The Permanent Sovereignty Over Natural Resources:
How It Has Been Accommodated Within the Evolving Economy
by Janeth Warden-Fernandez

Before embarking on an analysis of the recent and current developments of the Principle of Permanent Sovereignty over Natural Resources (PSNR) in relation to the new phenomenon of globalization, it is essential to touch upon the development of this principle of international law, which commenced as a ‘political claim' of the states formerly designated as "underdeveloped countries"¹ and the new ex-colonial countries who demanded the recognition of their right to participate in the development of their natural resources and the  benefits accruing from their exploitation.

During this period the UN adopted several resolutions in which the member States attempted to reach an agreement beneficial to all of them.  Within these resolutions the scope of the resources and activities covered by the principle of Permanent Sovereignty was enhanced from terrestrial and marine natural resources to all wealth, natural resources and economic activities for the exploitation of such resources.²  The most relevant resolutions were:

• General Assembly Resolution 523 (VI), 1952  "Integrated Economic Development and Commercial Agreements".  This was the first instrument which recognized the right of the developing countries to independently manage their natural resources, with the aim of realizing their plans for economic development with the obligation to use these resources with a view to integrating such development within the general expansion of the world economy.
• General Assembly Resolution 626 (VII), 1952 "Right to Explore Freely Natural Wealth and Resources".  This resolution was adopted after a draft proposed by Uruguay, which by that time had a very good reputation as a country, which honoured compromises, related to foreign investment.  Uruguay argued in its proposition that for the economic development of the under-developed countries it was necessary to recognize their right to "freely exploit their natural wealth and resources" in accordance with the stipulation of the UN Charter related to the principle of self-determination.  This draft was the object of strong opposition from countries in both the developed and developing world during the initial debates, especially because of their fears that the inclusion of  "nationalization" would act as a disincentive to foreign investment.  Finally, after it was agreed that the mention of nationalization should be avoided, the new drafting was adopted.³  Debates during the adoption of this resolution made clear the relevance within the context of international relations, that by this stage the developing countries had the right to freely manage their wealth and natural resources.⁴
• General Assembly Resolution 1314 (XIII), 1958 "Recommendations Concerning International Respect for the Rights of Peoples and Nations to Self-determination".⁵  This resolution stipulated inter alia, the Permanent Sovereignty over Natural Resources as a part of the right to Self-determination.  This was a very important instrument, since it established the Commission on Permanent Sovereignty over Natural Resources which undertook preliminary studies and surveys of the position of the PNRS which culminated in the adoption of the General Assembly Resolution 1803 (XVII), 1962 "Declaration on Permanent Sovereignty over Natural Resources".
• General Assembly Resolution 1803 (XVII), 1962  "Declaration on Permanent Sovereignty over Natural Resources".⁶  This Resolution was adopted by a wide majority of the Member States and was a result of an outstandingly comprehensive survey of the status of the PSNR.⁷  It has been considered also as the most important resolution that comprises a turning point for the PSNR because
  a) It sets down this right as a principle of International Law and
  b) It established a common ground for the interests of the majority of the Member States (developed and developing countries).

It declares on the one hand the inviolable exercise of the right to PSNR and also the right to nationalize or expropriate on the grounds of "public utility, security or the national interest".  On the other hand it lays down the legal obligation for the payment of "appropriate compensation" according to International Law and in the event of conflict, it established the possibility of agreement between the States for settlement through arbitration or international adjudication.⁸

The three General Assembly Resolutions on the Establishment of an New International Economic Order (NIEO) - (3202 (S-VI) – Declaration on the Establishment of a New International Economic Order; 3202 (S-VI) – Programme of Action on the Establishment of a New International Economic Order and 3281 (XXIX) – Charter of Economic Rights and Duties of States (CERDS)) adopted in 1974- enlarged the scope of Permanent Sovereignty to include "all its wealth, natural resources and economic activities".⁹

