Course 3 Comparative Public Law Assignment

Assignment Task

• East Timor is a newly formed nation, after the intervention of the United Nations, it gained independence in the year 2002 from Indonesia. It is the poorest country in Southeast Asia with a 20% unemployment rate and approximately one-third of the population is illiterate. After achieving independence, the government-controlled the energy sector through State-owned enterprises, mainly to keep the prices of oil and gas affordable for the public. However, the recent government failed to transform the country into a developing nation. The main reasons behind the failure were lack of investment in development infrastructure, in education and health sectors, rampant corruption in the extractive sector, lack of accountability and transparency, and the political attitude towards foreign capital and investment are the reasons why East Timor was unable to break out from this poverty trap. East Timor has failed to attract much foreign direct investment (FDI) which would help improve the unemployment and poverty situation.
• After coming to power, the recent government promised jobs and employment, transforming the country into an industrial hub and an economic powerhouse. The government was to increase industrial production through infrastructure development. To this, the government made significant investments in the development of infrastructure, and the increased demand for energy became a matter of concern. Having limited oil and gas reserves, the elected government decided to address these two issues on an urgent basis to avert the energy crisis, Thus to deal with this energy crisis the government first needed to privatize the energy sector to root out corruption and second to revamp the production and distribution system.
• Thus in 2019, East Timor undertook a vast programme of privatization of state-owned enterprises including among key sectors of the economy, gas, transportation, and distribution. To restructure the economy, currency convertibility was introduced in 2020 and East Timor currency was fixed as per with the US dollar. Further, the government decided to introduce new rules for governing the gas transportation and distribution system. Various other measures were also adopted in 2020 to open the economy to foreign trade investment (FDI) including most significantly among them. To attract investment in the energy sector, a discussion was held with prospective foreign investors in East Timor and abroad.
• To combat the current crisis, East Timor has opened its market for privatization and plays host country to many foreign investors. East Timor is aware of its new policies and the Bilateral Investment Treaty (BTI). In this context, the government of East Timor intends to have a deeper understanding of the benefits and consequences of the term investment (FDI)

Your Task You are an expert in international investment law and the Ministry of Foreign Trade and Investment of the Government of East Timor has contacted you for advice.

• Sisaaye is a developing country facing economic and energy crises. In the 2019 General Elections, it was the 1st time that the Liberal Party got the mandate to form a government. To avert the energy crisis the newly formed Government decided to privatize the energy sector which was now controlled by the government through state-owned enterprises. Thus, in 2019, the Government of Sisaaye undertook a program of privatization of State-owned enterprises, including, among other key sectors of the economy, gas transportation and distribution.
• The new Finance Minister decided to open up the economy to foreign investors to bring in new investments, create jobs and employment, and transform the country into an industrial hub and an economic powerhouse. To restructure the economy, Currency Convertibility was introduced in 2020 and the Sis Franc (Sisaaye’s currency) was fixed at par with the US Dollar. Further, the government decided to introduce new rules for governing the gas transportation and distribution system. Various other measures were also adopted in 2021 to open the economy to foreign trade and investments, including, most significantly among them, the policy of negotiating bilateral investment treaties with many countries to achieve energy security by 2030.
• To attract investments in the energy sector, discussions were held with prospective foreign investors in Sisaaye and abroad. During these discussions, the Government found out that Sisaaye is a country of interest for many foreign investors seeking to identify potentially high returns through possible growth opportunities, though risks are also relatively higher.
• The Government after having explored the avenues of foreign investment and the interests of foreign investors is now considering a program to draft a Model BIT (Bilateral Investment Treaty) to decide and define the nature and scope of foreign investment. The government of Sisaaye is aware that Bilateral Investment Treaties (BITs) might reduce the power and autonomy of the government to regulate important economic sectors significantly. Further, the government is also aware that in the past most BITs adopted a uniform approach to define ‘investment’ in a somewhat wider term to attract foreign investors and investments. However, in the past few years, this approach has changed and a host of new generation BITs has defined the term ‘investment’ in a somewhat restrictive manner. In this context, the government of Sisaaye intends to have a deeper understanding of the benefits and consequences of defining the term ‘investment’ broadly or restrictively before initiating the drafting process of a Model BIT.

You are an expert in international investment law and the Ministry of Foreign Trade and Investment of the Government of Sisaaye has contacted you for professional advice.

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