International Investing

A Money Merchants International investment agreement is now being considered for the European Union and for later worldwide passage by the Elite. Jane Kelsey turned over a rock and found the following:

A binding agreement intended eventually to remove all restrictions on foreign investment is being secretly negotiated at the OECD in Paris. (The O.E.C.D. was established September 30. 1961, and is a Western European organization called the Organization for Economic Cooperation and Development, comprised of 23 formerly sovereign nations.)

The OECD multilateral agreement on investment (MAI) has been described as a charter of rights and freedoms for multinational enterprises (MNEs) and international investors, which they will have the right to enforce against governments. It imposes no corresponding responsibilities on investors.

The objectives of this agreement are irreconcilable with the general principle set down in the 1996 coalition agreement 'that it is desirable that the control and ownership of important New Zealand assets and resources be held by New Zealanders', and conflict with the election manifestos of a number of parliamentary parties.

The MAI negotiations began in late 1995 and were due to be completed by May this year. It has taken longer than expected to finalize the details and there are still some major points of disagreement. Formal acceptance of the agreement has been delayed for several months and possibly until next year. That leaves little time for much needed debate on what commitments a New Zealand government should make. Once it has signed on to the agreement, that commitment will be locked in for at least 20 years.

A draft of the MAI, dated 9 January 1997, has been leaked to critics of unrestricted foreign investment in Canada. The following analysis has been prepared by Dr Jane Kelsey, Law Faculty, Auckland University, following discussions with officials at the OECD and the WTO.

The stated goal of the agreement is 'to ensure a high minimum standard of treatment for foreign investors and their investments' and prevent discrimination in favor of local investors or investment.

Governments must lodge a list of precise reservations which sets out all the areas where its policy does not conform to MAI requirements. These reservations are subject to 'standstill and rollback'. That means no new restrictions can be added by future governments and current reservations are expected to be reduced and eventually eliminated.

Governments cannot withdraw from the agreement at all for 5 years. If they later withdraw, commitments to existing investors continue for a further 15 years.

Investors are given legal standing to take action against governments for breaching the agreement, including enforcement of the MAI in domestic courts.

While investors are given extensive rights in this agreement, no responsibilities or obligations are imposed in return. There is no reference even to the OECD voluntary Guidelines for Multinational Enterprises.

OECD ministers agreed to begin negotiations on an MAI at their annual meeting in May 1995.

Earlier attempts to secure such an agreement during the Uruguay Round of the GATT met with strong resistance from poorer countries and resulted in a more limited agreement on Trade-Related Investment Measures (TRIMS).

The EU proposed developing a multilateral investment agreement (MIA) within the new GATT organization known as the World Trade Organization (WTO). Work on this was approved at the first ministerial meeting of the WTO in Singapore last December.

Other major powers, especially the US, believe any WTO agreement will be too weak, so have focused instead on developing a multilateral investment agreement (called the MAI, to distinguish it from the WTO proposal) within the 'rich countries' club' of the OECD.

Once enough support has been gained for the OECD version, it is expected to be flicked on to the WTO, thereby minimizing the ability of poor countries to influence the text.

The MAI is being negotiated by representatives of all 29 OECD member governments, with the assistance of drafting and expert groups.

New Zealand's main negotiator is a Treasury official seconded to our delegation at the OECD.

The Business and Industry Advisory Committee (BIAC) and the Trade Union Advisory Committee (TUAC) of the OECD are being consulted, but have no direct influence.

Once finalized the MAI will be open for all OECD members to sign, although they are not required to do so. Others can sign on later, with the approval of the original parties. The New Zealand government intends to sign on immediately.

Non-OECD countries are excluded from the negotiations, but they will be allowed to sign on to the MAI if the existing members approve.

The negotiations and drafts of the agreement are secret. Only the OECD, member governments and those whom they choose to consult are entitled to know the content until final agreement has been reached.

The draft agreement is only publicly available because it was leaked. There is no guarantee that future drafts will become available.

Some governments are required to submit the agreement and their reservations to their legislatures for final approval or ratification. For most, this will be the first opportunity they have had to debate the agreement. But there will be little they can do: the negotiations will be complete, the government's commitments will have been tabled, and any changes would mean reopening the whole deal. The US Congress has a rule that it can only approve or reject the agreement as a whole.