These resolutions -considered as the most important adopted by the General Assembly in economic matters- were the result of the crusade of the Third World against the economic domination of the Western Countries, that they perceived as exploitation with a disparate distribution of benefits and an inhibiting factor in the struggle of the developing countries to achieve social and economic development.  The wording of the Art. 2 of the CERDS related to the compensation for expropriation and the settlements of disputes, shows the influence of the developing countries as followers of the Calvo Doctrine, in which these issues will be decided within the framework of the domestic law.¹⁰ During this époque the Third World saw the adoption of a nationalistic approach in which the states carry out their business directly within an "inward-orientated, import-substituting state-engineered model of economic development" as the only way to achieve economic development.¹¹  The consequence of the implementation of this radical affirmation of Permanent Sovereignty over Natural Resources was a serious setback to the expectations of the Third World.  These developing countries erred in the belief that they could directly manage all their business.  The result of this new policy was the setting up of costly infrastructure with the unavoidable bureaucratic augmentation without the expertise to ensure profitability.  Consequently the benefits of their self-run business failed to contribute to the economic development of these countries, because of excessively high management costs and the fact that benefits of these state-enterprises were inequitably distributed between the community and the elite.  This nationalistic approach created a good opportunity for the enrichment of the most favoured social classes in the developing countries.  The State enterprises became a vehicle to repay political favours through well paid jobs and consequently a breeding ground for corruption.  Although the developed countries that participated in such negotiations saw the resolutions of the NIEO as untenable, they did not oppose their adoption, because they feared that the developing countries would opt for communism and alignment with the Eastern Bloc. At the time the NIEO were adopted, the developing countries did not clearly understand that international business could function appreciably well with minimal intervention from states of any state control.

In conclusion, the adoption of the precepts of the NIEO proved inadequate in achieving the expected economic development of the third world countries.  On the contrary in many cases where countries, pursuant to the policies, adopted state-controls, they suffered from the stagnation of their productive capabilities.¹² Consequently the third world countries started again to re-orient their policies towards the attraction of foreign investment in line with the prevailing global economy.  Privatization in developed countries such as US and UK provided the impetus for economic growth, the creation of jobs, and the honing of the effectiveness of their industries on a competitive plane.  Also the multinationals began to increase their investment in the developing countries in response to the changing investment climate. 

In the 1990 the member Countries of the Organization for Economic Cooperation and Development (OECD)¹³ conceived the idea of negotiating a multilateral treaty for regulating global investment flows, which initially would legally bind only the member States, but with time would be binding for all other States.  The negotiations of this Multilateral Agreement on Investment (MAI) which failed to be adopted in 1998 started on a wrong note.  Its inception was shrouded in secrecy and lacked the participation of stakeholders who at the end will be the subject to the regime covered by the rules.  It failed to consult national parliaments, government departments and civil society.  This secrecy led the NGOs to instigate a campaign to allow consultation with all the relevant stakeholders on the proposed regulations of the MAI.¹⁴

When the stipulations of the MAI are analyzed in depth, it became evident that taking into account its far-reaching approach, it did not have the necessary political support that was needed in the past to achieve the adoption of other multilateral treaties such as  GATT/WTO and NAFTA.  The MAI did not have the support of the United States who saw that its implementation, far from providing a benefit for it, would threaten their international policies for foreign investment.¹⁵

• The selection of the OECD as a negotiating forum was an ill conceived. The OECD is not the most representative organisation, for a treaty whose main objective was to establish a comprehensive framework for the liberalization and protection of foreign investment that would be legally binding not only on its members states, but also other states willing to endorse the agreement.  Consequently, any agreement reached by the OECD would reflect the policies of the developed countries who are the major source of outflows of investment.  Therefore, the MAI was seen as an instrument of the developed countries to gain rapid access to markets subject to regulations related to inward investment.
• The goals fixed by the MAI would constrain and undermine the sovereign right of the countries to intervene in market mechanisms.  There was an absence of equilibrium between the liberalization and the national regulations of each state.
• The assignation  of the negotiations to an outsider group of the OECD resulted in an imperfect analysis of the implications of the liberalization in areas such as taxation or intellectual property rights.  Therefore these issues had to be submitted to national governments to negotiate acceptable exceptions.¹⁶  Also the consultations with specialists of different areas  leads to the adoption of wide carve-outs and/or provisions for special exceptions.

