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Paul E. Comeaux & N. Stephan Kinsella, “Reducing Political Risk in Developing Countries: Bilateral Investment Treaties, Stabilization Clauses, and MIGA & OPIC Investment Insurance , 15 New York Law School Journal of International and Comparative Law 1 (1994)

This article, co-authored with my law school friend and colleague Paul Comeaux, summarizes ways international investors could reduce or respond to political risk in host states. This article was a synthesis of some previous articles my friend Comeaux and I had written, namely:

These articles, in turn, were inspired, in part, by a course, “The International Law of Natural Resources” that Paul and I took at the London School of Economics when pursuing our LL.M. degrees at the University of London in 1991–92. The course was taught by one of the world’s leading international law experts, the extremely impressive Rosalyn Higgins, later president of the International Court of Justice, and author of many influential works, such as Problems and Process: International Law and How We Use It.

This article led to our book Protecting Foreign Investment Under International Law: Legal Aspects of Political Risk (Dobbs Ferry, New York: Oceana Publications, 1997), which, in turn, led to a later book, International Investment, Political Risk, and Dispute Resolution: A Practitioner’s Guide, by me and Noah D. Rubins (Oxford, 2005) and a second edition with me, Rubins, and Thomas N. Papanastasiou (Oxford 2020).

I go into more detail about some of this in New Publisher, Co-Editor for my Legal Treatise, and how I got started with legal publishing.

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“Politcal Risk” (1997)

From: Chapter I.1, “Political Risk,” in Transnational Contracts, Vol. 1, edited and compiled by Charles Stewart (Dobbs Ferry, New York: Oceana Publications, Inc., 1997)

See also Rubins, Papanastasiou & Kinsella’s International Investment, Political Risk, and Dispute Resolution: A Practitioner’s Guide, Second Edition.

Chapter 1  Political Risk

  • In this chapter, we discuss the general nature of political risk: the various types or manifestations of political risk, factors that contribute to political risk, and ways that investors can assess the political risks inherent in particular investment regimes or with respect to certain investments.

[continue reading…]


[Update: The book was published April 2, 2020; more information here.]

As noted in previous posts,1 in 2005 I published International Investment, Political Risk, and Dispute Resolution: A Practitioner’s Guide, co-authored with Noah D. Rubins, an American international arbitration attorney in Paris.  The text has been widely adopted, well-received, and critically praised. For example:

“The book is a tour de force. Rubins & Kinsella have written a first-rate study of one of the most vital areas of international law today. Notwithstanding its subtitle (“A Practitioner’s Guide”), scholars as well as practicing attorneys will find this an invaluable guide to understanding the multifaceted adjudicatory regime for cross-border investment disputes.”
William W. Park, R. Gordon Butler Scholar in International Law and Professor of Law, Boston University School of Law; General Editor, Arbitration InternationalCounsel to Ropes & Gray; former Vice-President, London Court of International Arbitration; publications include the casebook International Commercial ArbitrationInternational Chamber of Commerce Arbitration (3rd ed.); International Forum SelectionIncome Tax Treaty Arbitration; and Arbitration of International Business Disputes: Studies in Law and Practice.

“This book is comprehensive, well-written, and balanced. An admirable mixture of learned commentary and primary documents, it is portable, authoritative, and up-to-date. It is a distinctive and well-organized addition to existing reference works and will be of great value to practioners and academics who seek a dependable, balanced treatment of a range of legal and practical questions affecting foreign direct investment and dispute resolution.”
Jack J. Coe, Jr., Professor of Law, Pepperdine University School of Law; author, Protecting Against the Expropriation Risk in Investing Aboard(Matthew Bender 1993); International Commercial Arbitration–American Principles and Practice (1997); NAFTA Chapter 11 Reports (with Brower and Dodge); vice-chairman, International Commercial Arbitration Committee, ABA International Law Section.

“This book provides an excellent account of how legal techniques can be used to provide significant protections to foreign investment. Its comprehensive coverage, clarity of expression, and useful appendices will prove invaluable to the busy lawyer. It is one of those rare books that is valuable not only for practice but also for the law classroom.”
Professor Dan Sarooshi, Professor of Public International Law, University of Oxford; Barrister, London; author of International Organizations And Their Exercise Of Sovereign Powers and The United Nations and the Development of Collective Security: The Delegation by the UN Security Council of Its Chapter VII Powers

But a lot has happened in law and international arbitral practice since 2005, so it’s time for an update. Noah and I have enlisted the help of a third co-author to contribute to a second edition, which Oxford University Press—UK has agreed to publish. It should be out in March 2020. Available for preorder: OUP Product Page.

The book will be part of the Oxford International Arbitration Series, and will include a preface by the Series Editor, Professor Loukas Mistelis. It will be promoted alongside other leading investment arbitration titles such as McLachlan, Shore and Weiniger’s International Investment Arbitration and Irmgard Marboe’s Calculation of Compensation and Damages in International Investment Law. As noted on the OUP-UK site,

The [Oxford International Arbitration Series] publishes books of quality and originality on subjects of practical importance in modern international arbitration, focusing on emerging topics and pervasive issues. The series provides both practitioner and scholarly readers with titles which offer a high standard of analysis.

