Committee on Special and Differential Treatment & Dispute Prevention

To provide the Applicants with the best possible and most relevant experience, the Model WTO has decided to adapt this years topic. By narrowing the topic to Trade & Investment: the framework of a potential Investment Facilitation Agreement, the Model WTO intends to create an even more relevant experience for its Participants as this topic has become even more relevant in recent weeks. We apologise for any inconveniences due to the delayed publication.

Committee on Investment Facilitation 3: Special and Differential Treatment and Dispute Prevention

 

Investment and Development: Special and Differential Treatment

Investment is seen as one of the greatest drivers of growth, particularly for developing countries. In 2016 over $646bn in FDI flowed into developing countries (UNCTAD, 2017b, p. x). In developing countries, FDI creates a lot of positive benefits. Besides improving social and economic conditions through corporate social responsibility (see Committee for Corporate Social Responsibility), FDI also creates technology spillovers, induces human capital formation, helps towards integration of international trade, as well as creating a more competitive business environment (OECD, 2008a, p.14). Examples of these benefits may include the transferal of “clean” technologies (OECD, 2002, p. 5). On the other hand, FDI can also cause crowding out of local businesses or create concerns about labour or environmental deterioration (“Investment Policy”, E15 Initiative). The benefits and threats of FDI to developing countries are clear, thus FDI should be increased to developing countries.

A possible method to achieving this is, is through Investment Facilitation. Investment Facilitation is recognized as crucial to achieving the aforementioned SDGs and thus growth for developing and least-developed countries (Khan, 2017, p.2). One tool of the WTO to achieving this through investment facilitation may be through Special and Differential Treatment. These provisions throughout international agreements reflect the idea, that these uniform regulations may not be appropriate or best suit the interests of all nations, particularly developing and least-developed countries (Keck & Low, 2004, p. 4).

Such special provisions may include:

  • “longer time periods for implementing Agreements and commitments,
  • measures to increase trading opportunities for developing countries,
  • provisions requiring all WTO members to safeguard the trade interests of developing countries,
  • support to help developing countries build the capacity to carry out WTO work, handle disputes, and implement technical standards, and
  • provisions related to the least-developed country (LDC) Members” (“Special and Differential Treatment”, 2018)

Another possibility would be to follow the Special and Differential Treatment provisions under the Trade Facilitation Agreement (TFA).

The Committee could discuss if developing, particularly least developed, countries should have different obligations or standards regarding investments in their respective countries that is, the applicability of special preferential treatment clauses. The Committee could see if the provisions of within the TFA are applicable. Further, the Committee could discuss in what manner and time frame these differing obligations and standards could be applied. Finally, the Committee shall bring all of these points of discussion together in either as part of a new regulatory agreement or within an existing agreement.

Dispute Prevention

Alternative Methods of Dispute Prevention (AMDP) avoid an emphasis on legal rights and obligations of investors and states, but rather focus on a solution recognized as fair by both parties (UNCTAD, 2013, p. 113). Prevention of disputes, as a measure to avoid dispute settlement, may provide countries with more incentives to conclude investment agreements, as they are then often not legally bound to the outcome of the mediation (UNCTAD, 2017a, p. 5). And whilst these AMDP are seen as a cheap solution for dispute prevention, dispute prevention is largely absent from international investment laws and agreements (UNCTAD, 2017a, p. 5). Merely, 32 countries offer dispute prevention policies, which however are mostly a prerequisite to dispute settlement and not seen as an actual dispute resolution (UNCTAD, 2017a, p. 5).

So far, on a bilateral level, conflict prevention measures involve strengthening institutional governance (Gabriel, 2016, p.145). This includes using Ombudsmen, who receive investors’ demands and issues, or joint committees between states where representatives of investors and governments involved can discuss issues, have provided prevention tactics (CFIA; Gabriel, 2016, p. 145). The Committee could discuss these measures and other prevention measures, whereby they discuss which are feasible on a multilateral level. In this regard, the Committee must also discuss the role of the WTO and how it can aid dispute settlement.

Author of the Committees 2018:

Marisa Menzel (marisa.menzel@model-wto.org)
Model WTO Head of Simulation Design

Disclaimer

This year’s Model WTO focuses on trade and investment, and notably investment facilitation.  The Model WTO organizers are fully cognizant that the ‘Joint Ministerial Statement on Investment Facilitation for Development‘ – co-sponsored by 70 WTO Members at the WTO’s Eleventh Ministerial Conference held in Buenos Aires in December 2017 (document WT/MIN(17)/59) – explicitly specifies that the “structured discussions with the aim of developing a multilateral framework on investment facilitation” […] “shall not address market access, investment protection, and investor-State Dispute Settlement” (emphasis added).[1]

This is why the 2018 Model WTO focuses on investment facilitation. Nevertheless, it was considered interesting for participating students – merely for educational purposes – to consider also investment promotion and market access (in Committee 5), as well as investment protection (Committee 6).  It is hoped that this will lead to a better understanding of the scope of investment facilitation and how it differs from these other areas.

We thank you for your understanding.