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Vol.1980/0061

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COMMISSION OFTHEEUROPEAN COMMUNITIES
COM(80)204final
Brusselst8"may1980
INVESTMENT PROMOTION ANDPROTECTION CLAUSESIN
AGREEMENTS BETWEENTHECOMMUNITY ANDVARIOUS
CATEGORIES OFDEVELOPING COUNTRY:ACHIEVEMENTS
TODATEANDGUIDELINES FORJOINTACTION,»
(ReportfromtheCommissiontothe-Council)
V"
?'o">'»•/'<fA»5•»>
"*e
>C"
..v>,/.
1
C0M(80)204final

Brussels.
ReportfromtheCommissiontotheCounoiL .
Subject:Investmentpromotionandprotectionclausesinagreementsbet­
weentheCommunityandvariousoategoriesofdevelopingcountryi
achievements todateandguidelinesforjointaction
Introduction
*
InJanuary197°"theCommissionpresentedacommunication totheCouncil
settingouttheguidelinesforCommunityactiontoenoourageEuropeaninvest­
mentinthedevelopingcountries. -
).
SincethentheCommunityhashadtotakedeoisionsontheinclusionofinvest­
mentclausesincooperation agreementstobeconoludedwithvariousdevelor
pingcountriesorgroupsofdevelopingcountries.Negotiations onthis
matterhavebeensuccessfully completedwiththeACPStates,ASEANMembercoun-
, I
tries,YugoslaviaandBrazil,andtakentothestageofadraftconventionin
theframeworkoftheEuro-Arabdialogue;furthernegotiations ,notably....
withIndiaandtheAndeanPaotcountries,areduetobeginshortly.'^
Thiswouldthereforeseemtobeasuitablemomenttoreviewprogressto
dateinthisfieldandsetoutguidelinesforjointaotiontobeunderta­
kenasregardsboththeimplementation oftheprovisionsnegotiatedso
farandthedevelopingcountrieswithwhiohnegotiations arebeingorare
shortlytobeheld.
Suchistheaimofthis^report.
Itisnot,therefore,concernedwiththeCommunitypositiontobeadopted
ininternational discussions onthesubjectofforeigninvestment.That
matterhasbeendealtwithinteraliainaCommissionworkingpaperin
connectionwiththepreparations forUNIDOIII.

Achievements todat'
The1978 Commissi ^^..reposals covered twotypes ofarrangement :
–thenegotiation ofagreements (orclauses to "beincorporated incoopera­
tion .agreements )with developing countries orgroups ofdeveloping coun–
tr*irregarding thebasic rules forthetreatment offoreign invest­
ments
–measures to "beapplied onacase-by-case basis (inparticular theconclu­
sion ofspecific agreements backed upwhere appropriate byCommunity finan­
cial guarantees )fortheselective promotion ofinvestment projects of
special interest both totheCommunity andthehost country .
Izjthenegotiations which have taken place sofarwith various developing
/
countries ,progress hasbeen made onvarious ideas putforward bytheCom­
mission inthefield oflegal protection forinvestments ,buttheexamina­
tion ofafinancial guarantee (orbackup foraction bytheMember States ),
which constitutes aninternal Community instrument ,has still produced no
positive results .
1.TheEuro-Arab dialogue :efforts have sofarfocused onthemore general
theme ,namely basic rules forinvestment .Following anagreement between
thetwosides ontheprinciples which should govern aconvention inthis
field ,theEuropean members oftheworking committee concerned have drawn
upadraft Euro -Arab Convention onmutual promotion andprotection of
investments .This docuaant isafully worked-up anddetailed legal text ,
which stands agood chance ofbeing approved without substantial amend­
ments when the suspended dialogue isresumed .
Thework done inthis context clearly revealed aconsensus within the
Gocmujiity onthedetailed contents ofaninvestment protection accord to
besubmitted toaspecific group ofdeveloping countries „Admittedly in
thecaae inpoint such aconsensus wasmade easier bythefact that seve­
ral oftheArab countries likewise had aaobvious interest inreaching an
agreement •which would protect their oiminvestments inEurope .Butthe

