Academic journal article Law and Policy in International Business

The Contribution of BITs to Cuba's Foreign Investment Program

Academic journal article Law and Policy in International Business

The Contribution of BITs to Cuba's Foreign Investment Program

Article excerpt

I. INTRODUCTION

Bilateral investment treaties ("BITs"), intended to promote and protect foreign investment, are relatively new but increasingly common instruments of international economic relations.(1) According to the specialized agency of the United Nations that tracks international investment, 1,332 BITs had been concluded by the end of 1996.(2) While BITs were originally conceived as accords between developed and developing countries, motivated by the former's interest in protecting their investments in the latter, this is no longer the case. A growing number of BITs concluded in the 1980s and 1990s have been negotiated between developing countries; other BITs have involved developing countries and countries with economies in transition.(3)

Cuba has recently joined the worldwide trend towards negotiating BITs. Its government, which is actively courting foreign capital, often refers to the BITs that Cuba has concluded (over forty through the end of 1999) as evidence of a positive climate in Cuba for foreign investment. The purposes of this Article are to assess whether Cuba's BITs have improved the framework for investment in the island and to estimate the potential impact of these BITs on the economic measures that the Cuban government may take following the country's transition to a free-market economy.

The Article begins, in Part II, with a brief description of the historical development of BITs and the rationale for their existence. Part III discusses Cuba's general framework for foreign investment that provides the legal and economic backdrop for the BITs. Part IV examines key provisions of several of the BITs that Cuba has signed. The Article then examines some issues relating to the role of BITs during Cuba's market transition and closes with some conclusions on the contributions that BITs have made and are likely to make to foster foreign investment in the country.

II. THE HISTORICAL DEVELOPMENT OF BITs

The concept of negotiating treaties aimed specifically at the promotion and protection of foreign investment originated in Germany.(4) The first BIT was signed between Pakistan and the Federal Republic of Germany on November 25, 1959. Subsequently, Germany signed similar agreements with several other countries,(5) as did France, Switzerland, the Netherlands, Italy, Belgium, Sweden, Denmark, and Norway.(6) By the end of 1996, 162 countries and territories from all regions of the world had signed at least one BIT.(7)

The quest for the protection of foreign investment long precedes the emergence of the BIT. Under customary international law, aliens engaged in business ventures (e.g., foreign traders or investors) have often been accorded fewer rights by States than those given to domestic citizens.(8) In order to protect the foreign trade activities of their nationals, capital-exporting countries (e.g., the United States and the Western European countries) had, by the late eighteenth century, concluded Friendship, Commerce, and Navigation ("FCN") Treaties; Treaties of Establishment; or Treaties of Amity and Commerce. These treaties included property protection provisions, such as restrictions on a host country's right of expropriation.(9) Because these agreements were very broad in scope and were more concerned with facilitating trade than regulating investment, they covered numerous topics, including: (1) right to enter; (2) access to local courts; (3) enforceability of arbitral awards; (4) the right to engage technical experts; (5) questions concerning the right to purchase or lease land; (6) patents; (7) trademarks; (8) tax issues; (9) exchange rates; (10) customs treatment of commercial travelers; and (11) consultations regarding restrictive business practices.(10)

Over time, it became desirable to develop specialized instruments to address the investment-related concerns that were only partially covered by the FCNs and like agreements. Moreover, the emergence of newly independent states in the 1950s created new opportunities for investment. …

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