Although it’s main function is to provide financial facilities and aid for supporting development and reducing poverty in the world, the World Bank plays a considerable role in the domain of international investment law as well. This function is exercised through different practices and via its affiliated agencies. We have briefly discussed the role of the World Bank in promotion of international investment law:
· The World Bank’s Guidelines on the Treatment of Foreign Direct Investment: Assuming that greater flow of foreign direct investment (FDI) will foster the economic development of host states, the World Bank has undertaken a mission to promote foreign direct investment in developing countries.
One of the steps taken by the World Bank is the preparation and publication of Guidelines on the Treatment of Foreign Direct Investments (the Guidelines). The main goal of the Guidelines is to help developing countries improve their legal environment and administrative procedures in order to provide a better environment for the absorption of FDI. The Guidelines provide for standards of treatment and protections that may encourage foreign investors to bring their capital in. The Guidelines are not mandatory and binding; they rather provide host states with a set of voluntary guiding principles that, if implemented, can help them promote FDI in their territories.
The Guidelines, however, have been criticizes by some analysts as going beyond settled rules of international law by expanding the boundaries of protection and by introducing new rules for the protection of foreign investors. The Guidelines have also been criticized for their unilateral approach. The Guidelines provided for a lot of advantages but no requirements, guidelines, or standards of practice on the part of foreign investors.
· International Convention on the Settlement of Investment Disputes between States and Nationals of other States (ICSID): It has been generally accepted that international investors are inclined to invest in countries where they can enjoy some degree of legal protection and legal certainty. One of the aspects of legal protection and legal certainty is the access to unbiased and independent dispute settlement fora. Most investors prefer an international forum rather than a local one to hear a dispute between them and a host country. This was the rationale behind the introduction of ICSIC in 1960s.
ICSID was very important because it reflected a clear departure from the idea of exclusive jurisdiction of local courts over investment disputes, which was supported and promoted by some developing countries during the 1960s. Today the World Bank hosts the International Center for the Settlement of Investment Disputes.
The ICSID is indeed an arbitration forum similar to many others. Referral to ICSID arbitration is optional for the parties. ICSID does not oblige the state parties to accept its jurisdiction over any investment disputes. Indeed referral to ICSID arbitration must have been agreed to in a specific agreement between the parties to a dispute.
· Multilateral Investment Guarantee Agency (MIGA): MIGA was established as an affiliate of the World Bank for providing insurance coverage to investors against non-commercial risks associated with their foreign investments. MIGA insurance covers political risks such as expropriation, nationalization, civil disturbance etc. and thus caters a better environment for international investors, which may result into the enhanced flow of foreign capital to developing countries.
· In addition to the above, The World Bank group provides technical assistance to countries in order to assist them to improve their legal frameworks with a view to attracting more foreign investment.
