BILATERAL INVESTMENT TREATIES (BIT) IN SOUTH ASIA: AN OVERVIEW G Manicandan Forum Against FTAs.
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Transcript of BILATERAL INVESTMENT TREATIES (BIT) IN SOUTH ASIA: AN OVERVIEW G Manicandan Forum Against FTAs.
BILATERAL INVESTMENT TREATIES (BIT) IN SOUTH ASIA: AN OVERVIEW
G Manicandan Forum Against FTAs
Why Bilateral Investment Treaties (BITs)
Investment – Sustainable Development – Paradox
Extra legal protection for investors Developing countries signed them to
attract investment and capital. Corporates can drag governments to
international arbitration process and claim huge compensation.
Corporates do not need to go through domestic courts(Unless mentioned in the agreement).
Overview of BITs
Bilateral Investment Treaties Total: 2808 - Total in force: 2107
Other International Investment Agreements Total: 345 - Total in force: 273
Investment treaties between governments: Bilateral Investment Promotion and
Protection Agreement (BIPA). Bilateral Investment Treaties (BITs). Free Trade Agreements (FTAs) – Investment
chapter
BITs in South Asia
Source: UNCTAD
BITs Other IIAs TotalAfghanistan 3 (3 in force) 4 (3 in force) 7
Bangladesh 29 (23 in force)4 (3 in force) 33
Bhutan 02 (2 in force) 2
India84 (69 in
force) 13 (9 in force) 97
Maldives 3 (3 in force) 3
Nepal 6 (4 in force) 3 (3 in force) 9Pakistan 46 (25 in force) 7 (6 in force) 53
Sri Lanka28 (24 in
force)5 (4 in force) 33
Total 196 (188 in force) 41 (33 in force) 237
Why investors love BITs
Fair and equitable treatment (FET) Compensation in the case of direct or
indirect expropriation National and Most Favored Nation (MFN)
treatment Freedom from Performance requirements Free transfer of capital Umbrella clause – Blanket obligation Investor State Dispute Settlement (ISDS)
– right to claim compensation
Investor state dispute settlement (ISDS) Increasing investor state arbitration
process 568 cases by 2013 – UNCTAD 57 % of respondent states are
developing countries 299 cases arbitrations initiated by
corporations from EU 127 arbitrations initiated by corporations
from US 32 cases from Canada
Investor state dispute settlement (ISDS) Arbitration Forums
International Centre for Settlement of Investment Disputes (ICSID) – World Bank Afghanistan, Bangladesh, Nepal and Pakistan
United Nations Commission on International Trade Law (UNCITRAL)
Stockholm Chamber of Commerce (SCC) International Chamber of Commerce (ICC)
Arbitration Process – 3 arbitrators – Highly secret
Investor state dispute settlement - South Asia Known treaty claims Respondents in
South Asia India – 14 Cases Pakistan – 8 Cases Sri Lanka – 3 Cases Bangladesh – 1Case
India
Bilateral Investment Promotion And Protection Agreements (BIPA) with 83 countries - 11 not enforced yet.
Investment protection - covered in India’s Comprehensive Economic Cooperation Agreement (CECA) with Singapore (2005), South Korea (2009) and Japan (2011)
Ongoing negotiations FTAs with the EU, EFTA and Canada.
India and ISDS Dhabol Power Corporation – Enron
(80%), GE (10%) and Bechtel (10%) – late 1990s and 2000
UNCITRAL case Mauritius India BIT - 2003 600 million $ claimed – Settled Govt paid US$160 million to Bechtel and
US$145 to GE UNCITRAL case – Netherlands India BIT -
2004 Enron Claimed - over US$ 4 billion Case settled secretly with unknown amount of
settlement Cases launched by banks funded this
project settled on undisclosed terms - ABN Amro, ANZEF Ltd, BNP Paribas, Calyon SA, Standard Chartered, Credit Suisse, Erste Bank Der Oesterreichischen Sparkassen AG
India and ISDS
In 2011 under India - Australia BIT India paid Aus$ 9.8 million to the White
Industries Australia Ltd Dispute – Coal India ltd – White Industries –
1989 Not direct investment but contract for supply of
goods and services India Australia BIT concluded in 1999
In 2012 Supreme Court of India cancelled 122 - 2G telecom licenses Illegally undercharging mobile telephone
companies SC termed them as “unconstitutional and
arbitrary” and directed the government to conduct fresh auctions.
