Tài liệu Mechanism and measures to prevent international investment disputes – international experience and lessons for vietnam

MINISTRY OF EDUCATION AND TRAINING FOREIGN TRADE UNIVERSITY ___________________ MASTER THESIS MECHANISM AND MEASURES TO PREVENT INTERNATIONAL INVESTMENT DISPUTES – INTERNATIONAL EXPERIENCE AND LESSONS FOR VIETNAM Specialization: International Trade Policy and Law DOAN VIET THANG Hanoi – 2019 MINISTRY OF EDUCATION AND TRAINING FOREIGN TRADE UNIVERSITY ___________________ MASTER THESIS MECHANISM AND MEASURES TO PREVENT INTERNATIONAL INVESTMENT DISPUTES – INTERNATIONAL EXPERIENCE AND LESSONS FOR VIETNAM Specialization: International Trade Policy and Law Code: 8310106 Full name: Doan Viet Thang Supervisor: Assoc. Prof. Dr. Nguyen Minh Hang Hanoi - 2019 REASSURANCE I hereby assure that this master thesis is exclusively made by myself and that all data and results stated in this master thesis are honest. In addition, I hereby assure that all of the supports in the process of implementation cited in the master thesis have been specified its sources. The author Doan Viet Thang ACKNOWLEDGEMENT First of all, I would like to express my deep gratitude and great appreciation to my supervisor Assoc. Prof. Dr. Nguyen Minh Hang, for her exemplary guidance and valuable encouragement throughout the course of this thesis. The support and guidance given by hers have been priceless. I also take this opportunity to express a deep sense of gratitude to all the professors and lecturers of master program of International Trade policy and law for their valuable supports and guidance, which helped me in growing in knowledge and experience through various stages. Furthermore, I would like to especially thank for the support, encouragement and assistance from my family, colleagues and friends during the time of this thesis. Hanoi, 28th Jun 2019 i TABLE OF CONTENTS TABLE OF CONTENTS ............................................................................................ i LIST OF ABBREVIATIONS ................................................................................... iv LIST OF FIGURES.................................................................................................. vii SUMMARY OF THESIS RESEARCH RESULTS ............................................... viii INTRODUCTION .......................................................................................................1 CHAPTER 1: BASIC THEORETICAL ISSUES ON INVESTOR - STATE DISPUTE ....................................................................................................................7 1.1. An overview of international investment and Investor - State dispute ................7 1.1.1. Conception of international investment ........................................................7 1.1.1.1. Conception of investment ......................................................................7 1.1.1.2. Conception of international investment ................................................9 1.1.2. An overview of international investment dispute .......................................10 1.1.2.1. Conception of international investment dispute ..................................10 1.1.2.2. Classification of international investment disputes .............................10 1.1.3. Investor - State dispute (ISD) .....................................................................11 1.1.3.1. Conception of Investor - State dispute ................................................11 1.1.3.2. Features of Investor - State dispute .....................................................14 1.2. An overview of mechanism and measures to prevent international investment disputes ......................................................................................................................16 1.2.1. Concept of investor-State dispute prevention .............................................16 1.2.2. Investor-States dispute prevention mechanisms .........................................17 1.2.3. Investor-States dispute prevention measures ..............................................20 CHAPTER 2: MECHANISM AND MEASURES FOR PREVENTING INVESTOR – STATE DISPUTES - INTERNATIONAL EXPERIENCE .............22 2.1. The situation of Investor - State disputes settlement in the world .....................22 2.1.1. The situation of Investor - State disputes settlement by the diplomatic protection method .................................................................................................22 2.1.2. The situation of Investor-State disputes settlement by the Courts’ mode ..23 ii 2.1.3. The situation of Investor-State disputes settlement by the Arbitration method...................................................................................................................24 2.1.4. The situation of Investor - State disputes settlement by the other methods ...............................................................................................................................26 2.2. Mechanism and prevention measures in settling international investment disputes in some countries ........................................................................................28 2.2.1. Mechanism and prevention measures in settling international investment disputes in Jordan ..................................................................................................28 2.2.2. Mechanism and prevention measures in settling international investment disputes in Colombia ............................................................................................29 2.2.3. Mechanism