57 This category includes both free trade agreements and customs unions. 50 See the standard text of the Indian Bilateral Investment Treaty, Article 15, at investmentpolicyhub.unctad.org/Download/TreatyFile/3560. 37 This class of problems is very similar to aspects of the international external problem mentioned in section I.A., since the same types of policies may be involved and the underlying issue arises because of certain types of hidden costs to investors. The difference in analysis in this section lies in the fact that the costs of the host country`s policy are fully borne by the resulting adjustments in the cost of capital and therefore there is no international externality. This article argues that international investment agreements (AI) serve a dual economic function – to discipline the host country`s policy that imposes international externalities on foreign investors and reduce the inefficient risks associated with agency fees, risk aversion, asymmetrical information and temporal inconsistency problems that unprofitably increase the cost of imported capital in host countries. It uses economic analysis to explain the essential characteristics of AI and its evolution over time, and to address various controversial issues in international investment disputes. 60 Institute of Sustainable Development, side-by-side comparison of Brazil-Mozambique and Brazil-Angola cooperation (2015), available from www.iisd.org/sites/default/files/publications/comparison-cooperation-investment-facilitation-agreements.pdf. See Article 11, paragraph 2, of each contract. 51 Ecuador has ended its bit after a multi-billion euro judgment against Occidental Petroleum. See Cecilia Olivet, Why Did Ecuador terminate All Its Bilateral Investment Treaty?, TNI (May 25, 2017), on www.tni.org/en/article/why-did-ecuador-terminate-all-its-bilateral-investment-treaties. Australia has threatened to withdraw from its ILOs and isDS system in response to the tobacco dispute filed by Phillip-Morris.
However, Australia changed its mind following a change of government and ultimately prevailed in the case of simple packaging – Australia`s current position remains in favour of ISDS. See Australian Government, Department of Foreign Affairs and Trade, Australia`s Bilateral Investment Treaty, at dfat.gov.au/trade/investment/Pages/australias-bilateral-investment-treaties.aspx.