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Dominic Dagbanja explores the efficacy of investment treaty reforms by analysing the intersection of constitutional provisions on compulsory acquisition and regulation of property in selected African constitutions and expropriation provisions in investment treaties.

Image courtesy of interviewee. March 12, 2024

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This video video outlines research focused on the relationship between international economic treaties, national constitutions, and the regulatory authority of states, particularly in the context of investment treaties. The speaker investigates how national constitutions limit states' abilities to enter into investment treaties and regulate for public interests.

Investment treaties, especially since 1987, have allowed foreign investors to challenge state regulations that affect their investments, often undermining public health and other objectives. The research notes the proliferation of investor-state dispute cases, with numerous claims brought against states regarding regulations perceived as detrimental to foreign investments.

The speaker discusses reforms in investment treaties that aim to balance the regulatory authority of states while still providing protections for foreign investors. These reforms often include clauses meant to exempt states from liability for indirect expropriation but struggle to reconcile conflicts between investor protections and national laws. The speaker argues that provisions concerning indirect expropriation are unconstitutional in various African countries, as such constitutions typically recognize only direct expropriation, lack compensation rights for indirect effects, and prefer national judicial resolution over international arbitration.

The conclusion emphasizes that the current reforms in investment treaties do not adequately preserve states’ regulatory autonomy. States should refrain from entering treaties that impose indirect expropriation clauses that could conflict with national regulations aimed at legitimate public interests. This video video highlights the necessity for a reconciliation between investment treaty obligations and national constitutional authority to regulate property rights effectively.

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X-TIMESTAMP-MAP:LOCAL=00:00:00.000,MPEGTS=900000

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So my research deals with the intersection

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of international economic treaties

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and public law and, and policy.

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And in particular, I am interested in the limitations

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that national Constitutions place on the authority of states

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to regulate in the public, interests.

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And in particular, I'm, I'm looking at

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how national constitution limit the, the, the capacity

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of states to, to enter into investment, treaties

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or international economic treaties generally.

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So basically that is what I, what I look at

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and the context of that research has to do with the,

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the development of investment treaties,

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which are intended to regulate

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or provide legal protection for foreign, investment

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investment treaties

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as they develop in the post-colonial period where designed

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to provide legal protection for foreign investment.

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And they came with absolute standards of investment,

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protection they

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provided for the rights of foreign investors without

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providing for a corresponding, rights of, of states.

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So the implication is that since 1987,

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these investment treaties, have become a reference point

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for foreign investors

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to challenge various public interest

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regulatory, measures.

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For example,

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Philip Maurice bringing a claim against Australia

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and Uruguay for enacting a legislation on plain

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packaging of, streets.

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And those legislation were put in place for purposes of,

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the public, public health.

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And so the world investment, report 2023, shows that

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there are over 1,257

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cases brought by foreign investors

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against about 132 states.

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And most of those measures relate to public interest

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regulatory measures, including, for example,

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those have already mentioned tax, regulations relating

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to public health and also tax measures like, for example,

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Yuko against Russia, which was a tax measure.

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And in fact, over over $60 billion were

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awarded against Russia.

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So with foreign universities increasingly using these

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international economic treaties to challenge

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the regulatory authority of states,

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states are now seeking to reform these treaties

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to preserve their regulatory measures, I mean,

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to protect their regulatory, authority.

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And those reforms include the inclusion of clause

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does seek to limit the scope

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and effect of, these international, the terms

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of these international economic treaties.

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There are also provisions on corporate social responsibility

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and sustainability.

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And so my, my, my paper Constitutional Acquisition

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and regulation of Property Investment treaties

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and S corporation in Africa was developed,

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within these context essentially to look at whether

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or not the provisions that seek to

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exempt states from liability for indirect as population,

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effective.

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So that is the context in which this, article was,

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was written.

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And then it was published in, the Journal

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of Well Investment and Treat Volume 24 Issues Five

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and Issues four and Six.

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This question is at the core of the paper that I did.

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And as corporation in investment treaties can be classified

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into two, we have the direct as corporation

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where the state actually takes

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or acquires the assets of the foreign investor.

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And, and traditionally this is the business in which,

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provisions on population develop in investment treaties.

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And historically, this is

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what states have always done acquiring the assets

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of foreign investors.

