Investment Agreements in Facilitating Foreign Direct Investment

1 Research background and literature review

The rise in foreign investments in the last few decades has been enabled by the rise of investment agreements and by the rigorous development of investment law in the past decades. The World Bank for example, has continually emphasised that the success of international trade depends for safeguarding investment as well as investors. As Lester points out, the protecting international investment, against mistreatment of the host states ensure the development of a welcoming climate for FDI. Indeed, investment safeguards can be observed throughout most investment safety agreements. Notably, both BITs and MITs contain treaties signed between investors and private organizations from the hosting country, along with arrangements made directly among investors and host countries.

As shown by Grazia Ietto-Gillies states implement investment laws and regulations to guarantee a specific regime for investors. This kind of legislation ranges from tax exemptions, preferential treatments, to specific safeguards to guarantee the protection of property for foreign investors and their respective investments. Investment protection safeguards include guarantees surrounding fair and equitable treatment, full protection and security, protection against arbitrary and discriminatory treatment, national treatment and most-favoured-nation treatment. An investment agreement between the host country and a specific investor are also popular in the extractive sector by signing concession partnerships as well as production-sharing agreements whereby investors are granted specific safeguards created to enable them to invest in the extraction of said county's natural assets. The investment agreements could protect investors from legislative changes, expropriation or regulations that negatively impact upon their best interest. That being said, the viability of these provisions when confronted with state action may be varied.

The purpose of the investment law developed from the understanding of the disadvantageous position foreign investors are put it with researchers highlighting that that hostile domestic laws that encourage the protection of domestic investments and capital required protecting the investors from the host country and possible arbitrarily defined and harmful conduct. Investment legislation, for example, considers the protections of foreign investors to be a prerogative to safety or regulatory oversight of the standards of safety listed in investment agreements. As Wälde notes, that investment safeguarding and adjudicative authority contained in investment agreement are a means of making rights efficient as well as enforceable. And yet, Investment liberalization and safeguards are still separated in much of the existing literature. This view is displayed in the opening paragraph of Dolzer and Schreuer's, and has been well encapsulated in Wälde's interpretation, arguing that International Investment Legislation is designed to establish adequate safeguards for international investors susceptible to the policy and governance of a foreign nation.

Furthermore, scholars acknowledge that the safeguards of foreign enterprises which governed international investment law in recent decades are not suited well to the world today where investments are becoming more and more internationalized. As it was well documented in the literature that the activities of investors throughout the past decades were subordinate to the whims of the host country, who had a limitless freedom to decide to either permit international investment or what decide upon what constraints to enforce. The insufficiency of this strategy was conspicuous by the reality that international investors have not been positioned on equal terms with national investors, because no contractual obligations for fair opportunities of investments had been implemented on the international stage. However, a feasible component of safeguards against unfair discrimination may have been attempted under in multiple jurisdictions to prohibit prejudicies prejudice, Beveridge notes that any such discrimination might be very hard to ascertain in the business setting. Sornarajah, nevertheless, argues that this very premise for safeguards might be feasible. However, it should be recognized that some states have been able to develop salient investment projection regimes that not only encourages the liberalisation of international trade and investment, but also provides important lessons, tool and policies other countries can learn from when developing their own investment protection regimes.

Singapore is widely recognised to be the most successful ASEAN country in attracting foreign investment, and the dichotomy is that it does not have an investment law. This is a fact that aligns Singapore’s approach with the approach of other successful countries like Australia, France, Germany, the United Kingdom and the United States, that also do not have investment laws. Also relevant to the regulation of the investments are the many investment agreements that Singapore has entered into with other countries; a prominent treaty in recent times is the European Union-Singapore Free Trade Agreement which was adopted in 2014.

Singapore regulates investments with the domestic laws and so does not differentiate between the treatment of domestic and foreign investments. The common law of contract and the Singapore Companies Act as well as other relevant legislation, are applied in Singapore for the regulation of the investments. An important institution in Singapore for the regulation of investments is the Economic Development Board (EDB), which was in 1961 under the Economic Development Board Act, which also sets out the functions and the powers of this institution. The Economic Development Board Act also provides in Section 6 that one of its functions is to attract and facilitate domestic and foreign investment.

