The Netherlands has published a new draft model bilateral investment treaty, which seeks to rebalance investment treaties and to respond to the criticism of international investment law. Since Dutch BITs are the second most frequently-invoked BITs globally (according to the UNCTAD), Dutch government’s intention to renegotiate and “modernise” BITs may significantly affect international direct investment flows. In addition, Dutch BITs have been traditionally acknowledged as treaties offering strong protection for investors – offering “gold standard”.
International investment law has been traditionally understood as a useful tool aimed at attracting foreign investment and stimulating flow of capital and technologies in order to achieve economic prosperity for all. The desire to attract foreign investment has led most countries to adopt policies designed to create a stable and predictable investment climate. Thus, international investment agreements provide legal protection to investors against interference by the host State in form of international guarantees including a guarantee of a fair and equitable treatment, a guarantee of full protection and security, a guarantee against arbitrary and discriminatory treatment as well as guarantees in case of expropriation. In addition, investors can enforce abovementioned standards of treatment by submitting claims to international arbitration.
In response to global criticism and rising distrust towards international investment law and investor-state dispute settlement in particular, the Dutch government seeks to rebalance rights and obligations arising out of the Dutch BITs and to limit interferences in state’s regulatory powers. In this context, the new draft Dutch model BIT introduces stricter eligibility requirements for investors to qualify for protection, contains more elaborate definitions and introduces following innovative features:
Article 1 introduces a “substantial business activities in the territory of a Contracting Party” requirement for investors to qualify for protection.
Article 2 reaffirms the right to regulate necessary to achieve legitimate policy objectives such as the protection of public health, safety, environment, public morals, labour rights, animal welfare, social or consumer protection or for prudential financial reasons.
Inspired by the CETA, a new draft Dutch model BIT includes a section dedicated to sustainable development and corporate social responsibility of investors, building on the commitment to promote the development of international investment in such a way as to contribute to the objective of sustainable development and principles of corporate social responsibility such as the OECD Guidelines for Multinational Enterprises, or the United Nations Guiding Principles on Business and Human Rights.
Article 12 includes a definition of indirect expropriation (indirect expropriation occurs if a measure or a series of measures of a Contracting Party has an effect equivalent to direct expropriation) and requires substantially deprivation of the fundamental attributes of property in investors investment to be eligible for compensation.
According to Article 18, a claim must be commenced within five years of the date on which the investor first acquired or should have first acquired knowledge of the infringing measure and of the loss incurred, or within two years after proceedings before a local court were exhausted or ceased.
Article 20 states that the investor and the host State may no longer each appoint an arbitrator to the arbitral tribunal that will hear a claim under the BIT. All members of the tribunal are to be appointed by the Permanent Court of Arbitration or by the International Centre for the Settlement of Investment Disputes.
According to Article 23, a tribunal may, in deciding on the amount of compensation, take into account non-compliance by the investor with its commitments under the UN Guiding Principles on Businesses and Human Rights, and the OECD Guidelines for Multinational Enterprises.