Contents
Chapter one.................................................................................................................................................2
1. Introduction.........................................................................................................................................2
2. Source of International Investment Law..............................................................................................2
3. Development Bilateral Investment treaties..........................................................................................2
4. Development multilateral investment treaties......................................................................................3
5. The Objective International investment agreements............................................................................3
6. The basic principles of international investment agreements...............................................................4
7. Settlement of international investment disputes...................................................................................4
7.1 Disputes settlement mechanisms and their procedures....................................................................5
7.2 Investor to state dispute....................................................................................................................5
Chapter two.................................................................................................................................................5
1. Introduction.............................................................................................................................................5
1.1 Definition of investment........................................................................................................................6
1.2 The Importance of Investment...............................................................................................................6
1.3 Types of Investment..............................................................................................................................7
2. Modalities of foreign investment.............................................................................................................7
3. The Investor.............................................................................................................................................8
3.1 Types of Investors.................................................................................................................................8
3.2 Elements of Investment.........................................................................................................................8
3.2.1 Reward...........................................................................................................................................9
3.2.2 Risk and Return...............................................................................................................................9
3.2.3 Time....................................................................................................................................................9
4. Conclusion...............................................................................................................................................9
Reference..................................................................................................................................................10
1
Chapter one
1. Introduction
“International investment law can be defined as the legal norms governing the relationship
between foreign investors and their host states and the protection of foreign investments. 1
International investment law (IIL) has evolved significantly over the past few decades, driven by
globalization, the proliferation of bilateral investment treaties (BITs), regional investment
agreements, and the increasing importance of foreign direct investment (FDI) in the global
economy.2 This paper explores the ever expanding of International investment law and the notion
of investor and investment.
2. Source of International Investment Law
The source of international investment law includes customary international law, international
treaties as found in BITs and regional investment agreements, Guidelines and code of conducts,
and investment contracts but there is no comprehensive multilateral convention on investment. 3
3. Development Bilateral Investment treaties
Over the past 50 years, international investment law has developed as a specialized area within
public international law, though it also incorporates a unique private component. 4 It consists of
many bilateral investment treaties (BITs) and agreements aimed at promoting and protecting
foreign investment. International investment law also draws upon large bodies of general public
international law including the law of treaties (especially the interpretation of treaties), much of
which has been codified by the Vienna Convention on the Law of Treaties,5
A significant new phase in the evolution of investment treaties commenced just before the 1960s,
At this point, individual European countries began to negotiate bilateral treaties. 6 These new
treaties dealt exclusively with foreign investment and sought to create an international legal
framework to govern investments by the nationals of one country in the territory of another. The
modern BIT was thus born. Germany, which had lost all its foreign investments as a result of its
1
S. Wittich, ‘International Investment Law’ in K. Miles (ed) The Origins of International
Investment Law Empire, Environment and the Safeguarding of Capital (Cambridge University
Press 2013) 822.
2
the Evolution of Bilateral Investment Treaties, Investment Treaty Arbitration and International Investment Law
Article · December 2011
3
M. SORNARAJAH, THE INTERNATIONAL LAW ON FOREIGN INVESTMENT, (3RD EDITION, CAMBRIDGE UNIVERSITY, PRESS, NEW YORK)
(2010).
4
the evolution of international investment law and its application to the energy sector elizabeth whitsitt* and nigel
bankes** p 209
5
Vienna Convention on the Law of Treaties, 23 May 1969, 1155 UNTS 331, 8 ILM 679 (entered into force 27 January 1980) [VCLT]. The VCLT
is widely but not universally ratified (e.g. neither the US nor France is a party); nevertheless it is broadly accepted that many provisions of the
VCLT represent customary international law, particularly articles 31-33 dealing with the interpretation of treaties. See generally Richard Gardiner,
Treaty Interpretation (Oxford: Oxford University Press, 2008).
