The Protection of Foreign Investments in Mongolia: Treaties, Domestic Law, and Contracts on Investments in International Comparison and Arbitral Practice

372 Pages·2018·5.18 MB·English

by  Bajar Scharaw (auth.)

EYIEL Monographs
Studies in European and International Economic Law 2
Bajar Scharaw
The Protection of
Foreign Investments
in Mongolia
Treaties, Domestic Law, and Contracts
on Investments in International
Comparison and Arbitral Practice
European Yearbook of International
Economic Law
EYIEL Monographs - Studies in European
and International Economic Law
Volume 2
Serieseditors
MarcBungenberg,Saarbrücken,Germany
ChristophHermann,Passau,Germany
MarkusKrajewski,Erlangen,Germany
J€orgPhilippTerhechte,Lüneburg,Germany
AndreasR.Ziegler,Lausanne,Switzerland
EYIEL Monographs is a subseries of the European Yearbook of International
Economic Law (EYIEL). It contains scholarly works in the fields of European
and international economic law, in particular WTO law, international investment
law, international monetary law, law of regional economic integration, external
tradelawoftheEUandEUinternalmarketlaw.Theseriesdoesnotincludeedited
volumes.EYIELMonographsarepeer-reviewedbytheserieseditorsandexternal
reviewers.
Moreinformationaboutthisseriesathttp://www.springer.com/series/15744
Bajar Scharaw
The Protection of Foreign
Investments in Mongolia
Treaties, Domestic Law, and Contracts
on Investments in International Comparison
and Arbitral Practice
BajarScharaw
FrankfurtamMain,Germany
ISSN2364-8392 ISSN2364-8406 (electronic)
EuropeanYearbookofInternationalEconomicLaw
EYIELMonographs-StudiesinEuropeanandInternationalEconomicLaw
ISBN978-3-319-66088-2 ISBN978-3-319-66089-9 (eBook)
DOI10.1007/978-3-319-66089-9
LibraryofCongressControlNumber:2017951219
©SpringerInternationalPublishingAG2018
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Preface
ThisbookistheresultofadoctoralthesisacceptedbytheUniversityofMannheim
in Germany. It was written during my time as a research fellow at the Chair for
Public Law and Legal Philosophy at that university. The manuscript reflects the
legalsituationandcase-lawasofDecember2016.
I wish to express my deep gratefulness to my doctoral supervisor, Professor
Dr.Hans-JoachimCremer,whogavemetheopportunitytocombinemyacademic
interestinpublicinternationallawwithatopicthatwasofpersonalimportanceto
me.Withhisencouragementanddedicationasmysupervisorandmentoroverthe
pastyears,hehasbecomearolemodelforme,bothpersonallyandprofessionally.
ProfessorDr.EibeRiedelkindlyundertookthesecondevaluationofmydoctoral
thesis,forwhichIamverythankful.
I am very grateful for the excellent research opportunities granted at the Max
PlanckInstituteforComparativePublicLawandInternationalLawinHeidelberg.
AsmostofthisbookwaswritteninHeidelberg,Iwouldfurtherliketothankmy
sisterSandraandherfamily,andallmyHeidelbergerfriendsandcolleaguesfora
wonderfultime,theirmoralsupport,thenumerouslegaldiscussionswehadandfor
alltheconstructivecritiqueIreceived.
Finally, I want to thank my parents with all my heart for their unconditional
supportduringmyeducationandthroughmylife.Idedicatethisbooktothem.