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So for example, investors in Mexico

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in the early 19 hundreds acquiring the assets of,

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American investors, in, in, in, in Mexico.

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Then we also have, indirect corporation where

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the focus of provisions on indirect corporation investment

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treaty essentially is to look at the effect of measures

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that stay stick on investment.

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If the effect of a measure is to

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deny the foreign investor from using

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and enjoying the benefit of investment,

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even though the foreign investor retains statute two, the,

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the, the property, then the case

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of indirect exportation can be made.

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So, for example, if a foreign investor is denied an

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environmental permit,

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let's say a foreign investor in the mining sector is denied,

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environmental permit,

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and they cannot proceed to mine.

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The implication and the effect of denial of the permit is

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that the foreign investor will be deprived

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of the economic benefits

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of the investment they have put into the mining sector.

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Though the foreign investor will retain, you know,

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title to the investment assets, a case

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of indirect export creation is made.

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So it is a very flexible standard

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that foreign investors can use

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to challenge the regulatory authority of states.

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So the reforms in investment treaties that seek to

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Preserve the regulatory authority

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of states in investment treaties essentially, seek

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to see that if the measure is non-discriminatory

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and it is adopted for legitimate public interest papers,

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such as, for example, environmental protection

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and for public health purposes, then that measure

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does not amount to indirect as population.

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However, there is a qualification to this,

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exception to liability.

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So it says that the measure must not be discriminatory

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and it must be, it effect must not be so severe,

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such that the measure cannot be said to have been

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adopted in good faith.

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And we can find that in Ann Next, 10

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of Canada Guinea bilateral investment treaty.

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So the question arises whether

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or not this provision in investment treaties

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that a measure

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that's not consistent within direct population,

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presumably the object of which to is

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to preserve the regulatory authority of states.

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The question is whether or not a provision of this na nature

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does indeed ensures that

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if the state adopts the measure in question,

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it does not get sued, or if it gets sued.

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If it gets sued, then it can reliably use this exemption

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to say, look, I am not, liable.

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So the point that I'm seeking to make in relation to this is

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that the qualifications to this as, exception

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to liability for indirect

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as population really weaken the scope

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and legal effect of those exceptions such

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that the states cannot effectively use this to say that,

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I mean to excuse themselves from, liability for

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indirect, for creation.

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This is another core aspect of the, the subject

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that we are discussing now, which was part of what I, I,

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I wrote in the, in the, in the article

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and in this, my respond directly is that indirect

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for creation provisions in investment treaties

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are unconstitutional in relation to

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the various African constitutions that I have stated,

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Nigeria, Ghana, Kenya, and so forth.

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They are unconstitutional, number one in the sense that

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under these constitutions, there is no corporation

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unless there is an actual acquisition

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or taken off property.

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So if you look at this constitution, they recognize

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only direct s population where the state

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has actually taken steps by statute

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to acquire the assets of the investor

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or the private individual.

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So indirect corporation provisions are,

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are known under the various African constitutions

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that I have, stated.

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And then under the constitution

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that I have stated stated number two.

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The second reason why I, I argue, I mean,

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the second reason I argue

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that these provisions are unconstitutional is that

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there's no right to compensation.

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And that these constitutions for general

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regulatory measures that have indirect

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adverse impact on the private property rights

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of individuals, whether they are they are foreign investors

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or whether they are, you know, citizens

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of the, of the states.

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And yet the right to compensation for indirect

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s population is at the core of provisions dealing

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with indirect, indirect s population in investment treaties.

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So you can see there is a clash in the sense that

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if the state adopts a certain measure, so for example,

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imposes a tax that essentially wipes out the, the,

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the benefits of investment to the extent

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that it is not directly targeted at foreign investor under

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this constitution, there should be no right to compensation.

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And yet investment treaties provisions dealing

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with indirect exportation essentially say

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that if the state adopts a certain measure that has,

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an adverse indirect impact

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effect on the investment, takes away the economic use

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and benefit of the investment, then there is a right to,

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compensation.

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So that is the case where I argue

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that indirect export creation provisions,

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to the extent that they require com compensation

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for measures that have an indirect effect on investment,

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unconstitutional.

