1. CARICOM AGREEMENTS ON
INVESTMENT:
POTENTIAL TREATY SHOPPING
AND CONSISTENCY ISSUES
Dr Chantal Ononaiwu
Trade Policy & Legal Specialist
Caribbean Regional Negotiating Machinery
OAS/CRNM/CARICOM WORKSHOP
“NEGOTIATING CARICOM INVESTMENT AGREEMENTS:
STATE OF PLAY AND WAY FORWARD”
GRENADA REX RESORT HOTEL, GRENADA, 22-25 JUNE 2009

2. Overview
Potential for ‘treaty shopping’ in relation to CARICOM
agreements on investment
Incoherence within CARICOM countries’ network of
IIAs
Incoherence between the IIAs of CARICOM countries
Overlapping agreements between the same contracting parties
Significance of policy incoherence
Approaches to addressing incoherence within the
network of IIAs

3. Potential for Treaty Shopping
Foreign investors may shop for a ‘home country of
convenience’, i.e. seek home countries that have treaties
with host countries where investments are to be made.
The potential for such treaty-shopping exists in relation
to many CARICOM agreements on investment because
they do not contain a ‘denial of benefits’ clause.
Most agreements that exclude a ‘denial of benefits’
clause guarantee only protection of investment after
establishment.
However, some BITs that grant access rights do not
include a ‘denial of benefits’ clause.
Barbados’ and Trinidad & Tobago’s BITs with Canada

4. Potential for Treaty Shopping
However, some CARICOM agreements extend benefits only
to investors that have a substantial link to the home country.
Under the Revised Treaty of Chaguaramas, legal entities
constituted under the laws of a Member State enjoy the right of
establishment only if they carry on “substantial business activity”
within CARICOM and are substantially owned and effectively
controlled by CARICOM nationals.
BITs with the US allow a Party to deny the benefits of the treaty to
companies that have no “substantial business activities” in the
other Party.
Under the CARIFORUM-EC EPA, an entity set up under the laws
of an EU Member State or a CARIFORUM State qualifies as an
investor of that State only if it engages in “substantive business
operations” in that State.

5. Incoherence within the Network of IIAs
Given that CARICOM countries typically do not have a
model agreement that constitutes the basis for
negotiation of their investment agreements, there is
incoherence between the IIAs that they have concluded.
A single CARICOM country may be bound by several
investment agreements concluded with the same treaty
partner at the bilateral level, as part of a regional
grouping, or at the multilateral level.
There are some inconsistencies between these overlapping
agreements

6. Incoherence between IIAs
The same country may have IIAs that protect only
established investment and others that also grant access
rights
Trinidad & Tobago’s BITs with the US and Canada liberalize
investment while its BITs with the UK and Germany include only
guarantees of protection after investment is established
Some IIAs utilize a “top down” approach to investment
liberalization, while others utilize a gradual “bottom up”
approach
Under the BITs that grant access rights, a “top down” approach is
used. Under the EPA, CARIFORUM States used a “bottom up”
approach to scheduling market access and national treatment
commitments on commercial presence in services activities

7. Incoherence between IIAs
Some CARICOM bilateral trade agreements contain
investment protection chapters while others contain
only framework provisions on investment
CARICOM’s FTAs with Costa Rica and the Dominican Republic
include investment chapters and CARICOM and Cuba have
concluded an agreement on the reciprocal promotion and
protection of investment
CARICOM’s agreements with Colombia and Venezuela include
only framework provisions

8. Incoherence between IIAs
There are differences with respect to how IIAs address
the same issue
Jamaica’s BIT with the US prohibits the imposition of certain
performance requirements on investors while its BITs with
European countries and China do not include specific provisions on
performance requirements
Trinidad & Tobago’s BITs with Canada, China, Germany and the
US include provisions on the temporary entry of persons in
connection with an investment, while its BITs with Korea, Mexico
and the UK do not.

9. Incoherence between Overlapping Agreements
The parties’ BIT may be limited to protection of
established investments while their FTA may include
market access guarantees for foreign investors
Jamaica’s BITs with EU Member States guarantee protection of
investment after establishment. The EPA includes market access
commitments for commercial presences and investors
The EPA includes obligations concerning the behaviour of
investors and the maintenance of environmental and
social standards that are absent from the BITS between
CARICOM countries and EU Member States

10. Incoherence between Overlapping Agreements
Provisions in overlapping agreements may be
contradictory
Jamaica’s BIT with Germany includes an unconditional guarantee
of the free transfer of payments in connection with an investment.
However, the EPA allows the host state to impose temporary
transfer restrictions under certain circumstances.
Multiple dispute settlement provisions may apply to the
same dispute
Under the CARICOM-Cuba investment agreement, ISDS is available
in relation to disputes concerning the obligation not to impose
performance requirements prohibited by the TRIMS Agreement.
Under the TRIMS Agreement, only State-to-State dispute
settlement is available.

11. Significance of Policy Incoherence
Differences in treatment embodied in different IIAs may
not be reflected in underlying domestic legislation
National laws tend to treat foreign investors equally, irrespective of
their nationality
Those charged with implementing the agreements may
be unaware of the inconsistencies among the
agreements

12. Approaches to addressing Policy Incoherence
Encouraging greater coherence through individual IIA
negotiations
The effectiveness of this approach will depend on the bargaining
strength of CARICOM countries in the negotiations
‘Preservation of rights’ clauses or clauses that resolve
inconsistencies
The scope of such clauses in CARICOM IIAs varies
Some cover provisions of international law, the host country’s
domestic law and agreements between the investor and host
country.
Others are limited to some of those categories

13. Approaches to addressing Policy Incoherence
Recourse to the rules of the Vienna Convention on the Law of
Treaties on the application of successive treaties relating to
the same subject-matter

14. THANK YOU
chantal.ononaiwu@crnm.org
www.crnm.org