Recent investment treaty developments for the UK and Jersey

In recent months, there have been several developments involving investor-state treaty protection for the UK and Jersey:

• The Jersey government's first ever Bilateral Investment Treaty (BIT) concluded with the United Arab Emirates (UAE) has entered into force.
• The UK government announced that it has concluded negotiations to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
• The UK government announced its intention to commence negotiations with Singapore for a new investment treaty.

Jersey 

As a self-governing Crown Dependency, Jersey would typically request that the UK government extend one of its treaties with another country to Jersey through an Exchange of Letters – a process it has followed for the extension of 37 of the UK's bilateral investment treaties. However, Jersey may also negotiate its own BIT with a third country, subject to receiving the UK's permission.  

The UAE requested the negotiation of a BIT with Jersey around the time that it was negotiating the Jersey-UAE Double Taxation Agreement in 2016, and Jersey then sought the necessary approval which it received from the UK in 2018. The final text was agreed and signed on 9 November 2021. The UAE confirmed on 11 April 2022 that it had completed its domestic procedures for ratification, and Jersey completed its own processes earlier this year, with 13 March 2023 being the entry into force date. 

The text of the treaty (released in January 2023) contains standard wording for a number of provisions, but also contains some distinct features:

• the definition of investor requires "substantial business activities" by either natural or legal persons
• specification that the fair and equitable treatment standard is only what is required by the customary international law minimum standard of treatment
• specification that "full protection and security" is limited to physical protection and security
• the omission of an umbrella clause
• a clause specifying that parties are not precluded from implementing measures that it reasonably considers are necessary for the protection of security interests, compliance with regulation on anti-money laundering or combating financing of terrorism, and compliance with regulations on financial sanctions
• a clause providing for the avoidance of frivolous claims.

In terms of dispute resolution, the text provides the investor with several options, namely the local courts or arbitration under ICSID Rules, UNCITRAL Rules, or LCIA Rules.

UK

Joining the CPTPP means that the UK will be part of a free trade agreement with Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. Although the CPTPP will only enter into force after both the UK and the CPTPP parties have completed their domestic ratification processes – for the UK, this includes finalising the Protocol of Accession, signing the treaty, completing pre-ratification scrutiny, and passing any necessary legislation required to implement the agreement.

The CPTPP includes a chapter on investment with protections for investors and an investor-state disputes settlement mechanism, but states can opt out of this mechanism on a bilateral basis. The government's announcement noted that UK investors will be provided with "robust guarantees on the treatment they will receive when accessing and operating in CPTPP markets with their investments", which will include protection from unfair, arbitrary, or discriminatory treatment. However, the announcement noted that, "in light of the investment relationship the UK has with Australia and New Zealand", the UK will disapply the investment provisions in CPTPP with those two countries. Accordingly, UK investors will not be able to bring claims under the CPTPP against Australia and New Zealand, and vice versa.

Next on the UK's list is Singapore, with the UK's Department of Business and Trade announcing that the UK and Singapore will commence negotiations on a "new, modern investment treaty". While the content of that treaty remains to be seen, the government's statement suggests that ISDS will be included, noting that "in addition to guaranteeing clear standards of fair treatment to investors, any deal we sign will be in the best interests of the British people and the United Kingdom economy. We will not compromise on our high environmental, public health, animal welfare and food standards, and we will maintain our right to regulate in the public interest."  

Conclusion

It appears that Jersey's BIT with the UAE may be the first of many – Jersey has already secured the UK government's permission to negotiate BITs with Ghana and Rwanda. In doing so, Jersey will be setting itself apart from the UK and from other offshore jurisdictions by promoting its own cross-border investment and enhancing opportunities for both outbound and inbound investments. These first steps towards presenting itself as an investor-friendly hub at the fringes of Europe are all the more significant for Jersey given the recent chill surrounding intra-EU ISDS.

The UK's recent announcements will be welcome news for both domestic and foreign investors. Accession to the CPTPP will certainly make it easier for UK businesses to trade with most CPTPP parties and for foreign investors to trade with the UK, and will generally encourage investment by guaranteeing that investors have certain protections and access to a dispute settlement mechanism. The eventual text of the UK's treaty with Singapore will be eagerly anticipated in the hopes that it too retains investor protections and robust ISDS provisions.