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The third point that I make in relation

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to the unconstitutional unconstitutionality

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of indirect export creation provision is in relation to,

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the question of who resolves dispute

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between foreign investors

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and the state in relation to indirect corporation

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or S corporation generally.

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Now, if you look at the various constitutions

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that I have stated, they provide for the right

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to dis dispute settlement relating to exportation,

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before national courts such as the high court

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of Ghana or Kenya.

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Whereas investment treaties provision dealing

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with indirect corporation requires that dispute concerning,

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indirect corporation

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or corporation generally be settled

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by international arbitration.

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So I am saying that provisions dealing with

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indirect corporation

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and corporation generally to the extent that they require,

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they take away the jurisdiction of national courts

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to settle disputes concerning,

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corporation, unconstitutional

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to the extent that they want

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to take away the jurisdiction of national court.

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So these are some of the arguments that are advanced

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and see that even in spite of the changes

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that have been made to the terms

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of indirect exportation provisions, these provisions

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are still unconstitutional.

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The conclusion that I drew in my research is that,

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the near reform of investment treaties incorporating,

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provisions that are seek to exempt states from liability

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for indirect export creation such as the inclusion

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of clause, limiting the scope

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and effect of indirect corporation provisions,

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I argue that they do not actually preserve

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the regulatory authority of African states to take an,

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to take and regulate private property,

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rights because the new reform

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process that have been, included in investment treaties,

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they do not actually, resolve that conflict

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because the right to, for example, the right to

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compensation remains an integral part of

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the S corporation,

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the indirect s corporation provisions

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in investment treaties.

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And, and under national constitutions that I have stated,

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Ghana, Kenya, Nigeria

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and others, you still find that the right to composition

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for, you know, indirect

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or general regulatory measures

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that have an adverse impact on investment does not exist.

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So the new generation investment

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do not actually resolve that kind of

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conflict incompatibility between the authority

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of African states to ate, property rights

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and their obligations under, investment treaties

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to compensate foreign investors for indirect population.

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These clause does seek to exempt states from liability

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for indirect s corporation.

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Um, they rarely have limited effect

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in terms of preserving the regulatory autonomy of states

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in relation to the assets of foreign investors.

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And the implication is that African states

15:32.845 --> 15:36.985
and all states for that matter, will continue to be sued

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for, measures that have

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an effect on foreign, investment assets,

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even if they are not designed to, to take away

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the foreign investors' interests.

15:57.405 --> 15:58.865
And, and,

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and the implication going forward Further,

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the further implication going forward is

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that if African states

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or states generally seek, seek to

16:09.065 --> 16:12.145
preserve their regulatory autonomy to ensure

16:12.145 --> 16:15.185
that they are not sued for measures that are designed

16:15.185 --> 16:18.885
for legitimate public interest papers, then

16:19.755 --> 16:22.205
they should not be signing, as you say,

16:22.205 --> 16:26.125
they must not be signing onto indirect operation

16:27.015 --> 16:30.625
provisions or clause in investment treaties.

16:31.985 --> 16:34.595
That is to say that there is a need to reconcile

16:35.405 --> 16:37.995
provisions in investment treaties dealing with

16:38.535 --> 16:42.215
as corporation with the,

16:42.915 --> 16:47.655
the authority of African states under national constitutions

16:48.275 --> 16:53.015
to regulate, private property, whether it relates

16:53.015 --> 16:56.615
to foreign investors or it relates to, to citizens.

16:57.565 --> 16:59.225
So, so this is the conclusion

16:59.225 --> 17:03.025
that I would draw in relation to the implications,

17:03.655 --> 17:06.865
that can be made from the fact that these

17:08.355 --> 17:11.695
reform, the reform of investment rate is relating

17:11.695 --> 17:15.855
to operation really are very weak.

17:16.785 --> 17:20.285
And if there's a, there has been a genuine desire

17:20.285 --> 17:22.925
to preserve the regulatory authority of, of states

17:23.315 --> 17:27.645
that is less likely to be achieved under the current reforms

17:27.675 --> 17:28.645
that are in place.

