When examining the development of foreign direct investment and the effects of multinational
corporations over the last decades, one has to come to the conclusion that the importance increased and
grew significantly. Until the 1970s most of the countries were opposed to foreign direct investment due to
a fear of losing economic and political independence by allowing foreign control over their economic
resources and their key industries. Since the 1990s, there has been a positive turn towards foreign direct
investment and its liberalization, because it is predominantly seen as requirement for economic growth,
productivity increase, creation of export potential and technology transfer. As a result, the amount of
foreign direct investment expanded faster than the world economy and the volume of international trade
resulting in a need to control the investment flows and to regulate the area.1
By virtue of the rather sensitive topic of foreign direct investments, it was impossible in the past for the
international community to agree upon an uniform and harmonized international regime setting out the
standards for international investments. Hence, a multitude of national and international policy rules and
principles govern the relevant aspects in this field resulting in a variety of international investment
agreements. As an example, more than 2670 bilateral investment treaties and more than 270 other
international investment agreements have been adopted globally until the end of 2008.2
Nevertheless, the plurality of the different international investment agreements with their different scopes,
different types, different signatories have led to a patchwork of treaties resulting in a highly fragmented
and incoherent international investment regime. As a result of this and the problems accompanying it,
such as a more and more complex structure and an increase in investment disputes due to the
interpretation and implementation of these treaties, the desire to adopt a general coherent framework for
investment has been stirred, especially by international organizations like the WTO or the OECD.
The OECD (Organization for Economic Co-operation and Development) is an international economic
organization consisting out of 34 countries and was founded in 1961 to stimulate economic progress and
world trade.
Table of Contents
A. Introduction
B. Multilateral Agreement on Investment
I. Advantages
II. Reasons for Failure
1. Controversies
2. Criticism
a. Developing countries
b. NGOs
C. Policy Framework for Investment
I. Advantages
II. Disadvantages
D. Conclusion
Objectives and Topics
The primary objective of this paper is to determine whether the OECD's "Policy Framework for Investment" (PFI) can serve as a viable substitute for a binding multilateral treaty, such as the failed "Multilateral Agreement on Investment" (MAI). The research explores the tension between the need for an enforceable global legal regime and the practical difficulties of achieving consensus among diverse international stakeholders.
- Analysis of the Multilateral Agreement on Investment (MAI) and its collapse.
- Examination of the structural differences between binding treaties and non-binding frameworks.
- Evaluation of the OECD's Policy Framework for Investment (PFI) as an alternative mechanism.
- Discussion of the challenges involving developing countries and non-governmental organizations (NGOs).
- Assessment of the role of "soft law" in modern international investment governance.
Excerpt from the Book
B. Multilateral Agreement on Investment
As a result of the desire to harmonize the international regime on investment, there have been various attempts in the past to reach a multilateral consensus. Given the positive attitude towards foreign direct investment in the 1990s and the successful establishment of the WTO, the OECD decided to promote a multilateral agreement to protect foreign investments and to ensure a liberalization of global investments. The idea was to create the “Multilateral Agreement on Investment” within the OECD Member States and then replacing the existing international investment agreements of non-member countries by allowing them to accede to the then existing system. By doing that, the initiators wanted to introduce a fair and stable global investment environment including clear rules and no hindrances.
Consequently, the OECD started the negotiations in 1994 for a “Multilateral Agreement on Investment” with an initial deadline of Spring 1997. The short period of preparation shows clearly the high level of consensus between the participating parties thinking that they only conducted a mainly technical codification of existing rules and practices.
Summary of Chapters
A. Introduction: This chapter provides an overview of the rise of foreign direct investment, the resulting fragmentation of the legal landscape, and the historical efforts by organizations like the OECD to create a coherent regulatory framework.
B. Multilateral Agreement on Investment: This section details the failed attempt to establish a binding international investment treaty, highlighting the initial goals and the subsequent controversies and criticisms that led to its abandonment.
C. Policy Framework for Investment: This chapter describes the PFI as a non-binding alternative, analyzing its flexible structure, its modular approach, and the benefits of its inclusive negotiation process.
D. Conclusion: The concluding chapter synthesizes the findings, ultimately arguing that while the PFI is a valuable tool, it cannot replace the necessity of a binding multilateral instrument for a truly enforceable investment regime.
Keywords
Multilateral Agreement on Investment, MAI, Policy Framework for Investment, PFI, OECD, Foreign Direct Investment, Investment Law, International Trade, Legal Harmonization, Non-binding Instruments, Investor Protection, Sustainable Development, Global Governance, Sovereignty.
Frequently Asked Questions
What is the core subject of this paper?
The paper examines the evolution of international investment law, focusing specifically on the OECD's attempts to harmonize rules through the Multilateral Agreement on Investment (MAI) and its successor, the Policy Framework for Investment (PFI).
What are the central themes of the research?
The core themes include the effectiveness of binding versus non-binding legal instruments, the role of international organizations in rule-making, and the challenges of balancing investor protection with national sovereignty.
What is the primary research question?
The primary research question asks whether a non-binding instrument like the PFI can effectively serve as an alternative to a traditional, binding multilateral treaty for governing international investments.
Which scientific methodology is employed?
The author uses a qualitative, analytical approach, reviewing existing legal literature, policy documents from international organizations like the OECD and WTO, and academic commentary on investment law failures.
What topics are covered in the main body?
The main body covers the history and failure of the MAI, the reasons for that failure (including criticisms from NGOs and developing nations), and an in-depth analysis of the design and perceived advantages/disadvantages of the PFI.
How would you characterize the keywords of this work?
The keywords reflect the intersection of economic policy, legal standardization, and institutional efforts to manage global investment flows effectively.
Why was the MAI ultimately considered a failure?
The MAI failed due to massive public opposition, ideological clashes between member states regarding sovereignty and industry protection, and the exclusion of key stakeholders such as developing nations and civil society organizations.
How does the PFI address the flaws of the previous MAI approach?
The PFI moves away from rigid, binding obligations towards a flexible, non-binding "checklist" approach that encourages self-assessment and includes a much broader range of stakeholders in the consultative process.
What is the author's final verdict on the PFI?
The author concludes that while the PFI is a positive "intermediate step" for policy coordination, it is ultimately not a true alternative to a binding treaty, as it lacks the legal enforcement necessary for a robust global regime.
- Arbeit zitieren
- Fabian Junge (Autor:in), 2012, Is the Policy Framework for Investment developed by the OECD a possible alternative for the adoption of a multilateral instrument? , München, GRIN Verlag, https://www.grin.com/document/196515