Our new co-author is an impressive scholar: Thomas N. Papanastasiou, an Assistant Professor of the Law Faculty of Neapolis University of Paphos (Cyprus). Thomas is licensed to practice with the Athens Bar, and holds a Ph.D. with a focus on International Investment Law and an M.A. in International Relations from Waseda University of Tokyo, as well as an LL.M. in Civil Procedure, and an LL.B. from Kapodistrian University of Athens (Greece). He has worked as a consultant to international organizations, such as the World Bank and to consulting firms in Japan and Europe. His research focuses on public international law, foreign investments, energy law, international development and human rights; his publications include: The Legal Protection of Foreign Investments against Political Risk: Japanese Business in the Asian Energy Sector (Quid Pro Books, 2015; Amazon); and Corruption in the Infrastructure Provision: The Role of Accountability Mechanisms in the Community Driven Development Projects of Indonesia (NOVA Publishers, 2016).

My other co-author, Noah D. Rubins, an American international arbitration attorney in Paris, also has extremely impressive credentials and experience. Noah is an attorney in the international arbitration and public international law groups of Freshfields Bruckhaus Deringer in Paris. He has advised and represented sovereign and private clients in arbitrations under ICSID, ICC, AAA, Stockholm Arbitration Institute, and UNCITRAL rules, and has also served as arbitrator under the UNCITRAL and ICC Rules. He specializes in investment arbitration, particularly under the auspices of bilateral investment treaties and NAFTA. Co-author of Investor-State Arbitration (forthcoming), he has published widely in the field of international investment and dispute resolution, and has taught foreign investment law at Georgetown Law Center in Washington, DC. He received a Masters degree in dispute resolution and public international law from the Fletcher School of Law and Diplomacy, a J.D. from Harvard Law School, and a bachelor’s degree in international relations from Brown University. Before entering the law, Noah served as attaché at the U.S. Embassy in Moscow, and founded a foreign-policy think tank in Bishkek, Kyrgyzstan.

The current version of IIPR sells for only $245—what a bargain compared to my other books (e.g. $3487.00 for the seven-volume Digest of Commercial Laws of the World published by Thomson/Reuters).


Update: All revised and new chapters submitted, new Preface and Introduction completed. So now it’s in the publisher’s hands. Publication is expected in March 2020. Here’s the current graphic for the cover.

  1.  Preface and Introduction to International Investment, Political Risk, and Dispute Resolution: A Practitioner’s Guide and New Publisher, Co-Editor for my Legal Treatise, and how I got started with legal publishing. []

In a previous post1 I mentioned how I got started in legal publishing as part of my law career. One of the books I mentioned was International Investment, Political Risk, and Dispute Resolution: A Practitioner’s Guide, co-authored with Noah D. Rubins, an American international arbitration attorney in Paris. This book was published in 2005 by Oceana Publications, which was then acquired by Oxford University Press. The publisher recently granted permission for me to publish the Preface and Introduction and some ancillary material such as the index and table of contents. It may be downloaded here (in PDF form).


Many of my free market and libertarian friends know mainly of my writing and in those areas, but I’ve also published a good deal on the legal and practitioner side—not that there is no overlap between them (for example, I’ve written on IP law, as a lawyer, as well as IP policy, as a libertarian). This book is primarily legal and practitioner related (but also attempts to present the material in a detailed, scholarly way), but one driving goal for this project was to help find practical, legal ways to protect property rights of capitalistic companies and investors from takings by the host state. That is one reason my dedication was to Hans-Hermann Hoppe, the world’s preeminent Austrian economist and libertarian theorist. I explained some of our motivation for writing the book in the Preface:

As globalization continues, foreign direct investment, including investment in developing economies, continues to grow each year as well. Political risk—the risk that a host government will interfere with the property rights of a foreign investor—is therefore a topic increasingly central to strategic discussions within both governments and the international business community. While domestic legal, economic and political considerations are critical to assessing political risk, international law also plays an important role. State responsibility for investor protection, treaties protecting foreign investment, political risk insurance, the immunity of states from suit in national courts, and international arbitration between states and investors are just a few of the matters governed or affected by evolving principles of international law.

There has long been a need for a current reference work integrating these and other issues related to international investment and political risk. Many of the relevant topics have been addressed in law journals or monographs, but never as part of an integrated analysis of political risk. And while there is certainly a wealth of material concerning the international law of investment protection, much of it is written from an academic viewpoint rather than from the perspective of assisting businesses and governments in avoiding or reacting to the conflict between interests private and public, foreign and domestic.

The 1997 Oceana monograph Protecting Foreign Investment Under International Law: Legal Aspects of Political Risk, penned by one of the present volume’s co-authors and his former colleague, Paul Comeaux, was written to address these and other topics. As one reviewer wrote, “The book is very useful for beginners as an introduction and easier to access and use than the much more comprehensive and in-depth studies by Sornarajah and Muchlinski.”2  Another commented:

This book provides an in depth analysis of the political risk associated with foreign investment—that the host government may decide to nationalize, or otherwise interfere with, alien property rights. It succinctly identifies the decisional factors including treaties, political risk insurance, sovereign immunity, and arbitration between States and investors. It serves as a useful primer for investors, corporate counsel, and anyone interested in expropriation litigation disputes.3

Since the previous book was released eight years ago, far more attention has been paid to some of these topics, in particular investor-state arbitration. This is no surprise: the number of cases registered at the International Centre for the Settlement of Investment Disputes between 1997 and 2001 was equal to the number initiated before 1997 since the Centre’s inception in 1965.

The present volume addresses the same issues as did the 1997 work, with updated and expanded coverage. Our goal here is to enable the investor to appreciate the risks associated with government interference in property rights, to minimize those risks and deal effectively with their consequences. But we also hope to promote understanding within host governments about investors’ expectations and concerns, to allow them to avoid conflict and maximize the benefits of foreign direct investment for their countries and constituencies.

