By Nuri Albala*
Le Monde diplomatique
March 1998
The first lever in the draft under discussion provides for a particularly wide-ranging definition of investment (1), which would have the authority of an international treaty and would consequently take precedence over the domestic law of almost every country - and certainly over French national law. Parliaments would not, therefore, in future be able to adopt legislation incompatible with the provisions of the MAI, and the national courts would condemn any attempt to undermine the agreement based on legislation or government action that relied on prior law, except in the case of the reservations we shall be considering below.
The effect of the general nature of its clauses on liberalising investment would make the MAI, if signed and ratified, the benchmark; it would thus take precedence over other bilateral or multilateral agreements, including those governing regional structures such as the European Union, whose 15 member states are taking part in the negotiations, alongside the European Commission. The only two exceptions provided for relate to the obligations of the states as signatories to the Articles of Agreement of the International Monetary Fund and the "guidelines" of the Organization for Economic Cooperation and Development. In fact, these are merely recommendations and are not binding on the multinationals. A very ambitious draft encompassing all sectors, the MAI is designed to be extended world-wide. Although it is being negotiated within the 29-member OECD exclusively, the aim is to open it to accession to all member states of the World Trade Organization and to countries such as Russia and China that want to become members of that body.
A second lever in the agreement requires states to consent unconditionally to the submission of disputes to international arbitration (2). However, when considering this aspect it is worth bearing in mind the reluctance of many states (including, for a long time, France) to agree to be bound by the jurisdiction of an international court on human rights. Moreover, the machinery being considered provides for just two possibilities: state-to-state disputes, or a complaint by an investor against a state. There is no mention of a state bringing an action against an investor. (This is perfectly logical, of course, since at no point does the text impose any duty whatsoever on investors.)
The third lever limits the possibility of introducing exceptions to the agreement. While the existence of public and private monopolies is not challenged, they have to "act solely in accordance with commercial considerations". And, laying it on the line, the draft specifies that a monopoly may apply different prices within different geographical markets "where such differences are based on normal commercial considerations, such as taking account of supply and demand conditions in those markets". That provision - with which some negotiators seem to be having a problem (to say the least) - illustrates the philosophy behind the agreement. In France, it challenges head-on republican principles as basic as the doctrine of equality of citizens in relation to public services: monopolies operating in the public service would no longer be able to retain differential pricing systems based on non-commercial considerations (as in the case, for example, of the SNCF, or canteens in state or educational institutions etc.).
Advocates of the MAI claim that "exceptions" or "reservations" may be made to protect culture, public health, the environment and social rights, but, as currently worded, the draft allows for one general exception only, and that relates to military and security issues. The French delegation recently proposed an "exception clause for cultural industries" (3). But under the terms of the draft an "exception" is an area that is not covered by freedom of investment in all of the signatory countries. Therefore, in order to be adopted, the French proposal would have to be accepted by the other 28 negotiators! At the last count it could rely on the support of five or six delegations at most.
The fourth lever makes liberalisation irreversible. The so-called "standstill" and "rollback" measures are probably the most inimical new measures in the draft. On the day the agreement is signed, every state will have to list those of its laws that are incompatible with total freedom of investment, and the list it provides will not only have to be accurate and exhaustive but also definitive, because no subsequent exceptions will be entertained. The text under discussion seeks to limit the use of reservations that are traditional in international law and enable states to retain in force provisions which may be incompatible with the draft agreement, but which they wish to preserve ("reserve").
Reservations have to "describe, in the most precise terms possible" their nature and scope, to thwart the introduction of excessively general reservations, known as precautionary reservations. It is even stipulated that they are to be drafted in accordance with a specific model! In other words, reservations have to be entered once and for all; the aim is to reduce the overall number of reservations and ensure there is no opportunity of introducing new ones.
Based on the rule of standstill, the authors of the agreement have deftly produced its corollary, namely "rollback", the definition of which is worth quoting. "Rollback is the process by which the reduction and elimination of non-conforming measures to the MAI would take place. It is a dynamic element linked with standstill, which provides its starting point. Combined with standstill, it would produce a 'ratchet effect', where any new liberalisation measures would be locked in so they could not be rescinded or nullified over time."
The logic is admirable: new liberalising measures and the withdrawal of reservations both constitute "progress" - within the meaning of the MAI. Therefore, any state waiver of a reservation constitutes a measure implementing the MAI, and will form a body of law (with the MAI) and take precedence over national law. It will then become irreversible in application of the MAI itself! And whether parliament and people want it repealed matters not a jot.
This is a legal device that dashes the hopes of those who believe that a cultural or other exception could help. Whether described as an "exception" or a "reservation", it would be provisional only, and would, by definition, be gradually whittled away until it faded completely - and "rollback" was achieved. To keep the locks well-oiled, the draft lays down procedures (including periodic negotiating cycles) designed to remove or limit incompatible measures.
Carrying on their negotiations behind closed doors so that they remain impervious to concerns other than the interests of the multinationals, the authors of the MAI have taken no account of the legal, political or moral commitments already entered into by the states that are incompatible with the text of their draft. Those commitments relate in particular to the International Labour Organisation, the 1992 Rio Earth Summit - which ought at least to have attracted their attention - and the Charter of Economic Rights and Duties of States, adopted by the United Nations in 1974. The Charter actually provides that every state has the inalienable right to regulate foreign investment within its national jurisdiction and to control investment (4).
* Lawyer responsible for international relations at the NGO Droit solidarité (AIJD), member of the Observatoire de la mondialisation, Paris.
(1) The preamble defines investment as "every kind of asset owned or controlled, directly or indirectly, by an investor", who may be either a natural or a legal person. See the text under negotiation on the Internet at www.citizen.org
(2) "Each Contracting Party hereby gives its unconditional consent to the submission of a dispute to international arbitration in accordance with the provisions of this Article."
(3) The proposed exception clause reads as follows: "Nothing in this agreement shall be construed to prevent any Contracting Party to take any measure to regulate investment of foreign companies and the conditions of activity of these companies, in the framework of policies designed to preserve and promote cultural and linguistic diversity."
(4) United Nations General Assembly Resolution No 3281 (XXIX) of 12 December 1974.
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