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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: Other International Investment Agreements Total: 2808 - Total in force: 2107 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 BITs 3 (3 in force) 29 (23 in force) 0 84 (69 in force) Other IIAs Afghanistan 4 (3 in force) Bangladesh 4 (3 in force) Bhutan 2 (2 in force) India 13 (9 in force) Maldives 3 (3 in force) Nepal 3 (3 in force) 6 (4 in force) Pakistan 46 (25 in force) 7 (6 in force) Sri Lanka 28 (24 in force) 5 (4 in force) Total 196 (188 in force) 41 (33 in force) Source: UNCTAD Total 7 33 2 97 3 9 53 33 237 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. India S.No Foreign investor Date of dispute Notice Country Applicable BIPA 1 1) 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 5 M/S Khaitan Holdings (Capita Global Ltd., Mauritius; and Kaif Investment Ltd., Mauritius - Original Claimants 16-Apr-12 Mauritius India - Mauritius 6 i) Axiata Investment 1 Ltd. & Axiata 6-June-2012 / and Mauritius / Investment 2Ltd., Mauritius / and 5 June 2012 Malaysia ii),Axiata Berhad Group Malaysia 7 Children's Investment Fund Management (UK) LLP and TCI Cyprus Holdings Ltd 16-May-12 Cyprus India - Cyprus 8 Tenoch Holdings Limited, Cyprus; Mr Maxim Naumchenko and Andrey Polouekktov (Russians) 18-Jun-12 Russia India Russian federation & India Cyprus India - Mauritius / and India Malaysia 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 Working Group – Ministries and Depts 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 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