specificnatureoftheseArabinvestments (mainlyfinancialassets)posed.J
particularproblemsfortheEuropeansidewhiohismoreusedtodisoussing
thetreatmentofdirectinvestments ;thiswasthecasenotablywithregard,
tothenon-discriminatory treatmentofportfolioinvestments andthetrans­
ferofinvestments andincome.Moreoveritwasneoessaryattheoutsetto
convinoeourArabpartnersnottoinsistontheooverageofmonetaryrisk
(againstinflationandexchangeratefluctuations )andtofindaresponse
totheArabolaimtobeallowedtoderogatefromapplyingnationaltreat­
mentonthegroundsofdevelopmentpolicy.■
Negotiations fortherenewaloftheLomeConvention :TheCommunityproposed
totheACPStatesthatthenewagreementshouldcontaincertainclauses
aimedatthepromotionandproteotionofinvestmentsingeneral,plus
morespeoificprovisionscoveringspecificinvestmentsintheminingand
energy"sectorsofpartioularinteresttobothparties.
a)Onthetreatmentofinvestmentsingeneral,theCommunity,becauseofthe
difficulties presentedbyagreements onbasioinvestmentrulesandatime
sohedulerulingout-lengthynegotiations onsuohrules,hadsimplyput
forwardaformulainteraliaaffirmingtheimportanceinthemutualinte­
restofconcludingreciprocalinvestmentpromotionandprotectionagree­
ments.Thisproposalhadtobedropped,inthefinalstagesofthenego­
tiationsowingtorigidoppositionfromahandfulofACPStatesfearing
thatinthecircumstances accessiontothenewConventionwouldmorally
obligethemtosignsuchagreements.Theproposedformulawasreplaced
byamuchmoregeneraldeclaration ofintent"totakesuohstepsaswould,
promoteinvestment"infieldsofmutualinterest.
TheCommunityproposalfornon-discrimination betweeninvestments fromthe
variousMemberStates,ontheotherhand,wasadoptedandspelledoutin
ajointdeclaration annexedtothefinalaotoftheLomSConvention.The
applicationofthisrightisbasedonbilateralinter-governmental agree­
mentsrelatingtothetreatment"ofinvestmentslrfhiohsh^l^erveaa^ref e-^~
renoeagreements.

4.
Forthepurpose_ofapplyingnon-discriminatory treatment >thecontrac­
tingstatesoonoemede.»tooonoludeagreementsintheferaofexohan-
gesoflettersorsomeotherappropriate form, :
«
TLedeclarationspecifiesthatsuchagreementswillcoverdisputesrelating
toinvestmentonlywheretheyariseaftertheentryintoforceofthenew
Convention ;butinvestments made"beforethatdatewhichhavenotgiven
risetoanydisputemayalsoqualifyforson-discriminatory treatment,
sinceitisstatedthattheirtreatmentshallbeexaminedbytheparties
concerned,casebycase,inthelightoftheprovisionsoftheagreement
ofreference#
*
' *
Thenon-discrimination clauseiswithoutprecedentinthefieldofthelegal
protectionofinvestments ,andinprincipleitshouldbeequivalentineffect
totheCommunityagreements onbasicrulesproposedbythe.Commissioni.e.
putfirmsfromallMemberStatesonanequalfootingasregardstreatment
oftheirassetsinthedevelopingcountriesconcerned.Itremainstobe
seentowhatextentthisobjectivecanbeattainedinrelationswiththe
ACPStatesbymeansofthebilateral ,agreementsprovidedforinthedecla­
ration.
Inanyevent,thedeclaration hasnotsettledtheproblemoftreatmentof
investments inACPStateswhichhavenotooncludedinvestmentagreements
anddonotintendtoGOso. .
b)RegardingthepromotionofminingandenergyinvestmentsinACPcountries,
bothsidesrecognizedtheimportanceofspecificprotectivemeasuresasa
meansofencouraging Europeanfirmstoengageinthissectorandthusbring
intoplaytheincreasedopportunities openedupbythenewConventionfor
EDPandSIBparticipation ,whichshouldessentiallyplaytheroleofcatar-
lystsforinvestment.

