Introduction

I was delighted to be asked to make some introductory comments on this Special Edition entitled, "The Pacific Rim and International Economic Law: Opportunities and Risks of the Pacific Century." Congratulations are in order for Professors Mark Feldman and Wenhua Shan for spearheading this collection of papers.

The topics addressed are multifarious and wide-ranging, but they can be grouped into four major and largely inter-related themes.

First, notwithstanding the many criticisms of investment treaties and investment arbitration, and the reservations in some quarters about the idea of creating international legal obligations relating to the protection of investment which are enforceable by private parties, investment treaty-making continues unabated around the Pacific Rim. This is well illustrated in this edition where a number of the authors have chosen to address various issues raised in the Trans-Pacific Partnership ("TPP"), the Regional Comprehensive Economic Partnership, the China-Japan-Korea trilateral investment treaty, as well as such bilateral initiatives as the US-China bilateral investment treaty, the Canada-China foreign investment protection agreement, and the Canada-Korea free trade agreement.

The second theme, perhaps the converse of the first, is that there have been sober second thoughts in some quarters. The shifts in Australia's stance vis-à-vis investment protection treaties are well known. Since the change of government there have been indications that Australia is re-engaging in the investment treaty-making process. Indeed, given the pressure in a plurilateral negotiation not to unravel obligations that are expected to bind all parties equally, one has to wonder how Australia could avoid committing to investment protections in the TPP negotiations. Hovering in the background of the debate in that country over the political acceptability of investment treaties is the outcome of the Philip Morris arbitration over Australia's legislation dealing with the plain packaging of cigarettes. This case has become the leitmotif of many who worry about the impact of investment treaties on States' regulatory freedom. Based on the publicly available information, there are jurisdictional issues yet to be resolved in the claimant's favour before the tribunal can move to the merits, and one can only speculate what the range of outcomes will be. Whatever the outcome, it is likely to be the subject of intense scrutiny.

Perhaps the more significant development in the region has been Indonesia's decision to terminate all of its bilateral investment treaties by letting them lapse. Indonesia has explained that the old treaties were concluded in early 1990s to early 2000s- a time when the country's investment policy landscape was very different. Although this may appear at first glance to be an extreme measure, it appears that the government is seeking to negotiate new treaties to replace the old ones. For this reason, Indonesia is currently working on a new model international investment agreement.

This leads to the third theme evident in this Special Edition: the evaluation and rethinking of treaty models. The vast majority of investment treaties in force, particularly the European treaties, were influenced by the OECD's 1967 Draft Convention on the Protection of Foreign Property. They are skeletal, often of no more than six or seven pages of text. In comparison to other international economic law agreements such as the WTO Agreements, they are worded in the broadest and most general of terms. The obligations are "open textured" and hence confer wide discretion upon arbitral tribunals.

The first major agreement to deviate from the short bilateral investment treaty model was Chapter 11 of the North American Free Trade Agreement ("NAFTA"). In comparative terms, particularly with its use of reservations and exceptions, as well as its procedural rules, Chapter 11 is considerably more detailed than the earlier bilateral investment treaties. But when it came to the core obligations of fair and equitable treatment, national and most-favoured nation treatment, and expropriation, NAFTA did not significantly differ from prior US (and to a much lesser extent Canadian) treaty formulations.^[1]

NAFTA, when applied in practice, turned out to raise a number of perhaps unanticipated interpretative issues. The unevenness of early NAFTA jurisprudence as well as arbitral pragmatism tending to give short shrift to objections based on noncompliance with the chapter's procedural requirements, led two of the three NAFTA Parties to reconsider their approaches. The first sign of this was a 31 July 2001 NAFTA Free Trade Commission Note of Interpretation. It dealt with two issues: public access to documents pertaining to Chapter 11 cases and the meaning of Article 1105, Minimum Standard of treatment.

