Investment Insurance in International Law
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Description
The practice of insuring investments abroad against the political risks of expropriation, inconvertibility, and war, revolution and insurrections, has evolved as an answer to a number of relatively new problems: the decline of the traditional standards of international law governing the protection of property of foreigners and diplomatic protection of citizens abroad; the inability to effectively protect investments abroad by resorting to the classical principles of the law of responsibility of States for injuries to aliens; and the continuing need for a glow of investments across international boundaries and especially from the developed to the less developed countries. This type of insurance has been one of the principal contemporary instruments and techniques devised in response to the new challenge, i.e. how to provide adequate protections to investors in foreign countries. The present study will consider some major aspects of the insurance of investments abroad, especially from the view pint of the international lawyer. Insurance of commercial risks, including insurance against inflation, will not be considered as it does not normally raise questions of international law. What makes insurance of investments particularly interesting to the international lawyer is the fact that the insurer is often a branch of the Government of the investor or a government corporation. Thus, the burden of compensating the investor often falls on the public treasury of his state. Given the operation of the principle of subrogation, interesting questions arise concerning the role of the insuring agency (the State) as a claimant vis-à-vis the country where the investment was made (the host country). In the course of this study, special attention will be given to the United States system of insuring investments abroad under the Overseas Private Investment Corporation (O.P.I.C.), not only because this is the largest operation of its kind, but also because its vast experience in insurance and in claims offers a particularly wide scope for study and analysis. The work of O.P.I.C. is also well documented and is more easily accessible to scholars. Investment insurance in international law has not been extensively treated in recent legal literature and while several leaned papers on the subject are referred to in the course of this study, the author has not deemed it necessary to prepare a comprehensive bibliography. This study is based primarily on material obtained from O.P.I.C., similar agencies in Canada and in the United Kingdom, the International Bank for Reconstructions and Development (I.B.R.D.) and the Organisation for Economic Co-operation and Development (OECD), on legislation and on congressional documents. We have not attempted to deal with the practice of all the counties which have agencies dealing with the insurance of investments abroad and not even with the practice of all the countries belonging to the OECD. The author hopes that by discussing in depth the United States practice and, in lesser detail, the Canadian and United Kingdom practice, and by presenting the theoretical and general background, he has provided the tools for the study of these and related subjects by scholars and practitioners alike. The abundant documentation contained in this volume has been collected and reproduced with the object of facilitating the task of the scholar and the practitioner by providing him with documents which often are not available in legal libraries. At the same time when this study was under preparation, major changes were taking place on the international investment scene. While in the past investments have flowed almost exclusively from the developed to the developing countries, or from one developed country to another, today, owing primarily to the availability of surplus oil revenues, there has been an increasing flow of petrodollars from developing countries to developed countries, channelled not only into portfolio investment, but also into direct equity investments. These developments have given rise in the United States, which has traditionally maintained an open-door policy towards foreign investments in most areas of economic activity, to various proposals concerning the control of foreign investments, but the petrodollar exporting countries have so far not found it necessary to set up machinery for insuring investments abroad. This may be related to the fact that the petrodollar surpluses are often owned by the State and its agencies, rather than by private investors. Neither has there been a move towards the conclusion of investment guaranty agreements as a means of protecting the investments of the petrodollar exporting countries in the developed countries. The attitude of these host countries towards private investors has apparently been considered as providing sufficient safeguards without having to resort to additional means. Thus, even the agreement concluded by the United States of America and Saudi Arabia on February 27, 1975 on Guaranteed Private Investment concerns only O.P.I.C. insured projects in Saudi Arabia, and not Saudi investments in the United States (the joint communiqué of February 27, 1975 on the first session of the U.S.-Saudi Arabian Joint Commission on Economic Cooperation spoke, however, of consultations regarding significant undertaking in each other’s economies). It will be interesting to see whether, as the volume of petrodollar investments in the developed countries increases, demand will arise to further protect them by means of international agreements and by insurance programmes.
Publication Date
1976
Recommended Citation
Meron, Theodor, "Investment Insurance in International Law" (1976). Faculty Books & Edited Works. 457.
https://gretchen.law.nyu.edu/fac-books-edited-works/457