Regulatory Authority in Investment Treaties

00:00:00 - So my research deals with the intersection of international economic treaties and public law and, and policy. And in particular, I am interested in the limitations that national Constitutions place on the authority of states to regulate in the public, interests. And in particular, I'm, I'm looking at how national constitution limit the, the, the capacity of states to, to enter into investment, treaties
00:00:33 - So basically that is what I, what I look at and the context of that research has to do with the, the development of investment treaties, which are intended to regulate or provide legal protection for foreign, investment investment treaties as they develop in the post-colonial period where designed to provide legal protection for foreign investment. And they came with absolute standards of investment,
00:01:03 - provided for the rights of foreign investors without providing for a corresponding, rights of, of states. So the implication is that since 1987, these investment treaties, have become a reference point for foreign investors to challenge various public interest regulatory, measures. For example, Philip Maurice bringing a claim against Australia and Uruguay for enacting a legislation on plain
00:01:37 - And those legislation were put in place for purposes of, the public, public health. And so the world investment, report 2023, shows that there are over 1,257 cases brought by foreign investors against about 132 states. And most of those measures relate to public interest regulatory measures, including, for example,
00:02:11 - to public health and also tax measures like, for example, Yuko against Russia, which was a tax measure. And in fact, over over $60 billion were awarded against Russia. So with foreign universities increasingly using these international economic treaties to challenge the regulatory authority of states, states are now seeking to reform these treaties
00:02:41 - to protect their regulatory, authority. And those reforms include the inclusion of clause does seek to limit the scope and effect of, these international, the terms of these international economic treaties. There are also provisions on corporate social responsibility and sustainability. And so my, my, my paper Constitutional Acquisition and regulation of Property Investment treaties

Examining Liability in Investment Treaties

00:03:13 - within these context essentially to look at whether or not the provisions that seek to exempt states from liability for indirect as population, effective. So that is the context in which this, article was, was written. And then it was published in, the Journal of Well Investment and Treat Volume 24 Issues Five
00:03:43 - This question is at the core of the paper that I did. And as corporation in investment treaties can be classified into two, we have the direct as corporation where the state actually takes or acquires the assets of the foreign investor. And, and traditionally this is the business in which, provisions on population develop in investment treaties. And historically, this is
00:04:16 - of foreign investors. So for example, investors in Mexico in the early 19 hundreds acquiring the assets of, American investors, in, in, in, in Mexico. Then we also have, indirect corporation where the focus of provisions on indirect corporation investment treaty essentially is to look at the effect of measures
00:04:49 - If the effect of a measure is to deny the foreign investor from using and enjoying the benefit of investment, even though the foreign investor retains statute two, the, the, the property, then the case of indirect exportation can be made. So, for example, if a foreign investor is denied an environmental permit, let's say a foreign investor in the mining sector is denied,
00:05:21 - and they cannot proceed to mine. The implication and the effect of denial of the permit is that the foreign investor will be deprived of the economic benefits of the investment they have put into the mining sector. Though the foreign investor will retain, you know, title to the investment assets, a case of indirect export creation is made. So it is a very flexible standard that foreign investors can use
00:05:52 - So the reforms in investment treaties that seek to Preserve the regulatory authority of states in investment treaties essentially, seek to see that if the measure is non-discriminatory and it is adopted for legitimate public interest papers, such as, for example, environmental protection and for public health purposes, then that measure

Limitations of Liability in Investment Treaties

00:06:27 - However, there is a qualification to this, exception to liability. So it says that the measure must not be discriminatory and it must be, it effect must not be so severe, such that the measure cannot be said to have been adopted in good faith.
00:06:58 - of Canada Guinea bilateral investment treaty. So the question arises whether or not this provision in investment treaties that a measure that's not consistent within direct population, presumably the object of which to is to preserve the regulatory authority of states. The question is whether or not a provision of this na nature
00:07:29 - if the state adopts the measure in question, it does not get sued, or if it gets sued. If it gets sued, then it can reliably use this exemption to say, look, I am not, liable. So the point that I'm seeking to make in relation to this is that the qualifications to this as, exception to liability for indirect as population really weaken the scope
00:08:03 - that the states cannot effectively use this to say that, I mean to excuse themselves from, liability for indirect, for creation. This is another core aspect of the, the subject that we are discussing now, which was part of what I, I, I wrote in the, in the, in the article and in this, my respond directly is that indirect for creation provisions in investment treaties
00:08:37 - the various African constitutions that I have stated, Nigeria, Ghana, Kenya, and so forth. They are unconstitutional, number one in the sense that under these constitutions, there is no corporation unless there is an actual acquisition or taken off property. So if you look at this constitution, they recognize
00:09:09 - has actually taken steps by statute to acquire the assets of the investor or the private individual. So indirect corporation provisions are, are known under the various African constitutions that I have, stated. And then under the constitution