This book is addressed to a wide audience, and is written to appeal to lawyers and non-lawyers alike. It is suitable as a primer for attorneys and investors seeking to familiarize themselves with international law pertaining to political risk. It is also addressed to both in-house and outside counsel for corporations who either have made or are contemplating foreign direct investment in developing (or other) countries. Experienced attorneys involved in expropriation-related litigation should also find this book useful as a reference guide to important principles of international law related to political risk. It should also be useful to law students studying international law and academics seeking a reference work pertaining to the legal aspects of international investment and political risk. Last but certainly not least, government officials and attorneys can glean important information about the mindset of foreign investors and their likely course of action should State measures adversely affect their investment. We hope that practitioners will find the sample and source documents in the appendices of use as well, both for comparison purposes and for ease of reference.

We are convinced that the reduction of political risk, through the active participation of both host countries and foreign investors, is a critical factor in the improvement of the human condition worldwide. Entrepreneurship and capital investment are essential to the expansion of prosperity. This conviction, in addition to a more detached enthusiasm for the subject of our practice and research, is one motivation for undertaking this book and, we believe, has spurred us to forcefully explain both how investors can protect themselves, and the ways that host States can make such protection superfluous. It should be noted that, regardless of the authors’ policy preferences, we have attempted to remain strictly objective in evaluating the realities of international law, business, and politics.

… To two individuals we owe special thanks, and it is to these two that we dedicate this book. One of the authors (Kinsella) has been lucky enough to be befriended and informally mentored by Professor Hans-Hermann Hoppe, a leading libertarian theorist and Austrian school economist in the tradition of Ludwig von Mises. Hoppe’s brilliant and tireless advocacy of the principles of individual liberty, sound economics, and international trade, peace and harmony has been an inspiration. …

I am obliged to note here that the material in the file is copyright 2005 Oxford University Press, and is reprinted here by permission of Oxford University Press, USA. The book may be found on Oxford’s website here.

Further information, such as book reviews and online resources and links to various institutions, websites, services, and other resources pertaining to topics discussed throughout the text of the book may be found here.

  1. New Publisher, Co-Editor for my Legal Treatise, and how I got started with legal publishing []
  2.  T. Wälde review, CEPMLP Internet Journal, vol. 3 (1998). See also review by Assad Omer, Transnational Corporations, vol. 10, no. 1 (UNCTAD, April 2001). []
  3. American Society of International Law: Reader’s Corner (Issue #16, June 1998).  []

Recent Developments in Jurisprudence and Legislation (1994)

One of my earliest published articles (and delivered speeches). From 1994. HTML from Word version below; PDF. When I was a young lawyer at large law firms, I took every chance I could to publish, get my name out there, etc. (see New Publisher, Co-Editor for my Legal Treatise, and how I got started with legal publishing).



Recent Developments in Jurisprudence and Legislation


Robert O. Thomas & N. Stephan Kinsella

Jackson & Walker, L.L.P.

Houston, Texas

41 LSU Mineral Law Institute Ch. 6 (1994) [continue reading…]

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This is an article I published in the Philadelphia Lawyer, p. 20 (Fall 1997) (PDF), about the now-defunct Multilateral Agreement on Investment, or MAI. At the time I was in favor of it and somewhat naively optimistic that a fairly universal pro-private property rights agreement might be adopted. Sigh.

For more background on related matters, see my book International Investment, Political Risk, and Dispute Resolution: A Practitioner’s Guide (Oxford University Press, 2005) and my Online Appendix XVII, “Online Resources”.

The Re-emerging International Framework for Protection of Investment

By Stephan Kinsella1

(version submitted to The Philadelphia Lawyer, September 1997 issue)

We’ll take and take until not even the nails in their shoes are left.  We will take American investments penny by penny until nothing is left.

                                                                                                 —Fidel Castro, 19602 

Less than seventy-five years after it officially began, the contest between capitalism and socialism is over: capitalism has won.

                                                                                        —Robert Heilbroner, 19893 

American entrepreneurs are, by and large, used to operating within a relatively fixed and predictable background of overarching state and federal laws.  If something goes wrong with a business transaction—e.g., one party breaches a contract or intentionally defrauds or harms another—the wronged party that he can very likely resolve the matter in some court, according to some applicable law, whether federal or state.

Similarly, if an investor’s property rights are damaged or otherwise taken by the government, the investor can obtain redress, typically in the form of compensation, in court.  In the West, though protection of property rights is far from perfect, it is largely taken for granted that the government is constitutionally prohibited from taking one’s property (including investments) without due process and just compensation.  Thus, trade and investment flourish in western countries, since both contractual and property rights and protected.

International trade, and investment in foreign countries (known as foreign direct investment), require protection as well.  With respect to foreign trade—for example, trade between an American company and a foreign company—the parties cannot simply assume that they are both subject to jurisdiction in the courts of the same nation.  Despite this seeming difficulty, however, foreign trade has been able to thrive since disputes can be settled, and contracts enforced, even between parties of different nations.  This has long been possible with the international Law Merchant, in which disputes between merchants of different countries are settled in neutral, largely private arbitration proceedings.

Today, for example, private arbitration is frequently conducted in accordance with the rules of the International Centre for the Settlement of Investment Disputes (ICSID), the International Chamber of Commerce (ICC), or the American Arbitration Association (AAA).  In addition, dispute resolution and other aspects of foreign trade are buttressed to some extent by the foreign trade framework established by multilateral agreements such as the General Agreement on Tariffs and Trade (GATT), and its successor, the World Trade Organization (WTO).  Thus, private parties have been and continue to be able to rely on and enforce the contracts necessary for foreign trade.

