Regulatory Readiness of the DPRK for Attracting Foreign Direct Investment

On the basis of past decisions with comparable circumstances, third-party data and anecdotal evidence linked to investors operating in North Korea, this report reaches the following conclusion: the first-order interaction for the DPRK is that it must demonstrate good faith through continued engagement in international legal mechanisms and institutions. This can help overcome regulatory chill imposed by unclear FET standards. One especially illustrative case of lacking good faith includes the investments of Orascom Telecom Media, an Egyptian company, into North Korea.The DPRK employed measures starting from 2012 that violated the legitimate expectations that Orascom held at the time of its investment. Based on comparable circumstances in past decisions of investment treaty arbitration, this can be conclusively seen as an act of indirect expropriation. Such actions explicitly violate the DPRK-Egyptian BIT, which grants Orascom the guarantees of FET, which typically provides for legitimate expectations. The lack of precedence to understand how the North Korean judicial system operates and no record of arbitral practice involving the DPRK make it difficult to anticipate how the state may behave when engaging the regulatory instruments of international investment law.Based on these findings, this report concludes by proposing the creation of a joint interpretation mechanism, e.g., joint government interpretation of treaties, as a policy solution that can help to not only strengthen the rule of law in the DPRK, but also boost North Korea's business climate to increase foreign capital injections. In addition to these medium-term benefits, providing incentives to pursue formal rather than informal economic transactions in North Korea can bolster long-term goals such as improved transparency, accountability and reduced reliance on shadow economies. Entering into treaty-based agreements on the harmonized interpretation of treaties represents a diplomatically flexible yet effectually robust means to strengthen confidence in the foreign investment regulatory climate of the DPRK