International investment law regionalism in Asia: the tale of South Asia

ABSTRACT

International investment law regionalism in the ASEAN region has been a spectacular success. It presents what can be described as ‘third regionalism’. This has prompted scholars to present the ASEAN success model representing the whole of Asia. But there are multiple ‘Asias’. Large swathes of Asia have reluctantly pursued regionalism. One such region is South Asia, whose experience is very different from that of the ASEAN region. The South Asian region has failed in achieving any significant economic integration including investment integration. The most prominent South Asian institution and vehicle for regionalism, SAARC, which was meant to facilitate investment integration, has miserably failed. There are hopes from another institution, BIMSTEC, to deliver on this front, but that would depend on whether South Asian countries value regionalism or not. There is much that South Asia can learn from ASEAN’s experience and imbibe the ‘ASEAN Consensus’ that marks the wave of ‘third regionalism’ based on incrementalism and flexibility.

KEYWORDS:

• South Asia
• investment
• regionalism
• SAARC
• BIMSTEC

Acknowledgements

The author expresses profound gratitude to Professors Julien Chaisse and Pasha Hsieh, along with all other participants of the Asia Pacific Law Review (APLR) & Singapore Management University (SMU) workshop held in October 2022, for their valuable insights and contributions to earlier drafts of this article. Additionally, the author conveys sincere appreciation to the two anonymous peer reviewers, whose discerning and constructive feedback played a pivotal role in refining and enhancing the manuscript. Lastly, the author extends heartfelt thanks to the editorial team at the Asia Pacific Law Review and Taylor & Francis for their exceptional editing efforts, which have greatly contributed to the quality of the final publication.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 Christopher M. Dent, East Asian Regionalism (Routledge, 2016).

2 Julien Chaisse and Pasha L. Hsieh, ‘Rethinking Asia-Pacific Regionalism and New Economic Agreements’ (2023) Framing Paper.

3 ibid

4 Julien Chaisse and Sufian Jusoh, The ASEAN Comprehensive Investment Agreement: The Regionalisation of Laws and Policy on Foreign Investment (Edward Elgar, 2016)

5 TMT Islam et al, ‘International Comparisons of Poverty in South Asia’ (2021) 38(1) Asian Development Review 142

6 Chaisee and Hsieh (n 2).

7 South Asian Association for Regional Cooperation, SAARC <https://www.saarc-sec.org/>

8 See generally Dushni Weerakoon, ‘The Political Economy of Trade Integration in South Asia: The Role of India’ (2010), 33(7) The World Economy 916; Rupa Chanda, Integrating Services in South Asia: Trade, Investment, and Mobility (OUP, 2011); Amita Batra, Regional Economic Integration in South Asia: Trapped in Conflict? (Routledge, 2013); Dhananjay Tripathi, ‘Regional Integration: The European Model and The South Asian Experience’ in Gulshan Sachdeva (ed), Challenges in Europe: Indian Perspectives (Palgrave Macmillan, 2019).

9 One of the few legal works on South Asian trade integration is Md. Rizwanul Islam, Economic Integration in South Asia: Charting a Legal Roadmap (Brill, 2012).

10 See also Richard Pomfret, ‘Regionalism’ and the Global Trade System’ (2021) 44(9) The World Economy 2496.

11 See Jagdish Bhagwati, Termites in the Trading System: How Preferential Agreements Undermine Free Trade (OUP, 2008) 239.

12 See Amita Acharya, ‘Foundations of Collective Action in Asia: Theory and Practice of Regional Cooperation’ (2012) ADBI Working Paper Series, No. 344.

13 See Gregory Shaffer and Henry Gao, ‘A New Chinese Economic Order?’ (2020) 23(3) J. Int’l Econ. L. 607.

14 Chaisse and Hsieh (n 2).

15 Report of the SAARC Group of Eminent Persons Established by the Ninth SAARC Summit, SAARC Beyond the Year 2000 (Shipra Publications, 1999).

16 Ibid. See also Indra Nath Mukherji, ‘The Report of the SAARC Group of Eminent Persons’ (2001), 2(2) South Asia Economic Journal 313.

17 Eighteenth SAARC Summit, (26–27 November 2014) <https://www.saarc-sec.org/index.php/resources/summit-declarations/24-eighteenth-saarc-summit-kathmandu-2014/file>.

