In addition to the absence of a clear and comprehensive legal regime or global institutional framework, FDI encounters an additional structural shortcoming because of the lack of a single common, shared view of FDI. This fact leads to certain theoretical misunderstandings about the meaning of some important concepts directly linked to foreign investments, mainly of ‘freedom of establishment’ and ‘freedom of capital movements’.

FREEDOM OF ESTABLISHMENT, FREEDOM OF CAPITAL MOVEMENTS AND FREEDOM OF INVESTMENT

There is a certain level of common understanding as regards the meaning of ‘freedom of establishment’ and ‘freedom of capital movements’. This is not yet the case in relation to the notion of ‘freedom of investment’, which in some cases is incorrectly taken as synonymous with the previous two notions.

The absence of a common notion of investment, and consequently of ‘freedom of investment ’, favours reference to the other two, even though they are not synonymous. The concept of a ‘permanent presence’ is central to both investment and establishment. Freedom of establishment also requires freedom of investment to be guaranteed, though not necessarily the other way round. Freedom of investment and freedom of movement of capital are similarly linked: international investment is by definition a capital movement. However, there is not yet full convergence between all of them, nor does the legal framework for the three concepts necessarily match.

No customary international law on freedom of establishment is said to exist. Its description results solely from the existing treaties and agreements entered into by sovereign states. Freedom of establishment is understood as ‘ the right for nationals of one country to set up a permanent presence within the territory of another country for the purpose of conducting economic activities other than activities of salaried character’.

Customary international law does not provide a definition of freedom of capital movements either, and reference to international treaties and agreements in this area is again necessary. Stricto sensu, freedom of capital movements can be defined as ‘ the right of residents of one country, to transfer any currency amounts to another country for the purpose of financing capital operations: i.e., operations other than current transactions’.