The Philippine BIT Program and Investor-State Disputes – Vol. 28 No. 2

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Author: Diane A. Desierto*

Published: November 2017

Categories of Disputes
Banking and Finance Disputes
Investment Disputes
States as Parties
International Institutions and Rules
Arbitral Process


In recent years, the Philippines has emerged as a “[Foreign Direct Investment (FDI)] powerhouse,” largely due to sharp increases in public-private partnerships for massive infrastructure projects.  The biggest share of FDI in the first half of 2016 went to the Philippines, with a 245% year-on-year surge in new FDI.   The World Bank’s chart of net FDI inflows for the Philippines demonstrates a steep rise of FDI volumes from slightly above US$0.1 billion in 1970 to around US$6 billion a year as of 2015.   The major country sources of FDI to the Philippines are the British Virgin Islands, the United States, Japan, the Netherlands, Singapore, South Korea, the Cayman Islands, and Australia. The main sectors for foreign investment are manufacturing, electricity, water and gas, transport and storage, hotels, services, and infrastructure. The Philippines’ high investment attractiveness can be explained by many factors, such as being one of the youngest and fastest growing economies in Asia with a high literacy rate, demographic and educational advantages with a large proportion of English speakers, and the private sector’s receptivity to innovation, among others. Recent developments suggest further substantial foreign investment from the People’s Republic of China of around US$24 billion, although details on specific investment projects are still lacking as of this writing.


This article discusses the Philippines’ investor-State disputes in light of lingering pathologies in the country’s prevailing BIT architecture, such as the absence of waivers and other safeguard mechanisms against investors’ automatic resort to investor-State arbitration, and the dearth of other public policy innovations that enable host States to maintain regulatory prerogatives without breaching investment treaty protections.  Significantly, the evidence does not show that the Philippines entered into BITs with other States as a matter of imposition by foreign powers on terms similar to those in contracts of adhesion.  Rather, as seen from the presidential policies and political announcements of the ruling elites from the 1980s post-dictatorship reconstruction period up to the liberalization and privatization heyday of the 2000s, the Philippines strategically courted FDI and purposely extended generous terms of investment protection as incentives to attract foreign investment.

However, it does not appear from publicly available records that Philippine decision-makers programmatically scrutinized the short-term and long-term strategic costs of investor-State arbitration on the country’s future ability to sustainably incentivize FDI.   These practical costs include not just the direct costs of engaging foreign counsels, and of defending itself in arbitration  and parallel disputes before local courts and the Philippine Supreme Court.  It also includes numerous indirect costs …

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*Michael J. Marks Distinguished Professor in Business Law, tenured Associate Professor of Law, Co-Director, ASEAN Law & Integration Center (ALIC), University of Hawaii William S. Richardson School of Law; Fall 2017 Senior Fellow, KFG ‘International Law – Rise or Decline?’ Berlin Potsdam Project, Humboldt University, University of Potsdam, and Freie University Berlin, Germany; 2016-2017 Fellow, Center for Advanced Study for the Behavioral Sciences (CASBS), Stanford University; Arbitration Partner, Desierto & Desierto Law (Philippines).