International Economic Law Symposium: Emerging Powers, Global Justice and International Economic Law

[James J. Nedumpara is a Professor and Head of Centre for Trade and Investment Law, Indian Institute of Foreign Trade, New Delhi.]

Andreas Buser’s “Emerging Powers, Global Justice and International Economic Law” is a deeply engaging work. The ‘Rise of the Rest’ signalled a remarkable shift within global power dynamics. The emerging powers represent a sizeable proportion of the global population. The key question is, however, whether the emerging powers would embrace the essential elements of the neo-liberal economic policies or whether these new powerhouses would chart out their own path and ideologies in shaping a new international economic order? Buser’s work look at this issue from the lens of international trade and investment law.

Among the emerging powers, India and South Africa, have terminated a number of their BITs. South Africa has introduced the South African Protection of Investment Act. India has introduced new Model BIT, terminated nearly 69 of its 84 BITs and is seen to be focusing on strengthening its domestic legal system to protect investments.  In the 2021 Budget speech in the Indian Parliament, India’s Finance Minister proposed the introduction of an investor charter as a right of all financial investors across all financial products. Brazil is traditionally not a proponent of signing investor protection treaties and has been highlighting the role of investment facilitation.

Most of these countries, in the past were rule takers. Buser has succinctly explained the background and the reasons that prompted these countries to take a serious relook of these  economics treaties, especially investment treaties. For example, India’s approach to BIT, reflected in its 2015 Model BIT, is a conscious and well considered decision. Although India is increasingly an exporter of capital, in the near term, India is likely attract more investor disputes against it.  In addition, as Buser notes in his book, most of the signatories to the BITs did not consider these treaties as ‘hard’ legal instruments capable of enforcement and consequent monetary damages. Once they realised the perils of being parties to the investment treaties, their response was predictable to an extent.

It is sound way to analyse the rising powers in four typologies – loyalists; reformers; revolutionaries; and undecideds. However, it is important to recognize that while the emerging powers have some commonalities, each is different and their response to each issue may be different. This is better illustrated through the responses of the emerging countries in the WTO. For instance, India and Brazil may not align properly with respect to agriculture issues or on the exact contours of public stockholding for food security purposes; or even in the matter of investment facilitation or e-commerce. It is interesting to note that while India and China came up with a response to the US paper on the question of self-designation of developing countries in the WTO, Brazil stayed away from it. This paradox is more evident in investment law. Buser has noted that China has attracted very few investment claims. The cultural aversion to litigation may be a factor. In addition, suing the powerful Chinese State, may not be without consequences. India’s situation is more complicated, where judicial decisions and a mesh of administrative and regulatory agencies, inter-ministerial tussles and the central- provincial divide can lead to uncertain policies and conflicting decisions.

Andreas Buser’s book has spent considerable focus on investment and trade issues. While backlash has taken place with respect to investment treaties and ISDS in most of the emerging economies with the possible exception of China, their response has to be considered more as efforts in reforming the existing liberal economic order. Especially in the context of India, the termination of BITs need not be interpreted as a complete resistance to BITs; it may be an effort to put an end to bad treaties while taking time to negotiate a new set of treaties. In addition, the introduction of various categories of general exceptions and the narrowed definition of investment along with the insertion of a preamble reaffirming the right of the State to regulate, could be considered as efforts in making incremental reforms to the system, and not its rejection.  The evidence is not enough to say that any of the emerging economies has advocated a radical overhaul of established paradigms.  In India’s case, the 2015 Model BIT was more of a reactive response. It is also an effort at reducing the dependence on investment treaties for attracting investment and use the interval to consider the implementation of efficacious and less controversial alternative forms of investment protection. In India’s case, a series of domestic reforms has emphasised the importance of introducing alternative forms of investment protection.

Buser is correct in arguing that India’s role as a rule maker or rule entrepreneur will depend upon India’s success in convincing its partner countries to accept the provisions of the 2015Model BIT. India has limited success so far, but efforts are underway. India has negotiated treaties with Belarus and Chinese Taipei and has also signed Joint Interpretative Statements with countries such as Bangladesh. Although India is not party to the RCEP, the decision to suspend ISDS in the final text for a certain period can be attributed to, among others, India’s position during the negotiating rounds.  For instance, Article 10.18 of RCEP provides a strong indication that the Parties were unable to reach agreement about ISDS. It provides, instead, that the parties would discuss this topic within two years after the date of entry into force of RCEP. The RCEP further removes the capacity for investors to attempt to access ISDS in other investment agreements through the RCEP’s MFN clause.  These developments indicate how emerging countries can play a key role in reforming the system.

Despite the rise of the emerging economies, it is hard to believe that these economies have completely shed their traditionalist positions. Buser notes that India’s 2015 Model BIT, the South African Protection of Investment Act, the Brazilian Model CFA, the SADC BIT do not contain prohibitions on performance requirements. This is in line with the import substitution led development model practiced by these countries for several decades. In this regard, the Chinese approach may be a kind of an outlier; however, the Chinese regime has historically practised other categories of restrictive policies and controls which encouraged inward investments and domestic value addition. Similarly, India, Brazil and South Africa have adopted policies which permit balance-of-payment (BoP) restrictions. Some of these countries have made BoP restrictions self- judging. In other words, the emerging countries are unwilling to shrug off the relics of the past, even if these countries enjoy impressive domestic investment and foreign exchange reserves.

In conclusion, it is difficult fit the emerging economies in any particular typology. Their approaches and responses are issue specific. China is relatively different; it is sui generis. China has adopted high standards of investment protection given its global ambitions.  Since China is a major exporter of capital, a strong investment protection can support China’s cause. Furthermore, China has not suffered adverse investment awards the way other members of the emerging economies have.  While China can be rule-taker, China has not come up with a rival model of economic governance, which is acceptable to most nations. The liberal economic order still has its appeal, and will continue to enjoy legitimacy. Indeed, the emerging economies will have greater role in global economic governance, but it is too early to envisage the Global South occupying the leadership role in global economic governance.  Andreas Buser deserves accolades for highlighting these issues in the context of power and justice in international economic relations.