Foreign direct investment is another matter.  Companies investing in other countries are not able to rely on private measures such as arbitration agreements to ensure that the host state (the state hosting foreign investment) does not interfere with investments.  States have sovereignty over property within their territory, and thus foreign investment is always subject to the threat of expropriation by the host state.  Investing in foreign regimes is thus said to be subject to “political risk,” especially in those states with a history of hostility to capitalism and property rights, such as the former communist states and other developing economies. [continue reading…]

  1.  LL.M., University of London; J.D., M.S., B.S., Louisiana State University.  The author is a member of the Intellectual Property Department and International Law Practice Group of Schnader Harrison Segal &amp; Lewis in Philadelphia, and co-author <i>Protecting Foreign Investment Under International Law: Legal Aspects of Political Risk</i> (Dobbs Ferry, New York: Oceana Publications, 1997).  Email: nskinsella@shsl.com; http://www.shsl.com.  The views expressed herein are those of the author alone, and should not be attributed to any other person or entity.   []
  2.  New York Times, 21 August 1960, § 3(F), p. 1, quoted in Eric N. Baklanoff, Expropriation of U.S. Investment in Cuba, Mexico, and Chile 112 (1975). []
  3.  Robert Heilbroner, “The Triumph of Capitalism,” The New Yorker, Jan. 23, 1989, p. 98.  The superiority of capitalism over socialism had been rigorously proved back in 1920 by the great Austrian economist Ludwig von Mises.  See Ludwig von Mises, Economic Calculation in the Socialist Commonwealth (1990) (1920); see also Ludwig von Mises, Socialism: An Economic and Sociological Analysis (J. Kahane trans., 3d rev’d ed. 1981) (1922).  Mises’s ideas were initially thought to have been refuted by socialist economists, in what is known as the “socialist calculation debate.”  The false conclusion that the socialists won the debate by disproving Mises’s claims was perpetuated in the following decades by economists such as Heilbroner.  See, e.g., Robert Heilbroner, Between Capitalism and Socialism (1970), pp. 88-93, in which Heilbroner claimed that Mises was wrong, that socialist economic calculation was possible, and that the “superior performance” of socialism would “soon reveal the outmoded inadequacy of a free enterprise economy.”  Despite decades of unjust and unfortunate neglect, Mises has finally been vindicated by the universally acknowledged failure of socialism as a viable economic system.  See Gertrude E. Schroeder, “The Dismal Fate of Soviet-Type Economies: Mises Was Right,” Cato J., v. 11, no. 1 (Spring/Summer 1991), p. 13; “Labor Party leader flips on policy,” Philadelphia Inquirer, Apr. 8, 1997, p. A2 (describing the British Labor Party’s endorsement of privatization of state-owned enterprises and recent elimination of a Marxist clause in its constitution advocating common ownership of the means of production).  Even Heilbroner now admits: “It turns out, of course, that Mises was right.”  Robert Heilbroner, “After Communism,” The New Yorker, Sept. 10, 1990, p. 91, 92.  See also Mark Skousen, “‘Just because socialism has lost does not meant that capitalism has won’: Interview with Robert L. Heilbroner,” Forbes, May 27, 1991, p. 130.  For further discussion of the socialist calculation debate, see Murray N. Rothbard, “The End of Socialism and the Calculation Debate Revisited,” 5 Rev. Austrian Econ. 51 (1991); Don Lavoie, Rivalry and Central Planning: The Socialist Calculation Debate Reconsidered (1985); David Ramsay Steele, From Marx to Mises: Post-Capitalist Society and the Challenge of Economic Calculation (1992). []

Back in the 90s, I wrote several critiques of foreign investment laws for some developing countries, some at the request of the American Bar Association’s  Central and East European Law Initiative, or CEELI, including:

I’ve lost the text files for all of these except the report on Romania’s draft foreign investment law, which is reproduced below.



March 25, 1997

TO:                 Mr. John C. Knechtle

Director, Legal Assessments, ABA/CEELI

FROM:           N. Stephan Kinsella [current contact info as of 04/2002: www.KinsellaLaw.com]

RE:                 Draft Law on Stimulation of Foreign Investment for the Republic of Romania

Note: The following are my comments on the referenced Draft Law. Please note that these comments are my personal opinion and do not represent the opinion of my firm, Schnader Harrison Segal & Lewis, or any of its clients. In the following, my focus, in general, is on the issue of whether and to what extent the Draft Law serves to protect private property, in particular private property related to foreign direct investment in Romania.

General Reaction

The Draft Law is commendable in that it is an attempt by Romania to add further protections to the private property of foreign investors. However, the Draft Law is problematic in that it is somewhat vague, it does not go far enough in protecting the private property of investors, and it leaves too much discretion in the hands of government in deciding whether to accord “special” treatment to investment. The Draft Law also rests on the assumption that some investments ought to be given favorable treatment, which rests on the false assumption that some investments are objectively “worse” than others, and that the government can accurately assess which investments are relatively more desirable than others. The Draft Law will result in some investors being given favorable treatment with respect to other investors, which is problematic and undesirable. To the extent possible, the Draft Law should be revised to clarify and strengthen the security of a foreign investor’s property rights, as explained in more detail below. The protections provided by the law should be broadened and extended to as many investors and types of investment as possible to reduce the discriminatory treatment that the Draft Law would otherwise provide.