18 World Bank, Deepening Linkages Between South Asia and South East Asia: Synthesis Report (June 2022), <https://openknowledge.worldbank.org/bitstream/handle/10986/37609/P16286504042220c808ee006e72f2cac441.pdf?sequence=1&isAllowed=y>.

19 Ibid.

20 Md. Rizwanul Islam, ‘An Appraisal of the South Asian Free Trade Agreement and Its Consistency with the WTO Rules on Preferential Trade Agreements’ (2010), 44 (6) Journal of World Trade, 1187.

21 For a detailed commentary on SAFTA see Islam (n 9).

22 Islam (n 20)

23 Nisha Taneja and Aparna Sawhney, ‘Revitalising SAARC Trade: India’s Role at the 2007 Summit’ (2007), 42(13) Economic & Political Weekly 1081.

24 Dushni Weerakoon and Jayanthi Thennakoon, ‘SAFTA: Myth of Free Trade’ (2006), 41 (37) Economic and Political Weekly 3920.

25 Also see Michael Ewing-Chow and Md. Rizwanul Islam, ‘South Asian Free Trade Agreement and the Possibility of Regional Integration within the SAARC: A Historical, Legal and Economic Analysis’ (2007) 2 Asian Journal of Comparative Law 1.

26 Nisha Taneja et al, ‘India’s Role in Facilitating Trade under SAFTA’ (2013) ICRIER Working Paper No 263 <https://www.econstor.eu/bitstream/10419/176281/1/icrier-wp-263.pdf>

27 Sanjay Kathuria (ed), A Glass Half Full: The Promise of Regional Trade in South Asia (World Bank, 2018) <https://openknowledge.worldbank.org/bitstream/handle/10986/30246/9781464812941.pdf?sequence=8&isAllowed=y>

28 Article 22.3 of SATIS – ‘trade in services is defined as the supply of a service by a service supplier of a Contracting State, through commercial presence in the territory of the other Contracting State ‘commercial presence’. See also Rupa Chanda, ‘Challenges to Regional Services Integration in South Asia’ (2015) 16(2_suppl) South Asia Economic Journal 19.

29 See Rupa Chanda and Sudeshna Ghosh, ‘India’s integration in services with Asian FTA partners’ in Deepagrhya Mukherjee (ed), Economic Integration in Asia (Routledge, 2019) 117.

30 Sanjay Kathuria et al, ‘Regional Investment Pioneers in South Asia: The Payoff of Knowing Your Neighbours’ (2021) World Bank: Washington DC 1.

31 See also Islam (n 9)

32 Raveen Ekanayake and Nipuni Perera, ‘Stimulating Intra-regional Investment in SAARC: Is a Regional Investment Agreement the Way Forward?’ (2015) 16(2) South Asia Economic Journal 75; Indra Nath Mukherji, ‘Potential for Intraregional Investment’ in Paras Kharel (ed), South Asian Cooperation: Issues Old and New (SAWTEE, 2018) 46.

33 Fourteenth SAARC Summit, (4 April 2007), <https://www.mea.gov.in/press-releases.htm?dtl/2378/Declaration±of±the±Fourteenth±SAARC±Summit>

34 Mukherji (n 32), 58.

35 Finance Ministry, Government of Pakistan (26 August 2016), <http://www.finance.gov.pk/press/SAARC_Report_2016.pdf>

36 See Prabhash Ranjan, ‘Investor-State Dispute Settlement (ISDS) Cases and India: Affronting Regulatory Autonomy or Indicting Capricious State Behaviour?’ (2022) 21(1) Journal of International Trade Law and Policy 42.

37 Ibid.

38 Model Text for the Indian Bilateral Investment Treaty, (14 January 2016) <https://dea.gov.in/sites/default/files/ModelBIT_Annex_0.pdf>. See also Prabhash Ranjan, India and Bilateral Investment Treaties: Refusal, Acceptance, Backlash (OUP, 2019).

39 Treaty between The Republic of Belarus and The Republic of India on Investments (signed 24 September 2018).

40 Bilateral Investment Treaty between The Government of The Kyrgyz Republic and The Government of The Republic of India (signed 14 June 2019).

41 Bilateral Investment Agreement between India Taipei Association in Taipei and the Taipei Economic and Cultural Center in India (24 October 2018).

