PLEASE STRICTLY USE MATERIAL PROVIDED.
Answer each one of the separated short questions and subjections.
For purposes of the Exam, imagine yourself as a policy analyst for Prime Minister Juana Soto of the relatively small, fictional, Caribbean island of Rendonia. The population of Rendonia is approximately 6.6 million, with a per capita GDP of US $20,190. Rendonia gained Independence from the Strasburg Kingdom in 2005, following a protracted period of violent popular resistance to colonial rule, led by Rendonia’s two large indigenous communities: the Robles and the Suzukis.
Rendonia has historically been the recipient of significant inward FDI, primarily from large Strasburg state-owned enterprises (SOEs). Rendonia is endowed with large oil deposits, which were historically exploited by Scherzer Petroleum, Strasburg’s state-owned petroleum company. However, following Independence, Rendonia’s first Prime Minister Dave Martinez, formed Rendonia’s largely state-owned petroleum company, Parra Petroleum, which has grown steadily since that time. Soto envisions even larger growth for Parra in the future. He hopes that Parra will eventually expand its operations to neighboring independent island states and participate in joint ventures with US and European firms in oil exploration operations in the US, French, and British territorial waters of the overseas protectorates of these countries.
In 2005, former Prime Minister Martinez signed a concession agreement with Scherzer Petroleum to continue conducting Rendonia’s oil operations for 20 years. Thus, Rendonia’s agreement with Scherzer will terminate in less than five years, and at that time, Soto would like Parra Petroleum to take over all operations formerly controlled by Scherzer. For this to be feasible, significant foreign investment in Parra will be necessary, as well as joint ventures with other foreign petroleum companies.
Because Prime Minister Juana Soto’s professional background is in the medical field, having become one of the most acclaimed cardiologists in her country prior to her foray into politics, Soto knows little about BITs. Rendonia has only signed one bilateral investment treaty, with Strasburg in 2005, which provides protection for SOEs, as is typical of nearly all BITs. The treaty is currently in force, though Strasburg’s investors have never brought a claim against Rendonia alleging a BIT violation. Soto understands that Rendonia signed its agreement as part of its negotiation with Strasburg over Rendonia’s Independence. As a result of this negotiation, Rendonia also became a member of the International Centre for the Settlement of Disputes (ICSID). Rendonia’s neighboring island states, as well as neighboring continental states in Central and South America, have signed numerous BITs with European nations and the United States. Now Prime Minister Soto wonders if she should implement a BIT program for Rendonia, as many of her neighboring states have done. She has brought you into her executive office at 2019 Rizzo Ave., in Rendonia’s capital city of Treaturn, seeking your expertise as a policy analyst.
Please include what you would tell Prime Minister Soto in your responses to the exam questions found below. You may use an informal tone, because you are engaged in an informal conversation with the Prime Minister, but you still must attempt to organize your thoughts effectively, write clearly, and reference course materials and any other source you use for your information.
1. Prime Minister Juana Soto asks you to briefly explain/define what Bilateral Investment Treaties are and what they contain.
2. The Prime Minister proceeds to ask you to explain the potential advantages and disadvantages for both Rendonia, and potentially for Parra Petroleum, of signing Bilateral Investment Treaties with the US, the UK, and France, as well as with other smaller neighboring states.
Prime Minister Soto expresses to you her greatest appreciation for the clarity and thoughtfulness of your response. You then proceed to review the text of various Model BITs with the Prime Minister, during which time she brings to your attention the differences in the “Fair and Equitable Treatment” clauses contained in the 1994 US Model BIT and the 2012 US Model BIT, respectively.
Article II, 3 (a) of the 1994 Model BIT, used by the United States in its bilateral investment treaties, contains the following “Fair and Equitable Standard of Treatment” provision:
Each Party shall at all times accord to covered investments fair and equitable
treatment and full protection and security, and shall in no case accord treatment less
favorable than that required by international law.
Article 5 of the 2012 Model BIT, used by the United States in its bilateral investment treaties, contains the following “Fair and Equitable Standard of Treatment” provision:
1. Each Party shall accord to covered investments treatment in accordance with customary international law, including fair and equitable treatment and full protection and security.
2. For greater certainty, paragraph 1 prescribes the customary international law minimum
standard of treatment of aliens as the minimum standard of treatment to be afforded to covered investments. The concepts of “fair and equitable treatment” and “full protection and security” do not require treatment in addition to or beyond that which is required by that standard, and do not create additional substantive rights. The obligation in paragraph 1 to provide:
(a) “fair and equitable treatment” includes the obligation not to deny justice in criminal, civil, or administrative adjudicatory proceedings in accordance with the principle of due process embodied in the principal legal systems of the world;
(b) “full protection and security” requires each Party to provide the level of police protection required under customary international law.
A footnote in the 2012 US Model BIT also states that “Article 5 [Minimum Standard of Treatment] shall be interpreted in accordance with Annex A.” Annex A reads as follows:
The Parties confirm their shared understanding that “customary international law” generally and as specifically referenced in Article 5 [Minimum Standard of Treatment] and Annex B [Expropriation] results from a general and consistent practice of States that they follow from a sense of legal obligation. With regard to Article 5 [Minimum Standard of Treatment], the customary international law minimum standard of treatment of aliens refers to all customary international law principles that protect the economic rights and interests of aliens.
Prime Minister Soto is intrigued by these differences and asks you the following questions:
1. What might explain the change that occurred in the text of the FET clause in the US’s 2012 Model BIT from that which was included in the US’s 1994 Model BIT?
2. Do these FET provisions seem vague to you as a policy analyst? What are the advantages and disadvantages of having a more or less vague Fair and Equitable Treatment Standard provision for the interests of both Rendonia and Parra Petroleum?
Prime Minister Soto again expresses to you her deepest gratitude for the quality of your analysis. Prime Minister Soto then reviews with you her own personal sacrifices made toward the achievement of Rendonia’s Independence as well as the significant losses suffered by the people of Rendonia in their hard-fought campaign against colonial rule. But given your response in Part 2, with even greater urgency, yet with the elegance and wisdom of a woman seasoned by decades of diligent study and personal trials, she presses you on your views regarding the following questions:
1. How would signing multiple BITs potentially impact Rendonia’s adolescent democratic institutions?
2. How might signing multiple BITs potentially impact the Rendonian public’s view of Rendonia’s democracy?
3. How might signing multiple BITs potentially impact the views of other states and potential foreign investors regarding Rendonia’s democracy?
As you conclude your remarks under Part 3, the Minister of Internal Affairs, Howie Kendrick, bursts into Prime Minister Soto’s office and disrupts your meeting. After speaking in confidences with Kendrick, Prime Minister Soto returns to reveal to you the reason for the interruption. A local NGO associated with the Robles indigenous group has just released a report revealing Scherzer Petroleum’s gross negligence in disposing of waste-water used in its petroleum refining operations, which, if true, would be in violation of Rendonian law. Soto relates that said disposal has severely contaminated the Long River, which runs through the heart of Robles community land, and from which the Robles indigenous community obtains 80% of its drinking water. Soto is furious and asks your opinion on the following matters:
1. If Rendonia terminates immediately its concession agreement with Scherzer Petroleum, what are Scherzer’s legal options under Rendonia’s BIT with the Strasburg Empire?
2. Would a cancellation of the concession does contract likely constitute a violation of the Rendonia-Strasburg BIT?
3. Approximately how long do these types of cases take to be resolved?
4. Approximately how much would it cost Rendonia to defend itself, given the costs of other similar cases?
5. What do you think the likely outcome of the case would be? Why?
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