The New Zealand government does not even need to submit the agreement and its reservations to Parliament for ratification. This is treated as an Act of State which Cabinet can decide secretly on its own.

Parliament would only debate the issue if legislation was needed to bring New Zealand law into line with the MAI and its reservations. New Zealand already has one of the most open foreign investment regimes in the world. The government is unlikely to go beyond that, so it won't need to pass any further legislation.

Cabinet papers released to the Alliance indicate there is no intention to consult even the National and New Zealand First caucuses on the agreement or on New Zealand's list of reservations, let alone the Crown's Treaty partners, Parliament or the public at large. Apparently the New Zealand government has already tabled its list of reservations. Ministers claim these are consistent with the coalition agreement, but they are not prepared to release the document for scrutiny.

Recent disputes over the meaning and application of key provisions in the coalition agreement, such as those on privatization, cast doubt on the value of such assurances and reinforce the need for open debate.

Similar concerns apply to the government's assurance that its reservations will protect Treaty of Waitangi entitlements.

Even assuming government's assurances are true, future governments will be bound by the commitments this government makes, locking in its policies for the next 20 years.

'Standstill and rollback' means future governments be prevented from imposing any new constraints, and will be expected to reduce the few restrictions which still remain-irrespective of economic conditions, public opinion, Treaty of Waitangi obligations, or social, environmental and employment concerns.

That presumes there will never be a need to impose stricter constraints on foreign investors and investments, and that no democratically elected government would have the right to do so.

Two basic principles underpin the MAI:

'national treatment' prevents governments from giving preference to their local investors over the individual or corporate investors of another country which has signed the agreement. This guarantees at least equal treatment; governments can still treat foreign investors better than locals.

'most favored nation status' (MFN) requires governments to extend any preferential arrangement which it has with one or more countries to investors from all the countries which have signed the agreement.

A government's commitments apply to transactions affecting the land, internal waters and territorial sea over which it exercises sovereign powers. Some want them to extend to the seabed, its subsoil and associated natural resources. 'Government' includes local government and delegated authorities. Governments must also ensure that all payments relating to an investment can be freely transferred in and out of the country, in a freely convertible currency. These include initial capital, returns, payments under contracts, proceeds of sale, compensate or settlement awards.

The agreement covers the rights to set up, acquire, expand, operate, manage, maintain, use, enjoy, sell or otherwise dispose of investments.

Investments are defined as: 'Every kind of asset owned or controlled by an investor', including an enterprise (specifically seen to include research institutes and universities)

stocks and shares

bonds, debentures and loans

rights under contracts

intellectual property rights (including cultural property)

concessions, rights and permits (including pollution permits)

claims to money (this might not include government debt unless the transaction

has the characteristics of an investment)

rights over property (some - not NZ - want real estate left out).

The MAI will apply to investors/ments which are directly or indirectly nationals (including legal entities) of a contracting country.

Detailed rules are proposed in a number of specific areas. In January the wording of many provisions had yet to be agreed and several options were included in the text. Possible clauses which are of particular concern include:

performance requirements:

Foreign investors can't be required to use a set amount of local content, transfer technology to local companies, export part of their production, hire a certain proportion of local workers, or achieve a certain level of investment, production, employment, or research and development.

movement of capital:

No limits are allowed on moving investors' capital, profits, proceeds of sale or compensation into or out of the country.

privatization:

While a government is not required to privatize, the agreement applies to anything they do privatize, unless they have made specific reservations.

There are several definitions of privatization. Some would apply only to assets and enterprises; others would apply to all functions of government, including contracting out of policy advice and service delivery.

Some countries want to allow measures like a Kiwishare, share giveaways to local consumers, or management buyouts. The US wants to exclude those, with each country having to spell out these restrictions narrowly in its reservations, which would then be rolled back over time.

immigration:

Where an investor has committed, or is in the process of committing, 'a substantial amount of capital' they or their senior managers would have automatic rights to enter and reside in a country temporarily (probably between 1 and 3 years). So would their spouse and family. No labor market or economic needs tests, or quota limits, could apply.

rights of local companies:

Local company law could not allow companies to discriminate against foreign investors, limit the nationality of their directors, require their managers to be of a certain nationality, or create different voting rights for local and foreign shareholders.

secondary boycotts:

Governments would not be allowed to discriminate against companies because of their activities in another country. This would rule out the investment boycotts adopted by number of governments against local branches of companies which were active in apartheid South Africa. (Powerful governments may selectively ignore this restriction - as the US has done in the past, and arguably is still doing with Cuba.)

