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Presentation on theme: "BILATERAL INVESTMENT TREATIES (BIT) IN SOUTH ASIA: AN OVERVIEW G Manicandan Forum Against FTAs."— Presentation transcript:


2 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).

3 Overview of BITs  Bilateral Investment Treaties  Total: Total in force: 2107  Other International Investment Agreements  Total: 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

4 BITs in South Asia  Source: UNCTAD BITsOther IIAsTotal Afghanistan3 (3 in force)4 (3 in force)7 Bangladesh29 (23 in force) 4 (3 in force) 33 Bhutan0 2 (2 in force) 2 India 84 (69 in force) 13 (9 in force)97 Maldives 3 (3 in force) 3 Nepal6 (4 in force) 3 (3 in force)9 Pakistan46 (25 in force) 7 (6 in force)53 Sri Lanka 28 (24 in force)5 (4 in force) 33 Total196 (188 in force)41 (33 in force)237

5 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

6 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

7 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

8 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

9 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.

10 India and ISDS  Dhabol Power Corporation – Enron (80%), GE (10%) and Bechtel (10%) – late 1990s and 2000  UNCITRAL case Mauritius India BIT  600 million $ claimed – Settled  Govt paid US$160 million to Bechtel and US$145 to GE  UNCITRAL case – Netherlands India BIT  Enron Claimed - over US$ 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

11 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 G telecom licenses  Illegally undercharging mobile telephone companies  SC termed them as “unconstitutional and arbitrary” and directed the government to conduct fresh auctions.

12 India S.NoForeign investor Date of dispute Notice CountryApplicable BIPA 1 1) CC/Devas (Mauritius) Ltd, 2) Deveas Employee Mauritius Pvt. Ltd. (Devas), 3) Telecom Devos Mauritius Ltd 13-Dec-11MauritiusIndia - Mauritius 2Deutsche Telekom15-May-12GermanyIndia - Germany 3Vodafone International Holdings BV17-Apr-12 The Netherlands India - The Netherlands 4Sistema Joint Stock Financial Corporation28-Feb-12RussiaIndia - Russia 5 M/S Khaitan Holdings (Capita Global Ltd., Mauritius; and Kaif Investment Ltd., Mauritius - Original Claimants 16-Apr-12MauritiusIndia - Mauritius 6 i) 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-12CyprusIndia - Cyprus 8 Tenoch Holdings Limited, Cyprus; Mr Maxim Naumchenko and Andrey Polouekktov (Russians) 18-Jun-12Russia India Russian federation & India Cyprus

13 Sri Lanka  First BIT with Germany in 1963  Deutsche Bank AG v. Democratic Socialist Republic of Sri Lanka (ICSID Case No. ARB/09/2)  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.

14 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 - $ and Euro

15 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

16 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

17 Global experience with ISDS  Public Safety  Vattenfall v. Germany (nuclear ), 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

18 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

19 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.

20 Key issues  Loss of policy space  Affecting role of Judiciary  Corruption  FDI in multi-brand retail policy

21 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

22 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.

23 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

24 Thank you


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