The MAI lays down provisions related to the protection of the investors and/or investments.  Under its dispositions, the foreign investors would be not be discriminated against and their investments would be subject to the national treatment (NT) and most favoured nation (MFN) treatment.  The MAI went further, stipulating the obligation of its member states to give investors from  other MAI country "no less favourable" treatment than  it gives either " to its own investors or those from another country".¹⁷  This stipulation would give the foreign investors,  not only a minimum standard treatment but also the guarantee of the highest treatment in the host state, which in cases could be superior to the treatment  provided for national investors.  This disposition would lead to the offer of incentives to attract the foreign investor and the promotion of  international competition between states, which has been seen as a factor of misrepresentation of the principles of international investment.  Such regulations would discriminate against the national investors and could erode the validity of national regulations, because the states would be obliged to accommodate these international standards, without taking adequate account of their own needs.¹⁸ This provision would create conflicts within host States, because they would allow the foreign investors to oppose the application of national regulations, under the pretext that the  norms are biased.  The non-discrimination clause impelled France to withdraw from the negotiations, in view of the fact that this regulation could endanger the francophone culture, especially facilitating the free access of states such as United States to the media industry.¹⁹  This clause of non-discrimination went further, because with the MAI the protection would be extended to the pre-investment stage (Likewise the NAFTA and US BIT model)²⁰.  This provision has been seen as contrary to international law, which prescribes that it is within the sovereignty of the States to "control the entry" of foreign investment.

With the stipulation of free access for foreign investors and the obligation of the states to permit it, in the case of development of natural resources, the foreign investors would enjoy equal rights to the nationals in terms of access to these resources.²¹  This regulation would obviously cause conflicts and concern, in view of the fact that its application would infringe the International Principle of Permanent Sovereignty over natural resources.²²  The grounds on which States could claim exceptions to free-access in the areas of natural resources can be summarized as follows:

1. The land belongs to the nationals and therefore they should have priority in the decision of  how to develop their natural resources.  Moreover, they have the sovereign right to use them, taking into account that natural resources are finite and they are needed for their livelihood and primary needs for food.
2. It has been demonstrated that the conservation of natural resources could be more readily achieved if their exploitation is in  the hands of the locals, because with the bestowal  of a free access to foreign investors to develop the natural resources they could be rapidly depleted due to over-exploitation.  Moreover the manner in which natural resources are exploited must conform to a procedure that guarantees that the benefits are deployed as far as possible for the economic development of the States.  This ideal situation is not guaranteed when the exploitation is totally in the hands of foreign companies who may tend, for example to ‘gold plate' mining expenditure in order to maximize profitability.
3. The  free-access for the foreign investor for the development of natural resources, could conflict with the rules of conservation established by the host States, since the multinational companies, unlike the indigenous population, lack any strong tie with the land which is object of the exploitation.  The MAI did not provide that the use of these rights by foreign investors would be subject to the observance of national and international standards for sustainable development.  With the approach of the MAI the natural resources would be treated as a commodity which would fall within the laws of the capital market.

3.1.4 Repatriation of profits and other Income

Another provision, which generated concern, relates to the absolute obligation of the states to permit the repatriation of profits and other earnings²³.  This provision would affect the balance of payments in times of economic crises.  It also would encourage the locals to associate with foreign members of the MAI to repatriate funds abroad or take it out of the country, taking advantage of the incentives for foreign investors thereby avoiding the national regulations specially those related to tax.

3.1.5 Settlement of disputes

This provision will give leverage to powerful countries and would be unfairly prejudicial to the poorer countries, because they the lack the resources to hire the ultra costly services of international lawyers.²⁴  The MAI would give sweeping protection and rights to the foreign investors while fixing only obligations for the host States.²⁵  According to the provisions of the draft the investors could be sued before the national courts but they can not be subjects of international arbitration initiated by the Host State.