6
Law of International Investment Treaties(3rd edition) Jeswald W Salacuse 18 February (2021) p111
2
defeat in World War II, took the lead in this new phase of investment treaty-making. Beginning
with the first such agreement 7 with Pakistan in 1959, Germany proceeded to negotiate similar
investment treaties with countries throughout the developing world. Bilateral investment treaties
(BITs) have emerged as a global trend, extending beyond the efforts of developed nations to
secure protections for their investors in developing countries. According to a 2014 estimate by
the United Nations Conference on Trade and Development (UNCTAD), 41% of BITs were
categorized as north-south agreements, 27% as south-south, 9% as north-north, and another 27%
involved 'countries in transition,' which includes Southeast Europe and the Commonwealth of
Independent States, engaging with other regions.8 Although the rate of BIT formation had
decreased by early 2019, the cumulative total of BITs and treaties with investment provisions
reached a record high of 3,117 that year.9
4. Development multilateral investment treaties
The 1980s and 1990s wide spread evolution of regional investment treaties, the development of
multilateral regional investment agreements the purpose of which was to promote and protect
investments among countries within a geographical area. 10 The regional international
organizations such as the League of Arab States or the Association of Southeast Asian Nations
(ASEAN), The Common Market for Eastern and Southern Africa (COMESA). North American
Free Trade Agreement/United States–Mexico–Canada Agreement also sought to develop
regional international investment treaties. 11
5. The Objective International investment agreements
As generally almost all international investment treaties have two primary objectives, the first
one is investment protection and the second one is investment promotion. 12 The primary motives
behind the rapid expansion of international investment treaties were the desire of investors from
capital-exporting states to invest safely and securely abroad and the need to create a stable
international legal framework to facilitate and protect those investments. 13 Such protection has
been aimed at investment risks posed by injurious acts and omissions by host governments
themselves and also injurious acts and omissions by other persons in the host country. Without
an applicable investment treaty, international investors would be forced to rely on host country
law alone for protection, a reliance that entails a variety of risks to their investments. Host
governments can easily change their own domestic law after a foreign investment is made, and
7
Treaty between the Federal Republic of Germany and Pakistan for the Promotion and Protection of
Investments, signed 25 November 1959, entered into force 28 April 1961.
8
UNCTAD, World Investment Report 2014 (2014) 123.
9
Ibid 99.
10
Supranote 6 p.117
11
Law of International Investment Treaties(3rd edition) Jeswald W Salacuse 18 February 2021.
12
Supra note 6 p 143
13
ibid
3
host country officials may not always act fairly or impartially towards foreign investors and their
enterprises.14 Moreover, host country officials may fail to take action to protect foreign investors
and their investments from injurious actions by other persons. Investor recourse to local courts
for protection may prove to be of little value in the face of prejudice against foreigners or
governmental interference in the judicial process.15
The disciplines of international investment law refers to the standards that IIAs impose on the
host state with respect to the manner in which it, and those entities for which it must assume
responsibility, deals with foreign investors.16
6. The basic principles of international investment agreements
There are a core principle of IIAs that is common to most agreements. The core principles are the
national treatment (NT) standard, the most-favored-nation (MFN) standard, the fair and equitable
treatment (FET) standard, the duty not to expropriate except for a public purpose and upon
payment of compensation, and the duty of full protection and security. Those all principles are
set for protection of investment activities. Broad prohibitions against arbitrariness and
discrimination are also part of the protections afforded to investors in some IIAs.
7. Settlement of international investment disputes
Dispute that arises from investment activities may be settled by courts of law or outside
courts.17The investment dispute settlement mechanisms out of court are diplomatic channels and
arbitration.18 Trilateral relationship is relationship among a host state, a foreign investor and the
home country of the investor.19 Investment disagreement may either be state-to-state or investor
to state.20 State-to-state (or “inter-state”) investment disagreement may arise directly between the
signatories of IIAs, or to issues that first arise between investors and their host states, but then
becomes inter-state disputes.21 Governments may take measures affecting the establishment, and
operations of investment might create disputes, and such disputes are categorized under state-to
state disputes.22 Dispute Settlement Arrangements (DSAs) are made in IIAs or at national laws,
at the international level, two states may arrange dispute settlement mechanisms. 23 There is lack
14
ibid
15
UNCTAD (1998) (n 89 above) 114–18. The UN identified 875 distinct acts of governmental taking of foreign
property in sixty-two countries during the period between 1960 and 1974. D Piper, ʻNew Directions in the
Protection of American- Owned Property Abroadʼ (1979) 4 Intʼl Trade LJ 315, 330.
16
Report of the International Law Commission, 53rd Sess, Supp No 10, UN Doc a/56/10 (2001) [Report]. arts 4-11 (which outline the
circumstances in which a state will be responsible in international law for the activities of its sub-national governments as well as para-state and
private entities operating within its jurisdiction or control).