5
ThatisthepurposeofthejointACP-EECdeclaration annexedtothenew
ConventionattherequestoftheACPStateswhiohprovidesforthepossi­
bilityofconcludingagreementsbetweentheACPStatesontheonehandand
theCommunityanditsMemberStatesontheother,relatingtospecific
miningandenergysectorprojectspromotedbytheconcernedACPState,wherethe
CommunityrecognizesthatsuchprojeotsareofinteresttoitandEuro­
peancapitalisinvolvedinthefinancing.
Thusthenegotiations withtheACPStatesshowedthosecountriestobe
unwillingtobindthemselvesinanywaytheyfeelisincompatible with
nationalsovereignty ,forexamplebyooncedinganyautomaticor^retroactive
forcetotheextensionofrightsgrantedtoathirdparty,butnotopposed
inprir";-^todiscussingmattersofinvestment.Thereferencetospeci­
ficagreementsintheminingandenergysectorwasnevercalledintoques-
* •
tioninthenegotiations .Similarly,anumberofACPStateswerenotably
open-mindedregardingtheconclusionofagreementsintheinvestmentfield
-asindicatedforinstanoeinthespeeohbythePresidentoftheCouncil
ofACPMinistersatthesigningofLom6II–providedtheirsovereignty
issafeguarded .
3.Thenegotiations ontheinvestmentclauseincludedintheCooperation Agree­
mentrecentlysignedwiththefivemembercountriesofASEAN(Indonesia,
Malaysia,Philippines,Singapore,Thailand)werehelpedbytheopenattitude
ofthesecountriestowardsforeigninvestmentwhichtheyconsidernecessary
todevelopanddiversifytheirindustrial .capacityandbuilduptheirtech–
nologicalpotential.
Evidenceofthiscanbeseeninthepromotionmeasurestakenbythesecoun­
triesthemselvesandtherelativelyhighnumberofpromotionandprotection
agreementsconcludedwithMemberStatesoftheCommunity *Intheinvestment
clauseoftheAgreement,whiohisbasedonthetextadoptedonthismatter
atthe1978Community-ASEAN ministerialmeeting,itislaiddownthat,in
ordertoimprove,thealreadyfavourableinvestment -climate,thepartiesshould
encourageeffortstoextendtheagreements oninvestmentpromotionandpro­
tection,whileensuringthattheseagreementsendeavourtoapplytheprinciple

6
ofnon-discriminatior aimatprovidingfairandequitabletreatmentand
*
reflecttheprincipleofReciprocity.TheCounoilstatedthattheagree-•
mentsprovidedformtheoiausearetobeconcludedbytheMemberStates
oftheCommunityandxieatJlcrcountriesofASEAN.
Whatisinvolved,therefore,isadeclaration ofintentbythemembercoun­
triesrbothgroupingstoaddtothenetworkofbilateralagreements
beingaimedmoreespeciallyatthoseMemberStateswhichhaveconcluded
veryfew,ifany,agreementsofthiskindsofar.Amongthethreeprinciples
tobefollowedinconcluding newagreements,thereciprocity andfairand
equitabletreatmentcriteriaarestandardforsuchagreements.
Thenon-discrimination principle,ontheotherhand,isbasedontheLomSII
formulaandmeansthatanynewagreementsconcludedintheEEC-ASEANcontext
shouldnotdeviatetoofarfromexistingagreements,soastoavoiddiscri­
minationbetweeninvestorsfromdifferentcountries.
However,unlikethejointdeclarationinthe,Lom6Convention)theformula
adoptedinthecooperation agreementwiththeASEANcountriesdoesno't'
establisharighttonon-discriminatory treatment.
Inanyevent,theexistenceintheEEC-ASEANcontextofaconsiderable num­
berofagreementsofdifferingscopeconoludedbycertainMemberStateswould
havemadestrictapplication oftheprincipleofnon-discrimination extremely
complexandhaphazard. .
4.TheinvestmentclauseintherecentlyconcludedagreementbetweenYugoslavia
andtheCommunitylaysdownthattheContractingPartiesshouldtakesteps j
•«opromoteandprotecteachother'sinvestments aridinthisregardendeavour
toconcludereciprocalinvestmentpromotionandprotectionagreementstotheir
mutual'advantage.
Thisformula ;r6Dresentssomethingofacommitmentbythepartiesto-
establishcontraotuallinksinthesphereofinvestmentincentives,without ,
actuallyspecifyingthenatureoroontentoftheagreementstobeconcluded
inthisarea.