FrankfurtamMain,Germany BajarScharaw
June2017
v
Contents
1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 ProblemDefinitionandResearchQuestion. . . . . . . . . . . . . . . . . 3
1.2 ObjectsoftheInvestigationandConceptualFramework. . . . . . . . 5
1.3 TheCourseoftheArgument. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2 InternationalInvestmentTreaties. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1 InvestmentProtectionUnderInternationalInvestmentTreaties. . . 13
2.1.1 OverviewofProtectionStandardsinInternational
InvestmentTreaties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.1.2 DevelopmentofInvestmentProtectionUnderInternational
Treaties. . .. . . . .. . . . .. . . . .. . . . .. . . .. . . . .. . . . .. 15
2.1.2.1 Friendship,CommerceandNavigationTreaties. .. 15
2.1.2.2 TheProliferationofBilateralInvestment
Treaties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.1.2.3 RecentDevelopmentsinInternationalInvestment
Treaty-Making. . . . . .. . . . . . . . . .. . . . . . . . .. 21
2.1.3 EarlyFailuresofMultilateralInternationalInvestment
TreatyAttempts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.1.3.1 TheAbs-ShawcrossDraftConvention
onInvestmentsAbroad(1959). . . . . . . . . . . . . . 23
SubstantiveLawProtectionStandards. . . . . . . . . 24
ProceduralLawProtectionStandards. . . . . . . . . 25
2.1.3.2 TheOECDDraftConventionontheProtection
ofForeignProperty(1967). . . . . . . . . . . . . . . . . 25
SubstantiveLawProtectionStandards. . . . . . . . . 26
ProceduralLawProtectionStandards. . . . . . . . . 27
2.1.4 SignificanceofLegalProtectionUnderInternational
InvestmentTreaties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.1.4.1 CreatingaFavourableandStableLegal
Environment. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
vii
viii Contents
2.1.4.2 EnforcementoftheInvestmentTreaty-Shaped
LegalEnvironment. . . . . . . . . . . . . . . . . . . . . . 29
2.1.5 TheLegalEffectofInternationalLawinMongolia. . . . . . 29
2.1.5.1 CustomaryInternationalLawandInternational
MinimumStandardofTreatmentofAliens. . . . . 29
2.1.5.2 GeneralPrinciplesofLaw. . . . . . . . . . . . . . . . . 32
2.1.5.3 International(Investment)Treaties. . . . . . . . . . . 33
2.2 BilateralInvestmentTreaties. . . .. . . . . . . .. . . . . . .. . . . . . . .. 35
2.2.1 BilateralInvestmentTreatiesEnteredintobyMongolia. . . 36
2.2.2 ApproachTowardsBilateralInvestmentTreaties. .. . . . .. 37
2.2.2.1 The1990s. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
2.2.2.2 The2000s. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
2.2.2.3 ApproachAnalysis. . . . . . .. . . . . . .. . . . . . . .. 38
2.2.3 BilateralInvestmentTreatiesEnteredintowithMember
StatesoftheEuropeanUnion. . . . . . . . . . . . . . . . . . . . . . 39
2.2.3.1 TheEuropeanUnion’sExclusiveCompetence
forForeignDirectInvestments. . . . . . . . . . . . . . 40
2.2.3.2 Regulation(EU)No.1219/2012ontheLegal
StatusofExtra-EUBilateralInvestmentTreaties
UnderEuropeanUnionLaw. . . . . . . . . . . . . . . . 41
2.2.3.3 FutureInternationalInvestmentTreatiesofthe
EuropeanUnion. . . . .. . . . . . . . . .. . . . . . . . .. 42
2.3 Trade-RelatedandSectoralInternationalTreatieswithInvestment
Chapters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
2.3.1 PreferentialTradeandInvestmentAgreements. . . . . . . . . 45
2.3.1.1 The(Re-)IntegrationofInvestmentRulesinto
InternationalTradeAgreements. . . . . . . . . . . . . 45
2.3.1.2 ImplicationsfortheCurrentInternational
InvestmentLawSystem. . . . . . . . . . . . . . . . . . . 46
2.3.1.3 PreferentialTradeandInvestmentAgreements
andRegionalEconomicIntegrationin
EastAsia. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
2.3.2 TheJapan-MongoliaEconomicPartnershipAgreement
(2015). . . . . . .. . . . . . . . . .. . . . . . . . . .. . . . . . . . . .. . 51
2.3.2.1 ContentsoftheAgreementandEconomic
Significance. . . . . . . . . . . . . . . . . . . . .. . . . . . . 51
2.3.2.2 Chapter10oftheAgreementGoverningMutual
ForeignInvestments. . . . . . . . . . . . . . . . . . . . . . 52
2.3.2.3 RelationoftheAgreementtotheJapan-Mongolia
BIT(2001). . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
2.3.3 TheEnergyCharterTreaty(1994). . . . . . . . . . . . . . . . . . 54
2.3.3.1 TreatyOrigin. .. . . . . . . . . . . .. . . . . . . . . . . .. 54
2.3.3.2 SectoralScopeofTreatyApplication. . . . . . . . . 55
Contents ix
2.3.3.3 InvestmentProtectionUndertheEnergyCharter
Treaty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
2.4 StandardsofInvestmentProtectionandReflectioninthe
InternationalInvestmentTreatiesofMongolia. . . . . . . . . . . . . . . 57
