VIETNAM NATIONAL UNIVERSITY HO CHI MINH CITY UNIVERSITY OF ECONOMICS AND LAW FACULTY OF ECONOMIC LAW GRADUATION THESIS STABILIZATION CLAUSES IN INTERNATIONAL INVESTMENT AND ITS IMPACTS ON THE PROTECTION OF THE ENVIRONMENT IN SUSTAINABLE DEVELOPMENT GOALS INSTRUCTOR: LLM. NGUYEN DINH DUC STUDENT: TRAN THANH TRA ID STUDENT: K195022066 HO CHI MINH CITY, 04/2023 VIETNAM NATIONAL UNIVERSITY HO CHI MINH CITY UNIVERSITY OF ECONOMICS AND LAW FACULTY OF ECONOMIC LAW GRADUATION THESIS STABILIZATION CLAUSES IN INTERNATIONAL INVESTMENT AND ITS IMPACTS ON THE PROTECTION OF THE ENVIRONMENT IN SUSTAINABLE DEVELOPMENT GOALS INSTRUCTOR: LLM. NGUYEN DINH DUC STUDENT: TRAN THANH TRA ID STUDENT: K195022066 HO CHI MINH CITY, 04/2023 DECLARATION I hereby declare that the graduation thesis: “Stabilization clauses in international investment and its impacts on the protection of the environment in sustainable development goals” is my independent research work under the guidance of Instructor: LLM. Nguyen Dinh Duc; and does not have any copying by others.
The topic and the content of the thesis are the products that I have made efforts to research during my study at university. The results presented in the thesis are completely honest, I would like to take full responsibility and discipline of the subject and university if there are problems. Ho Chi Minh City, April 9, 2023 Student Tran Thanh Tra LIST OF ABBREVIATIONS BTC Baku-Tbilisi-Ceyhan pipeline CSCs Contractual Stabilization Clauses FDI Foreign Direct Investment HGA Host Government Agreement i. That is IFC International Finance Corporation LSCs Legislative Stabilization Clauses OECD Organization for Economic Co-operation and Development PSA Production Sharing Agreement PSC Production Sharing Contract SDGs Sustainable Development Goals United Nations Special Representative of the Secretary- SRSG General for Business and Human Rights UN United Nations UNCITRAL United Nations Commission on International Trade Law VCCI The Vietnam Chamber of Commerce and Industry TABLE OF CONTENTS DECLARATION .ii LIST OF ABBREVIATIONS.
iii TABLE OF CONTENTS .iv THE INTRODUCTION. The reason for choosing the topic. Research status of the topic. Research purpose, object, limitation of the research scope.
Scientific significance and application value of the topic. The layout of the thesis. 3 CHAPTER 1: THE OVERVIEW OF STABILIZATION CLAUSES AND THE PROTECTION OF THE ENVIRONMENT IN SUSTAINABLE DEVELOPMENT GOALS. The overview of stabilization clauses in international investment.
The definition of stabilization clauses. The scope of stabilization clauses. Sources of stabilization clauses. The classification of stabilization clauses.
Legality and effect of stabilization clauses. The overview of the environmental protection area in sustainable development goals. The sustainable development in international law and policy. The protection of the environment in sustainable development goals.
13 CONCLUSION OF CHAPTER 1. THE APPLICATION OF STABILIZATION CLAUSES AND ITS IMPACTS ON THE PROTECTION OF THE ENVIRONMENT IN THE WORLD. The use of stabilization clauses in some countries. Empirical studies on modern stabilization practice.
The use of stabilization clauses’ type. Some reasons behind the use of stabilization clauses in some countries. Implications of stabilization clauses on environment protection. 21 CONCLUSION OF CHAPTER 2.
THE APPLICATION OF STABILIZATION CLAUSES IN VIETNAM AND SOME RECOMMENDATIONS. Some provisions on the stabilization clause in the international investment in Vietnam. Some comments about the stabilization clauses in the international investment in Vietnam. Standard Legislative stabilization clause.
