International Investment Law and Development
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International Investment Law and Development

Bridging the Gap

Edited by Stephan W. Schill, Christian J. Tams and Rainer Hofmann

Foreign investment is meant to contribute to the host country’s development, and yet international investment law has often been seen as an obstacle to (sustainable) development. So are investment and development friends or foes? Combining critical reflection and detailed analysis, this timely volume explores the relationship between the two concepts and explores options of harnessing investment for development.
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Chapter 8: Sovereignty over natural resources and international investment law: The elusive search for equilibrium

Melaku Geboye Desta


The relationship between national sovereignty over natural resources and protection of foreign investment is a complex one. Natural resources, such as oil and gas reserves or mineral deposits, are often in such high demand that resource companies are mostly willing to put their capital and reputation at serious risk in order to acquire a stake in their development. Likewise, as soon as the presence of a reasonable deposit of some valuable resource in the territory of a particular country becomes public, governments come under intense ‘economic and political pressure’ to develop it. The comparative lack of complete geological information in most developing countries means that the majority of new and worthwhile resource discoveries today and in the future are likely to be in these countries, while only firms from mainly developed countries have the necessary financial, technical and managerial capability to unlock the resource and transform it into actual wealth. Almost inevitably, the involvement of foreign firms, especially if they are successful in their primary task of producing and exporting the resource, tends, sooner or later, to provoke nationalist sentiment and accusations about loss of host country sovereignty, or worse.

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