The No of Tokyo Revisited: Or How Developed Countries Learned to Start Worrying and Love the Calvo Doctrine

Abstract

This article explores the negative reaction of developed countries, as host State recipients of foreign investment, when they are faced with the possibility of having its national policies and regulations challenged through investor-State arbitration, a system of adjudication of investment disputes created and promoted by developed countries over time. The discussion about the need and suitability of an investor-State settlement dispute mechanism between developed countries has been particularly relevant in preferential trade agreements involving developed countries, some already in force (like NAFTA and AUFTA), and other in current negotiation (like CETA, TTIP and TPP). The article compares the reaction of developed countries against investor-State arbitration with the past experience of developing countries with respect to investment disputes, particularly considering the experience of Latin American States in cases of 'diplomatic protection' and investor-state arbitration. The article concludes that developed countries can draw lessons from such experience, especially if they want to improve the international settlement of investment disputes, a mechanism that requires a reciprocal commitment from all States in order to be effective.

Missing Calvo? Latin America’s love-hate relationship with the Investment Treaty Regime

“…Out of the 21 countries that opposed the creation of the International Centre for Investment Dispute Settlement 19 were Latin American. This event of collective opposition to the investment treaty regime has become known as El No de Tokio, due to where the meeting took place (BAER, 1972, LAZO, 2015, LOWENFELD, 2009. It is possible to notice the influence of the Calvo Doctrine in the statement of Felix Ruiz, Chilean member of the World Bank's Board of Governors, at the time speaking on behalf of all Latin American countries:…”

“…Meanwhile, the inclusion of ISDS in the TTIP (Transatlantic Trade and Investment Partnership) ended up becoming one of the deal-breakers for the European Union in its negotiations with the US. The Europeans sought to replace ISDS with a new investment court system that would introduce novelties such as permanent judges and an appeals mechanism if adopted (LAZO, 2015;BALIÑO;CAMPOS, 2020).…”

“…The European Union's proposal is more reformist and seeks not to address the root of the problem, granting special jurisdictional rights to investors, but to create an appeals procedure to try to solve the problem of inconsistent decisions by arbitral tribunals that plagues the regime. That is despite the European Parliament's opposition to the inclusion of ISDS in new trade agreements to which the EU is a party taken in light of the recent ISDS cases in Europe such as Vattenfall v Germany (2009)(LAZO, 2015, BAS, 2018b. Under President Obama, the United States had reformulated its model BIT in an effort to answer the most pressing criticisms of the investment regime: inconsistency in language that would give too much interpretative sway to arbitrators, and labour and environmental provisions to attend to domestic constituencies (trade unions and environmentalists).…”

Investment arbitration and human rights cases in Latin America

“…Yet, the position of the Latin American governments has been wavering from a complete support to the foreign investors to an intransigent opposition to its participation on their economies, characterized by several events of discrepancy and contradiction. 10 Indeed, this thorny relationship has a clear example on the attitude with respect to ISDS in the Today Latin America is the region with the highest number of ISDS cases, Argentina being the most frequent respondent State, followed by Venezuela, and with Ecuador also ranking within the top ten respondent States. 12 Claims against Latin American countries registered at ICSID represent around 30% of the total number of cases until December 2016.…”