국제투자분쟁해결제도의 발전방향과 한미FTA 수용태도에 관한 연구

Abstract

Abstract

A Study on the Development Direction of International Investment Dispute Settlement Mechanism and Receptive Attitude on KOREA-U.S. FTA

Tae Hyun Kim

Department of Maritime Law

The Graduate School of Korea Maritime University

Busan, Korea

As with an increasing number of new bilateral investment treaties (BITs) between Korea and other countries, there is a strong need to study legal implications of individual provisions under BITs. BITs contain many substantive provisions, such as the scope of investment, general standards for protection of investment, such as the scope of investment, taking, compensation and transfers. In addition, one of the essential components of BITs is dispute settlement-related provisions.

What is striking in respect of investment-related dispute settlement is

that investors can bring an arbitration against the hosting government, which is normally covered by the Washington Convention and administerd

by ICSID(International Center for Settlement of Investment Disputes). This paper focuses on this unique type of investment dispute settlement procedures. While introducing relevant provisions of the Washington Convention, this paper demonstrates the practical importance of how to draft individual dispute settlement-related provisions.

The investor-state dispute settlement mechanism(ISD) has resurged in the 1990s, and has been given a new meaning. This mechanism is specifically applies to the KORUS FTA, and as a result, has grown in significance for Korea.

While traditionally only States enjoyed absolute powers(sovereign prerogatives), the strength of investor (as a individual) authorities have been increasing. When a person invests in a foreign state is damaged property, the home state of the investor sues the host state or exercises diplomatic protection under the traditional international law. However, currently, a system where most investors have an opportunity to apply for arbitration against the host state directly has been established.

The arbitration authority of the foreign investor is guaranteed by a concession contract, an investment treaty(BITs) and an FTA(Free Trade Agreement) between the investor’s home state and the host state.

Although the investment treaty is contracted, the investor’s arbitration application authority is not guaranteed. But after NAFTA which is a contract between the US, Canada and Mexico, the investor can apply for international arbitrations, and not pass through the consent procedure of host state.

The ISD has recently come under systematic criticism by nations, even with people concerned with municipal law, due to a lack of recognition.

The ISD is one international arbitration system for protecting foreign investors and the accumulated precedents and cases on international trade relations exist. Nevertheless in domestic cases, no one besides some researchers are interested in ISDs.

Because of the lack of mutual implementation in subjects concerned with relations between legal regimes, ISD legal studies do not grasp the connection between the ISD and legal research.

This confusion is exhibited in the changing forms of the ISD between the Korean government and the US government in the KOR-US FTA through 8 separate negotiations.

Specifically concerning the ISD regime, matters of sovereign prerogatives, indirect expropriation and constitutionality were mainly analyzed. Originally the ISD regime was established to protect investors' assets against sovereign prerogatives.

However, the authority of investors has increased to the point that sovereign prerogatives can be encroached. The scope of investment has expanded from the movement of capital and resources to rights of claim, contractual rights, property rights, non-equity investment and permission. Specifically, because investors may be able to claim a ‘denial of justice’ and seek damages from an international tribunal convened under the FTA.

Fortunately, the KORUS FTA regulates the limits of arbitration applications. Investors can apply for arbitration related in property in principle, except for real estate price stabilization policy and public welfare objectives, such as public health, safety and environmental concerns.

When actual government actions are “extremely severe or disproportionate in light of its purpose and effect”, it is applicable to indirect expropriation so that arbitration is able to apply in most situations. But it doesn't seem to be regular practice for investors to apply for expropriation by constraint.

When ISDs occur, it is hard to find a case where an arbitral decision in NAFTA has deviated from customary international law.

The single-trial system of arbitration often encroaches policies and interests of the states. For this reason, ISDs policies which are judged by state have been criticized because important state policies are treated carelessly.

Indirect expropriation which the KOR-US FTA has allowed is hard to accept for the current Korean legal regimes. Under the interpretation Constitutional law, Korean domestic law is compensated only for direct expropriation, not indirect expropriation. Therefore, there is a need to arrange compensation for legal regimes such as, state indemnity, administrative compensation, compensation of infringement on quasi- expropriation to pass through the preparation process thoroughly.

Because if indirect expropriation are introduced, many compensation expenditures would increase.

As a result of an examination of ISDs, operation strategies and effective execution methods of ISD mechanisms are as follows.

Korea is expanding its roles as a host state as well as an investment state. So in principle, 1) ISDs are excluded for agreements, for example the Australia-US FTA, 2) when a treaty is included in a ISD, the investor can apply for the arbitration through the concent of the host state or use the domestic laws of the host state, 3) if 1), 2) are unreasonable, it is necessary to reduce the scope of the ISD to a minimum.

Because arbitral decision might be wrong, or differ from each tribunal, the public policy of a state can be forfeited. Therefore, in order to prevent misjudgment, there exists a need to arrange an appellate review.

By creating a coherent, well-reasoned body of jurisprudence, investment tribunals bolster their legitimacy, fulfill the goals of both investors and sovereign states, and enhance the possibility of norm development resulting from the dialogue between international and national courts.

In the long term, it is necessary to examine the establishment of international investment dispute court. Indirect expropriation must be introduced, examined and applied to the national budget so as to fit in accordance with in Korea legal regimes.