3.1.6 Expropriation

The terms of the MAI are very restrictive in relation to expropriation.²⁶  It stipulates its prohibition, which would be contrary to the dispositions of the Art. 2 of the Charter of Economic Rights and Duties of States, considered as the most authoritative statement on International Law, which contemplates the right to "nationalize, expropriate or transfer ownership of foreign property". Therefore the MAI with this provision, instead of creating more international harmonization would diminish the sovereign rights of the States which would lead to conflict.  In the case of land-uses the disposition would have a very broad effect on the sovereign power of the states to promulgate regulations related to their development in a sustainable form.²⁷  The implementation of this clause in countries with a history of corrupt governments would provide security to the investments of investors, without taking into account that these transactions may have been permitted under dubious circumstances, and that in some cases they are contrary to the national interests.²⁸

Ultimately, the MAI failed in its effort to promote a global framework for the protection of investment and the liberalisation of its rules.  Therefore, as is pointed out by scholars, this result and the reluctance of the GATT/WTO to continue the negotiations with the aim of promoting a Multilateral Agreement on Investment, the next step would be an increase of Bilateral Treaties and the "organic growth" of the regional and sectoral treaties, such as the Energy Charter Treaty and the NAFTA., which will provide for the protection of foreign investments.

4 Conclusions

The interpretation and application of the concept of Permanent Sovereignty over Natural Resources has changed during the last fifty years, evolving from a political claim to a principle of International Law.  The experiences of the democratic countries with the initial nationalistic approach did not produce very beneficial result.  Instead of enhancing economic growth it appears to have contributed to stagnation in their development.  As a consequence of this experience the statist approach changed for a more moderate one, in which the States do not give away their sovereign right over their natural resources, but through national regulations accommodate their development within the context of the new global economy.  Also, the states foresaw the need to attract private investment as one of the driving forces to create economic growth and national wealth.  The actual situation is dominated by a more flexible concept of sovereignty, because it must adapt to global demands.  Open market economies will prosper while introspective ones will remain underdeveloped.

The foundering in the negotiations of the MAI demonstrates that the developed countries are also not yet ready to give away their national sovereignty in the interest of creating a multilateral agreement for promoting liberalization and protecting investment without providing for proper state regulation. Furthermore, the implementation of the MAI in developing countries would have had devastating effects.  It would bias the conditions for capital investment through allowing foreign investors special rights and benefits which would lead to anti-competitive behavior which will not help the economic growth of these countries.  The failure of the MAI and the disinterest of continuing the negotiations in other forums leads one to conclude that the adoption of an international framework, which protects the global investment, is by now an utopian concept.  Therefore in their international relations the states will rely on the negotiation of BITs and MITs, such as those already in existence. Perhaps the conflicts that originated during the negotiations of the MAI have demonstrated a swing once again towards a moderate nationalist approach related to private investment, with a more democratic participation of the local community, within the structure of an international framework which recognizes and respects the sovereignty of the states.

Thus Permanent Sovereignty over Natural Resources, while still a fundamental principle that justifies the right of the States to freely use and manage their natural resources with the aim of promoting their development, without hindrance from external influences, has adjusted to the new trends of  globalisation taking into account the interest of other states and humankind

