International Legal Framework After World War II

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2 Rationales for Trade and Investment Treaties (a) drawbacks of international legal framework after world war II After World War II, there were two drawbacks referring to the legal framework of international trade and investment. Firstly, although the GATT did exist as a response of the failure of the International Trade Organization (‘ITO’), it did not have a formal organizational structure to conduct its function. Besides, the GATT only covered goods and yet services, although the latter was becoming more vital for countries’ economies. In international investment, there was no applicable law protecting the interest of foreign investment, for example, how to regulate monetary transfer from host countries, and how to calculate compensation upon nationalisation. Albeit customary international law did exist, it did not accommodate the needs of multinational enterprises. Moreover, it was nearly impossible to change customary international law. The next drawbacks related to the enforcement mechanism. Even though the GATT had operated dispute settlement system, there were significant delays of enforcement process due to the practice of consensus decision-making that could prevent the adoption of the GATT report. In international investment, the disagreement between industrialised countries and newly independent countries was not properly resolved because there was no appropriate enforcement mechanism. In particular, foreign investors were difficult to pursue claims
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