17
Tesfaye Abate, Investment Law, Teaching Material Prepared under the Sponsorship of the Justice and Legal
System Research Institute year (2009) p267
18
Ibid
19
Ibid p 277
20
Ibid p 277
21
UN, Volume III, 2004, p.316
22
Ibid, Pp. 316-17
23
Supra note 12 p 278
4
of compulsory dispute settlement force within the international system at large. 24 Thus, the
parties involved must ensure that they can settle the disputes amicably and peacefully. 25
7.1 Disputes settlement mechanisms and their procedures
The investment dispute may resolve through bilateral and third-party mechanisms to settle inter-
state investment disputes. To settling a dispute parties at issue may use arbitration, Conciliations,
negotiations, Ad hoc inter-state arbitration, Permanent arbitral or judicial arrangements for
dispute settlement, and Political or administrative intuitions‟ decisions are binding. 26
7.2 Investor to state dispute
Dispute may arise between investor and state over the interpretation of applicable investment law
in line with rights and obligation of the parties. 27 Dispute may also come from violation of
international investment principles required by treaty or customary law. 28 This dispute may
resolved by mutual and amicable mechanisms.29 The last but not the least dispute arises between
investor and state may resolved under customary international law, in the tribunal or courts of the
country, if the court is not effective the investor may proceed to diplomat or enterprise.30
Chapter two
1. Introduction
While this chapter is concern the notion of Investment and Investor it would be of paramount
importance to first define the concept of investment. Next, we shall discuss the importance and
types of investment. In addition, we will discuss concept of investor and types of investor lastly
but not least the elements of investment will be discussed. There are different types of
investment, and we will discuss them based on the multi dimension .for brainstorming
Investment refers to the allocation of resources, typically money, with the expectation of
generating income or profit over time.31 It plays a crucial role in both personal wealth-building
and broader economic growth.32 By investing, individuals and institutions aim to grow their
wealth, diversify their portfolios, and manage risk.
Understanding investment and the role of investors is fundamental to navigating the financial
world, as it influences economic dynamics, business growth, and personal financial security.
24
Ibid p 278
25
Supra note 16, p.317
26
Ibid, p.320
27
Supra note 12 p281
28
Ibid p281
29
Supra note 16 p 349
30
Ibid pp 347-348
31
Investment Proclamation 2020,proclamation No.1180,Negarit Gazeta, 26th Year No. 28 ADDIS ABABA 2nd Day of
April, 2020,Art.2/1/.
32
Id, first paragraph of the proclamation
5
1.1 Definition of investment
The term „investment‟ may have different meanings in different disciplines and context. Thus, it
may mean “expenditure to acquire property or assets to produce revenue”. 33 From the legal point
of view, the term “investment “ refers to Every kind of asset and in particular shall include
though not exclusively: a) movable and immovable property and any other property rights such
as mortgages, liens and pledges; b) shares, stocks and debentures of companies or interests in the
property of such companies; c) claims to money or to any performance under contract having a
financial value; d) intellectual property rights and goodwill; e) business concessions conferred by
law or under contract, including concessions to search for, cultivate, extract or exploit natural
resources.34
Under a bilateral investment treaty to which Ethiopia is a party, investment is defined as: “Any
kind of asset and any direct or indirect contribution in cash, in kind or in services, invested or
reinvested in any sector of economic activity.” 35 In general, investment may be defined as
making an outlay of money or capital for profit ,this definition given by the Ethiopian investment
law investment means expenditure of capital in cash or in kind or in both by an investor to
establish a new enterprise, or to acquire, in whole or in part, or to expand or upgrade an existing
enterprise;36
1.2 The Importance of Investment
There are numerous importance of investment. Investment as a general has an advantage to
increases export performance, generates more and better employment opportunities, by reducing
unemployment number and enhancing human capital and facilitates sustainable and entwined
linkage among various economic sectors.37 FDI in particular has many advantage for host state in
relation to employment :-investment or FDI can be source of employment by reducing the
problem of unemployment in host states, It have positive contribution on human capital
enhancement in the host state, in the form of employees’ acquisition of new skills and knowledge
through trainings.38 Investment or FDI can also result in the transfer of knowledge and
technology from home states to host states. 39 When investment is made in a host country,
especially in a developing country, the nationals of the host state (employees, suppliers and
others) could get the opportunity to acquire knowledge and technologies that are not available in
33
Bryan A. Garner,(Editor-in-Chief), Black’s Law Dictionary,(Eight Edition), Thomson, West, United States of
America, 2004, p.844
34
ASEAN Agreement for the Promotion and Protection of Investments, Article 1(3), from UNCTAD, 1996, Volume II,
p. 294.
35
The Reciprocal Promotion of Investments Agreement between The Belgian-Luxemburg Economic Union and the
Federal Democratic Republic of Ethiopia, Article 2.