Therecentlyinitialledcooperation agreementbetweenBraziland,the-–>
Communitycontainsaninvestmentclauseofgeneralcaracter,according
towhichtheContractingpartiesintendtofacilitateandpromote,"by
appropriate measures,favourableconditionsfortheexpansionofinvest–-
meftta,onadvantageous baaasforBoohoftheinterestedparties.
-Thisopeningclause,althoughnotinvolvinganypreciseundertaking ,will
makeitpossiblefortheparties,toconsiderconoretemeasuresinorder
toattaintheaimlaiddownintheolause.
_ ·-
x~x
TheresultsobtainedhithertowithincentivesforEuropeaninvestmentin
thedevelopingoountriesreflectthediversityofthepositionsofthe
variousnegotiatingpartners,thevarietyofpriorarrangements' forforeign
investmentandthe.Community'sowndifferentinterests *
Theyrepresenttheacquiscommunautaire inthissphereandmayconsequently
havesomevalueasaprecedentforcurrentorfuturenegotiations withother
developingcountries. '
Theprecedentliesfirstandforemostintheveryfactof.havingincluded
inaoooperation agreementbetweentheCommunityandnon-membercouirtries .
clausesaimedatprotecting,andtherebypromoting,foreigninvestmentof
mutualbenefittothehostcountryandtheCommunity.Sucharrangements '
arealsoanintegralpartofindustrialcooperation betweentheCommunity
andthedevelopingcountriesconcernedbecausetheydonotstemfroma
concessionrequestedbytheCommunityinreturnforvariousbenefitsbut
fromacleargraspofwheremutualinterestslie.
•,
Thisisobviouslyparticularly applicabletodevelopingcountrieswhiohcan
hopetobenefit,fromthereciprocitybuiltintotheseolausesorwishto
keeptheoptiontouseitopen.
Withregardtothecontentofinvestmentclauses,theformulasadoptedupto
now,i.e.aformalagreementonthebasicrules,theclauseonnon-discrimi-
natorytreatmentbetweenMemberStates,specifioagreementsforindividual
* ■* I
projeotsandtheclauseopeningthewayforsubsequentmeasureswillprovide
averyusefulbasisforfuturenegotiations.

8
II.GuidelinesforfutureCommunityactiontoencourageinvestmentinthe j
developingcountries j
i
!A.Guidelinesfortheapplication oftheinvestmentclausesinagreements !
concludedbytheCommunity !
UnliketheEuro-Arabconvention onthepromotionandprotectionofinvest– 1
.- ' ' I
ment,which,whensignedandinforce,willinitselfconstituteanimmedia­
telyapplicablecommitmentunderinternational law,theinvestmentclauses
intheotheragreementsconcluded ,bytheCommunitysetoutprinciplesand I
intentionswhiohtheContractingPartieswillhavetogiveconcreteshape j
later. j
* !
■■ t
TheCommunity'sactionherecouldbebasedonthefollowingguidelines : i
■ I
I
1.InthecontextofthenewLomeConvention
%
–Withregardtothenon-discriminatory treatmentprovidedforinthejoint
declarationrelatingtoArticle64oftheConvention,itisuptotheCon–'
tractingStates–andinparticulartheCommunityMemberStatesconcerned–t
tomakesuchtreatmentapplicablebyrequestingthehostACPcountrythe
conclusionofanagreementrelatingtothetreatmentofinvestments which
wouldbebasedonbilateralinvestmenttreaties,knownas"reference
agreements"(l). j
Asregardssuchreferenceagreementsconcludedbeforetheentryintoforce {
oftheConvention,theapplication ofnon-discriminatory treatmentshall
takeintoacoountanyprevisionsin.thereferenceagreement ;theconcerned
ACPStatehashowevertherighttomodifyoradaptthistreatmentwhenin­
ternationalobligationsand/orchangeddefaotooircumstanoes sonecessitate.
Thepartiesconcernedthenagreeontheformoftheiragreement.
ItwouldbeadvisablefortheMemberStatestodiscusswithintheCouncil
howtheyintendtousetherighttothenon-discriminatory treatmentof J
investment.Atalaterstageitmightproveusefultohaveanotification j
procedurewhichwouldenabletheMemberStatestobeinformedasamatter j
ofcourseofanynewbilateralagreementsand"extensionagreements"con->;
cluded".1 1 .
(l)Inthisrespect,thelistofreferenceagreementsinofficiallysubmitted
duringtheLomenegociations shouldserveasabasisandbroughtuptodate
periodically .InthecaseanACPStatehasconcludedseveralbilateral i
agreements,thepartiesconcernedshallchoosetheonethatwillserveas!
"referenoeagreement". ;

