Protecting freedom of investment at the OECD

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Permanent url: www.oecd.org/daf/investment/foi

Maintaining investment markets open in times of crisis

The global financial and economic crisis has put protectionist pressures on governments. The “Freedom of Investment" (FOI) process has stepped up monitoring of investment policy developments and will be issuing reports on investment measures throughout 2010. The 11th FOI Roundtable in October 2009 considered a report on investment measures taken between 15 November 2008 to 31 August 2009. A report on earlier findings was presented at the OECD Ministerial Meeting in June 2009 and fed into a joint WTO-OECD-UNCTAD report to the G20 Summit in Pittsburgh in September 2009.

The Freedom of Investment Process

The “Freedom of Investment" process hosted by the OECD Investment Committee has since 2006 provided a forum for intergovernmental dialogue on how governments can reconcile the need to preserve and expand an open international investment environment with their duty to safeguard the essential security interests of their people and take action to recover from the crisis.

Dialogue has taken place in a series of discussions involving the 30 OECD members, Brazil and the 10 other non-member adherents to the OECD Declaration and other major non-member countries. The “Freedom of Investment” (FOI) process extends the tradition of OECD dialogue on investment issues that has been framed by the two OECD investment instruments: the Code of Liberalisation of Capital Movements and the Declaration on International Investment and Multinational Enterprises.

Reaffirming basic OECD principles: transparency, liberalisation and non discrimination

The FOI discussions have confirmed the continuing relevance of the basic principles underpinning these instruments: transparency, liberalisation and non-discrimination. They have focused on clarifying, in the current security context, the one exception to open investment policies provided for in these instruments: that governments may take measures they “consider necessary to protect essential security interests”.

The FOI discussions include peer monitoring sessions through tours d’horizon of national developments, in-depth policy discussions of selected national security topics, and identification of good investment policy practices. The Investment Committee has issued a report summarising these discussions. A key finding of these discussions is that any restrictions designed to protect national security should be transparent, subject to accountability and proportional to the objective pursued. To the extent possible, other policy remedies to the problem should be used before considering new restrictions.

Recipient government policies and SWFs

The Investment Committee is treating the issue of recipient country policies toward Sovereign Wealth Funds (SWFs) and other government-controlled investment entities as an integral part of the FOI project. A report by the Investment Committee issued in April 2008 confirms that the OECD’s established principles for investment policy apply equally well to investments by SWFs. OECD guidance on recipient country policies towards SWFs was published in October 2008 following the 8th Roundtable on Freedom of Investment. This work responds to a 2007 mandate from G7 Finance Ministers and from other OECD countries and was presented to the 2008 meeting of G7 Finance Ministers. It complements work by SWFs, assisted by the IMF, on developing guidance for their own transparency and governance practices. The two projects, taken together, contribute to a policy framework that reinforces mutual confidence and trust between recipient countries and SWFs.

Documents and links

Reports and declarations

Roundtable summary reports
Building trust and confidence in international investment, March 2009
At the 10th roundtable on Freedom of Investment on 26 March, OECD and non-OECD governments reviewed recent policy measures and found no trend to date towards protectionism. This report calls for renewed vigilance in resisting protectionist pressures and continued peer monitoring at the OECD.
OECD guidance on recipient country policies towards SWFs, 11 October 2008
OECD Declaration on sovereign wealth funds and recipient country policies, 5 June 2008
Sovereign Wealth Funds (SWFs) and Recipient Country Policies [ English / français ], 4 April 2008
Progress report on the Freedom of Investment, National Security and ‘Strategic’ Industries project [ English / français ], 26 March 2008
Freedom of Investment, National Security and “Strategic” Industries: An Interim Report, October 2007