Renegotiating Ethiopian Bilateral Investment Treaties in line with the Constitutional Goal of the Right to Sustainable Development


Student thesis: Doctoral Thesis

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Award date15 Jan 2021


The Ethiopian Constitution stipulates that all international agreements concluded by the country shall respect and ensure Ethiopia’s right to sustainable development. This provision -- which imposes a ‘soft obligation’ on the government -- sets out a critical policy goal for Ethiopia’s sustainable development-related interests in international agreements. This thesis investigates, by combining doctrinal and empirical research tools, the extent to which this constitutional goal has been taken into account in negotiating Ethiopian bilateral investment treaties (BITs).

Negotiating BITs compatible with the sustainable development goal would require the Ethiopian government to strike a balance between economic, social and environmental considerations. This may, for example, be achieved by acting in line with the Principles of the New Delhi Declaration, a specific international standard of sustainable development. However, a textual evaluation of all Ethiopian BITs entered into force so far shows that they do not take into consideration the constitutional goal of the right to sustainable development. An analysis of three case studies concerning foreign investments in different sectors further corroborates this finding that investors are not operating in accordance with this goal of Ethiopian Constitution. These case studies demonstrate that there are serious sustainability problems in the operation of foreign investment projects, mainly due to lack of commitment and capacity of the government to enforce, as well as for investors to follow, the applicable local standards.

This situation, therefore, demands a reform of Ethiopian BITs in line with the constitutional goal of the right to sustainable development. I argue that some of the challenges in regulations related to sustainable development would be mitigated if the BITs incorporated sustainable development-related provisions along with an enforcement mechanism. The existence of sustainable development-related provisions could be used as an additional source of investor obligations, while the enforcement provisions would be helpful to enhance the capacity of the Ethiopian government to implement local regulations aimed at pursuing sustainable development.

To contribute to the reform of Ethiopian BITs, I develop a model BIT by integrating lessons from the Canadian model BIT, the Morocco-Nigeria BIT, and the International Institute for Sustainable Development’s (IISD) model international investment agreements. I selected these agreements in view of their sustainable development-related contents and to draw upon good practices from developed countries, developing countries and non-governmental organizations.

I also redefine some fundamental concepts of foreign investment and use them as a benchmark to develop the model. First, instead of generalizing foreign investment as completely advantageous (classical theory), disadvantageous (dependency theory) or both (middle path theory), the evaluation should be on a case by case basis looking at the nature of the investment and where and how it is invested. I term this the ‘realistic approach’. Second, it is vital to redefine elements of foreign investment to avoid unqualified interpretations during the implementation of BITs and dispute settlements. I argue that the ‘contribution to the sustainable development of the host State’ should be considered as one of the fundamental elements to qualify for foreign investment.

I believe the recommended model is better than some of the existing new BIT models, especially from the perspective of least developed countries. For example, unlike the new models, my model explicitly includes in the substantive provisions the need for balancing the economic, social and environmental objectives and the issue of poverty eradication.

I identify five reform options for Ethiopia by considering UNCTAD’s reform package and the Vienna Convention on the Law of Treaty. These are (1) amending treaty provisions, (2) replacing ‘outdated’ treaties, (3) referencing global standards, (4) abandoning unratified old treaties, and (5) terminating existing old treaties. Depending on the different challenges such as the resistance of the treaty partner States, the five reform options can be combined and used by Ethiopia to reform its existing BITs based on the model that I developed in this thesis. Ethiopia should also negotiate future BITs based on this model.