Preliminary Considerations

The protection of private property of foreign investors is essential if Romania is to attract foreign direct investment. This is the essential touchstone by which any proposed policy, law, regulation, or regime is to be judged. The degree to which private property rights are respected is extremely significant in attracting foreign investment. The Draft Law should be amended to clarify and strengthen the security of a foreign investor’s property rights, for example by taking steps to lower political risk and taxation rates.

Many changes to the legal and political climate of Romania could be suggested to contribute to these factors. Constitutional, limited government, low taxes, respect for private property, the free market, and civil liberties contribute to both a health economy and to a low political risk.

Promulgating a pro-foreign investment law which provides for government guarantees that property rights will be respected can also play an important role in attracting foreign investment. However, as investors are all too aware, even a pro-investment law may be changed at a later time by the legislature due to the government’s legislative sovereignty. A new government may desire to nationalize certain industries, for example. Thus, the ability of Romania to promulgate new laws that might override property rights previously guaranteed to investors tends to reduce the attractiveness of any government guarantees that are made. For a developing economy such as Romania, such guarantees should be made more effective by reducing the chance that the laws will change to investors’ detriment.

One way to increase the likelihood that such a guarantee, once granted, will be respected by future governments is to implement a constitutionally limited government, with an independent judiciary having the power of judicial review. Another way is to make the guarantees binding under international law, since states are often reluctant to be seen as clearly violating international law. An investment agreement executed between the host state and investor accordingly may be “internationalized,” so that the state’s obligations contained therein are binding under international law. For example, the agreement may contain both an international arbitration clause, which grants jurisdiction to a neutral third party (such as the International Center for the Settlement of Investment Disputes (ICSID)), and a stabilization clause. A stabilization clause provides that the law in force in the state on a given date is the relevant law for purposes of interpreting the investment agreement, regardless of future legislation. This effectively “freezes” the legal regime in place on a certain date, so that any future changes in law contrary to the state’s guarantees are without effect, at least under international law.

General Comments

The Draft Law essentially assumes that there is some background protection of the private property of foreign investors, such as that provided by international law, other municipal laws in force, or by treaties entered into by Romania (see, e.g., Art. 3). The Draft Law then attempts to add another measure of protection to foreign investors by providing for various tax and custom duty exemptions or favorable rates, and other incentives, if the investment qualifies for such treatment under the Draft Law or in the determination of the Government. (Art. 4.)

One problem with the foreign investment regime established by the Draft Law is that it will result in some types of investment being favored over others. This presumes that some types of investment are objectively superior, more efficient, or otherwise more preferable than others; and that the Government accurately assess proposed investments accordingly. However, government is notoriously incapable of determining which type and amount of investment or other capital allocation is efficient or proper. This is why Russian-style centralized economic planning has failed so disastrously. Economic planning on a more modest scale is also unwise. Government is unable to centrally collect the relevant information that would be required to efficiently allocate capital; and even if all the relevant information could be centrally collected, government is unable to efficiently allocate capital since centralization destroys the private property and market price system that otherwise efficiently allocates capital.1 Further, even assuming away these problems, decisions will tend to be made or at least influenced by political factors, such as favoritism, corruption, bribery, and special interest lobbying.

Another problem with the Draft Law is that at least some of the incentives provided are provided only at the discretion of the Government. The incentives provided in Arts. 6 and 7 appear to be available as long as the more or less objective conditions of Art. 5 are met. However, the additional incentives contemplated under Art. 8 are available only if the Government so approves; and the amount and types of incentives to be provided appear to be wholly within the discretion of the Government or the Romanian Development Agency (RDA). Further, it is not clear that an investor denied the incentives under Arts. 6 and 7 have any legal recourse to challenge this decision, so the incentives of these Arts. appear to be discretionary as well, for all practical purposes. (Additionally, the incentives under Arts. 6 and 7 require the RDA’s approval. Art. 5.)

One problem with such discretion is that it is bound to be misused for corrupt or petty purposes—e.g. influenced by bribery, special interest group lobbying, and other forms of political favoritism—from time to time. This will lead to an inefficient selection of favored investments. Further, such discretion will make Romania a less attractive home state for investment from the outset, since the discretion increases the uncertainty as to whether the investor will be able to obtain the maximum incentives available. Such favoritism can also cause an investor to fear being put to a competitive disadvantage with other investors receiving more favorable treatment. Finally, giving discretion to the Government will likely lead, in the long run, to fewer favored investments than would be favored under an overall more liberal investment policy.

The law could be improved by reducing this discretion, and by providing for a legal right of an investor to challenge a decision relating to the approval of these incentives in a Romanian court, or, better yet, in an international arbitration forum.

As mentioned above, favoritism or discrimination in investment treatment can be problematic. Ideally, there should be no discrimination between foreign investors, on the basis of nationality or any other criterion. Rather, all foreign investors (and, for that matter, municipal or local investors) ought to enjoy equal, i.e. MFN treatment. Otherwise, foreign investors could be justifiably concerned that competition between them is not fair.

A superior alternative, then, to the present regime contemplated by the Draft Law would be to accord the maximum feasible protection of private property rights to all foreign investors and types of investment. This would reduce the overhead expenses associated with government oversight, reduce corruption, and spur overall investment to a greater extent than would be obtained from piecemeal and discretionary favorable treatment.