There are certain restrictions that are placed on foreign investments in Singapore that are in place under relevant legislations like Newspaper and Printing Presses Act, which prohibits foreign control of newspaper companies. Thus, there are restrictions in foreign investment in sectors like telecommunications, media, banking and land ownership. In the area of banking, the foreign investments can be restricted and regulated by the Monetary Authority of Singapore, which regulates through a system of licensing under Section 7 of the Banking Act.

The question is that when Singapore does not have an investment law, then what are the reasons that there is higher foreign investments in Singapore as compared to other ASEAN countries some of which like Malaysia, do have investment laws. Singapore has the highest foreign investments in the ASEAN region. There are some reasons for this, which can be discussed here. One important reason could be that because there is no specific legislation for foreign investment, there are fewer restrictions on foreign investments and lesser regulation or more specific regulation of foreign investments because the regulation regime is generally similar for both the domestic and foreign investments. Another important reason is that Singapore offers various tax incentives to encourage investment in the country and that these incentives are available to both the domestic and foreign investors. An example can be seen in the Economic Expansion Incentives Act, which allows tax deduction for capital expenditure in approved projects. Both domestic and foreign firms can have access to the tax benefits for such approved projects. Singapore provides tax incentives for investment in projects involving research and development and also provides other financial incentives like government subsidies and infrastructure subsidies to both foreign and domestic investors. Singapore also set up has export production zones, for the purpose of duty-free imports of materials for the production of goods for export and this is applicable to the entire country and not limited to some factories or limited zones within the country. In the United Arab Emirates, the Federal Law by Decree No. (19) of 2018 Regarding Foreign Direct Investment has been enacted to regulate certain aspects of foreign investments. This law gives more flexibility in business ownership in certain sectors aimed at developing the country’s investment environment, which will also impact Dubai as one of the emirates.

The desire for creation of more favourable environment for foreign investors has led Dubai along with Sharjah and Abu Dhabi to enact flexible rules concerning the acquisition of real estate property by foreigners and there are also changes made to the Companies Law by the United Arab Emirates. In free zones, foreign investors may can even hold 100% of a company's shares. There are other benefits of setting up a business in the free zone, which include exemptions from import and export tax, corporate tax and personal income tax. A dual licensing regime has been implemented for entities located in the free zones, which may be authorised to carry out commercial activities outside the free zone in selected sectors specifically authorised by the Department of Economic Development. Free zones in Dubia include the Dubai Multi Commodities Centre; Dubai Airport Free Zone; Dubai South; and Dubai International Financial Centre.

Dubai’s policy and law change with regard to investment is also driven by the goal of transforming the economy from an oil economy to a post oil economy. Consequently, financial legislation and friendly taxation is being used by Dubai to open up business opportunities, increase investor inflows and international trade. Within the UAE, Dubai has emerged to become the most attractive investment destination. Investments are monitored by Dubai International Financial Centre, and Dubai Investment Corporations are the largest institutes for investment and advisory. The Emirates Investment Authority regulates all investments.

Recently, Qatar has used its annual budget surpluses to broaden and innovate the financial sector via the increased investment in infrastructure, healthcare programs as well as schooling. In 2005, the country established the Qatar Investment Authority (QIA) to formulate and update investment for Qatar's emerging financial sector, both local and foreign.

The primary bill which governs international investment in Qatar is Investment Law No 13/2000 (hereinafter "Investment Law"), that allows international investors the opportunity to invest in several business operations with no more than 49% of the investment whereas the majority is retained by a Qatari citizen. Additional government authorization is a precondition for permitting up to 100% foreign ownership rights in specific sectors including: healthcare, schooling, the exploitation of natural resources in sectors such as agricultural production, energy and mineral extraction. With the authorization of the Government international investment in banks and other financial institutions was also permitted by the 2004 amendment of the Investment Law. Moreover, the liberalization implemented continues throughout the financial sector, in which international investors have a complete ownership at the Qatar Financial Centre.

