28 Oct 2014
Lessons Learned and Lessons to Be Learned: What Developed Countries Can Learn from the Experience of Latin America in Foreign Investment Disputes
Paper by Rodrigo Polanco delivered at 20th Seminar in Latin America on Constitutional and Political Theory (SELA), Yale University (Lima, 20-22 June, 2014)
ABSTRACT: The Law and Development movement was based on the idea that developing nations could/should learn from developed countries to reform their judicial systems and substantive laws. But what if is the other way around? When investment flows were running mostly from developed to developing countries, the reaction about the level of protection received in developing countries was rarely a good one. Developed countries secured the status of their nationals through unequal treaties guaranteeing extraterritorial application of the law and jurisdiction of such “civilized” countries, or challenged the substantive and procedural treatment that foreign investors received as not conformed to an “international minimum standard”. As a consequence of this, Latin America became the main example of the use of “diplomatic protection” and investor-state arbitration.
In recent years, investment flows have changed and developed countries are increasingly recipients of investment from developing countries. That has opened the possibility for disputes where in a reversal of the traditional roles, a developed country is challenged in its policies or regulations by foreign investors from developing countries affected in their investment. The reaction of developed countries as host states is no different from the ones of developing countries in the past. Some are looking to limit the interpretation of certain standards and others are outraged that their domestic courts are discarded as a forum of these disputes. This paper will analyze what developed countries can learn from developing countries copious experience in this field.