FRANKFURT—December 3, 2009—As practitioners, experts and investors gather to commemorate the signing of the first bilateral investment treaty ever, they may wish to consider whether this is an occasion to celebrate, or reflect on the implications of such treaties on developing countries, said Nathalie Bernasconi-Osterwalder of the International Institute for Sustainable Development.

As part of the celebrations, Pakistan Prime Minister Yousaf Raza Gillani signed a new economic agreement with Germany at an event this week to replace the first bilateral investment treaty signed 50 years ago, in 1959. Since then, there have been over 2,700 such treaties, signed by at least 179 countries.

"The celebrations fail to focus on the implications of these treaties for developing countries, which are based on a format designed to protect the interests of foreign investors and nothing else," said Bernasconi-Osterwalder, senior international lawyer and head of IISD's investment program.

Over 77 countries, the majority of whom are developing states, have faced the consequences of arbitrations launched by investors under such treaties. These agreements are unique in the world of treaties, as they allow private investors to bring a claim directly against states to challenge a wide range of governmental action, including domestic regulation. 

"Pakistan may be expecting increased investments and other benefits from the new treaty, but in reality the German-Pakistan treaty is only about Pakistan providing guarantees and assurances to the German investors in Pakistan, not the other way around," she said.

"The diplomatic protocol associated with these agreements, which have often been described as 'photo opportunities,' continues to exert pressure on states to conclude such agreements, despite the growing threat of investor-state claims, " she said.

She added that Germany's own conduct has recently been challenged by a Swedish investor under the Energy Charter Treaty, which may have implications with respect to placing boundaries on the government's ability to implement environmental and social policies.

"There are stark realities that underlie the complexity of these treaties. What we need now is greater transparency, predictability, and new thinking.  We need to remove the layers of complexity that undermine the social, economic and environmental aspirations of the developing countries that enter into these agreements."

For additional comment, please contact Nathalie Bernasconi-Osterwalder by email: nbernasconi@iisd.org.

For more information, please contact IISD media and communication officer, Nona Pelletier
Phone: +1-(204)-958-7740, Cell: +1-(204)-962-1303.