Scholars observe that Qatar's total international investment legislation is developed to encourage its successful implementation inside the WTO's multilateral trading structures and is therefore attractive to foreign investors. Qatar's total economic strategy can be characterized as one that aims to achieve the ultimate objective of encouraging international investment but ensure that the country maintains a steady control on the joint ventures by prohibiting foreign investors to have more than 49% of the capital in many critical sectors for the economic .

In the event of economic hardships, for instance, the state might apply the balance of reimbursement and even dumping stipulations. At this point, the biggest concern for Qatar is to choose the appropriate strategies of action and to structure its financial rights and powers in the most effective manner possible, in order to bridge the gap between the policies that stimulate the growth of investments as well as the continued necessity to safeguard its nationwide private businesses to be able to bring about a diverse and sustainable economy.

In 2019, Qatar brought important revisions to the preceding framework for international investment in order to stimulate the investment climate in the country and thus further incentivise international investment. The New Law brings a number of concepts, among the most significant of which is that it makes it possible for foreign direct investment up to 100% ownership throughout all sectors of the economy, relating to the relevant provisions on commercial operations conducted by non-Qatarians as laid down in the New Law executive legislation. Several operations are still excluded, namely the financial institutions as well as insurance (except if permitted by ruling of the Council of Ministers). However, there is lack of scholarly research assessing whether those introduction will bring the necessary benefits for both the Qatari state and the international investors.

2 Research gap and the contribution of this study to the wider literature

By examining and critically comparing the investment legislation of Qatar on the one hand and Singapore and Dubai, this project aims to contribute to the existing literature and address a pressing research gap. In the first place, this work proposes the in-depth examination the investment laws and other applicable laws in Singapore and Dubai, the recent developments that occurred involving the passage of the Federal Law by Decree No. (19) of 2018 in the United Arab Emirates and the tax and other financial policy in Singapore.

Secondly, this project will examine the legislation regulating foreign investment in Qatar, focusing on the new legislation passed by the Qatar government which extends the liberalisation of international investment. Furthermore, this project will analyse the Qatar investment regime through the lens of a critical evaluation of the Qatari legislative projection of foreign investment. In doing so, the project will draw on comparative analysis of the Singaporean, Dubai and Qatari regime for investment protection to identify the best practices and recommend policy transplants. Thirdly, the aim of this work is to fill the gap which exists in the existing literature concerning the development of the Qatari foreign investment policies which are currently under-researched. This will also enable the researcher to recommend appropriate policy changes beneficial to the development of the foreign investment sector of Qatar, and ensure a continued growth of this sector.

3 Research aims and objective.

The purpose of the project is to examine in a comparative fashion the steps and the measures that have been taken by the Qatari government and the Singapore and Dubai government to ensure a hospitable environment for foreign investors. In doing so, the research will strive to achieve the following objectives:

To examine the best practices for investment protection in the international private law and how those practices have been introduced

To critically assess the Qatari framework for legal projection of international investment and compare it with the international best practices and achievements

To critically assess the Singapore and Dubai framework for legal projection of international investment and compare it with the international best practices and achievements

To suggest proposals for substantive reforms in the Qatari investment protection law that would ensure the development of investment-friendly climate in the country

4 Research methodology

Conducting legal research requires a comprehensive examination of rules of law, core values, definitions, hypotheses, doctrines, decisions, legal structures, legal concerns, challenges or queries, or a mixture of one or more of them, whereas social research entails research which derives on social science for empirical and methodological guidance which may be driven by advancement and societal shifts.

While it is clear throughout this interpretation that law research shares many characteristics in common with non-legal analysis, also it varies greatly in other aspects. Legal research utilises essentially two approaches: doctrinal and socio-legal research. Doctrinal research is asserted to be qualitative investigation of the letters of the law in order to examine the manner in which the law operates and the way the courts have utilized and interpreted that law. An advantage of the doctrinal method is that provide a comprehensive overview on how legal doctrines function in practice, by equipping the researcher with methodology tools to examine the nature and the content of the law and their application. However, a notable limitation of the doctrinal research is their narrow scope as the doctrinal methods are not capable of examining the impact the law has on the society and on the economy. In turn socio-legal research uses methodologies utilized by other scientific fields to identify the broader significance of the law for the socio-political realm and expand further on the narrowed scope of doctrinal methods. This signifies that the socio-legal approach must be regarded in response to existing necessities and developments in law, because this method could, for example, investigate the reasons behind the judicial process or the rationale behind a legal ruling which could offer meaningful information for the legal doctrine. The objective is to gain an extensive understanding of the topic or phenomena of interest and also to contribute to improving the quality of the research work as well as the research results.

