System Protection Agreement Spa 71


As the name suggests, MIT allows a number of states, often on a regional basis, to offer this protection. Negotiations have recently taken place on important trade agreements involving nations that control much of world trade. For example, the comprehensive and progressive agreement for the Trans-Pacific Partnership (CPTPP), one of the largest trade agreements after the North American Free Trade Agreement (NAFTA). Another important MIT, which offers investor protection on an industrial and non-regional basis, is the Energy Charter Treaty (ECT). The ECT came into force in April 1998. To date, more than 50 states as well as the European Community and Euratom have signed or joined. ECT also grants observer status to more than 30 countries as well as international organizations such as the World Bank and the World Trade Organization. It provides safeguards for trade and investment in the energy sector. An investor can avail himself of the obligation of a host state to provide full protection and security in situations where the host Member State has not prevented the physical destruction of the investor`s assets by controlling the judicial and regulatory authorities. It can also be successfully invoked for intangible assets. A state can pass investment laws that guarantee some treatment of investors.

Such legislation could guarantee an exemption from tax regimes or provide a specific tax regime for investors in a given industrial sector. However, investors may be concerned that the protection measures contained in the legislation could be revoked by a subsequent government. ICSID arbitration is controversial and, despite attempts to “depoliticize” the field, views differ sharply, including among those who are called upon to be arbitrators. Such discrepancies and decisions have led to accusations that the ICSID system fuels uncertainty and inconsistency in international law. One of the most striking features of the risk of an explosion in foreign direct investment has been the increase in investment contracts concluded by host countries. Investment contracts can take the form of bilateral investment contracts between two states or multilateral investment agreements between several states (ILO or MITs). These contracts, designed to encourage foreign investment, generally contain provisions that provide specific protection for investors in the countries concerned. As the name suggests, MIT allows a number of states, often on a regional basis, to offer this protection. Negotiations have recently taken place on important trade agreements involving nations that control much of world trade. For example, the comprehensive and progressive trans-Pacific Partnership (PPAC) agreement, one of the largest trade agreements after the North American Free Trade Agreement, and the Transatlantic Trade and Investment Partnership (TTIP) between the EU and the United States (although the negotiations did not go smoothly).