Stabilization clauses in petroleum agreements. Stabilization clauses and the evolution of environmental standards. The regulation of accountability and public scrutiny process. 37 CONCLUSION OF CHAPTER 3.
The reason for choosing the topic Over the years, the rate of foreign investment in Vietnam has continuously grown. Even when the world is greatly affected by the COVID-19 pandemic, the investment of investors in Vietnam still does not decrease in vibrancy and efficiency, even appears on the critical list of desirable emerging markets for international investment (Deloitte’s Report, Doing Business In Viet Nam 2022-2023 Accelerate to breakthrough). Because of the meaning and role of foreign direct investment, like accelerating the time to expand the international market, reducing the burden of capital for large projects, etc., Vietnamese states have issued many policies, implemented many solutions, including granting stabilization clauses to create an attractive and safe investment environment. Stabilization clauses in international investment law, are commitments by the host country that it will not invalidate or change the terms of the contract by legislation or administration without the consent of the foreign investor.
Thereby protecting the interests of foreign investors and limiting disputes between parties. Stabilization clauses are quite common in international investment contracts in countries around the world, especially in developing countries to attract foreign investment. In Vietnam, this clause has been reflected in Law on Investment 2020, Law on Investment under Public Private Partnership mode 2020,… However, this provision has the potential to adversely affect the regulatory rights of the host country in implementing actions toward the goal of sustainable development, which environmental protection is one of the three important aspects of sustainable development. For the above reasons, the author decided to choose the topic “Stabilization clauses in international investment and its impacts on the protection of the environment in sustainable development goals” to make the thesis.
Research status of the topic The author has not yet found complete studies in Vietnam directly referring to the stabilization clause and its impacts on sustainable development, but only a few articles related to the impact of international investment in general on the environment and human rights, such as Tran Thang Long (2019), Applying regulations on environmental exceptions in international investment law and some comparisons with Vietnamese practice; Nguyen Duc Vinh (2020), The ability to invoke regulations on human rights protection in international investment disputes,… Unlike Vietnam, there are many works relating to the stabilization clause in the world from many economic and legal views, which have provided an overview of stabilization provision and its impact, however have not studied in depth its impacts on environmental protection, which is one of the three important aspects of sustainable development in developing countries. Some examples of foreign studies: Gjuzi, J. (2018), Stabilization Clauses in International Investment Law. A Sustainable Development Approach; Cotula, L.
(2007), Stabilization clauses and the evolution of environmental standards in foreign investment contracts; Gehne, K. (2017), Stabilization clauses in international investment law: beyond balancing and fair and equitable treatment;… From these studies, the author has drawn some principles, characteristics and effects of stabilization clauses, thereby applying to the Vietnamese context in this thesis. Research purpose, object, limitation of the research scope - Research purpose: To analyze the practice of the stabilization clause in international investment in the world and its impacts on the environmental protection of the sustainable development goals. From there, to evaluate some current Vietnamese regulations on the stabilization clause and propose to improve relevant regulations to 3 complete the Vietnamese legal framework to limit the negative impacts of this clause on the goal of environmental protection in Vietnam.
- Research object: The overview, regulation, and practice of stabilization clauses in international investment and its impacts on environmental protection of sustainable development of developing countries, including Vietnam. - Scope of the research: Regulations, practices, and effects of stabilization clauses in investment contracts in Vietnam and some countries worldwide, in recent decades. Research methods To understand, and conduct research effectively and accurately, the writer has closely coordinated research methods such as comparative method, case studies in some countries from available sources, like textbooks, theses, articles in journals, law reports, legislation and internet sources; methods of analysis of stabilization clauses and their effects through empirical studies, reports of international organizations, regulations in Vietnam and other countries…; and deductive reasoning to draw conclusions. Scientific significance and application value of the topic The thesis provides an overview of the practice of applying the stabilization clause and its impact on environmental protection, which has been a complex issue in international investment law, but under-reviewed in Vietnam.