42 Investment Cooperation and Facilitation Treaty between The Federative Republic of Brazil and The Republic of India (signed 25 January 2020).

43 See Henrique Choer Moraes and Pedro Mendonça Cavalcante, ‘The Brazil-India Investment Co-operation and Facilitation Treaty: Giving Concrete Meaning to the “Right to Regulate” in Investment Treaty Making’ (2021) 36(2) ICSID Review – Foreign Investment Law Journal 304.

44 See Article 12.3 of the India-Kuwait FTA, which provides: ‘The Parties shall establish a UAE-India Technical Council on Investment and Trade Promotion and Facilitation (the Council), which shall be composed of representatives of both Parties. The side of the UAE will be chaired by the Under Secretary of the Ministry of Finance, or the authorised representative thereof, and the side of India will be chaired by the Joint Secretary (or equivalent), Department for Promotion of Industry and Internal Trade, Government of India.’

45 Anthea Roberts, Henrique Choer Moraes, Victor Ferguson, ‘Toward a Geoeconomic Order in International Trade and Investment’ (2019) 22(4) Journal of International Economic Law 655.

46 Trade Profile: Pakistan, WTO Statistics Database <http://stat.wto.org/CountryProfile/WSDBCountryPFView.aspx?Country=PK&Language=S>

47 Ashutosh Misra, ‘An Audit of the India-Pakistan Peace Process’ (2007), 61(4) Australian Journal of International Affairs 506 at 520; See also The Joint Statement, First Meeting of India-Pakistan Joint Study Group (JSG) on Trade and Economic Cooperation, Ministry of External Affairs, Government of India (23 February 2005) <https://mea.gov.in/bilateral-documents.htm?dtl/6415/Joint±Statement±First±Meeting±of±IndiaPakistan±Joint±Study±Group±JSG±on±Trade±and±Economic±Cooperation>

48 Nisha Taneja, Samridhi Bimal, Varsha Sivaram, ‘Emerging Trends in India-Pakistan Trade’ Indian Council for Research on International Economic Relations Working Paper (2008) 363 <http://icrier.org/pdf/Working_Paper_363.pdf>. For a detailed understanding of India-Pakistan trade, see Nisha Taneja and Isha Dayal (eds), India Pakistan Trade Normalisation: The Unfinished Economic Agenda (Springer, 2017).

49 Taneja et al (n 48).

50 Kathuria (n 27).

51 Trade Policy Review: Pakistan, Trade Policy Review Body – Report by the WTO Secretariat (17 February 2015) WT/TPR/S/311 <https://www.wto.org/english/tratop_e/tpr_e/s311_e.pdfr>

52 Prabhash Ranjan, ‘National Security Exception in the General Agreement on Tariffs and Trade (GATT) and India-Pakistan Trade’ (2020) 54(4) Journal of World Trade 643.

53 Gazette Notification No. 05/2019 – Customs (G.S.R. 124€), Department of Revenue, Ministry of Finance, Government of India (16 February 2019) <http://egazette.nic.in/WriteReadData/2019/197811.pdfr>

54 Sanaullah Khan, Naveed Siddiqui, Tahir Sheran, Reuters, ‘Pakistan suspends trade ties with India, asks Indian envoy to leave’ Dawn (August 7, 2019) <https://www.dawn.com/news/1498609r>

55 For more on this see Christophe Jaffrelot, Modi’s India: Hindu Nationalism and Rise of Ethnic Democracy (Princeton University Press, 2021).

56 Chaisse and Hsieh (n 2).

57 PTI, ‘Pakistan Stalls Inking of SAARC Connectivity Agreements, The Economic Times’ (26 November 2014) <https://economictimes.indiatimes.com/news/international/world-news/pakistan-stalls-inking-of-saarc-connectivity-agreements/articleshow/45282759.cms?from=mdr>

58 Press Information Bureau, Government of India, ‘India, Nepal, Bhutan and Bangladesh Sign a landmark Motor Vehicles Agreement for seamless movement of road traffic among Four SAARC Countries in Thimpu’ (15 June 2015) <https://pib.gov.in/newsite/printrelease.aspx?relid=122516>

59 BIMSTEC Charter <https://bimstec.org/bimstec-charter/>

60 Vinay Kaura, ‘India’s Pakistan Policy: From 2016 “Surgical Strike” to 2019 Balakot “Aairstrike”’ (2020) 109 (3) The Round Table: The Commonwealth Journal of International Affairs 277.