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Endnotes

¹ After 1960 this term of ‘underdeveloped countries' was changed for "developing countries".  Under this category fall the Countries of Latin America, Asia (exception of Japan) Africa  and some European Countries, such as Albania, Cyprus and Malta. N. Schrijver, Sovereignty Over Natural Resources 10 (Cambridge: Cambridge University Press, 1997).   Return to text
² In the last two decades the tendency is to return to the original scope of the Permanent Sovereignty that is over ‘Natural Resources and Wealth. See Id, at 11-12.   Return to text
³ The operative part of the Resolution was modified according with the Indian Amendment, as follows:
"Recommends all Member States in the exercise of their right freely to use and exploit their natural wealth and resources wherever deemed desirable by them for their own progress and economic development, to have due regard, consistently with their sovereignty, to the need for the maintenance of mutual confidence and economic co-operation among nations; Recommends further all Member States to refrain from acts, direct or indirect designed to impede the exercise of the sovereignty of any State over its natural resources." See Schrijver, supra note 1, at 46.   Return to text
⁴ United States voted against the Resolution, because there was no  mention of the states obligation "to recognize the rights of private investors under international law, including treaties and other international agreements". A. Dias, International Law for Global Environmental Cooperation: A critical Assessment of the Scope and Role of Permanent Sovereignty over Natural Resources, Report ST/TCD/21 for the United Nations (New York: UN Department for Development Support and Management Services, 1994).   Return to text
⁵ Dias points out how within this Resolution the concept of PNSR was the consequence of the claim for freedom of the colonies and self-determination. Also, this right was vested on the peoples rather than on the States. See id, at 2.   Return to text
⁶ United Nations Conference on Trade and Development, International Investment Instruments: A Compendium Vol I, 21 (New York: United Nations, 1996).   Return to text
⁷ This study which was the object of praise from the Member States, was qualified as a "remarkable achievement". It contained: "National Measures affecting the ownership or use of natural resources by foreign nationals or enterprises; international agreements affecting the foreign exploitation of natural resources; international adjudication and studies prepared under the auspices of inter-governmental bodies relating to the property and contracts of aliens; status of permanent sovereignty over natural wealth and resources in newly independent States and in non-self-governing and trust territories and economic data pertaining to the status of sovereignty over natural wealth and resources in various countries" See Schrijver, supra note 1, at 57-76.  
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⁸ This Declaration was considered as a well-adjusted equilibrium between the requirement of safeguarding the permanent sovereignty over natural resources and the requirement to safeguard the interests of foreign investors in compliance with the International Law. See id, at 85.   Return to text
⁹ The Art 2 of the CERDS stipulates that :
"1.-Every State has and shall freely exercise full permanent sovereignty, including possession, use and disposal, over all its wealth, natural resources and economic activities.
2.-Each State has the right:(a)To regulate and exercise authority over foreign investment within its national jurisdiction in accordance with its laws and regulations and in conformity with its national objectives and priorities. No State shall be compelled to grant preferential treatment to foreign investment; (b) To regulate and supervise the activities of transnational corporations within its national jurisdiction and take measures to ensure that such activities comply with its laws, rules and regulations and conform with its economic and social policies. Transnational corporations shall not intervene in the internal affairs of a host State. Every State should, with full regard for its sovereign rights, co-operate with other States in the exercise of the right set forth in this subparagraph; (c) To nationalize, expropriate or transfer ownership of foreign property, in which case appropriate compensation should be paid by the State adopting such measures, taking into account its relevant laws and regulations and all circumstances that the State considers pertinent. In any case where the question of compensation gives rise to a controversy, it shall be settled under the domestic law of the nationalizing State and by its tribunals, unless  it is freely and mutually agreed by all States concerned that other peaceful means be sought on the basis of the sovereign equality of States and in accordance with the principle of free choice of means." See United Nations Conference on Trade and Development, supra note 6 , at 61   Return to text
¹⁰ For a more detailed account of the Calvo Doctrine, See Schrijver, supra note 1, at 177-181.   Return to text
¹¹ T. Waelde, A requiem for the "New International Economic Order" The Rise and Fall of Paradigms in International Economic Law,  Vol 1-2 Art. On Journal- CEPMLP <http://www/dundee.ac.uk/cepmlp/htlm/article-2h>.   Return to text
¹² See Id, at 12.   Return to text