36
Supranote 31.
37
Supranote 31 ,preamble of the proclamation.
38
OECD, Foreign Direct Investment for Development: Maximising Benefits, Minimising Costs: Overview, (2002), p.
14.
39
Id, pp.12-13
6
their home country.40 The other advantage of Investment or FDI is that it normally results in the
increase of public revenue of a host state, mostly through the various types of taxes paid by
foreign investors.41
1.3 Types of Investment
Investment may be categorized differently. two types of investment may be distinguished:
investment in the means of production, and purely financial investment. 42 Both types may
provide a monetary return to the investor.43 Investment may also be grouped into foreign
(international) and local (domestic) investment. 44 The classification of investment into foreign
and domestic depends on the identity of the investor because the identity of the investor would
attract several legal consequences.45 Foreign investment is an investment by a foreign investor
while a domestic investment is an investment by a domestic investor.46
2. Modalities of foreign investment.
There are two types of modalities of foreign investment. 47 These are, Foreign Direct Investment
(FDI) and Portfolio Investment.48 FDI has been defined as “an investment made to acquire a
lasting interest by an entity resident in one economy in an enterprise resident in another
economy.”49 As such, FDI should enable an investor to “exert direct control over the
management of assets in the invested firm.” 50 On the other hand , a portfolio investment “is
normally represented by a movement of money for the purpose of buying shares in a company
formed or functioning in another country.”51 In nutshell, the main distinguishing factor between
FDI and a portfolio investment is an investor’s level of control over the management of the
investment.52
FDI can be take two forms:,53these are green field investment and brown field investment.
A green field investment is if a foreign investor establish a new enterprise like factory or other.
Whereas brown field investment is if a foreign investor may fully or partially acquire the assets
or shares of an existing enterprise in order to continue, expand or change the business purposes
of the enterprise. 54
40
Mehari Redae , ethiopian civil and commercial law series (volume - ix )p,19
41
Ibid.
42
Supra note 17 ,p-20
43
Ibid
44
Ibid
45
Ibid
46
Ibid
47
Mehar Redae Supranote 40,p .17
48
Ibid
49
OECD, The Impact of Foreign Direct Investment on Wages and Working Conditions, (2008), p. 3
50
Ibid.
51
M. Sornarajah, The International Law on Foreign Investment, (3rd Edition, Cambridge University Press), (2010), p.
8.
52
Mehari Redae supranote 40,p,16
53
Ibid,p.17
7
3. The Investor
Who is an Investor? According to Ethiopian Investment proclamation No.1180/2020 Investor”
means a Domestic or Foreign investor who has invested capital in Ethiopia. 55 According to The
Agreement on the Promotion and Protection of Investments among ECO Member States The
term “ investor “ with regard to either Contracting Party refers to the Natural or legal persons
who invest in the territory of the other.56
3.1 Types of Investors
According to Ethiopian investment proclamation No.1180/2020.there are two types of investor
these are Domestic or Foreign investor. 57“Domestic Investor” means any one of the following
who has invested capital in Ethiopia: a /An Ethiopian National; b) An Enterprise incorporated in
Ethiopia and wholly owned by Ethiopian National; c) The Government; d) a Public Enterprise e)
A cooperative society f) A Foreign National g) An Enterprise incorporated in Ethiopia.58
“Foreign Investor” means any one of the following who has invested foreign capital in
Ethiopia: a) A Foreign National; b) An Enterprise in which a Foreign National has an ownership
stake; c) An Enterprise incorporated outside of Ethiopia by any investor; d) An Enterprise
established jointly by any of the investors specified under Sub-article (6) paragraphs (a), (b) or
(c) of this Article; or e) An Ethiopian permanently residing abroad and preferring treatment as a
Foreign investor.59
3.2 Elements of Investment
There are three factors that are considered as elements of investment. 60 a) Reward (return); b)
risk and return; and c) time.61
3.2.1 Reward
We have seen above that investment is made with the intention to gain profit. Thus, investors,
generally, may expand their fund to earn a return on it. The return is known as reward from the
investment, and it includes both current income and capital gains or losses which arise by the
increase or decrease of an investment.62
54
Corporate Finance Institute, “What is a Brownfield Investment?”, Available at
https://corporatefinanceinstitute.com/resources/knowledge/strategy/brownfieldinvestment
55
Supranote 31,Art.2/4/.
56
The Agreement on the Promotion and Protection of Investments among ECO Member States.Art.1
57
Supranote 31.Art.2/4/
58
Id,Art.2/5/.