InaccordancewithArticle63oftheConvention,whichpointsouttheneed
totakesuohstepsaawouldpromoteInvestment ,andinordertosolveth«
problemofthetreatmentofinvestmentoperationsinACPStateswhichhave
notconcludedbilateralinvestmentagreementsandwhicharethereforenot
boundbythedeclaration onnon-discrimination ,theCommunityanditsMem­
berStatesshouldexplorethepossibility ofconcludingwithoneormoreof
thoseACPStateswhichwishsoinvestmentagreementswhichwouldhelpto_~J
enoouragetheinflowofEuropeancapitalwhilefullysafeguardingthe
sovereignty ofthehostcountry.
. \
Lastly,theCommunityanditsMemberStatesshouldendeavour,inconjunction
withthehostcountriesconcernedandontheirinitiative,topromoteEuro­
peaninvestmentinminingandenergydevelopmentprojectsintheACPStates
,towhichbothsidesattachparticularimportance.Inordertodothis,-
theyshouldmakeuseoftheincreasedopportunities foractionbytheEDF
andtheEIBinthissectoropenedupbytheConvention,andalsoconclude
withtheACPStatesconcernedagreements onspeoifioprojectspart–financed
byEuropeancapital. '
Europeanundertakings wouldhaveagreaterinoentivetoinvestiftheCommu­
nityandtheMemberStatescouldofferthem,inadditiontothepreventive
protectionconstituted *bythespecifioagreementsignedbythepublioautho­
rities,afinancialguaranteeagainstnon-commercial risks,incaseswhere
suchguaranteesoouldnotbeprovidedbynationalguaranteebodies(l).
TheCommissionproposesthatthisquestionbedealtwithduringtheactual
examination ofaspeoifioagreement,onthebasisoftheproposalsithas
alreadymade'inthisrespect(2).
(1)Theimportanceofhavingamultilateralguaranteesystemforcoveringthe
particularly highrisksinthissectorisbroughtoutbysuchmovesasthe
Inter-American Development Bank'srecentproposaltocreateafacilityof
itsownalongtheselinesinordertoencourageminingandenergyinvest­
mentoperationsinLatinAmerica.Inthisrespect,itisstrikingthatmost
–-^-of-theMember-States-of-theGommunity-have had–afavourableoratleastin–
"terestedfirstreaction,-whentheproposal-wastabled*
(2)seeCOM(tSV23finalof30January1978–PP*9-H
andCOM(79)130finalof14Maroh1979-pp.11-13

10.
&
2.InthecontextoftheAgreementwiththeraemcercountries orASSAN
Relativelyspeaking,thelargestnumberofinvestmentpromotionandprotec­
tionagreementshavebeenconcludedbytheMemberStateswiththemember
countriesofASEAN.Amongotherthings,thisexplainsthesolutionspeci­
ficallyadoptedintheCooperation Agreement ,namelybilateralextensionof
thenetwork.
T'heMemberStateswillthereforehavetoaddressthemselvestothistask;
theywill,ofcourse,startfromverydifferentpoints,concerning -thenum­
berofbilateralagreements concluded®
Ithasalreadybeenmentionedinconnectionwiththeprinciplestobefollowed
17.negotiating newagreementsthatreciprocity andfairandequitabletreat­
mentshouldnotcausaanyprobl6mfwhiletheprincipleofnon-discrimination
shouldbeconceivedsufficiently flexibly,thusgenerallyTakingforadegree
ofprotectionwhichisnolessthanthatalreadyaffordedby'existing -agreements.
Moreover,itwouldseemtobeinthecontractingparties'interestnotto
restricttheiractivitiesintheinvestment'fieldtoexpandingthenetworkof
bilateralagreements,
–Industrial andtechnicalcooperation ,withparticularemphasisonmining
operations–whichtheAgreementrecommendsshouldbeencouraged-could
befacilitated ,asinthecaseoftheAC?State?,bytheconclusionof
agreements onspecificprojects "betweentheConvnTunityandtheStates,
ontheonehand,andthemembercountriesofASEAN,ontheother.
–Inaddition,theCommunityshouldjoinwithitsASEANpartners'inseeking
todevelopcontactsandpromotionalactivitiesbetweenthetworegions®
firmsandorganizations ,particularly topavethewayfornewEuropean
investmentortheacquisition ofholdingsinSouthEastAsia.Suchacti­
vities,whichgotofftoapromisingstartwiththetwoconferences on
industrialcooperation ,mightbegivenamoreinstitutional form,stillto
"bedetermined.