¹³ There are twenty nine (29)  members of the OECD They share  the principles of the "market-economy, pluralist democracy and respect for Human rights. These countries are: Australia, Canada, Finland, Greece, Ireland, Korea, The Netherlands, Poland, Sweden, United Kingdom, Austria, Czech Republic, France, Hungary, Italy, Luxembourg, New Zealand, Portugal, Switzerland, United States, Belgium, Denmark, Germany, Iceland, Japan, Mexico, Norway, Spain, and Turkey. <http//www.oecd.org/about/general/member-countries.htm>. visited on 20 January 2000.
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¹⁴ By 1998 the NGO position was that "There is an obvious need for multilateral regulation of investments in view of the scale of social and environmental disruption created by the increasing mobility of capital. However, the intention of the MAI is not to regulate investments but to regulate governments. As such, the MAI is unacceptable". This campaign confirmed once again the strong legacy of the precepts of the Rio Earth Summit of "participation, consultation and sustainable development". N. Mabey. Defending the Legacy of Rio: the Civil Society Campaign Against the MAI, in Regulating International Business 60 (S. Piccioto and R. Mayne (eds.), 1999).   Return to text
¹⁵ Professor Waelde points out that "United States support for Multilateral Treaties where it is not the prime mover is rarely very keen, as its withdrawal from the Energy Charter Treaty illustrates. As far as the United States is concerned a multilateral approach is good as long it covers United States actions, but not if threatens to constrain United States freedom of action." T. Waelde, International Law of Foreign Investment: Towards Regulation by Multilateral Treaties 57 Bus. Law Int'l, 1 (1999).
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¹⁶ The designation by the OECD Council of Ministers of a high level Negotiating Group outside the OECD, was done with the only aim of accelerated the discussions and not to promote haggling between national positions concentrating on the scope of the undertakings to be liberalised, which is exactly what happened.   Return to text
¹⁷ The wording of the  drafting  of the MAI related to the Treatment of Investors and Investment –  is:
"1. Each Contracting Party shall accord to investors of another Contracting Party and to their investments, treatment no less favourable than the treatment it accords [in like circumstances] to its own investors and their investments with respect to the establishment, acquisition, expansion, operation, management, maintenance, use, enjoyment and sale or other disposition of investments.
2. Each Contracting Party shall accord to investors of another Contracting Party and to their investments, treatment no less favourable than the treatment it accords [in like circumstances] to investors of any other Contracting Party or of a non-Contracting Party, and to the investments of investors of any  other Contracting Party or of a non-Contracting Party, with respect to the establishment, acquisition, expansion, operation, management, maintenance, use, enjoyment, and sale or other disposition of  investments,
3. Each Contracting Party shall accord to investors of another Contracting Party and to their investments the better of the treatment required by Articles 1.1 and 1.2, whichever is the more favourable to those investors or investments."  The Multilateral Agreement on Investment: The MAI negotiation texts (as of 24 April, 1998), at 13,  in <http://www.oecd.org//daf/cmis/mai/maitext.pdf>, visited on January 16, 2000.
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¹⁸ S. Piccioto, A Critical Assessment of the MAI, in Regulating International Business 92-95 (S.Piccioto and R. Mayne (eds.) 1999).   Return to text
¹⁹ During the negotiations the French government insisted in including an exception related to the national policies for the promotion and protection of cultural and linguistic diversity. This exception would include not only restrictions on foreign ownership of media, but also rules related to the obligation of the TV channels to made a proportion of material locally or in French.   Return to text
²⁰ The regulation stipulates that the non-discrimination would be guarantee for the "establishment, acquisition, ..". See Article (1), supra note 17.   Return to text
²¹ A clear analysis of the possible implications of the MAI on the use of Natural Resources is provided by Lawerence Tshuma, Implications of the MAI for Use of Natural Resources and Land,, in Regulating International Business 109-125 (S.Piccioto and R Mayne (eds), 1999.   Return to text
²² Within this particular Norway advocated for the prevalence of the dispositions of the UN Convention of the Law of the Sea (UNCLOS) over that from the MAI , excluding  free access for fishing and Natural Resources.  Return to text 
²³ The Article IV (4) of the MAI drafting, lays down that:
"4.1. Each Contracting Party shall ensure that all payments relating to an investment in its territory of an investor of another Contracting Party may be freely transferred into and out of its territory without delay. Such transfers shall include, in particular, though not exclusively : a) the initial capital and additional amounts to maintain or increase an investment ;b) returns; c) payments made under a contract including a loan agreement; d) proceeds from the sale or liquidation of all or any part of an investment ; e) payments of compensation under Articles 2 and 3; f) payments arising out of the settlement of a dispute; g) earnings and other remuneration of personnel engaged from abroad in connection with an investment.