and prevention measures in settling international investment disputes in Korea ..................................................................................................33 2.2.4. Mechanism and prevention measures in settling international investment disputes in Peru .....................................................................................................37 CHAPTER 3: LESSONS FOR VIETNAM IN PREVENTING INVESTOR – STATE DISPUTES ...................................................................................................44 3.1. The basis for proposing measures to prevent Investor - State disputes .............44 3.1.1. Current situations of foreign investment in Vietnam .................................44 3.1.2. Situation of Investor - State disputes and Investor-State dispute settlement in Vietnam.............................................................................................................46 3.1.2.1. Situation of Investor - State disputes in Vietnam ................................46 3.1.2.2. Situation of ISD settlement in Vietnam ..............................................47 3.1.3. Situation of Vietnamese on prevent Investor - State dispute......................59 3.2. Lessons learn for Vietnam to prevent Investor-State disputes and applied solutions ....................................................................................................................61 3.2.1. Lessons for Vietnam to prevent Investor-State disputes ............................61 3.2.1.1. Focus on the warning mechanism and dispute prevention ..................61 3.2.1.2. Establish a specialized agency to represent the State in the prevention and resolution of ISD........................................................................................62 iii 3.2.1.3. Complete methods of settling disputes with foreign investors in the country ..............................................................................................................65 3.2.1.4. Pay attention to negotiating and signing IIAs .....................................66 3.2.2. Investor-State dispute prevention mechanism and measures for Vietnam .67 3.2.2.1. Mechanisms and measures to prevent international investment disputes remotely ..............................................................................................67 3.2.2.2. Select and appraise the capacity of foreign investors and determine and prioritize investment sectors in accordance with the law to prevent disputes. ............................................................................................................74 3.2.2.3 Monitor closely the implementation of investment projects of foreign investors. ...........................................................................................................75 3.2.2.4. Mechanisms and measures that block disagreements and conflicts develop into disputes. .......................................................................................75 3.2.2.5. Ensure authority to negotiate and settle - budgetary authority............80 3.2.2.6. Institutional response: ombuds and mediation services ......................81 3.2.2.7. State-State cooperation in dispute prevention .....................................82 CONCLUSION .........................................................................................................84 LIST OF REFERENCES ..........................................................................................86 iv LIST OF ABBREVIATIONS Abbreviation Description AAA American Arbitration Association ACIA ASEAN Comprehensive Investment Agreement AF Additional Facility ANDI Algeria's Agence National de Development des Investments APR Arbitration Procedures Rules ASEAN Association of Southeast Asian Nations BIT Bilateral investment treaty BOT Build-Operate-Transfer BT Build-Transfer BTA Bilateral Trade Agreement BTO Build-Transfer-Operate DRCAFTA Dominican Republic Central America Free Trade Agreement ECT Energy Charter Treaty FDI Foreign Direct Investment FI Foreign Investment FTA Free Trade Area GDP Gross Domestic Product ICC International Chamber of Commerce ICDR International Center for Dispute Resolution ICSID International Centre for Settlement of Investment Dispute IIA International investment agreements v ISD Investor-State Dispute ISDS Investor-State Dispute Settlement JCAA Japan Commercial Arbitration Association JIC Jordan Investment Commission JICA Japan International Cooperation Agency KOTRA Korea Trade-Investment Promotion Agency MOJ Ministry of Justice MoFA Ministry of Foreign Affairs MPI Ministry of Planning and Investment NAFTA North American Free Trade Agreement NHK-ITEC NHK Integrated Technology Inc ODA Official Development Assistance OECD Organization for Economic Cooperation and Development OFIO Office of the Foreign Investment Ombudsman OIO Office of the Foreign Investment Ombudsman OPIC Overseas Private Investment Corporation PCA Permanent Court of Arbitration PMU Project Management Unit SCC Stockholm Chamber of Commerce TPP Trans-Pacific Strategic Economic Partnership Agreement UCCI Urban-Civil Works Construction Investment Management Authority of Ho Chi Minh city UNCITRAL United Nations Commission on International Trade Law UNCTAD United Nations Conference on Trade and Development vi US United State USA United States of America USD United States dollar VIAC Vietnam International Arbitration Center VND Vietnam dong VTV Vietnam Television VUS.BTA Vietnam-United State Bilateral Trade Agreement WIPO World Intellectual Property Organization vii LIST OF FIGURES Figure 2.1 - Getting