Lorenzo Cotula

Team Leader – Legal Tools

International Institute for Environment and Development (IIED)

Investment treaties:

What they are and why

they matter

Investment treaties and grassroots action:

A hypothetical but plausible scenario

Agribusiness project, large-scale land acquisition, community and CSO mobilisation

Following company breach of contractual conditions, government terminates the project

Company initiates arbitration against government, arguing treated unfairly and claiming $’00mn damages (plus arbitration costs)

Monetary issue - should the public purse shoulder costs?

Can prospect of compensation payouts discourage government from heeding to community/CSO demands?

Investment treaties

Agreements concluded between two or more states to promote

investment by nationals of one state into the other state

• Bilateral, regional, multilateral treaties

• Increasingly investment chapters within wider preferential trade &

investment agreements

Reciprocal in form but often not in practice, especially in treaties

between developed and developing countries

Not to be confused with investment contracts concluded between a

government and a company to regulate a specific investment project

Investment promotion mainly through protection, increasingly pre-

establishment provisions

Investment protection

Substantive standards

Eg ‘fair and equitable treatment’ - flexible standard, leaves significant room for discretion reflected in diverse arbitral interpretations

Legal remedies - usually, investor-state arbitration (‘ISDS’)

Investor can take disputes with government to an arbitral tribunal -

usually three private lawyers, appointed to settle the dispute

If the investor wins, tribunal awards compensation - can involve very

substantial amounts (compensation, arbitration costs)

No appeal, relatively effective mechanisms to enforce pecuniary awards

Investment treaties and CSO advocacy

Complex technical/legal issues – but choices on whether to conclude

an investment treaty, and in what form, are political

Need for transparency and democratic deliberation, CSO advocacy

key

Diverse perspectives and positioning in the political spectrum – but

important to share lessons from experience

What strategies, tools and tactics work, where and under what

conditions?

ENGAGING THE TPPA – LESSONS

FROM MALAYSIAN CIVIL SOCIETY

Fauwaz Abdul AzizIdris Institute for Research (Malay Economic Action Council)12 February, 2015

1.1 Assessment, Analysis

Setting• The People’s Anti-FTA Coalition (to tackle US-

Malaysia FTA (2006) and EU-ASEAN FTA (2007), TPPA and EU-Malaysia FTA (both in 2010): Advocated on all those controversial aspects of FTAs

• FTA Coalition had more opposition party involvement = less political engagement, but more direct actions

• Weak Bush position on US FTAs • Differences between administrations of Mahathir

(1981-2003), Badawi (2003-2009) and Najib (2009-present): Transition period between state-led capitalism (Mahathir), to ‘Mr Nice Guy (Badawi) and corporate-led capitalism (Najib). During Badawi’stime, Mahathir legacy still casted a long shadow:

• Set up BANTAH (‘Resist’) the TPPA coalition (2013): • Greater emphasis on Investment Chapter, ISDS –

impacts on Affirmative Action, Income & Wealth Distribution

• ‘Apolitical, Non-partisian’, less political in terms

1.2. Assessment, Analysis

International scenario:• Increasing prominence of Investment chapters

(NAFTA, CAFTA, EU FTAs, etc), TPPA’s draft Investment Chapter • Increasing powers, protection, benefits (vs

responsibilities, liabilities) of Trans-National Corporations

• Governments getting smaller as representative of public interest & responsibilities, but getting bigger as representatives, manager of corporate interests

• Attack on fundamental elements of democratic, civil society practices (e.g. prior consultation, prior consent, public services & sensitive/strategic sectors)

Domestic senario• ‘Najiberalism’• Greater US Stakes (Democrats campaign during Bush

administration against ISDS, Obama’s pre-2008 presidential campaign against ISDS

1.3. Goals

• Malaysia walks out of the TPPA. • Not have an Investment Chapter• Malaysia should NOT agree to

• ISDS, regulation of capital flow, “fair and equitable treatment”

• an “expropriation” provision, “indirect expropriation”, restrictions on performance requirements beyond those at the WTO, bind state and local governments, restrict capital controls on inflows and outflows to prevent a financial crisis or to deal with it when one happens, disciplines on ‘currency manipulators’ if defined in a way that would include Malaysia (foreign exchange reserves that can cover 6 months of imports and a current account surplus), punishment of currency manipulators by tariffs being raised on their exports

• Malaysia SHOULD ensure that an Exceptions chapter has the effective exceptions needed (e.g. for financial crises, health, environment, consumer

Civil Society Advocacy

on Investment Treaties: Lessons from the PhilippinesJoseph Purugganan

Focus on the Global South /EU-ASEAN FTA Campaign

THE PROBLEM

CORPORATE AGENDA The strong push for a global consensus on 21st Century trade

and investment regime, which institutionalizes the corporate

agenda in trade and investment policies.

This corporate driven agenda would worsen inequality, erode

peoples rights and impact negatively on the environment.

New Generation FTAs These new generation trade agreements encompass a whole

range of economic policies that push for market liberalization

of goods and services, stronger and more restrictive

intellectual property rights, but also the easing of restrictions

on investments, and greater investor protection

STRATEGIES

To push back FTAS AND IIAS, and

Expose and address impacts of

investments on the ground

1. CONSOLIDATING THE POLITICAL

AGENDA AND ANALYSIS

National and regional forums on

investments

Bangkok 2013

Phnom Penh 2012

STRENGTHENING NETWORKS AND

BUILDING MOVEMENTS

In SEA, the existence of a regional

campaign network (EU-ASEAN) became

the main platform for discussions on ISDS

and integrating ISDS and investment

issues into the trade campaign.

