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How Investment Is Important For Job Creation And Growth Of Germany And Pakistan Signed A Bilateral Investment Treaty

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Investment is key to job creation and growth. When Germany and Pakistan signed a bilateral investment treaty in 1959, it showed the world how modern trade and investment agreements among countries can be concluded to protect foreign investment ("arbitration game | The Economist," n.d.). Since then, there have been over 3000 trade and investment agreement between 180 countries. Many of these agreements contain a mechanism called Investor State Dispute Settlement (ISDS), which allows a foreign investor to invoke arbitration against the host government for the breach of certain investor protections (Sapiro, 2015).

Governments put ISDS in place for at least three reasons:

1 To resolve investment conflicts without creating state-to-state …show more content…

They are also not bound by a legal precedent system and enjoy wide discretion. The tribunalists are not salaried but paid by the parties (foreign investors or host government), which results in incentivizing a pro-investor bias among tribunalists. According to the “Fair and Equitable Treatment” (FET), foreign investors alone enjoy broadly interpreted substantive rights which are also vague. Not only this poses a threat to the environmental, health and financial protections but also give privileges to foreign investors over domestic firms. Domestic firms can launch ISDS cases using their foreign subsidiaries against their home government. Treaty shopping is another concern as foreign investors can reshuffle their corporate structure or establish new subsidiary to access ISDS ("Do the Commission’s reform proposals for ISDS really solve the problem? - Stop TTIP Stop TTIP," n.d.).

Although, there is a lot of discussion around reforming the ISDS clause, there are sound reasons why most states still embrace the ISDS provisions in their trade and investment agreements. The domestic quality of legal protections varies widely among states with some of the legal systems not functioning within the acceptable standard of fairness despite treaty obligations. We do see that the largest number of ISDS disputes have

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