prepared: the institutional system of Colombia .......................32 Figure 2.2 - The Republic of Korea Office of the Foreign Investment Ombudsman ...................................................................................................................................36 Figure 2.3 - Alert system of Peru ..............................................................................42 viii SUMMARY OF THESIS RESEARCH RESULTS In the trend of international integration, up to now, Vietnam has signed nearly 70 investment treaties. Most bilateral investment treaties stipulate issues related to the settlement of Investor-State dispute (ISD). Most investment treaty regulates that ISDs can be settled according to the procedures of the International Centre for Settlement of Investment Disputes (ICSID), under the ICSID Additional Facility or any other arbitration organization. However, the ISD settlement at arbitration is not only costly, but these arising ISDs will reduce the confidence of foreign investors in Vietnam's investment environment. Therefore, the purpose of the thesis is providing measures to prevent possible ISDs. After the research process, the thesis should give the following results: Firstly, give the concept of "Investor-State dispute". Secondly, on the basis of studying the status of ISD settlement in some countries, synthesizing mechanisms and preventive measures of ISD in those countries. Thirdly, assess the current status of legal provisions on investment dispute settlement between foreign investors and the Vietnamese Government. Fourthly, analyze some cases between foreign investors and the Vietnamese government, thereby drawing lessons for Vietnam in the prevention and settlement of ISD. Fifthly, propose measures to prevent disputes between foreign investors and the Vietnamese government. 1 INTRODUCTION 1. Rationale of the study The implementation of opening policy, attraction of foreign investment (FI) in Vietnam makes economic relationship in general and foreign investment relationship in particular in Vietnam become more and more diversified and complicated. In that context, it is difficult to avoid investment disputes. The disputes can be a foreign investor-domestic investor dispute or a foreign investor to foreign investor dispute or foreign investor- Vietnamese Government dispute. In recent years, foreign investor-Vietnamese Government disputes in investment activities are increasing. Practice of international investment dispute settlement shows that arbitration is a dispute settlement method that investor and State usually take precedence to choose; and practice also shows that Vietnam has not had experience in the dispute settlement at arbitration yet. Unfruitful dispute settlement will harm Vietnam’s attraction for foreign investment and reduce Vietnam’s completion in drawing foreign investment. Therefore, besides good settlement of international investment dispute, it is important to prevent international investment disputes. It is the reason the author selects the theme: “Mechanism and measures to prevent international investment disputes – International experience and lessons for Vietnam” as my graduation thesis. 2. Research situation 2.1 Situation of research topics oversea In overseas, there have been many studies mentioning the theoretical issues about ISD and ISD resolution. Some projects can be listed as follows: - Dr. David A. Gantz: “Settling international investment disputes through arbitration” (2004) – The aim of this study is to take stock of and to analyse the Investor-State Arbitration under ICSID, the ICSID Additional Facility and the UNCTAD Arbitral Rules 2 - Research "Investor-State Dispute Settlement Public Consultation: 16th May – 23rd July 2012" (2012) which gathers reports of experts at the 16th round table of the Organization for Economic Cooperation and Development (OECD). - Research "Investor - State Dispute Settlement and Impact on Investment Rulemaking" (2008) study of the United Nations Conference on Trade and Development (UNCTAD). The aim of this study is to take stock of and to analyse the major developments in the interpretation of procedural and substantive international investment agreement (IIA) provisions as contained in bilateral investment treaties and economic integration agreements with investment provisions. It addresses the implications of those developments for countries, emphasizing the particular needs of developing countries. It presents some conclusions and reflections on possible next steps that countries could take to implement the lessons learned from the investor-State dispute settlement experience. - Research “Dispute settlement provisions in international investment agreements: A large sample survey” by Joachim Pohl, Kekeletso Mashigo and Alexis Nohen (2012). This document surveys Investor-State Dispute Settlement (ISDS) provisions in a sample of 1,660 bilateral investment treaties (BITs) and other bilateral agreements with investment chapters (mainly Free Trade Agreements, FTAs). The treaties in the sample were concluded by the 54 countries that participate in the “Freedom of Investment” (FOI) Roundtables with any other country. The survey presents a statistical portrait of ISDS provisions of this treaty sample that is both comprehensive and detailed. The intention is to provide a factual and statistical catalogue of treaty content and not to in any way engage the OECD or countries participating in the FOI process regarding interpretation of treaty language in an arbitral setting, regardless of whether these treaties are in force or not. In