en.
[3] OECD (2021), Fostering economic resilience in a world of open and integrated markets: Risks, vulnerabilities and areas for policy action, https://www.oecd.org/newsroom/OECD-G7-Report-Fostering-Economic-Resilience-in-a-World-of-Open-and-Integrated-Markets.pdf.
[10] OECD (2021), Middle East and North Africa Investment Policy Perspectives, OECD Publishing, Paris, https://doi.org/10.1787/6d84ee94-en.
[8] OECD (2015), Policy Framework for Investment, 2015 Edition, OECD Publishing, Paris, https://doi.org/10.1787/9789264208667-en.
Notes
← 1. OECD, in collaboration with the European Commission (Directorate General for Regional and Urban Policy – DG REGIO), is currently conducting a multi-year project to offer tailored policy advice to countries and regions on how to develop linkages between FDI and local SMEs how to strengthen FDI-SME ecosystems to create more opportunities for productivity and innovation spillovers. On the OECD’s work in this policy area, see: https://www.oecd.org/industry/smes/fdi-sme.htm.
← 2. Investment facilitation should thus be distinguished from investment liberalisation which refers to the process by which restrictions imposed to foreign investors – such as foreign equity caps, screening or licensing requirements, minimum capital requirements or limitations to the appointment of key foreign personnel – are phased out or partially alleviated in a given country. Investment facilitation provisions do not usually encompass disciplines on market access for foreign investors. Similarly, while investment facilitation and investment promotion are often used interchangeably, these two terms cover nevertheless two distinct investment policy areas. Investment promotion is principally concerned with generating investments by promoting a country or its regions as investment destinations (‘image building’), while investment facilitation focuses on policies to foster an enabling investment climate and ease the establishment, operation and expansion of investment projects. Investment promotion and investment facilitation are also temporally distinct: while promotion is rather about attracting potential investors that have not yet selected an investment destination, investment facilitation starts at the pre-establishment phase, when an investor has already shown interest in a location or a country.
← 3. For more information on the OECD’s work in this policy area, see, https://www.oecd.org/investment/sustainable-investment/.
← 4. On such standard language, see e.g., the Egypt-Germany BIT (2005): “intending to create favourable conditions for investments by investors of either State in the territory of the other State”; or more recently, the Japan-Jordan BIT (2018): “intending to further create stable, equitable, favourable and transparent conditions for greater investment by investors of a Contracting Party in the Area of the other Contracting Party”.
← 5. Investment facilitation agreements have tended to explicitly limit such interactions. For instance, the EU-Angola SIFA states on its scope that it “does not create or modify commitments related to the liberalisation of investments, nor does it create or modify rules on the protection of established investors in the territory of Parties, or of their investments, or on investor-state dispute settlement” (Article 2(3)). Such matters were also explicitly excluded early on from the scope of discussions on the Investment Facilitation for Development Agreement in the context of the WTO.
← 6. For instance, the Comprehensive Economic and Trade Agreement (CETA) between Canada, of the one part, and the EU and its Member States, of the other part, includes “fundamental breach of due process, including a fundamental breach of transparency in judicial and administrative proceedings” or even “manifest arbitrariness” within its FET clause (Article 8.10) which could be theoretically avoided by the rationalisation of administrative decisions.
← 7. See e.g., CMS Gas Transmission Company v. The Argentine Republic, ICSID Case No. ARB/01/8, Award, 12 May 2005, in which the Tribunal held that “a stable legal and business environment is an essential element of fair and equitable treatment” (para. 274). In Metaclad Corporation v. The United Mexican States (ICSID Case No. ARB(AF)/97/1, Award, 30 August 2000), the Tribunal found that the administration of measures in the case was in breach of NAFTA’s transparency requirements which subsequently amounted to a breach of the Agreement’s FET clause. The scope of the NAFTA FET clause was further clarified following the Metaclad award by the NAFTA Free Trade Commission in 2001 which stated that FET does not require treatment “in addition to or beyond that which is required by the customary international law minimum standard of treatment of aliens” and that the determination of a breach of another NAFTA provision or of a separate international agreement does not establish a breach of NAFTA’s FET clause. While the note did not explicitly state that the FET standard in NAFTA excludes regulatory transparency requirements, it inherently limited the possibility of importing foreign legal provisions – such as the Agreement’s transparency provisions – within the customary international law minimum standard treatment of aliens. Such specifications were subsequently reflected in recent investment treaty designs, including in the USMCA (Investment Chapter, Article 14.6) which replaced NAFTA.