4.2. Each Contracting Party shall further ensure that such transfers may be made in a freely convertible currency. [Freely convertible currency means a currency which is widely traded in international foreign exchange markets and widely used in international transactions.] or [Freely convertible currency means a currency which is, in fact, widely used to make payments for international transactions and is widely traded in the principal exchange markets]
4.3. Each Contracting Party shall also further ensure that such transfers may be made at the market rate of exchange prevailing on the date of transfer.
4.4. In the absence of a market for foreign exchange, the rate to be used shall be the most recent exchange rate for conversion of currencies into Special Drawing Rights.
4.5. Notwithstanding Article 4.1(b) above, a Contracting Party may restrict the transfer of a return in kind in circumstances where the Contracting Party is permitted under the GATT 1994 to restrict or prohibit the exportation or the sale for export of the product constituting the return in kind. Nevertheless, a Contracting Party shall ensure that transfers of returns in kind may be effected as authorised or specified in an investment agreement, investment authorisation, or other written agreement between the Contracting Party and an investor or investment of another Contracting Party.
Notwithstanding paragraphs 1 to 5 of this Article, a Contracting Party may delay or prevent a transfer through the equitable, non-discriminatory and good faith application of measures:(a) to protect the rights of creditors, (b) relating to or ensuring compliance with laws and regulations (i) on the issuing, trading and dealing in securities, futures and derivatives,(ii) concerning reports or records of transfers, or (c) in connection with criminal offences and orders or judgements in administrative and adjudicatory proceedings; provided that such measures and their application shall not be used as a means of avoiding the Contracting Party's commitments or obligations under the Agreement. See MIA draft, supra note 17 ,at 53.   Return to text
²⁴ Waelde and Kolo pointed out that "increased investment liberalisation which allows foreign investors a direct right of action against host governments will cripple democratic governments regulatory authority thereby compromising public safety and the environment". Multilateral Investment Treaties and Environmental Expropriation of Foreign Investment, On-line Journal – CEPMLP, Vol 5-2 Article, at http://www.dundee.ac/uk/cepmlp/htlm/article5-2.htm, visited on January 5, 1999.
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²⁵ Some NGOs considered that the MAI would give to Transnational Companies a "license to loot the human, social and environmental resources of the globe for their own profit". N. Mabey, Defending the Legacy of Rio: the Civil Society Capaign against the MAI, in Regulating International Business 65(S. Piccioto & R. Mayne (eds), 1999)
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²⁶ The clause  related to Expropriation and Compensation reads as follow:
"2.1. A Contracting Party shall not expropriate or nationalise directly or indirectly an investment in its territory of an investor of another Contracting Party or take any measure or measures having equivalent effect (hereinafter referred to as "expropriation") except: a) for a purpose which is in the public interest, b) on a non-discriminatory basis, c) in accordance with due process of law, and d) accompanied by payment of prompt, adequate and effective compensation in accordance with Articles 2.2 to 2.5 below.
2.2. Compensation shall be paid without delay.
2.3. Compensation shall be equivalent to the fair market value of the expropriated investment immediately before the expropriation occurred. The fair market value shall not reflect any change in value occurring because the expropriation had become publicly known earlier.
2.4. Compensation shall be fully realizable and freely transferable
2.5. [Compensation shall include interest at a commercial rate established on a market basis for the currency of payment from the date of expropriation until the date of actual payment.]
2.6. Due process of law includes, in particular, the right of an investor of a Contracting Party which claims to be affected by expropriation by another Contracting Party to prompt review of its case, including the valuation of its investment and the payment of compensation in accordance with the provisions of this article, by a judicial authority or another competent and independent authority of the latter Contracting Party. "See MAI draft, supra note 17, at 57.  Return to text
²⁷ The foreign investors could use a disposition of such scope to evade the national  provisions over Land-uses under the pretext that the effect of its implementation would result in an "expropriation".   Return to text     
²⁸ Mabey points out how this type of clause would provide encouragement for the foreign investors to make deals with " undemocratic and corrupt regimes". With the overprotection of the MAI afforded to foreign investors, all the negative effects on the national economy due to corrupt  on inept dealings  will be absorbed by the host Country and therefore would not affect the foreign investors interest. N. Mabey, Defending he Legacy of Rio: The Civil Society Campaign Against the MAI, in Regulating International Business 68 (S. Piccioto and R. Mayne (eds.), 1999).   Return to text

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