some cases, the bilateral treaties are also compared with selected multilateral agreements with investment chapters (e.g. NAFTA, Energy Charter Treaty) - Research “Reform of Investor-State Dispute Settlement: In search of a roadmap” (2013) .This note outlines five main reform paths: Promoting alternative 3 dispute resolution; Tailoring the existing system through individual IIAs; Limiting investor access to ISDS; Introducing an appeals facility; Creating a standing international investment court. And “Global Value Chains: Investment and Trade for Development” by UNCTAD. – The world investment report by UNCTAD In general, these works investigate theoretical and practical issues of ISD resolution based on international investment agreements (IIA), bilateral investment agreements (BIT) and on the basis of ISD solving experience. But each study only touches on certain issues, but there is no comprehensive study on preventing ISD. These studies study the resolution of ISD by developed and developing countries, but there is no separate study for Vietnam. Regarding ISD mechanisms and precautions, there are a number of studies abroad mentioned, such as : - Research “Investor-State Disputes: Prevention and Alternatives to Arbitration I” by UNCTAD (2010). This is reports summarizing the opinions of experts in this field around the world from both direct and online. The arbitration experts of the Center for Effective Dispute Resolution (CEDR) are active and offer many analysis and recommendations to promote the use of alternative methods in international investment disputes. - Publications “Stocktaking of Investment Dispute Management and Prevention in the Southern Mediterranean Region” by OECD (2018). It provides an overview of the region's recent ISDS trends, an analysis of each country’s regulations and international agreements, as well as the current mechanisms set up for the management of investment disputes. It also presents selected case studies and good practices in investor-State dispute prevention. These studies focus on analyzing the practice of dispute resolution of some countries, from which draw lessons, synthesize mechanisms and preventive measures in those countries, but there is no content which is related to Vietnam. 4 2.2 Situation of research topics in Vietnam In Vietnam, there have been a number of studies on ISD settlement but few and only focus on theoretical and practical issues to resolve disputes between foreign investors and the Vietnamese government, including: - Assoc. Prof. Dr. Hoang Phuoc Hiep "Theory and practice on the position, role and participation of government agencies in handling government-related international trade and investment disputes", research works (2012). It provides an overview of the role of government agencies in solving investment disputes base on theory and practice in Vietnam. Thereby it makes suggestions to improve the legal regulations on the role and operation of state agencies in settling investment disputes. - Phan Hong Nguyen "Law on settlement of disputes in the field of foreign direct investment by arbitration in Vietnam" master thesis – Hanoi Law University (2012). The dissertation provides an overview of the legal provisions on settlement of investment disputes in the field of direct investment from abroad into Vietnam; the current situation of application and to finalize the relevant legal system to ensure the quick and convenient settlement of investment disputes. - Tran Phuong Thao "Settling investment disputes between the Government of Vietnam and foreign investors", Master thesis – Diplomatic Academy of Vietnam (2015). The thesis provides an overview of the Law and the actual status of investment disputes between foreign investors and the Vietnamese government; propose to improve the legal regulations on resolving disputes between foreign investors and the Vietnamese government. An overview of the research works on theoretical and practical issues of investment dispute resolution between foreign investors and the Government of Vietnam, found that in the country there has been research on this issue, although, the number of research works is still limited. Although there has not been any study to introduce the concept of "investment disputes between foreign investors and the Government of investment host- countries", there have been studies to introduce the 5 concept of "disputes in foreign direct investment". The research in this group mainly refers to the Department of Justice's focal position in international dispute resolution, the research on dispute settlement mechanism and the methods of dispute settlement are only complementary for the main content of the study. Therefore, there has not been comprehensive research on the theory and practice of resolving investment disputes between foreign investors and the Government of Vietnam. Master's thesis "Settling investment disputes between the Vietnam Government and foreign investors" by Tran Phuong Thao carefully analyzed some disputes between foreign investors and the states of Vietnam, withdrew the lessons learned in dispute resolution. However, the introduction of ISD precautions is not mentioned in this study. Thus, the above works and articles only stop at dealing with small issues or content related to investment disputes, there is not a complete and comprehensive study of investment disputes between foreign investors and the Government of Vietnam and there has not been any research to introduce or systematize mechanisms and measures to prevent investment disputes between foreign investors and the Government of Vietnam. Therefore, the thesis will focus on solving theoretical issues about ISD, based on research, referring to mechanisms and preventive measures of ISD of countries, derived from practical experience in ISDS of Vietnam to draw up mechanisms and measures to prevent investment disputes between foreign investors and the Government of Vietnam. 