BizCLIR

Our analysis is based on the premise that the more an FDI regime resembles internationally accepted norms, the more attractive it will be to potential investors. As in the other substantive legal areas, our FDI indicators are intended to inquire beyond the formal legal guarantees. This includes an examination of whether government agencies and the courts afford equal treatment in practice to foreign corporations. Our Team also met with private business executives both local and foreign to obtain their insight into the investment climate. It will be important to distinguish between those bureaucratic hurdles that restrict investment generally and those that are aimed at foreign investors. A regulation that is investor neutral on its face, if selectively enforced, may become a de facto restriction on foreign investment. We will also investigate whether there are unwritten agreements to exclude foreign corporations from certain Markets, or whether the "cost of doing business" is significantly higher for those companies. Finally, we will compare the results of FDI research with the results of our analyses of trade laws and company law.

The challenge of developing meaningful comparative indicators for FDI lies in the diversity, breadth and complexity of the subject area. The indicators developed for this purpose place heavy emphasis on compliance with international obligations and norms, rather than the details of specific national legislation. This emphasis reflects the broad trend toward international harmonization of law and practice governing cross-border direct investment. It is also based on the assumption that a correlation exists – all other things being equal – between the degree that a country’s FDI regime reflects international standards and its ability to compete for and retain FDI.

The emphasis placed on international obligations, rather than on a detailed analysis of national legislation is useful for several important practical reasons. First, the data required can be obtained relatively easily and cost-effectively via widely published sources. This reduces the cost of assessment significantly and makes monitoring development and updating the analysis simpler. Second, for comparative purposes, the quality of the data is relatively uniform since in many cases a single source (e.g., WTO Secretariat; MIGA, OECD can be used. Third, focusing on consistency with international norms provides a useful means of limiting the subjectivity inherent in comparative analysis of national legislation. This approach therefore creates an opportunity to emphasize the quantitative element to the analysis by distilling development indicators into performance measures that can be stated in relatively simple yes/no propositions for comparative purposes.

The expediency of focusing on adoption of international conventions and norms as a basis for drawing cross-country comparisons has significant limitations, however. First, a gulf generally exists between formal accession to treaty obligations and compliance with those obligations. In a practical sense, therefore, it is misleading to consider treaty accession without explicit reference to treaty compliance. In developing these indicators, an effort has been made to control for this shortcoming in two ways: 1) by attempting to capture the extent to which obligations have been limited or reserved by the acceding country during negotiations (e.g., the number of conditions placed on right to national treatment); and, 2) by focusing on regulatory barriers to entry as a basis for characterizing the climate for foreign investment.

A second difficulty arises in the selection of international norms to be included in the analysis. Poland has made full membership in the EU a central foreign policy objective. EU membership is likely to have a significant impact in terms of Poland’s future FDI flows. Nevertheless, including EU membership as an indicator of commercial law development is problematic from the standpoint of cross-regional comparisons given that access to membership is not universal.

Eliminating EU (and OECD) accession from the analysis, however, poses the risk that an artificially narrow and potentially distorted view of commercial law development in Poland will be presented. There is no doubt that Poland’s accession to both the OECD and the EU offer significant benefits in terms of credibility, consistency, predictability and durability of the reforms. Because membership in these organizations is conditioned upon meeting certain legal and administrative conditions precedent (i.e., “reforms”), membership confirms, rather than necessarily determines, Poland’s emergence from “transitional” to “developed” status in terms of its legal regime for FDI.