11.
3.In-thecontextoftheAgreementwith_Yugo8lavia
ThefactthatYugoslaviahasagreedtoincludeaolauseonpromotionand
protectionofforeigninvestmentinitsAgreementwiththeCommunitymight
beunderstoodtomeanthatitisopentothistypeofinflow,providedthat
certainconditionsaresatisfiedandaccountistakenofthespeoificfea­
turesofitseconomicsystemTinderwhich,forinstance,noforeignfirm
mayhaveamajorityshareholding .
Inaddition,Yugoslaviahasconcludedinvestmentpromotionandprotection
agreementswithtwoMemberStates.
Assoonastheagreemententersintoforce,theCommunityshouldtherefore
proposeimplementing theinvestmentclauseandexploringwiththeother
* *
ContractingPartywhatcontentandformthereciprocalinvestmentagreements ,
providedforinthisclausemightbegiven.-
Asregardsthebasicrulesforthetreatmentofinvestment,themosteffective
solution-sinoeitavoidstheneoessityofnegotiating asetofagreements
presupposed bysuohsolutionsastheextensionofbilateralagreementsor
non-discriminatory treatment–wouldbeanagreementbetweentheMemberStates
asawholeandYugoslavia.
Therelationship betweenamultilateral agreementofthiskindandbilateral
agreementsmightbedealtwith,asinthedraftEuro-Arabconvention,by
appropriateclausessafeguarding theinterestsoftheMemberStateswhile
offeringundertakings Maximumprotection.
Thepartiescouldalsoexplorethepossibility ofconcludingagreements on
theencouragement ofinvestmentinanumberofsectorspersuanttothe
Agreement,whichmakesparticularprovisionfjrtheparticipation ofCommu­
nityundertakings inresearoh,productionandprocessingprogrammesincon­
nectionwithYugoslavia'senergyresources.,c

InthecontextoftheAgreementwith_Brazil
BrazilcontinuestobeoneofthemainfocusesofEuropeaninvestment
flowstothedevelopingcountriesingeneralandSouthAmericainpar­
ticular.
Theinvestmentconditions andclimateinBrazilaxegenerallyregardedas
stableax^dsatisfactory bothbyundertakings andbytheGovernments ofthe
MemberStates,whichregularlyagreetoprovidecoverforinvestmentpro­
jectsagainstnon-commercial risks,despitethefactthatthecountryhas
neversignedanyinternational investmentprotectionagresmet.
Thissatisfactory stateofaffairscouldbefurtherimprovedifBrazil
decidedtoabandongrantingfavourableinvestmentconditions onauni­
lateralbasisinfavourofinternational cooperation inthisfield.
Inordertoimplementthefuturedevelopments clauseintheagreement ,
withBrazil,specificagreementsforindividualprojectsmightprove
aparticularly appropriate instrumentasitmightlogicallyto"be
perceivedbyBrazilasameansofsafeguarding itssovereignty more
effectively .Suchagreementsmightturnouttobeamorapragmatic
solutionthanagreements onthebasicrules.
Inviewofthetypeandscaleoftheinvestmentprojectstobeundertaken
inBrazil,especiallyfordevelopingitsmineralresourcesandenergy
potential,specificagreementsmighthelptostepuptheinvolvement of
Communityundertakings inthecountry,thusservingthainterestscf
bothparties.