3. Objectives of the study International investment dispute can be foreign investor - domestic investor dispute; foreign investor-to-foreign investor dispute; foreign investor - State dispute. However, in the scope of the study, author only concentrates in investment dispute between the investor and the host country. Therefore, the objectives is finding the mechanism and measures to prevent the dispute between foreign investor and Vietnam state after researching the experiences from other countries 6 4. Scope of the study The thesis research ISD and prevention of investment dispute between the foreign investor and the Vietnamese Government on the basis of international experience and practice, theory and practice of ISD settlement in Vietnam. On international experience, based on the source of the material, the thesis focuses on the experiences of Jordan, Peru, Columbia, and Korea. 5. Methodology of the study The study uses the methodology of dialectical materialism and historical materialism. The specific research methods of the study included analysis, synthesis, going from general to specific and other scientific methods such as comparison, statistics, case studies etc. to solve the problems that the topic has set. The study focuses on assessing the advantages, limitations and obstacles of the current legal provisions, identifying issues that have not been stipulated by law or have been legal provisions or needed to be amended and supplemented accordingly and better meet the requirements of practice preventing investment disputes between foreign investors and the Vietnamese government. 6. Structure of the study Excepting for the foreword, conclusion, and recommendations, reference, the research includes 3 chapters: Chapter 1: Basic theoretical issues on Investor - State dispute Chapter 2: Mechanism and measures in preventing Investor - State dispute - International experience Chapter 3: Lessons for Vietnam in preventing Investor - State disputes 7 CHAPTER 1: BASIC THEORETICAL ISSUES ON INVESTOR - STATE DISPUTE 1.1. An overview of international investment and Investor - State dispute 1.1.1. Conception of international investment 1.1.1.1. Conception of investment Considering legal documents, we see that Investment law 2014 issued conception of “business investment”, according that: “Business investment is that the investor invests in order to implement business activities through establishing economic organization; contributing capital, buying shares of economic organization; investing under contract form or implementing investment project” (Article 3, Item 5). Popular conception of “Investment” is mentioned on BIT conventions signed or participated by Vietnam with other countries. According to Chapter 4, Article 1, Item 1 Vietnam-United States -Bilateral Trade Agreement (VUS.BTA): "Investment" means every kind of investment in the territory of a Party owned or controlled directly or indirectly by nationals or companies of the other Party ” According to Article 4, item c ASEAN Comprehensive Investment Agreement (ACIA): “Investment” means every kind of assets owned or controlled an investor including but not limited to: (i) Movable property and real estate, property rights such as pledgement, mortgage or guarantee; (ii) Stock, shares, bond, debentures, and every form of participating in a legal entity and rights and benefit received from it. (iii) Intellectual property empowered according to law and regulations of each member state; 8 (iv) Right of demanding money or for every contract implementation related to business and having financial value; (v) Contractual rights, such as under turnkey, construction, management, manufacture contract or allocation of tariff contract; and (vi) Franchising is required in order to carry out economic activities and having financial value empowered according to law or contract including any franchising for research, cultivation, extract or exploitation of natural resources; Term of “investment” also includes amounts of money be brought by investment, in details: profit, interest rate, profit from capital, dividend, royalties, and emoluments. Any change of form under that invested and reinvested assets does not affect their classification as an investment Although Conceptions of investment mentioned above are different, there are general features as follows: The first, the purpose of investment is profit. For enterprise, benefits tended by them are recovery rate, profit, development of position of the enterprise. For the State, investment activities tend to make social economic benefits such as employment, supply of public products and services, protection of resources and environment and firm development. The second, the investment are only implemented when the investor or procuring agency brings his capital in investment process. The client can be organizations, individuals and the state. Investment capital can exist under many forms such as tangible assets, intangible assets. The third, the investment has hidden risks. Now investment activities surpass territory of a state so the degree of risk of these activities is getting higher. Restricting risk as well managing risk are issues interested in and studied by investors, imported government or exported government.