59
Id,Art.2/6/.
60
Tesfaye Abate ,supranote 17,p.12
61
Gangadhar and Ramesh Babu, Investment Management including Portfolio Management And
Security Analysis, Publications Pvt, Ltd, New Delhi, (2003) , P. 3
62
Tesfaye Abate,supranote 17.p.13.
8
3.2.2 Risk and Return
The second element of investment is risk and return. Risk may be defined as the chance that the
expected or prospective gains, or profit or return may not materialize. It also includes the fact
that the actual outcome of investment may be less than the expected outcome. It is important to
not that the greater the variability or dispersion in the possible outcome, the greater the risk will
be.63
3.2.3 Time
Time is the third element of investment. It offers several different courses of action. Conditions
change as time moves on and investors should re-e valuate expected return for each investment. 64
4. Conclusion
The notion of investment centers on the strategic allocation of resources to generate future
returns, while the investor plays a crucial role in taking on risks to achieve financial growth.
Understanding this dynamic helps clarify how investments are made, the factors influencing
investor decisions, and the potential outcomes of these financial ventures. This foundational
knowledge is key to grasping the broader concepts of finance and wealth-building strategies.
Reference
Laws
1.Investment Proclamation 2020,proclamation No.1180,Negarit Gazeta, 26th Year No. 28 ADDIS
ABABA 2nd Day of April, 2020,
Conventions
63
Ibid
64
Id,p.14.
9
1. The Reciprocal Promotion of Investments Agreement between The Belgian-Luxemburg Economic
Union and the Federal Democratic Republic of Ethiopia,
2. OECD, Foreign Direct Investment for Development: Maximising Benefits, Minimising Costs:
Overview, (2002),
3. The Agreement on the Promotion and Protection of Investments among ECO Member States.
4. ASEAN Agreement for the Promotion and Protection of Investments, Article 1(3), from UNCTAD,
1996a, Volume II,
5. OECD, the Impact of Foreign Direct Investment on Wages and Working Conditions, (2008),
8. R Vernon, Sovereignty at Bay: The Multinational Spread of U.S. Enterprises 1 (Basic Books, 1971) 46.
9. North American Free Trade Agreement Between the Government of Canada, the United Mexican
States
10. North American Free Trade Agreement Between the Government of Canada, the United Mexican
States and the Government of the United States, 17 December 1992, Can TS 1994 No 2, 32 ILM 289
(entered
into force 1 January 1994) [NAFTA].
11. Energy Charter Treaty, 17 December 1994, 2080 UNTS 95, 34 ILM 360 (entered into force 16 April
1998) [ECT].
12. Vienna Convention on the Law of Treaties, 23 May 1969, 1155 UNTS 331, 8 ILM 679 (entered into
force 27 January 1980) [VCLT].
13. Treaty between the Federal Republic of Germany and Pakistan for the Promotion and Protection of
Investments, signed 25 November 1959, entered into force 28 April 1961.
14. Law of International Investment Treaties(3rd edition) Jeswald W Salacuse 18 February 2021.
15. UNCTAD (1998) (n 89 above) 114–18.
16. Report of the International Law Commission, 53rd Sess, Supp No 10, UN Doc a/56/10 (2001)
[Report].
Books
1. Tesfaye Abate ‘Investment Law’’ Teaching Material Prepared under the Sponsorship of the Justice and
Legal System Research Institute, year (2009).
2. Gangadhar and Ramesh Babu, Investment Management including Portfolio Management And Security
Analysis, Publications Pvt, Ltd, New Delhi, 2003
3. Mehari Redae , Ethiopian civil and commercial law series (volume - ix )
10
4. M. Sornarajah, The International Law on Foreign Investment, (3rd Edition, Cambridge University
Press), (2010),
5. S. Wittich, ‘International Investment Law’ in K. Miles (ed) The Origins of International Investment
Law Empire, Environment and the Safeguarding of Capital (Cambridge University Press 2013) 822.
6. the Evolution of Bilateral Investment Treaties, Investment Treaty Arbitration and International
Investment Law Article · December 2011
7. m. sornarajah, the international law on foreign investment, (3rd edition, cambridge university, press,
new york) (2010).
Dictionary
1. Bryan A. Garner,(Editor-in-Chief), Black’s Law Dictionary,(Eight Edition), Thomson, West, United
States of America, year (2004).
Internet Source
1. Corporate Finance Institute, “What is a Brownfield Investment?”, Available at
https://corporatefinanceinstitute.com/resources/knowledge/strategy/brownfieldinvestment
11