13.
B.Guidelinesforfuturenegotiations 1
ThosedevelopingcountrieswithwhichtheCommunityispreparingto
negotiatecooperationagreements,namelytheAndeanPactcountries
andIndia,displaythesamereluctancetoincurintergovernmental
legalcommitmentstopromoteandprotectforeign.investment,,yetat
thesametimetheyareinterestedintheideaofsuchinflows.
Theestablishment ofoloserrelationsbetweenthesecountriesandtheCommu­
nitymightthereforebeconduoivetoexploringnewformsofcooperationin
thisfield,takingaccountofthedifferentwaysinwhichthehostcountries
viewtheroleofforeigninvestmentintheirdevelopment prooesses.
inthisconnection,thevariouscooperationagreementsshouldcomprisegene­
ralopeningclausesspecifyingtheaimsof.investmentcooperation–asenvi­
sagedintheagreementwithBrazil–sothattheparties ~■"~"~
canoonsideratalaterstagewhatpractioalstepsshouldbetakentoattain
theseaims* ;,
Withthisinmind,theCommunitymightbaseitsattitudetowardsthedifferent
developingcountriesontheconsiderations setforthbelow*
TheAndeanGroup ' *
Theencouragement ofinvestmentshouldbeonemajoraimofthecooperation
agreementwhiohtheCommunityisabouttooonoludewiththefivemember
countriesoftheAndeanGroup,setupin1969bytheCartagenaAgreement.(l)*
DespitetherelativeimportanceoftheAndeanGroupamongthedeveloping
countries–itisthefourthlargestexporterandimporter,theseventhlar­
gestproducerandoneofthemainsuppliersofrawmaterials–European
investmentinthesecountriesislowsin1977netdirectprivateinvest­
mentbytheMemberStateswasonlyj636million(comparedwithji354million
bythe,UnitedStates)andhasneverexoeeded8#oftotalinvestmentin
LatinAmerica.
(^■)InitiallythisagreementwassignedbyBolivia,Chile,Colombia,Ecuador
andPeru;Venezuelaacoededtoitin1973andChileoeasedtobeamem­berin1976 !

TheEuropeanundertakings havenotbeenreassuredbytheAndeancountries'
statedpositiononforeigninvestment ,causingthemtosharetheopposi­
tionoftheotherLatinAmericancountriestointernational commitments
onthispoint(l)and,inparticular,toestablishin1971»undertheir
Decisionn°24,subsequently amendedbyotherdecisions,acommonsetof
rulesforthetreatmentofforeigncapitalrequiringallmembersofthe
Grouptoincorporate anumberofsubstantive andproceduralprovisions
intotheirnationallegislation ,thoughleavingthemsomelatitudein
determiningtheirnationalpoliciesinthisconnection.
Themostimportantoftheseprovisionsconcernthegradualconversionof
theforeignfirmintoa"joint"undertaking (withnationalinvestors
exercisingeffectivecontrolandholdingatleast51%oftheshares),
restrictions onthetransferofcapitalandearnings,lessfavourable
treatmentthanthataccordedtonationalfirms(especiallyinrespect
ofcreditfacilitiesandtradewithintheAndeanGroup)anddetailed
rulesonthetransferoftechnology.
Theexistenceofthislegislation shouldnot,however,preventtheCommu­
nityfromexploringpossibleformsofinvestmentcooperation withthe
AndeanGroup.TheGroupwouldseemtobetakingarathermoreopenatti­
tudetoforeigninvestment ,asisborneout,forinstance,byitspositive
responsetotheInter-American Development Bank'sproposaltosetupa
multilaterail guaranteefundtoencourageinvestmentintheminingand
energysectorsinLatinAmerica,despitethefactthatthiswouldmean
relinquishing somedegreeofsovereignty .
(l)Theonlyexceptionhasbeenthe"conventional "investmentprotection
andpromotion -agreementconcludedin1965betweenEcuadorandGermany
thoughthisagreement _isstillformallyinforce,itobviouslyno
longerreflectsEcuador'spositionandthuswouldnotbeasuitable
"referenceagreement"forotherMemberStates.

Moreover,theCommunity,whichhasaninterestinencouragingthepro-.
cessofintegration "begunwithintheAndeanGroupwouldappeartobe
better'placedthanotherstodiscusswaysofincreasingtheflowof
; 1•
investmentunderconditionssatisfactory forbothparties.Paoedwith
thecommonattitudeoftheAndeancountriesonthisquestion,theCommu–1
nityforitspartmustestablishajoint'position.
TheCommunitycouldaccordingly putforwardtheideaof'an
agreementtocoverinvestments,whichwouldembraceallthe^ ^
membercountriesofthetworegionsandwouldtakedueaccount,inter
alia,oftheintrinsiofeaturesoftheAndeancommonsystem.
SincetheAndeancountriesareanxioustodeveloptheirlargemineraland
energyresources,theymightalsobeinterestedintheideaofspeoifio
agreementsforindividualprojects.
índia i
.------------- --------■----- ;;;j-7T~–
IndiaconsidersthattheIndianConstitution togetherwiththe
country'srulesandregulations giveallsecuritytoforeignfirmsengaged
inbusinessaotivityopentoforeigninvestment.
ϊ.-
In1964IndiaconcludedaninvestmentprotectionagreementwiththeFederal
RepublioofGermanyincorporating theessentialbasicrulesapplicablein
thisfield. •.•
However,thisisaprovisional agreementbetweengovernments whiohwasnot
ratifiedbytheparliamentsconoerned(contrarytopracticeinthecaseof
allotherGermanagreements),anditsvalueasaprecedentis~ '
thereforelimited.India,moreover,appearstobeopposedtothetermsof
thisagreementbeingappliedtoalltheMemberStatesandunwillingto
agreetoevenamentionofthesubjeotofinvestmenttreatmentinthe
cooperation agreement.
TheCommunity,however,shouldproposethatthisimportantaspeotofeconomic
cooperationbetweenthetwopartiesbeincludedintheagreement,atleastin
theformofaclauseonimprovingtheolimateofinvestment,whichwouldopen
thewayforsubsequentconsideration ofappropriateoonoretemeasures*

