Monday, November 26, 2012

By signing FTAs with Investor Protection Clauses, Malaysia has failed Malaysians

One danger in most FTA(Free Trade Agreement) which Malaysia signs is the Investor protection clause/section, in which the right is given to the investor to take Malaysia to some international arbitration tribunal 

In such  “investor-state dispute settlement” (ISDS) demands becomes exposed to international arbitration at a tribunal such as the International Centre for the Settlement of Investment Disputes (ICSID). This means that the investor sues the government of that country.
And, by investor it can also mean a shareholder. In short, when Malaysia signs such FTA Agreements, Malaysia surrenders its right to amend laws that will improve worker rights and conditions, and even measures for the public good. The reason for the action is that this new policy, regulation or law affects the legitimate interest of the investor...Read the article below by Fifa Rahman, which also gives examples of countries that have fell victim to such clauses - having to spend millions in defence, and millions (maybe even billions) if and when these 'investors' succeed. The author looks primarily to tobacco and cigarettes - but our concern must be broader..

The irony is that such disputes are settled at usually some international arbitration in the US,etc - not in the Malaysian courts according to the Malaysian law. I believe, if there be any such disputes, it must be resolved in the Malaysian courts - or at some local independent arbitration body like the Kuala Lumpur arbitration centre. Should not that foreign investor also be accorded equality and equal protection under the Malaysian law - not some different special right. Private corporations can do what it wants - but certainly not the Malaysian government.

RISK :- If Malaysia passes laws with regard to a just living wage, laws that ensure that workers are employed as regular permanent workers until retirement (hence abolishing the practice of short-term employment contract and/or labour outsourcing)...or even effect a ban on say cigarettes, alcohol or even some dangerous medicines...or even imposes higher standards to the protection of public health/environment - then, by reason of the existence of such investor protection clauses, actions may be commenced against Malaysia in some far away arbitration body by reason that it will affect the 'legitimate interest of the investor'...or his profits...This is certainly wrong.

Australia have woken up - and is objecting to the inclusion of such “investor-state dispute settlement” (ISDS) clauses. Malaysia should do the same.

Australian New Position: Australian Parliamentary Commission’s stance is that no new Bilateral Investment Treaties (hereinafter referred to as ‘BIT’s) entered into by Australia will contain an alternative dispute resolution (ADR) clause normally calling for international arbitration. 

In my opinion, Malaysia should take steps to revoke any or all FTA agreements or other treaties that contain such clauses that give individual investors and Trans National Corporations the ability to take such actions against Malaysia... The government must always be FREE to do the needful for the better rights, good, health and welfare of the people in Malaysia.

MARCH 1 — The Trans-Pacific Partnership Agreement (TPPA) is an agreement being negotiated between the US and nine countries, including New Zealand, Singapore, Australia and Malaysia.

This week, from March 1-9, negotiators from these nine countries will meet in Melbourne, Australia in what is known as the Melbourne round — to discuss and negotiate provisions in the TPPA.

What is bound to be discussed — particularly by pro-health Australia and New Zealand — are provisions in the TPPA that will negatively affect domestic regulation of tobacco and expose parties who continue to regulate post-signing to international tobacco litigation/arbitration, the costs of which reach into the hundreds of millions of US dollars.

In simple terms, the TPPA basically demands that any measure to reduce tobacco use will be “unfair and unequitable” to investors, that some measures constitute technical barriers to trade, and that laws to reduce tobacco use amount to “expropriation of value of investments”, all of which breach the terms of the agreement.

So what happens upon breach? Any country that agrees to “investor-state dispute settlement” (ISDS) demands becomes exposed to international arbitration at a tribunal such as the International Centre for the Settlement of Investment Disputes (ICSID). This means that the investor sues the government of that country.

Why is this such a big deal then? Firstly, international arbitration at ICSID or other similar international tribunals costs hundreds of millions of US dollars. The Czech Republic, in the case of CME vs Czech Republic, was required by the United Nations Commission on International Trade Law (UNCITRAL) to pay the investor US$350 million (RM1,050 million), the equivalent of their entire health budget for that year. Slovakia, however, had to pay more: in CSOB vs Slovakia, CSOB was awarded US$867 million.

The question is: Is there a real threat of Malaysia being sued because of tobacco laws?

There are two high-profile cases currently in procedural stages at international tribunals on tobacco — Philip Morris Asia vs Australia and Philip Morris International vs Uruguay. In the latter, Uruguay is being sued by Philip Morris International’s subsidiary in Switzerland, and a small Uruguayan company called Abal Hermanos under the Swiss-Uruguay Bilateral Investment Treaty, for having 80 per cent of their cigarette packs covered with health warnings — the largest health warnings in the world, and also for only allowing one variant of cigarette per brand, such as only Dunhill Reds, but not Dunhill Greens or Blues.

The President of Uruguay, José Mujica, knew that Uruguay could not afford the fees — so he asked his friend Mayor Mike Bloomberg of New York for technical and financial assistance.

In the Australian case, Philip Morris Asia, which is based in Hong Kong, bought shares in Philip Morris Australia to prove vested interests, and sued Australia under the Hong Kong-Australia Bilateral Investment Treaty due to Australia’s law to introduce plain packaging of cigarettes in the year 2012. (see picture)

So basically, if Malaysia enacts any law to reduce tobacco use, it could be sued at the international tribunals, and face hefty penalties that could exceed the national health budget.

Some people say that an option is simply not to regulate tobacco at all. No public health professional in their right mind will say this is an option at all. Malaysia is in the situation where 46 per cent of our males from 18-65 years old smoke, and we spend RM20 billion a year treating tobacco-related diseases.

The fear is that when we choose not to regulate to avoid expensive tobacco arbitration, health expenditure will increase and, most importantly, the health burden will increase. If tobacco is not regulated, we can expect that more Malaysians will die from tobacco-related diseases.

Australia, which is a party to the negotiations, is refusing to agree to ISDS. In the words of Gleeson, Tienhaara and Faunce in their 2012 article in the Medical Journal of Australia: “Australia’s refusal to consent to ISDS in the TPPA is a significant step towards limiting the encroachment of international trade agreements into our national health policy space and retaining our sovereign right to regulate significant areas of public health policy.”

Malaysians must push for the exclusion of tobacco from the application of the agreement, or at the very least, insist on no ISDS. Tobacco lobbying is extremely strong, and only a collective and strong voice can pressure negotiators to go pro-health.

Last week, on February 24, a tobacco industry-sponsored event was held in Washington DC, hosted and attended by ambassadors and embassies of TPPA negotiating countries. The event calendar can be viewed here.

According to this event calendar, the Malaysian ambassador hosted along with his counterparts. The New Zealand ambassador, Mike Moore, also hosted, and New Zealanders have since called for his sacking. Australia did not attend on grounds on conflicts with their pro-health stance.

This paragraph illustrates just how strong and influential the tobacco industry is, and how it is highly likely at this moment that citizens will lose unless we begin to fight for our right to health. It also shows the importance of the TPPA to the tobacco industry. We must urge negotiators from the Ministry of International Trade and Industry (MITI) to discuss our concerns on tobacco and how it will affect Malaysian health.

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