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