Presentation by G Manicandan - South Solidarity Initiative

Report
BILATERAL INVESTMENT TREATIES (BIT)
IN SOUTH ASIA: AN OVERVIEW
G Manicandan Forum Against FTAs
Why Bilateral Investment Treaties (BITs)
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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
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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)
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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
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Known treaty claims Respondents in South Asia
 India
– 14 Cases
 Pakistan – 8 Cases
 Sri Lanka – 3 Cases
 Bangladesh – 1Case
India
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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
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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
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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

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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.
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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
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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
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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
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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
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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
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Global experience with ISDS
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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
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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)
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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…
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Investors use threat of arbitration to force governments to
change or remove regulations.
Key issues
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Loss of policy space
Affecting role of Judiciary
Corruption
FDI in multi-brand retail policy
India’s review of BIPAs
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Standing Committee of Secretaries (SCoS) and Working
Group for the Model BIPA Text formed
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Working Group – Ministries and Depts
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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
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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.
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Need for active civil society role
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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

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