61 Joyeeta Bhattacharjee, SAARC vs BIMSTEC: The Search for the Ideal Platform for Regional Cooperation ORF Issue Brief No 226, (January 2018) <https://orfonline.org/wp-content/uploads/2018/01/ORF_Issue_Brief_226_BIMSTEC-SAARC.pdf>

62 Framework Agreement on the BIMSTEC Free Trade Area, 2004

63 Article 2, BIMSTEC Framework Agreement.

64 Article 2(c), BIMSTEC Framework Agreement.

65 See Understanding on the Interpretation of Article XXIV of the General Agreement on Tariffs and Trade 1994, para 3.

66 Ibid.

67 BIMSTEC, Trade, Investment and Development <https://bimstec.org/trade-investment-and-development/>

68 See Pratnashree Basu and Nilanjan Ghosh, ‘Breathing new life into BIMSTEC: Challenges and imperatives’ ORF Occasional Paper No. 243, (April 2020), Observer Research Foundation <https://www.orfonline.org/research/breathing-new-life-into-bimstec-challenges-and-imperatives-65229/>

69 Ibid.

70 Fifth BIMSTEC Summit Declaration, (30 March 2022) <https://bimstec.org/event/bimstec-leaders-sign-and-adopt-the-bimstec-charter-during-the-fifth-summit-on-30-march-2022/>

71 Bhattacharjee (n 61).

72 Kallol Bhattacherjee, ‘PM Modi moots free trade agreement for BIMSTEC’ (The Hindu, 30 March 2022) <https://www.thehindu.com/news/national/pm-modi-calls-for-strengthening-bimstec/article65273458.ece>; Remarks of Hon’ble Prime Minister of India, Fifth BIMSTEC Summit (30 March 2022) <https://drive.google.com/file/d/1exkU9r0GqLbj_o6eRAKVa9jqVBAskocD/view>

73 See Article 6 of the BIMSTEC Charter.

74 See Charter of the Organization of Islamic Cooperation, (14 March 2008) <https://www.oic-oci.org/upload/documents/charter/en/oic_charter_2018_en.pdf>

75 Agreement for the Promotion, Protection and Guarantee of Investment among Member States of The Organization of the Islamic Conference.

76 Article 10(1) of the OIC Investment Agreement provides: ‘The host state shall undertake not to adopt or permit the adoption of any me–ure – itself or through one of its organs, institutions or local author–ies – if such a measure may directly or indirectly affect the ownership of the in’estor's capital or investment by depriving him totally or partially of his ownership or of all or part of his basic rights or the exercise of his authority on the ownership, possession or utilization of his capital, or of his actual control over the investment, its management, making use out of it, enjoying its utilities, the realization of its benefits or guaranteeing its development and growth’.

77 Article 8(1) of the OIC Investment Agreement provides: ‘The investors of any contracting party shall enjoy, within the context of economic activity in which they have employed their investments in the territories of another contracting party, a treatment not less favourable than the treatment accorded to investors belonging to another State not party to this Agreement, in the context of that activity and in respect of rights and privileges accorded to those investors’.

78 Articl’ 11(1') of the OIC Investment Agreement provides: ‘The host state shall undertake to guarantee the free transfer to any contracting party of the capitals and its net proceeds in cash without the investor being subject to any discriminatory banking, administrative or legal restrictions and without any taxes or charges on the transfer. This shall not apply to the bank service charges. The repatriation of the original capital shall be effected on the termination of the investment according to its nature of after five years from the date of its transfer to the host state, whichever is earlier.’