From there, it can be used as a basis to research further on commitments to stability in other related areas, to ultimately serve as a reference for Vietnam to consider in stipulating stabilization clauses to avoid affecting the Vietnamese general development. The layout of the thesis The introduction 4 Chapter I: The overview of stabilization clauses and the protection of the environment in sustainable development goals Chapter II: The application of stabilization clauses and its impacts on the protection of the environment in the world Chapter III: The application of stabilization clauses in Vietnam and some recommendations Conclusion 5 CHAPTER 1: THE OVERVIEW OF STABILIZATION CLAUSES AND THE PROTECTION OF THE ENVIRONMENT IN SUSTAINABLE DEVELOPMENT GOALS 1. The overview of stabilization clauses in international investment 1. The definition of stabilization clauses Stabilization clauses were initially developed in the 1930s to protect foreign investors from nationalization and expropriation.
Since the 1990s, these provisions have regarded as an attractive investment tool, protecting investors, in both developing nations and some Organization for Economic Co-operation and Development (OECD) countries,1 against adverse effects of changes in the host state’s laws.2 The purpose of stabilization clauses is to “stabilize” the investment project’ terms and conditions, thereby contributing to non-commercial (i. fiscal, regulatory) risk management. They include host states’ commitments not to change the regulatory framework governing the project, by legislation or any other means, except in some specified circumstances (i., the mutual consent of parties, the economic equilibrium restoration, compensation).3 In other words, these provisions remove host states’ 1 The member countries of the OECD are Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Ireland, Italy, Japan, Korea, Luxemburg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Spain, Sweden, Switzerland, Turkey, UK and USA. See: OECD (2005), OECD Guidelines on Corporate Governance of State-owned Enterprises, International Finance Corporation in Vietnam, <https://www.org/daf/ca/SOEGuidelinesVietnamese.pdf>, accessed on January 13, 2023.
Cernic, Jernej Letnar, “Corporate Human Rights Obligations Under Stabilization Clauses”, German Law Journal, Vol: 11, No: 2, 2010, pp. ‘The Stabilization Clause Of The Baku-Tbilisi-Ceyhan Pipeline Agreements: A Legal Review. Necmettin Erbakan Üniversitesi Hukuk Fakültesi Dergisi, 5(2), 465-481 3 Cotula, L. (2008), “Reconciling regulatory stability and evolution of environmental standards in investment contracts: Towards a rethink of stabilization clauses”, Journal of World Energy Law & Business, 2008, Vol.
6 unilateral right to change national law and affirm that investors’ consent is required before any legal changes affect them. The scope of stabilization clauses The scope of stabilization provisions may be full or limited. A full clauses protect foreign investors against any changes in the host state regulations, whether the laws are related to fiscal issues (taxes, royalties, etc.) or non-fiscal regulatory areas (environment, labor, health and safety).5 Conversely, a limited stabilization clause only protects the investor from changes to the specific laws covered by this clause, for instance, some changes which directly affect the fiscal regime, like tax laws. Sources of stabilization clauses Jarrod Wong and Abdallah Abuelfutuh Ali, differentiate stabilization clauses on the basis of the stabilization clauses’ source.
In detail, there are two main types of stabilization clauses, the first more frequently is contractual stabilization clauses (CSCs), and the second is legislative stabilization clauses (LSCs), i., stability provisions in their domestic law. General information about these is difficult to find clauses in contractual practice, as agreements between investors and states are not easily accessible to the public.7 Therefore, the author, within the scope of the thesis, mainly focuses on analyzing issues related to LSCs. Based on LSCs’ structural form and utility, LSCs are divided into three basic categories: Aspirational LSCs, Standard LSCs and Contractual LSCs.8 4 Claudio Dordi and Nguyen Thanh Tam (2017), Textbook On International Investment Law, Youth Publishing House, Hanoi, 265. (2017), Stabilization clauses in international investment law: beyond balancing and fair and equitable treatment, Institute of Economic Law, Transnational Economic Law Research Center (TELC), School of Law, Martin Luther University Halle-Wittenberg, 6.
7 (i) Aspirational LSCs: contain encouraging language about, or ostensibly authorize states to grant, stability guarantee, but do not commit states to provide them.