Another general consideration concerns bribery and corruption. Bribery and corruption of public officials is well-known in many developing countries. However, American investors are prohibited by the Foreign Corrupt Practices Act (FCPA), 15 U.S.C. § 78m(b) et seq., from engaging in such activities. If bribery and political corruption are widespread in Romania, American investors will be at a competitive disadvantage with respect to investors from other regions such as Western Europe. Thus, given the existence of the FCPA, the existence of widespread bribery and corruption will tend to reduce American investment in Romania.

It is preferable, for the reasons given above regarding internationalization of obligations, that the Draft Law be given as much force as possible by internationalizing it, for example by making its terms part of a multilateral treaty or bilateral investment treaties (BITs), or by incorporating its provisions into internationalized, stabilized investor-state contracts. Romania also ought to attempt to strengthen the protections of private property and foreign investment provided in BITs and other treaties. Romania also ought to support the negotiation of the OECD’s multilateral agreement on investment (MAI), and seek to accede thereto as soon as possible.2

The Draft Law should include a Statement of Principles that clearly indicates that Romania recognizes the importance and sanctity of private property, and that purpose of the Draft Law is to protect the private property rights of foreign investors. Such a statement may be useful in persuading investors that Romania is serious in its commitment to protecting and respecting investors’ property rights. This statement would also increase the chance that the Draft Law, in cases of ambiguity, would be interpreted in favor of investors’ property rights.

“Foreign investment” is insufficiently defined in the Draft Law. Further, it is often unclear whether contractual rights are considered to be property rights on an equal footing with other types of property rights. The Draft Law should clearly define foreign investment, and should provide that foreign investment includes “property” and “property rights” or foreign investors, including immovables and movables, corporeals and incorporeals, intellectual property rights, and contract rights. As a general matter, it is preferable to adopt general terminology or concepts utilized in or compatible with established Western legal systems, primarily Anglo-American common-law concepts and terms.

Detailed Comments

The following comments are made with reference to the relevant section of the Draft Law. These comments assess various provisions of the Draft Law without further criticizing the Draft Law’s assumption that favorable investment conditions will be accorded only to some investors or types of investment, and only at the Government’s discretion. Thus, the suggestions below are aimed at strengthening the investment protections currently provided by the Draft Law, even though it would be preferable if these investment protections would not be handed out selectively by the Government.

Art. 2. The term “foreign capital companies” is not well-defined. Also, the fact that the treatment to be given to such companies is to be “in accordance with the laws in force” serves to reduce the certainty of any guarantee of treatment by making it conditional on laws in force.

Art. 5. The capital requirements ought to be lowered as much as feasible to extend the favorable coverage provided by the Draft Law to as many investments as possible.

Art. 6. The term “contribution in cash effectively disbursed” is confusing and unclear.

Art. 7. The three-year exemption from payment of import customs and value-added taxes ought to be extended as much as possible, for example to six, ten, twenty years, or longer. Another useful change would be to allow the exemption period to be indefinitely repeated for an investor. This automatic renewal of protections could be usefully applied to other favorable treatments provided by the Draft Law.

A problematic aspect of Art. 7 is the provision that the exemptions provided therein are conditioned upon the investor’s securing of financing of imports using sources from abroad that do not encumber Romania’s “balance of payments.” This ought to be completely deleted from the Draft Law, since it rests on the economically fallacious (but widespread) mercantilist idea that there can be a “favorable” or “unfavorable” balance of trade. Unlike a budget deficit, which is undesirable, it is irrelevant whether there is a trade “surplus” or “deficit,” since this results from the sum total of a large number of individual credit transactions, each of which presumably benefits both parties thereto.3 Developing economies ought to be careful not to adopt fallacious economic doctrines unwisely adopted in the West in this century. While the West’s free-market systems are worth emulating, various Western policies are not, such as our anti-trust laws, fiat-money and Federal-reserve-controlled banking system and other Keynesian-based institutions and policies, protectionism, and the like.

Art. 8 contains several possible “additional incentives” that are unacceptably vague, such as “high technology,” “free writ of possession over land,” and the like.

Art. 9 states that the RDA provides investment counseling to foreign investors. It is not clear why this ought to be monopolized or even engaged in by a government agency. Private enterprise would better fill this need.

Art. 13. The prohibition against nationalization or expropriation of investments should be clarified and broadened, to clarify that these concepts include both indirect and creeping expropriation.

Arts. 13 and 14. The provision for compensation in the event of a (lawful) expropriation should be clarified to provide that the full, market value of nationalized property will be paid to the expropriated investor, and the concept of “equitable” principles enunciated in Art. 14 ought to be examined to ensure that there is no implication that less than full compensation can be awarded. Additionally, the following standard should be adopted to make clear to investors Romania’s commitment to the sanctity of the investors’ property rights: the standard of compensation should be the greater of the full market value of the investment, or the commercial value to the investor (which may be greater than the market value due to synergy, etc.) Further, the Draft Law should clarify that any taking is “illegal” if not done for a public purpose, or if done in a discriminatory manner. This will help to dissuage Romania from engaging in such an expropriation for fear of being seen as commiting an unlawful taking, which should help to ensure investors that Romania is sincere and serious about respecting the property rights of investors.

Art. 15 provides for a disputed amount of compensation to be established “through the courts of law, in accordance with the legal provisions.” It is unclear to what “the legal provisions” prefers. It is also unclear whether “the courts of law” contemplates only Romanian courts or whether international arbitration is available. Courts should be empowered to nullify the effects of an illegal taking or nationalization. Further, international arbitration should be authorized, and commitments in the Draft Law internationalized if possible, as discussed above.

