The Principle of National Treatment in International Economic Law Trade, Investment and Intellectual Property
Trade, Investment and Intellectual Property
- European Intellectual Property Institutes Network series
Edited by Anselm Kamperman Sanders
Chapter 6: National treatment in emerging market investment treaties
Foreign direct investment (FDI) to developing countries comprised 45 per cent of the world’s total FDI flows in 2011, a rise of 11 per cent over the previous year. This considerable increase was led by large economies such as Brazil, India, China and Russia, as well as upcoming giants such as Indonesia, Mexico and Turkey. Such countries are often described as ‘emerging markets’ because they have high rates of economic growth, typically well beyond those enjoyed by developed countries, with rising GDPs and a burgeoning middle class. Taken together these factors represent an attractive target for foreign firms seeking new consumers and an increasingly educated yet low-cost labour pool. Emerging market countries, as with their developed country counterparts, continued in 2011 to demonstrate a positive trend of liberalization in their policies towards FDI. The role played by international investment agreements (IIAs) in FDI flows remains controversial, but there is some evidence to suggest that one of the chief regulatory means by which FDI flows to emerging markets have been enhanced is through the conclusion of such agreements, of which there are now more than 3000 in existence. These instruments – which are now regularly concluded between two developing countries rather than a developed and a developing country as in the 20th Century paradigm – protect foreign investments from certain harmful regulatory actions by host states. These include actions such as expropriation without compensation and discrimination on the basis of nationality. This latter risk can be mitigated through the use of a national treatment provision.
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