2.4.1 ScopeofApplicationofInternationalInvestment
Treaties. . .. . . . .. . . . .. . . . .. . . . .. . . .. . . . .. . . . .. 58
2.4.2 SubstantiveLawProtectionStandardsinInternational
InvestmentTreaties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
2.4.2.1 NationalTreatment. . . . . . . . . . . . . . . . . . . . . . 59
OverviewofContentandApplicationofthe
Standard. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
EvaluationofInternationalInvestmentTreaties. . . 63
2.4.2.2 Most-Favoured-NationTreatment. . . . . . . . . . . . 64
OverviewofContentandApplicationofthe
Standard. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
TheExtensionofMost-Favoured-Nation
TreatmenttoDisputeSettlementClauses. . . . . . 66
EvaluationofInternationalInvestmentTreaties. . . 68
2.4.2.3 FairandEquitableTreatment. . . . . . . . . . . . . . . 69
Fair-and-Equitable-TreatmentClausesLinked
to(Customary)InternationalLaw. . . . . . . . . . . . 70
UnqualifiedFair-and-Equitable-Treatment
ClausesasAutonomousLegalStandard. . . . . . . 71
PrinciplesofProtectionCommonlyAssociated
withFairandEquitableTreatment. . . . . . . . . . . 73
TheDoctrineontheProtectionofLegitimate
Expectations. . . . . . . . . . . . . . . . . . . . . . . . . . . 78
EvaluationofInternationalInvestmentTreaties. . . 82
2.4.2.4 FullProtectionandSecurity. . . . . . . . . . . . . . . . 83
OverviewofContentandApplicationofthe
Standard. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
EvaluationofInternationalInvestmentTreaties. . . 89
2.4.2.5 ExpropriationandCompensation. . . . . . . . . . . . 90
OverviewofContentandApplicationofthe
Standard. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
EvaluationofInternationalInvestmentTreaties. . . 93
2.4.2.6 FreeTransferofFundsandCapital. . . . . . . . . . . 94
OverviewofContentandApplicationofthe
Standard. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
EvaluationofInternationalInvestmentTreaties. . . 97
2.4.2.7 UmbrellaClausesinInternationalInvestment
Treaties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
2.4.2.8 InterimConclusion. . . . . . . . . . . . . . . . . . . . . . 98
x Contents
2.4.2.9 CompetingObligationsUnderHuman
RightsLaw. . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
InternationalHumanRightsObligations. . . . . . . 101
DomesticHumanRightsObligations. . . . . . . . . 104
2.4.3 Investor-StateArbitrationOffersinInternational
InvestmentTreaties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
2.4.3.1 FormsofStateConsenttoInvestor-State
Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
ConsentThroughDisputeSettlementClauses
inInternationalInvestmentTreaties. . . . . . . . . . 107
ConsentThroughDisputeSettlementClauses
inDomesticInvestmentLaws. . . . . . . . . . . . . . . 108
ConsentThroughArbitrationClauses
inInvestor-StateContracts. . . . . . . . . . . . . . . . . 109
2.4.3.2 SignificanceofInvestmentTreaty-Based
Investor-StateArbitration. . . . . . . . . . . . . . . . . . 109
2.4.3.3 FeaturesofDisputeSettlementClausesin
InternationalInvestmentTreaties. . . . . . . . . . . . 110
ScopeofConsenttoInvestmentTreaty-Based
Investor-StateArbitration. . . . . . . . . . . . . . . . . . 111
(Pre-)ConditionsofInvestmentTreaty-Based
Investor-StateArbitration. . . . . . . . . . . . . . . . . . 112
2.4.3.4 EvaluationofInternationalInvestmentTreaties. . . 114
WideDisputeSettlementClausesinInternational
InvestmentTreaties. . . . . . . . . . . . . . . . . . . . . . 115
NarrowDisputeSettlementClausesin
InternationalInvestmentTreaties. . . . . . . . . . . . 116
(Pre-)ConditionsforInvestor-StateArbitration
inInternationalInvestmentTreaties. . . . . . . . . . 117
2.4.3.5 InterimConclusion. . . . . . . . . . . . . . . . . . . . . . 120
2.4.4 Investor-StateArbitrationsBasedonInternational
InvestmentTreatiesofMongolia. . . . . . . . . . . . . . . . . . . 121
2.4.4.1 AlstomPowerItaliav.Mongolia. . . . . . . . . . . . 121
2.4.4.2 Paushokv.Mongolia. . . . . . . . . . . . . . . . . . . . . 121
2.4.4.3 ChinaHeilongjiangv.Mongolia. . . . . . . . . . . . . 123
2.4.4.4 KhanResourcesv.Mongolia. . . . . . . . . . . . . . . 129
2.5 InternationalConventionsSupportingtheEnforcement
ofInternationalInvestmentTreaties. . . . . . . . . . . . . . . . . . . . . . 133
2.5.1 ConventionontheRecognitionandEnforcement
ofForeignArbitralAwards(1958). . . . . . . . . . . . . . . . . . 133
2.5.1.1 InternationalObligationtoEnforceForeign
ArbitralAwards. . . . . . . . . . . . . . . . . . . . . . . . . 134
2.5.1.2 ChallengeandReviewofForeignArbitral
AwardsbyNationalCourts. . . . . . . . . . . . . . . . 135