Art. 17. “Non-mediated foreign investment” is unclear in meaning, and consequently the meaning and purpose of this article is unclear as well.

Art. 19. The certificate of investor ought to be internationalized, e.g., by stabilization and international arbitration clauses, or protected through BITs or other treaties if possible.

Recommended Commentary

Paul E. Comeaux & N. Stephan Kinsella, Protecting Foreign Investment Under International Law: Legal Aspects of Political Risk (Dobbs Ferry, New York: Oceana, 1997) [see also Rubins, Papanastasiou & Kinsella’s International Investment, Political Risk, and Dispute Resolution: A Practitioner’s Guide, Second Edition ]

Paul E. Comeaux & N. Stephan Kinsella, “Reducing Political Risk in Developing Countries: Bilateral Investment Treaties, Stabilization Clauses, and MIGA & OPIC Investment Insurance (original version), 15 New York Law School Journal of International & Comparative Law 1 (1994) (copy attached)

N. Stephan Kinsella, “Lithuania’s Proposed Foreign Investment Laws: A Free Market Critique,” Russian Oil & Gas Guide, Apr. 1994, at 60 (copy attached)

Bernard H. Siegan, Drafting a Constitution for a Nation or Republic Emerging into Freedom (2d. ed. 1994)

Robert W. McGee, “Some Tax Advice for Latvia and Other Similarly Situated Emerging Economies,” 13 International Tax and Business Lawyer 223 (1996)

Daniel T. Ostas & Burt A. Leete, “Economic Analysis of Law as a Guide to Post-Communist Legal Reforms: The Case of Hungarian Contract Law,” 32 American Business Law Journal 355 (1995)

“Symposium: Development of the Democratic Institutions and the Rule of Law In the Former Soviet Union,” including the article by Judith Thornton, “Economic Reform and Economic Reality,” 28 John Marshall Law Review 847 (Summer 1995)

  1. For more discussion of the problems of centralized economic calculation, see Paul E. Comeaux & N. Stephan Kinsella, Protecting Foreign Investment Under International Law: Legal Aspects of Political Risk (Dobbs Ferry, New York: Oceana, 1997), app. I; Ludwig von Mises, Socialism: An Economic and Sociological Analysis (J. Kahane trans., LibertyClassics 3rd rev’d ed. 1981); Ludwig von Mises, Human Action: A Treatise on Economics (3d rev’d ed. 1966), pp. 200-31, 695-715; Murray N. Rothbard, ‘The End of Socialism and the Calculation Debate Revisited,” 5 Rev. Austrian Econ. 51 (1991); Collectivist Economic Planning (F.A. Hayek ed., 1935). []
  2. For further discussion of the MAI, see “American Bar Association Section of International Law and Practice Report to the House of Delegates: Multilateral Agreement on Investment,” 31 International Lawyer 205 (1997) [see also Kinsella, An International Framework for the Protection of InvestmentPhiladelphia Lawyer, p. 20 (Fall 1997) (text version)]; and William H. Witherell, “Developing International Rules for Foreign Investment: OECD’s Multilateral Agreement on Investment,” 32 Business Economics 38 (January 1997). []
  3. For further discussion of the fallacy that a balance of trade deficit is harmful to an economy, see Murray N. Rothbard, Man Economy, and State: A Treatise on Economic Principles (1962), ch. 11, 5 10; Ludwig von Mises, Human Action: A Treatise on Economics (3d rev’d ed. 1963), ch. XVII, §14; Frederic Bastiat, Economic Sophisms (Arthur Goddard trans., Foundation for Economic Education ed. 1964), ch. 6; David Boaz, Libertarianism: A Primer (1997). pp. 176-81; Clichés of Politics (Mark Spangler ed., 1994). § 72, p. 260. []

Louisiana Civil Law Dictionary Review

My recent book, Louisiana Civil Law Dictionary(Quid Pro Books, 2011), co-authored with an  Austro-libertarian legal scholar friend, Gregory Rome, was recently reviewed at the iPhoneJD blog:

November 13, 2012

Review: Louisiana Civil Law Dictionary — ebook of civil law words and phrases

I’ve reviewed several legal dictionary apps for the iPhone and iPad — Black’s Law DictionaryBarron’s Law Dictionary,Nolo’s Plain English Law Dictionary, the Book of Jargon series by Latham & Watkins — but considering that dictionaries were traditionally books, it makes sense that an ebook dictionary could be just as useful on the iPhone and iPad as an app.  Proof of this is found in the Louisiana Civil Law Dictionary, an ebook by Chalmette, Louisiana attorney Gregory Rome and Houston, Texas attorney Stephan Kinsella.  You can purchase this ebook in several formats including Kindle and Nook, and this review is based on the iBooks version of the ebook.  The book is published by ebook publisher Quid Pro Books, the brainchild of Tulane Law Professor Alan Childress.  Prof. Childress sent me a free review copy a few weeks ago.

As you may know, unlike the other 49 states where the law is based on English common law, the law here in Louisiana is based on civil law from jurisdictions such as France.  That means that we have concepts in Louisiana that are very similar to common law concepts but have different names (e.g. “liberative prescription” instead of “statute of limitation”), plus we have many civil law concepts that are unique to Louisiana.  Black’s Law Dictionary does a decent job with some civil law terms, but a dedicated source like the one has the ability to offer more … and I was impressed by this book.

