So far investment protection and promotion agreements between Arab States have attracted little attention, but current developments in the region are about to change this.
The two probably most important agreements, which both date back to the 1980s, have not been used very frequently in the past. The majority of investors from Islamic States and even the legal community in these countries and elsewhere were not aware of the existence of these treaties. Partly, this might be due to the fact that the literature and many official documents relating to these agreements are available only in Arabic.
The first agreement is the Agreement on Promotion, Protection and Guarantee of Investments among Member States of the Organization of the Islamic Cooperation (“OIC”). It was approved and opened for signature on 1–5 June 1981 and entered into force five years after its signature, on 23 September 1986. This agreement is the first multilateral agreement that provides foreign investors with the right to initiate arbitration against their host country, many years before the creation of the North American Free Trade Agreement or the Energy Charter Treaty. Article 17 of the agreement offers resort to arbitration:
“[…] 2. Arbitration. If the two parties to the dispute do not reach an agreement as a result of their resort to conciliation, or if the conciliator is unable to issue his report within the prescribed period, or if the two parties do not accept the solutions proposed therein, then each party has the right to resort to the Arbitration Tribunal for a final decision on the dispute”.
The agreement was signed and/or ratified by numerous Arab countries, including Egypt, Libya, Morocco, Tunisia and Yemen.
The other not very known agreement is the Unified Agreement for the Investment of Arab Capital in the Arab States, which was signed on 26 November 1980 and entered into force on 7 September 1981. This Agreement establishes an Arab Investment Court, open to States and investors.
Under both of the agreements, investors may bring legal action without prior consent. In 2003, a Saudi company, Tanmiah, decided to sue the Tunisian Government to settle an investment dispute under the 1980 Arab agreement of investment. The Court confirmed its jurisdiction and rendered its first decision on 12 October 2004.* The Court has now 7 cases pending where Arab investors filed complaints against other Arab States.
With the recent developments in the Arab region and the revolutions that swept across Egypt, Tunisia, Libya and Yemen, these regional investor protection agreements are set to attract even more attention. Especially because in many Arab countries post-revolution governments revoked investment contracts concluded by the former regimes, foreign investors are exploring legal options.
This raises the likelihood of a rise in investor-State disputes in the region and at the same time raises the question whether the agreements’ substantive provisions allow for balanced interpretations and decisions, weighing the legitimate desire of post-revolution governments to re-design their countries’ investment regimes in the pursuit of sustainable development and inclusive growth on the one hand, and the required protection of foreign assets on the other.
* Walid Ben Hamida, The First Arab Investment Court Decision, Journal of World Investment and Trade 2006, p. 699-721.