16
Possiblenegotiations with,otherdevelopingcountries
SouthernMediterranean countries
AlltheArabcountrieswithwhichtheCommunityhasconcludedoverallcoo­
perationagreementswithinthecontextofits"Mediterranean approach"would
becoveredlaytheEuro-ArabConvention onInvestmentPromotionandProtec­
tion.ApprovaloftheConventionwillbeoneofthepriorityitemsfor
discussionwhentheEuro-ArabDialogueisresumed.
Hence,onlyiftheConventionwerenotapprovedortheEuro-Arabagreement
assumedamuchmoregeneralcharaoterthanplannedatpresent,wouldthe
«
Communityhavetotaketheinitiativeofpresentingitsinvestmentpropo­
salsthroughtheCooperation Counoils,whosejobitistomonitorthe
workingoftheMediterranean agreementsandproposefurthercooperation
measures.
Asimilarproposaloninvestmentcooperation shouldinany.casebesubmitted
toIsrael. -
*
TheGulfStates
TheGulfStateswouldalsobecoveredbytheEuro-ArabConvention.Shouldthe
Communityengageinnegotiations withthemwithaviewtoconcludingbilateral
agreements,thoseagreementsshouldeitherincludeareferencetotheConven­
tionor,indefaultoftheConvention,provideclausesbasedontheresult
actuallyachievedintheEuro-ArabDialogue.
Othercountries
Amongtheothernon-membercountrieswithwhichtheCommunitycoulddiscuss
thequestionofinvestment tparticularattentionshouldbegiventoChina.
Chinahasrecentlyaltereditspositionregardingtherolewhichforeigninves-
mentiscanplayinthecountry'sdevelopment.Itisimportantthereforeto
ensurethatCommunityfirmsareabletoparticipateinChina'sdevelopment
effortsunderthebestpossibleconditions *

17
Conclusion
Consideration oftheCommunity'sachievements inpromotingEuropean
investmentinthedevelopingcountriesandofpossiblefutureaotion
inthissphere,revealsthediversityofthesituationsinquestion
andofthepositionsofthepartiesinvolvedand,consequently ,the
difficultyofproducingformulaswhichwouldbeuniversallyapplicable.
Forthisreasonithasprovednecessary ->andwilldoubtlessbenecessary
inthefuture–tohaverecoursetodifferentvariantsofthetwobasio
instruments proposedbytheCommission,namelyagreements onthebasio
rulesforinvestmentandspecificagreementsforindividualprojects*
Furthermore ,certainguidelinesemergefromtheCommunity'saction
inthissphere,notably:
» i
–theutilityofraisingthesubjectofinvestmentwithallpartner
developingcountries,,includingthosereliuotanttoagreetocooperation
inthisfield: '
-thedesirability ofincorporating thebasiorulesoninvestmentorother
measuresinanagreementdistinctfromtheoverallcooperation agreement,
.providedthecooperationagreementcontainsaclauseopeningthewayfor
suchmeasures: ,-
-thepotentialimportanceoftheinstrumentcomprisingspecific
agreementsforindividualprojects,preferablysupplemented by
financialguarantees,notablyinthecaseofdevelopingcountri.es
opposedtotheoonolusionofgeneralagreements j
-theCommunity'sspeoifiointerestinnegotiating investmentclauseswith
groupsofdevelopingcountries.Aregionalapproachofthiskindwould.
permitabetterbalanceofcooperation andwouldhelptoharmonize
investmentconditionsbyestablishing atoneandthesametimea
largenumberofcontractualrelationsbetweentheCommunityandthe
developingoountriesinquestion.
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