지방자치단체의 국제투자 유치와 투자분쟁

Korea’s local governments are vigorously seeking to host foreign direct investment from all over the world to boost their regional economies. In fact, it is important for the Korean local governments to continue to make efforts to invite more foreign investment in the future. The local governments’ active drive to bring in more foreign investment, however, has the potential of causing unintended investment disputes for the government of Korea. First of all, under international law, there is no difference between the central government and local governments. Both of them collectively constitute one government which is bound by a relevant international treaty or agreement. Bilateral Investment Treaties (BIT) or Free Trade Agreements (FTA), which provide legal norms in the investment sector, particularly make clear that these agreements are equally applicable to the local governments of the contracting parties. So, any violation of a provision in the BITs and FTAs by a local government of Korea is directly attributable to the Republic of Korea or the central government in Seoul, which may lead to a huge amount of compensation payment to the claimant foreign investor. At the same time, many investment disputes in other countries involve measures adopted by local government because investment by nature is made within the jurisdiction of a local government. Thus, local governments’ measures on investment are more vulnerable to international investment disputes than the ones adopted by a central government. As such, it is critical that the central government and local governments of Korea coordinate and cooperate when it comes to introducing, adopting or implementing measures to lure foreign investment. The basic legal problem in this regard arises from the situation where a local government offers a tempting incentive package to a prospective foreign investor. This kind of selective and targeted provision of preference may lead to the local government’s (thus Korea’s) violation of the Most-Favored-Nation provision, National Treatment provision, indirect expropriation provision or performance requirement provision, to name a few, depending upon the situation. Foreign investors who fail to get a similar level of incentives or preference could argue that they are being discriminated compared to other foreign investors and Korean investors which may then lead to Korea’s violation of the Most-Favored-Nation provisions or National Treatment provisions. Inconsistent policy implementation and non-transparent operation may also lead to the possible claim of indirect expropriation or imposing illegitimate performance requirements for those who fail to get similar incentives and preferences. And all these issues could be raised through the controversial Investor-State Dispute Settlement Procedure. Thus, the central government and the local governments of Korea should initiate contemplating on how to coordinate and cooperate among themselves regarding various investment policies and measures. A systematic and practical framework should be devised as soon as possible.