Revisiting the BITs of Bangladesh

The Daily Star | 12 January 2023

Revisiting the BITs of Bangladesh

by Imtiaz Ahmed Sajal

In an interdependent global economy, the movement of capital from one part to another has become a common phenomenon. Every state needs to maintain friendly economic relationship with other states, which is done ordinarily by multilateral or bilateral free trade agreements. This facilitates cross-border movement of goods and services. Globally, there are more than 3000 international investment agreements (IIAs), including 2850 bilateral investment treaties (BITs) today. The proliferation of BITs depicts the accelerated engagement of states in inter-state economic activities and capital transfer. Some countries have good production base, but they do not have enough capital to utilise that. Other countries have more capitals, but they do not have adequate facilities to invest that. This is how countries cooperate in importing and exporting of capitals. Capital importing countries offer fair treatment and safeguard for foreign investments. Capital exporting countries then enter legal relations to secure their investments in other countries.

Bangladesh has signed a considerable number of IIAs with different countries and regional economic integration organisations. Bangladesh started signing BITs in 1980 with the UK as part of its larger policy shift towards economic liberalisation through boosting multilateral trade and foreign investment flows into and out of the country. Immediately after signing the BIT with the UK, Bangladesh enacted the Foreign Private Investment (Promotion and Protection) Act 1980’ to secure all foreign investments. Till now, Bangladesh has signed 31 BITs with countries from different parts of the world. Bangladesh has also entered 4 other treaties with investment provisions. As a founding member of the WTO, Bangladesh is committed to carrying out its multilateral trade obligations.

While foreign investors demand strong protection of their investments under the BITs by incorporating provisions scrutinising any legitimate acts or measures of host state amounting to violations of foreign investments protection standards, host state is actively advocating for their sovereign right to regulate. Regulatory power is the ability of the host state in adopting variety of measures to achieve wide ranging policy objectives. Right to regulate is the sovereign prerogative of a country arising from the control over its own territory. Historically, the divergent position of investment protection and sovereign regulatory power started suddenly after the World War II with the evolution of newly independent (formerly colonised) states. These newly independent states of Global South realised that most of their natural resources are in the hands of private entities having origins in their colonisers. It is in this context that those newly independent developing states, by using their numerical majority in the General Assembly of the UN, passed the resolutions on Permanent Sovereignty over natural resources; New International Economic Order; and Charter of Economic Rights and Duties of States. In all these, they have reiterated their sovereign power to regulate foreign investments in their territories.

At the same time countries of the Global North started entering into new deals/agreements, designed solely with the single objective of protecting their own investments, with developing countries who were unaware of the consequences of those treaties. As such, international investment law has been almost purposefully developed in isolation. Some states, as well as scholars, have argued that such compartmentalised development aids in the promotion of the sectional interest in investment protection to the detriment of the global interest in environmental protection, as well as the protection of human rights, labour rights, cultural rights, and the rights of indigenous peoples. With the increase of South-South cooperation, intra-developing states investment has also increased considerably in recent past. This new paradigm has led to another phenomenon. Now the more powerful developing countries (prospective investors) want to dictate the terms of IIAs in diminution of host states’ regulatory power to incapacitate their weaker counterpart.

Many of the investment protection treaties of Bangladesh include potentially broad and vague provisions which could be interpreted by the arbitral tribunal in a manner giving preference to investment protection over Bangladesh’s exercise of regulatory power to adopt measures directed at achieving legitimate policy objectives. Bangladesh can go for re-negotiation of its first-generation BITs (where sole purpose is to secure investment, and protection of foreign investment has been given priority over other considerations) to insert an express provision to protect legitimate public welfare objectives so that it will not constitute expropriation or nationalisation. Bangladesh as a capital importing country must tailor the four core provisions of BITs namely – fair and equitable treatment; expropriation; non-precluded measures; and monetary transfer provisions to safeguard its regulatory power as host state.

The Writer is Lecturer in Law, Bangladesh Army International University of Science and Technology (BAIUST), Cumilla.

source: The Daily Star