← 8. On specifications of FET provisions in recent investment treaty language, see OECD (2023), “‘Fair’ and ‘equitable’ treatment provisions in investment treaties: a large-sample survey of treaty provisions” (forthcoming), to be published on https://oe.cd/foit.
← 9. See, Joint Ministerial Statement on Investment Facilitation for Development, 13 December 2017. Negotiations on the text of this agreement, which formally started in 2020, have only very recently (July 2023) concluded with an agreement reached on the final text of an IFD Agreement (see, WTO Structured Discussions on Investment Facilitation for Development – Statement by the Co-ordinators, 6 July 2023). The final text of the WTO IFD Agreement has not yet been made public at the time of publication in November 2023 but the OECD Secretariat has been able to consult it.
← 10. Regional agreements with investment facilitation provisions include the EU-Kazakhstan EPCA (2015); the EU-Armenia CEPA (2017); the Investment Chapter of the PACER Plus (2017) ; the Hong Kong (China)-ASEAN Agreement on Investment (2018) ; the USMCA (2020); and the Regional Comprehensive Economic Partnership (2020) (RCEP). These follow earlier initiatives to include investment facilitation provisions in regional IIAs, e.g., the Framework Agreement on the ASEAN Investment Area (1998) and its subsequent replacement, the ASEAN Comprehensive Investment Agreement (2009), and the subsequent series of ASEAN Agreements concluded with partners (e.g., the ASEAN-China Investment Agreement (2009);
← 11. This shift in global investment treaty making priorities is especially reflected by some countries’ model investment agreements. Brazil appears to have pioneered such approach; its IIAs were indeed the first set of treaties that directly incorporated key facilitation provisions in parallel to investor protection standards, including regulatory transparency requirements and the establishment of national focal points to support investors. Additional countries have started incorporating key facilitation provisions within their model agreements: see the India Model BIT (2015), and more recently, the Canada Model FIPA (2021).
← 12. The regulatory transparency-related provisions in recent IIAs have essentially focused on basic publication requirements for relevant laws and regulations. Only a few IIAs concluded in the past ten years have featured facilitation provisions specifically relating to providing stakeholders with an opportunity to comment on relevant investment laws and regulations, on arranging for reasonable time periods between the publication of a law and its application, and requirements to explain the rationale of an investment-related law or regulation. Similarly, IIAs that address administrative streamlining are relatively rare (see e.g., the Investment Agreement of the China-Hong Kong (China) CEPA (2017)).
← 13. See e.g., the Intra-MERCOSUR Investment Facilitation Protocol (2017) and the ASEAN Investment Facilitation Framework (2021). The Investment Protocol to the African Continental FTA (AfCFTA) was adopted in February 2023 but its final text is not yet available. The latest publicly available drafts of the text shed lights on the text’s ambitions, namely with respect to investment facilitation (e.g., the publication of relevant laws and regulations, entry and sojourn requirements, general requirement to streamline administrative procedures, the institution of national focal points), investment promotion (e.g., incentives for sustainable investments), and investment protection (e.g., national treatment, most-favoured nation treatment, administrative and judicial treatment, physical protection and security). The last draft also features a chapter dedicated to sustainable development-related issues.
← 14. Council Decision (EU) 2020/13 of 19 December 2019, OJ L 6, 10.1.2020, p. 101-111. The EU’s Global Gateway strategy also refers to the need to improve local investment climates to improve conditions for attracting quality investments in partner countries (European Commission, 2021[14]).
← 15. Lebanon has not been included in the scope of this Report, in the light of the important economic and legislative reforms, and improvements to its transparency mechanisms, which are expected to benefit from the financial support of the International Monetary Fund (IMF), and which have not to date been implemented, but which could entail comprehensive reforms and considerable adjustments to Lebanon’s domestic legal framework for investment. A stocktaking of Lebanon’s current investment-related laws and regulations would thereby soon become obsolete. In that regard, Lebanon’s investment legal framework does not appear to have witnessed any significant changes since the Investment Law No. 360 was issued in 2001.
← 16. The present Report’s consideration of Chapter 5 of the EU-Angola SIFA (Investment and Sustainable Development) primarily focuses on providing a broad assessment of FDI trends and policies in the selected Southern Neighbourhood countries’ to boost the positive benefits of FDI to their sustainable development, but it does not include a benchmarking assessment of the provisions specifically set out in Chapter 5. Further work is currently being conducted by the OECD in the context of a separate project to comprehensively identify avenues of improvement of the model agreement’s approach to investment and sustainable development specifically (forthcoming).