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Preserving Flexibility in IIAs

The Use of Reservations

image of Preserving Flexibility in IIAs
Reservations in International Investment Agreements are a key technique for balancing flexibility of national authorities with international commitments in the field of investment, especially for developing countries. This paper studies the use of such reservations at two levels. First, it assesses the various means that signatories have at their disposal when attempting to preserve flexibility and regulatory autonomy. Second, it explores the revealed preferences for flexibility emerging from the reservation lists of eight International Investment Agreements employing a negative list approach to scheduling non-conforming measures.

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A brief description of the sample IIAs under review

The Andean Community Decision 291 establishes the general regime for foreign investments in the Andean countries. It makes no reference to the positive or negative listing of commitments or reservations for non-conforming measures. Indeed, the obligations enshrined in the Decision are general and mandatory. Information on restrictions concerning the establishment and operation of foreign investment in Andean countries is to be found in other legal instruments. Andean Decision 510, entitled "Adoption of the Inventory of Measures that Restrict Trade in Services" provides no mandatory disciplines, but annexes countries' lists of services-related investment measures that do not comply with the disciplines on market access and national treatment found in GATS Articles XVI (Market Access) and XVII (National Treatment). While restrictive measures not listed are "automatically liberalized", listed measures are subject to a gradual liberalization process, which is scheduled to be completed in 2005. No such Decision currently exists with respect to foreign investment in goods-related industries. Some references to national preferences in primary and secondary sectors can be obtained from Andean countries' constitutions. Nonetheless, countries may apply restrictions in other sectors than those indicated in their constitutions.

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