Mandalay civil society calls for EU treaty halt

A group of 15 civil society organisations (CSOs) based in Mandalay released a statement last week calling for the government to hold off on signing new bilateral investment treaties with the European Union, saying the proposed regulations of the agreement could have a “chilling effect” on policy making.

The CSOs specifically raised alarms over the proposed mechanism for settling disputes between investors and the government, known as the Investor State Dispute Settlement Mechanism (ISDS).

A common feature of bilateral trade agreements across the globe, ISDS is defined by the World Bank as a form of resolution of disputes between foreign investors and the state that hosts their investment. ISDS allows foreign investors to initiate dispute settlement proceedings against a host state.

Legal proceedings are then settled by independent arbiters and conciliators appointed to each case.

In a statement released on June 21, the Mandalay-based CSOs warned that such an agreement would give foreign investors far too much power to block proposed legislation.

Foreign investors can bring cases against governments through the ISDS mechanism at international tribunals, while the state or communities cannot sue the investor, the statement said. “The threat of a potential case brought by an investor to a state through ISDS has a chilling effect on policymaking,” it added.

The groups point out that even if the arbitration panel finds in favour of the state, the legal fees for such a procedure routinely run into millions of dollars.

“Given the above concerns we are of the opinion that no investment treaties should be signed,” it said.

Representatives from the EU and the Directorate of Investment and Company Administration could not be reached for comment last week.

However, in a statement released in May following the beginning of the negotiations, Jean-Luc Demarty, the EU commission’s director general for trade, wrote, “The existence of investment protection and ISDS does not prevent the host state from applying all its laws … and interested parties can always seek redress in national courts.”

“I strongly believe that such an agreement will allow for EU investors to play an important role in contributing to sustainable growth and development in Myanmar”.

EU Ambassador to Myanmar Roland Kobia has publicly stated that the EU is only pursuing an ISDS agreement in order to address Myanmar’s lacking “legal infrastructure” and allay concerns of European investors, thus incentivising them to bring in capital that the nation needs to develop.

The concerns of the local CSOs, including the Kachin Peace Network and EcoDev, are shared by many experts on international investment, who claim that such treaties often stand in the way of progress in developing nations.

“The system was designed to protect investors from nationalisation of their property but has evolved through arbitrations to include protection against regulatory measures adopted in the public’s interest,” said Daniel Auguirre, a legal advisor for the International Commission of Jurists based in Yangon.

Experts in other ASEAN countries said similar treaties have reduced policy options open to their governments.

“[In] the last couple of years it is becoming an issue; more and more countries are being sued. This is a problem because it has an impact on policy space for governments,” said Charles Santiago, a Malaysian Parliamentarian and former economist. “[Arbitrators] who are not judges are now calling the shots in terms of investment and democracy.”

Speaking to The Myanmar Times last week, Mr Santiago claimed that he himself has proposed legislation to limit advertising for tobacco products in the Malaysian parliament, only to be told by his peers that such a law could open the government up to a lengthy and costly arbitration battle with Phillip Morris Tobacco.

“Even if Malaysia wants to introduce plain packaging [on cigarettes] in the interests of our citizens, for public health reasons, now [we] cannot do it,” he said.

In addition, both Mr Aguirre and Mr Santiago claimed that there is very little evidence that such treaties benefit developing nations.

There is a “dearth of research directly linking the adoption of BITs with increased economic growth. In fact, in some of the poorest African states, the opposite relationship has been shown” said Mr Aguirre.

Both Mr Aguirre and Mr Santiago say that citizens would be better served if the nation’s judicial system were properly reformed, removing the need for independent arbitration, and sentiment shared by the CSOs in their statement.


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