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Investment provisions in Economic Partnership Agreements

Key findings of the paper are:

- The EPA model, represented by the CARIFORUM Agreement, appears not to account for the potentially adverse impacts of foreign investment on development and regional integration or acknowledge the role of government in preventing and limiting these impacts. It sidelines domestic tools that can be used to encourage foreign investment, thus displacing the greater flexibility and adaptability that domestic instruments offer.

- The CARIFORUM Agreement establishes an obligation of most-favoured-nation treatment which could be read expansively to incorporate into the Agreement post-establishment obligations from other investment treaties, including access to investor-state arbitration.

- The CARIFORUM Agreement’s market access commitments will trigger post-establishment protections, including access to investor-state arbitration, that are available to European investor in other investment treaties. This exposes CARIFORUM states to major liabilities arising from the prospect of direct claims by investors and damages awards against the state. Such claims may arise in any sector with substantial foreign ownership and are particularly prevalent in the energy and resource sectors and privatised sectors.

Key recommendations of the paper are:

- The CARIFORUM Agreement’s definition of the right to regulate, and its exclusion of a commitment to privatise public undertakings, should be strengthened. The Agreement should also clarify that MFN treatment is limited to the pre-establishment phase of an investment. The commitment to liberalize the capital account should be subject to the balance of payment safeguard.

- ACP states should avoid any further commitments to investor-state arbitration in an EPA or in any other treaty. Future consents to investor-state arbitration should be limited to investment contracts that are concluded in anticipation of a specific project.