Constitutional Conflicts in Investment Treaties

00:09:39 - The second reason why I, I argue, I mean, the second reason I argue that these provisions are unconstitutional is that there's no right to compensation. And that these constitutions for general regulatory measures that have indirect adverse impact on the private property rights of individuals, whether they are they are foreign investors
00:10:11 - of the, of the states. And yet the right to compensation for indirect s population is at the core of provisions dealing with indirect, indirect s population in investment treaties. So you can see there is a clash in the sense that if the state adopts a certain measure, so for example, imposes a tax that essentially wipes out the, the,
00:10:43 - that it is not directly targeted at foreign investor under this constitution, there should be no right to compensation. And yet investment treaties provisions dealing with indirect exportation essentially say that if the state adopts a certain measure that has, an adverse indirect impact effect on the investment, takes away the economic use and benefit of the investment, then there is a right to,
00:11:13 - So that is the case where I argue that indirect export creation provisions, to the extent that they require com compensation for measures that have an indirect effect on investment, unconstitutional. The third point that I make in relation to the unconstitutional unconstitutionality of indirect export creation provision is in relation to, the question of who resolves dispute between foreign investors
00:11:48 - or S corporation generally. Now, if you look at the various constitutions that I have stated, they provide for the right to dis dispute settlement relating to exportation, before national courts such as the high court of Ghana or Kenya. Whereas investment treaties provision dealing with indirect corporation requires that dispute concerning,
00:12:20 - or corporation generally be settled by international arbitration. So I am saying that provisions dealing with indirect corporation and corporation generally to the extent that they require, they take away the jurisdiction of national courts to settle disputes concerning, corporation, unconstitutional

Investment Treaties and National Sovereignty Conflict

00:12:50 - to take away the jurisdiction of national court. So these are some of the arguments that are advanced and see that even in spite of the changes that have been made to the terms of indirect exportation provisions, these provisions are still unconstitutional. The conclusion that I drew in my research is that, the near reform of investment treaties incorporating, provisions that are seek to exempt states from liability
00:13:26 - of clause, limiting the scope and effect of indirect corporation provisions, I argue that they do not actually preserve the regulatory authority of African states to take an, to take and regulate private property, rights because the new reform process that have been, included in investment treaties,
00:14:02 - because the right to, for example, the right to compensation remains an integral part of the S corporation, the indirect s corporation provisions in investment treaties. And, and under national constitutions that I have stated, Ghana, Kenya, Nigeria and others, you still find that the right to composition
00:14:32 - or general regulatory measures that have an adverse impact on investment does not exist. So the new generation investment do not actually resolve that kind of conflict incompatibility between the authority of African states to ate, property rights and their obligations under, investment treaties
00:15:06 - These clause does seek to exempt states from liability for indirect s corporation. they rarely have limited effect in terms of preserving the regulatory autonomy of states in relation to the assets of foreign investors. And the implication is that African states
00:15:37 - for, measures that have an effect on foreign, investment assets, even if they are not designed to, to take away the foreign investors' interests. And, and, and the implication going forward Further, the further implication going forward is

Balancing Regulatory Autonomy and Investment Treaties

00:16:05 - or states generally seek, seek to preserve their regulatory autonomy to ensure that they are not sued for measures that are designed for legitimate public interest papers, then they should not be signing, as you say, they must not be signing onto indirect operation provisions or clause in investment treaties. That is to say that there is a need to reconcile
00:16:38 - as corporation with the, the authority of African states under national constitutions to regulate, private property, whether it relates to foreign investors or it relates to, to citizens. So, so this is the conclusion that I would draw in relation to the implications, that can be made from the fact that these
00:17:27 - to operation really are very weak. And if there's a, there has been a genuine desire to preserve the regulatory authority of, of states that is less likely to be achieved under the current reforms that are in place.

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