Linking campaigns and

movements

Regional Forums like ASEAN Peoples Forum (APF), Asia-

Europe Peoples Forum (AEPF), ASEAN Grassroots Peoples

Assembly (AGPA) among others

Finding common ground; defining a common handle for joint

campaigning

Amplifying core issues through emblematic cases

DIRECT ENGAGEMENT WITH

GOVERNMENT Submissions made to the Philippine government on:

Conduct of social impact assessment

Memorandum on the benefits of undertaking a review of

international investment agreements and the ISDS mechanism

Dialogues with Agencies

Trade Department

Human Right Commission

Congress/Parliament

POPULAR EDUCATION AND

MEDIA organizing public forums and media briefings on ISDS-

anchoring the discussions on the actual cases both those

against the particular countries and the emblematic cases

proved useful.

OVERALL GOALS To inform and educate the public

To build the campaign constituency

To document and articulate impacts of investments

To inform and influence government to reject iSDS in FTAs,

to begin a process of review or auditing existing BITS, and

review of investment policies

2.1. -Approach- Strategy- Tactics

• Have research done, published, disseminated• Non-partisan, apolitical = MORE political

engagement• Strategic alliances, coalition-building• Raise questions & concerns remaining unaddressed

by Government, challenge the paradigm framing investment agreements, values underlying them:

• Strip off the cloak of secrecy & technicalities surrounding the TPPA, Investment Chapter:

• Dichotomising the benefits-costs of TPPA: Obscene lop-sidedness of Investment Chapter, ISDS arbitration system

• Overall Impact on Malaysian lives• Specific impacts on Bumiputera community• Strengthen government position on investment

issues of• Exclusions• investment authorization• pre-establishment• ISDS arbitration

TIPS on Campaigning1. Clearly define your position and how you frame the issue

2. Build a constituency around this position and framing

3. Back up your assertions with studies and clear cases

4. Use emblematic cases to drive home the point and as a

tool to link campaigns

3.1 Outcome: Successes

Government agreed to: • Engage with CSOs on TPPA (from 2 in 2011, 3 in

2012, 13 in 2013)• Carry out, disclose cost-benefit analyses and a

‘national interest analysis’ of the TPPA• Appoint ‘cleared advisors’ on the TPPA from

industry, trade, civil society reps as well as academics and other experts on a voluntary, non-remunerative basis.

• ‘Carve out’ tobacco from the list of goods that firms could claim under the TPPA benefits, such as ISDS arbitration

Public:• Before: very little awareness about TPPA. Now:

many ordinary men and women at least now recognise there are negotiations taking place, even if they know very little beyond

• Its secrecy• the higher costs of medicine• ISDS

3.2 Outcome: Failures

The ball was always with the government to decide how frequent, and how far, it would engage with BANTAH or other civil society organisations over the TPPA.Specific failures• ISDS (government previously promised to look into

‘alternatives to ISDS)• regulation of capital flow• “fair and equitable treatment”• an “expropriation” provision• “indirect expropriation”• restrictions on performance requirements beyond

those at the WTO• bind state and local governments• restrict capital controls on inflows and outflows to

prevent a financial crisis or to deal with it when one happens

3.3 Outcome: Failures

Failure to mobilise more people: Only a very small number of social and political activists were ready to devote their energies to the ‘dry’ issues of political and socio-economics, at most a few hundred at rallies/gatherings/talks on TPPA. Most were caught up in the partisan politics of BN versus Pakatan. But tens and hundreds of thousands would brave tear gas, water cannons, police batons and arrests to express support for, or opposition against, one political group or another, only a few hundred people made up mostly of leftists would show up for rallies and talks on the TPPA.

4. Closing remarks

• Need for adequate human, financial resources to tackle issues (applies to government, civil society and industries).

• Advocacy on trade and investment an EXHAUSTIVE process.

• Lack of resources to tackle HUGE issues (deep & comprehensive changes that are fundamental to Malaysia and other countries

• Need for accurate, timely research for both awareness, informative and lobbying purposes.

• Need for full-time, dedicated coordinators• Network and build coalition, strategic alliances: How

to balance between advocating for race-based affirmative action while convincing other races to join the same call on top of other cross-cutting issues? Look at commonalities of issues, persuade need still remains for affirmative action

• The TPPA report Malaysia is Not for Sale has maintained the campaign. Whatever difficulties during the campaign, we are remembered afterward for the book and other, smaller reports – most of

Thank you.

Idris Instite

Mallay Economic Action Council

No.24, Jalan Telawi 9, Bangsar

59100 Kuala Lumpur

No. Tel: +603-2284 6670 Faks: +603-2284 6671

Email : fauwaz@idrisinstitute.org

OUTCOMES ISDS IN THE PUBLIC CONSCIOUSNESS

GOVERNMENTS ARE OPEN TO THE IDEA OF

REVIEWING INVESTMENT POLICIES

BUT THERE IS ALSO THE DANGER OF FOCUSING

SOLELY ON ISDS IN FTA CAMPAIGNING