This project will embrace a combined approach of both doctrinal and socio-legal that is essentially in order to reducing the likelihood of partiality or limitations which might emerge from the use of a single method. The doctrinal approach remains crucial for this project because it will help the researcher to examine the content of the law of Qatar and Singapore and Dubai, and identify how the investment law in these jurisdictions have worked in practice. The use of a socio-legal method with empirical evidence will complement the current study by providing a detailed analysis of the economic and policy impact the investment law in both jurisdictions have had and thus facilitate the comparison of the legal rules and practice.

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Reference list

Statutes

Law No. 13 of the Year 2000 on the Organization of Foreign Capital Investment in Economic Activity.

Qatar Law no. (1) of 2019 On Regulating Non-Qatari Capital Investment in the Economic Activity (2019)

Books

Bryman A, Mixed Methods in Organizational Research (SAGE Publications, 2009)

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Dolzer R and Schreuer C Principles of International Investment Law (Oxford University Press, 2008) 3-7.

Gudgin G Coutts KJ Gibson N and Buchanan J The role of gravity models in extimating the economic impact of Brexit (University of Cambridge 2017)

Ietto-Gillies G Transnational Corporations and International Production. Trends, Theories, Effects (2nd edition Cheltenham 2012)

Kahn P and Wälde T New Aspects Of International Investment Law (Routledge2007)

Lester S Liberalization or Litigation? Time to Rethink the International Investment Regime (CATO Institute 2013)

Mike M and Chui WH Research Methods for Law (Edinburgh University Press 2007 246)

Mohamed Khadijah, Combining Methods in Legal Research (The Social Sciences 2016)

Peczenik A On Law and Reason (2nd Edn Springer, 2008)

Samuel G, Epistemology and Method in Law (Ashgate Publishing Company, 2003 384)

Sornarajah M The International Law on Foreign Investment (2nd edn Cambridge University Press 2004)

Wälde T, The Specific Nature of Investment Arbitration New Aspects Of International Investment Law (Martinus Nijhoff Publishers, 2007)

Journals

Al Khatib F Al and Abdulla MS, The State of Qatar: A Financial and Legal Overview (2001) 8 Middle east policy

Aziz SS, ‘The investment protection chapter of the EU-Singapore Free Trade Agreement: A model for the post-Brexit UK IIAs’ (2017) 10 JE Asia & Int'l L. 7

Hsu L, ‘EU-ASEAN trade and investment relations with special focus on Singapore’ (2015) European yearbook of international economic law 233

Mosteanu NR, and Carla Alghaddaf, ‘Smart economic development by Using Foreign Direct Investments–UAE case study’ (2019) Journal of Information Systems & Operations Management 9.

Pain N and van Welsum D Untying the Gordian knot: the multiple links between exchange rates and foreign direct investment (2003) 54 JCMS, 823–846

Russ KN, The endogeneity of the exchange rate as a determinant of FDI: a model of entry and multinational firms (2007) 71 J Int Econ 71 344–372

Ruzmetov B, Z K Jumaeva and M Xudayarova, ‘International Experience in Attracting Foreign Direct Investment’ (2021) 3(4) International Journal on Economics, Finance and Sustainable Development 38

Wells L, The Emerging Global Regime for Investment: A response (2010) 52 Harvard International Law Journal,

Theses

Al-Qahtani M Qatar's Membership Of The World Trade Organization: What Are The Economic Benefits? (PhD, Durham University 2016)

OthersInternational Institute for Sustainable Development, Investment Laws of ASEAN Countries: A comparative review (IISD 2017) accessed < https://www.iisd.org/system/files/publications/investment-laws-asean-countries.pdf>

Satander, ‘United Arab Emirates: Foreign investment’ (2020) accessed