The Louisiana Civil Law Dictionary includes all of the civil law terms that I use in my practice and a bunch more that were new to me.  (I may have learned some of them when I took the bar exam back in 1994, but that space in my brain has long since been replaced by other knowledge.)  The definitions are clear and complete, and the book includes lots of hyperlinks that make it easy to jump around in the book.  Plus it is easy to slide the marker at the bottom of this ebook to jump to different sections.

IMG_1743 [continue reading…]

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Update: Second Edition of International Investment, Political Risk, and Dispute Resolution Forthcoming from Oxford University Press; and see also Advice for Prospective Libertarian Law Students.

As most of my libertarian friends and readers know, I’ve published for a number of years books and articles in the area of political and legal theory. I’ve also engaged over the years in more practical legal writing, from law review articles to authored and edited books (I maintain a separate website, KinsellaLaw.com, for my legal practice). My legal writing has primarily covered intellectual property and patent law, and international law topics. I started writing in both areas–libertarianism and law–at the beginning of my legal career, in the early 1990s.

Book covers

The way I got into legal publishing may be of some interest to aspiring legal scholars and law students. Some of my early legal writing was based in part on some of the international business law I learned during my LL.M. at University of London–many of these were published in the Russian Oil & Gas Guide and other fora, while I was an associate practicing oil & gas law at Jackson Walker in Houston, at the encouragement of my boss and mentor, Lanier Yeates. (For more on how I ended up in London, see The Start of my Legal Career: Past, Present and Future: Survival Stories of Lawyers.)

These were all co-authored with my friend and colleague Paul E. Comeaux. We put a lot of this together into a more comprehensive law review article, “Reducing Political Risk in Developing Countries: Bilateral Investment Treaties, Stabilization Clauses, and MIGA & OPIC Investment Insurance,” 15 New York Law School Journal of International and Comparative Law 1 (1994). This piece was scholarly yet practical. Shortly after the piece came out, we were approached by Susan DeMaio, a project editor at Oceana Publications, an international law publisher. Susan suggested we turn the article into a book. Paul and I did this, resulting in Protecting Foreign Investment Under International Law: Legal Aspects of Political Risk (Oceana Publications, 1997). Years later, I co-authored International Investment, Political Risk, and Dispute Resolution: A Practitioner’s Guide (Oxford University Press, 2005), a successor volume to the 1997 book. This was published with Oxford which had by then acquired Oceana; my co-author was Noah D. Rubins, an American international arbitration attorney in Paris. (A second edition was published in 2020.) [continue reading…]


My new book: Louisiana Civil Law Dictionary

From the site of my publisher, Quid Pro Books, information about the release this month of my new book, Louisiana Civil Law Dictionary (with Gregory Rome; Quid Pro Books 2011). It’s available now at Amazon in paper and kindle formats, and in hardback later this month. Also available in other ebook formats. (Additional information at the dictionary’s website, Civil-Law-Dictionary.com.)


A Dictionary of Civil Law Terminology in Louisiana: Usufruct and Naked Owners Are Explained to Common Lawyers and Civilians

With obscure terms like emphyteusis and jactitation, the language of Louisiana’s civil law can sometimes be confusing for students and even for seasoned practitioners. But the Louisiana Civil Law Dictionary can help. It defines every word and phrase contained in the index to the Louisiana Civil Code, plus many more–in clear and concise language–and provides current citations to the relevant statutes, code articles, and cases.  Soon available in paperback, hardback and ebook formats linked below. The dictionary’s dedicated website is here.

Whether you are a student, researcher, lawyer, or judge, if you deal with Louisiana and its laws, this volume will proveindispensable. It is also a valuable resource for notaries and paralegal assistants. No doubt common law practitioners in other states, too, will find ready uses for a dictionary that translates civil law terminology into familiar concepts; they will know how ‘naked ownership’ is different from ‘usufruct.’ And since the civil law dominates the world’s legal systems, this book will find a home with libraries and scholars anywhere there is a need to compare civil law terms with those of the common law.

Quality ebook formatting from Quid Pro Books features active contents, linked notes and URLs, and hundreds of linked cross-references for ready association of related topics. Print editions are available of this valuable resource, yet the ebook format is not just a textual replication of the print book or a PDF; instead, the ebook is carefully designed to take full advantage of the digital ereader’s optimal arrangements and hyperlinks.

“Rome and Kinsella have done a huge service to legal scholarship by assembling the Louisiana Civil Law Dictionary — a splendid resource for those seeking to understand the rich vocabulary of Louisiana law.”
— Bryan A. Garner, President, LawProse, Inc.; and Editor in Chief, Black’s Law Dictionary

“For ready reference on the desk or in a personal or law firm library, in the office of a civilian of any walk of practice or intellectual endeavor, this enormously helpful dictionary is a must. This scholarly reference is essential to the study of the civil law tradition; the Louisiana Civil Law Dictionary serves as a gateway to understanding the civil law system embraced by the majority of legal systems in the world.”
— J. Lanier Yeates, Member, Gordon Arata McCollam Duplantis & Eagan, LLC

AVAILABLE NOW in ebook and print formats:

Amazon for Kindle.

B&N for Nook.

Also available directly on Apple iBooks and iTunes for iPad and iPhone, as well as Kindle and Nook apps.

Available in paperback edition, including from our eStore page with fulfillment by Amazon; at the general Amazon site; and at other booksellers. Library-quality hardcover edition also available from Amazon, B&N, Dawson Books, Ingram catalog and Baker & Taylor (listed in the library catalogs as of Aug. 15). Please contact us for discounts on bulk adoptions.

ISBNs include: 9781610270830 (ePub) and 9781610270878 (hardcover)

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