IndiaS.No Foreign investor Date of dispute
Notice Country Applicable BIPA
11) CC/Devas (Mauritius) Ltd, 2) Deveas Employee Mauritius Pvt. Ltd. (Devas), 3) Telecom Devos Mauritius Ltd
13-Dec-11 Mauritius India - Mauritius
2 Deutsche Telekom 15-May-12 Germany India - Germany
3 Vodafone International Holdings BV 17-Apr-12 The Netherlands India - The Netherlands
4 Sistema Joint Stock Financial Corporation 28-Feb-12 Russia India - Russia
5M/S Khaitan Holdings (Capita Global Ltd., Mauritius; and Kaif Investment Ltd., Mauritius - Original Claimants
16-Apr-12 Mauritius India - Mauritius
6i) Axiata Investment 1 Ltd. & Axiata Investment 2Ltd., Mauritius / and ii),Axiata Berhad Group Malaysia
6-June-2012 / and 5 June 2012
Mauritius / Malaysia
India - Mauritius / and India - Malaysia
7 Children's Investment Fund Management (UK) LLP and TCI Cyprus Holdings Ltd 16-May-12 Cyprus India - Cyprus
8Tenoch Holdings Limited, Cyprus; Mr Maxim Naumchenko and Andrey Polouekktov (Russians)
18-Jun-12 Russia India Russian federation & India Cyprus
Sri Lanka
First BIT with Germany in 1963 Deutsche Bank AG v. Democratic Socialist
Republic of Sri Lanka (ICSID Case No. ARB/09/2) - 2010
Oil hedging transaction deal concluded between Deutsche Bank and the Ceylon Petroleum Corporation (CPC), a wholly state-owned oil company – early 2008
Oil prices fell dramatically from late 2008 onwards (a drop of almost 50% between August and October 2008).
Central Bank of Sri Lanka prohibited enforcement of contract.
Sri Lanka ordered to pay $60.4 million.
Bangladesh
Saipem Vs Bangladesh (2005) awarded in favour of investor
Bangladesh - Italy – BIT Saipem contract with Petrobangla
(Bangladesh Oil, Gas & Mineral Corporation) to build natural pipeline
Project delayed opposition from Locals ICSID award - $6148770 and Euro
110995
Global experience with ISDS
Health: Philip Morris v. Australia (tobacco) 2011,
pending Australia – Hong Kong BIT Health warnings to deter smoking by Aus Govt
law Fair and equitable treatment violation against
Public health Lost case in Australian court
Philip Morris v. Uruguay (tobacco) 2010, pending Switzerland-Uruguay BIT Seeking compensation for lost profits
Global experience with ISDS
Environment: Chevron v. Ecuador (Amazonian oil pollution,
evading court rulings) 2009, pending Chevron case against Ecuador under the U.S.-
Ecuador BIT to evade payment of a multi-billion dollar court ruling against the company for widespread pollution of the Amazon rainforest.
26 Years of Texaco – acquired by Chevron In 2013 Ecuador’s highest court ordered
Chevron to pay US $9.5 billion Texaco’s investment in Ecuador ended in 1992,
the BIT did not take effect until 1997
Global experience with ISDS
Public Safety Vattenfall v. Germany (nuclear - 2012),
pending Swiss - Germany BIT Public opinion after the Fukushima power
plant disaster in 2011 German government decided to phase out
nuclear energy Vattenfall demanded $1 billion
compensation
Global experience with ISDS
Public services Azurix v. Argentina (water) 2001, investor
win Argentina-US BIT Azurix took over privatised water
distribution and sewage treatment in 1999 Steep in increase in prices – Govt capped
price increase Contaminated water – Govt advised not to
pay the bill Azurix awarded $165 million plus interest
Investor state dispute settlement (ISDS) Investors can challenge policies and
regulations that are harming “Investor rights” Tax policies Fiscal policy Investment policy Environmental policy Health policy Water distribution Court Verdicts
And many more…
Investors use threat of arbitration to force governments to change or remove regulations.
Key issues
Loss of policy space Affecting role of Judiciary Corruption FDI in multi-brand retail policy
India’s review of BIPAs Standing Committee of Secretaries (SCoS) and
Working Group for the Model BIPA Text formed Review overall framework of BIPAs/BITs/CECAs with the
view to harmonising different provision in the context of recent developments
Consider legal steps if possible – other wise Renegotiate
Directions to ongoing negotiations Working Group – Ministries and Depts
Prepare revised Model BIPA Text Harmonize provisions of BIPAs with CECA Address broad generic issues arising from disputes Provide roadmap for re-negotiation of BIPAs
Dept of Economic Affairs monitors overall process Revised Model text will be placed before cabinet
Key gaps
Key Gaps - Lack of information among key actors Members of Parliament & Political leadership State governments Activists at national and regional level Media Lack of information in regional languages Need to build alliance with groups - Tax justice,
Environment, Anti-MNCs struggles and protection of natural resources groups.
Larger public Need to invoke rights guaranteed under the
constitution and issues of national sovereignty in our articulation.
Need for active civil society role Monitor the review of BITs in India Monitor progress in investor disputes
arbitration Stop expansion and renewal of BITs Withdrawal from BITs by the government
of India Reformatting or renegotiation of BITs Regaining policy space Political advocacy
Thank you