This initial step of elaborating on NAFTA Chapter 11 through interpretation was followed by new model treaties. Somewhat chastened by the early experience, and perhaps surprised by the intensity of their respective publics' interest in the workings of NAFTA tribunals and demands for more transparency in the arbitral process, Canada and the United States, while by no means disavowing the whole idea of investment treaty-making and arbitration thereunder, essentially went back to the drawing board to develop more detailed and prescriptive treaties. By 2004, both states had developed new model treaties (the Canadian Model Foreign Investment Protection Agreement and the United States' Model Bilateral Investment Treaty).

We see from this Special Edition that some 14 years later, the NAFTA Free Trade Commission's Note of Interpretation on the meaning to be given to the Minimum Standard of Treatment continues to be relevant to the investment treaty-making world. The Note's points have found their way into many subsequent treaties throughout the Pacific Rim. It is a good example of the phenomenon of 'treaty propagation' whereby an expression of a substantive obligation in one bilateral treaty finds its way into other treaties not necessarily being negotiated by the states who agreed the original text. It has shown up for example in Article 15.5 of the Singapore-United States Free Trade Agreement and Article 4 of the Canada-China FIPA. Parts of the Note of Interpretation showed up in the Agreement establishing the ASEAN-Australia-New Zealand Free Trade Area's Article 6.

Recently, the investment chapters of both the Singapore-EU Free Trade Agreement (draft text subject to legal "scrubbing") and the Canada-EU Free Trade Agreement (likewise a draft text subject to scrubbing) have taken a significant further step of elaborating on the meaning to be given to fair and equitable treatment.^[2]

Treaty negotiators seem no longer to be "prisoners of precedent", unwilling to abandon prior models. Considerable thought has and is being given to more precisely expressing the obligations undertaken by the States party to investment treaties. The old approach of leaving it to tribunals to sort out the meaning of core obligations is giving way to much longer, more detailed investment treaties. We have already seen this in relation to fair and equitable treatment, and it has also occurred in relation to the meaning of expropriation - where the negotiators have sought to give guidance on the meaning of "indirect expropriation" and how to distinguish between bona fide regulatory measures not capable of constituting an expropriation and measures that might amount to an expropriation. We see it in the development of more extensive exceptions clauses and the use of reservations. We also see it in much more detailed prescriptions on the procedural aspects of investor-State arbitration, rules on transparency of proceedings, consolidation provisions and other attempts aimed at dealing with parallel proceedings, and so on.

Finally, we see the emergence of "new issues" on the investment treaty agenda. By "new", I do not mean that the international community has suddenly woken up to their existence, but rather that they have percolated up on the policy agenda. Are state-owned enterprises (SOEs) to be considered as private actors or as emanations of the State? Should they be subject to special disciplines in the light of their being used to further national governmental objectives in addition to having commercial objectives? What to do about corruption? There have, of course, been important advances in the negotiation of international treaties aimed at fighting corruption. It is not unusual for allegations of corruption to be made in investor-State arbitral proceedings and some decisions that have dealt with the impact of corruption upon an investment, the burden of proof, and the legal consequences of a finding of corruption, have made it into the public domain. The link between investment and other issues such as the enforcement of environmental protection and labour laws, first addressed in the NAFTA side agreements, continues to be on the agenda. All of these issues and others are moving up the policy agenda.

All of this leads to a more fundamental point. In my view, the emergence of plurilateraltreaty negotiations such as the TPP will be of seminal importance in ushering in a new era which arguably can reverse the fragmentation and "noodle bowl effect" of States' entering into sometimes dozens of differently worded treaties dealing with the same subject-matter. If the TPP negotiations succeed and if more bilateral negotiations with the European Union take place such as those already completed by Canada and Singapore and those presently underway between the EU and the United States, China and ASEAN, respectively, result in more treaties between Pacific Rim States and a European Union of 28 States, we will see a much greater degree of investment treaty policy convergence between North America, the European Union and Asia than has previously been the case.^[3]

We are moving to a new world of investment treaty-making and investment treaty arbitration. The result appears to be greater specificity of obligations, more guidance to tribunals, more instruction on the consequences of noncompliance with procedural rules, more modification of the applicable arbitration rules (to reduce the differences in arbitrations held under the same treaty but under different rules), and so on. It is an exciting time in this field and this Special Edition contributes to our collective understanding of the rapidity of the changes and their significance for this area of international law.