79 Generally on Sri Lanka’s BIT programme see Dilini Pathirana, ‘An Overview of Sri Lanka’s Bilateral Investment Treaties: Status Quo and Some Insights into Future Modifications’ (2017) 7(2) Asian Journal of International Law 287; Niroshika Liyana Muhandiram, ‘The Formulation and Determination of Expropriation Clauses in BITs of Sri Lanka: Gaps and Prospects’ (2022) Asia Pacific Law Review <https://doi.org/10.1080/10192557.2022.2117488>

80 Joint Interpretative Notes on the Agreement between the Government of the Republic of India and the Government of the ’eople's Republic of Bangladesh for the Promotion and Protection of Investments (4 October 2017) <https://investmentpolicy.unctad.org/international-investment-agreements/treaty-files/5725/download>

81 Ibid.

82 Ibid.

83 Ministry of External Affairs, ‘Government of India, India – Bangladesh Joint Statement During the State Visit of Prime Minister of Bangladesh to India’ (7 September 2022) <https://www.mea.gov.in/bilateral-documents.htm?dtl/35680/india±±bangladesh±joint±statement±during±the±state±visit±of±prime±minister±of±bangladesh±to±india>

84 UNCTAD, Investment Policy Hub, India Nepal BIT <https://investmentpolicy.unctad.org/international-investment-agreements/treaties/bit/1939/india---nepal-bit-2011>

85 UNCTAD, Investment Policy Hub, Bangladesh <https://investmentpolicy.unctad.org/international-investment-agreements/countries/16/bangladesh>

86 Tanja A Borzel and Thomas Risse, ‘Introduction: Framework of the Handbook and Conceptual Clarifications’ in The Oxford Handbook of Comparative Regionalism (Oxford University Press, 2016) 3.

87 Kathuria, (n 30).

88 Ibid.

89 Tethyan Copper Company Pty Limited v Islamic Republic of Pakistan, ICSID Case No ARB/12/1, Award (12 July 2019).

90 Manuel Pérez-Rocha, ‘Ousted Pakistani Leader Was Challenging Investment Treaties That Give Corporations Excessive Power’ (14 April 2022) <https://inequality.org/research/pakistan-khan-investment-treaties/>; See also Sarah Ahmad, ‘The Role of Developing Countries in Investor-State Arbitration: Reflections on Tethyan Copper v Islamic Republic of Pakistan’ (2023) 8(3) LSE Law Review 453.

91 Sri Lanka has been a respondent in five ISDS claims. It lost and won two each with the fifth one being pending – Sachintha Dias, ‘The Impact of Investment Treaties on the Rule of Law in Sri Lanka’ in N Jansen Calamita and Ayelet Berman (eds), Investment Treaties and the Rule of Law Promise (CUP, 2022) 204.

92 Pathirana (n 79).

93 Dias (n 91), 231.

94 Chaisse and Hsieh (n 2).

95 UNCTAD, Investment Policy Hub, Singapore, BITs <https://investmentpolicy.unctad.org/international-investment-agreements/countries/190/singapore>

96 UNCTAD, Investment Policy Hub, Indonesia, BITs <https://investmentpolicy.unctad.org/international-investment-agreements/countries/97/indonesia>

97 UNCTAD, Investment Policy Hub, Philippines, BITs <https://investmentpolicy.unctad.org/international-investment-agreements/countries/166/philippines>

98 Chaisse and Hsieh (n 2).

99 ASEAN China Investment Agreement (2009).

100 ASEAN Korea Investment Agreement (2009).

101 ASEAN India Investment Agreement (2014).

102 Agreement Establishing the ASEAN-Australia-New Zealand Free Trade Area (2009).

103 Christophe Jaffrelot, ‘India's Look East Policy: An Asianist Strategy in Perspective’ (2003) 2(2) India Review 35; See also Debashis Chakraborty, Julien Chaisse and Xu Qian, ‘Is It Finally Time for India's Free Trade Agreements? The ASEAN “Present” and the RCEP “Future”’ (2019) 9(2) Asian Journal of International Law 359.

104 Framework Agreement on Comprehensive Economic Cooperation Between the Republic of India and the Association of Southeast Asian Nations, 2003.

105 Prabir De and Nida Rahman, ‘Broad Contours and Next Steps: Review of ASEAN – India FTA in Goods’ (2022) 57(13) Economic and Political Weekly 22.

106 Article 41(7) of the ASEAN Charter provides: ‘ASEAN may conclude agreements with countries or subregional, regional and international organizations and institutions. The procedures for concluding such agreements shall be prescribed by the ASEAN Coordinating Council in consultation with the ASEAN Community Councils’.

107 Pasha L Hsieh, New Asian Regionalism in International Economic Law (Cambridge University Press, 2021).

108 Chaisse and Hsieh (n 2).

109 Ibid.