Enforcement

The agreement can be enforced against contracting governments by other governments which are party to the agreement. In a major new development it can also be enforced by foreign investors who claim they have been disadvantaged in actual or planned investments.

Disputes between governments: If these can't be resolved by consultation, they can be submitted to specially constituted international tribunals for binding arbitration. Ultimately there is no way for one government to make another government comply; the right to refuse is seen as the ultimate exercise of sovereignty. But only the most powerful states can do so with impunity. In reality, New Zealand would suffer enormous economic and political damage if it refused to comply with a decision.

Disputes between investors and governments: Investors have the further option of enforcing the agreement, e.g. seeking a declaration or award of compensation, in the domestic court of the government they claim is in breach. This raises a difficult constitutional question, as treaties are only binding in New Zealand courts if they have been formally incorporated into domestic law. That suggests the need for some separate move to do so before the courts could directly enforce the agreement. Alternatively, an investor could use the MAI to support their preferred interpretation of a New Zealand law.

Governments, or people who are adversely affected by investors/ments, have no rights under the agreement to take action against them, unless they are in breach of a domestic law. Enforcing local laws against large and complex transnational enterprises is notoriously difficult.

The MAI has grave ramifications for rights of tangata whenua and Crown obligations under the Treaty of Waitangi. The following concerns have been expressed:

The government continues to disregard the right of its Treaty partner to full and equal participation in the international arena, including the negotiation of international treaties.

While the MAI provides limited exceptions for protection of human and animal life, and the environment, there's no recognition of the intrinsic rights of tangata whenua nor of any prior obligations on governments to honor treaties or agreements with them.

Depending on how national treatment is interpreted, a foreign investors/ments could object to Maori receiving preference, even if other local investors/ments were also discriminated against. This could prohibit all claims by Maori for priority rights over taonga, knowledge, inshore and offshore fisheries, control over mining, pollution and environment, forestry, and even land.

Any new regulations to protect Maori interests or give Maori preference, for example in response to a Waitangi Tribunal report, could lead to claims for compensation or restitution if foreign investors believe it has caused them actual or potential loss. For example, the MAI applies to intellectual property, including cultural property. That could pre-empt new, more restrictive, regimes emerging from the current consultations on intellectual and cultural property laws.

Special rights attached to privatizations may also be at risk if rights to give special treatment to local communities are prohibited.

These rights can be protected in the government's reservations. According to the Deputy Prime Minister there is provision for measures giving 'special treatment' to the Treaty Partner. However,

The exact nature of these reservations is not known.

Interpretation of Treaty rights is heavily contested, and the current government's view (so far as it is known) is very conservative.

The National government's reservations in the GATT services agreement (GATS) merely retained the ability of government to give preference to individual and groups of Maori (there was no reference to the Treaty, nor to Iwi/Hapu). It gave Maori no rights; it just authorized the government to act if it so wished.

Whatever reservations this government has proposed will continue to apply for the next 20 years, despite changes in constitutional arrangements or in interpretations of the Treaty, Waitangi Tribunal reports or government policy.

These reservations will also be subject to standstill and rollback; i.e. future governments will be expected to reduce them over time.

The MAI confers extensive rights and benefits on foreign investors and investments, especially transnational enterprises, but imposes no responsibilities on them. Governments claim they cannot impose any obligations on MNEs because they are not a party to the agreement; this is only an agreement between states. So they can confer benefits, but not impose responsibilities!

There is nothing to stop governments from committing themselves to passing domestic legislation to control MNEs, if they want to; there is simply not the political will.

In 1976 the OECD agreed to a set of voluntary Guidelines for Multinational Enterprises to accompany a Declaration on International Investment and Multinational Enterprises. This recognized the downsides to MNE activities. There is no reference to these in the agreement. Some governments are prepared to see the guidelines referred to in the preamble and annexed to the agreement, which would have no legal effect. New Zealand does not support even that.

Nor does it support moves to include protections for workers or the environment. According to the Cabinet paper: 'There have been concerted efforts to work labor and environmental references into the Agreement. This is contrary to New Zealand policy on what is appropriate to address in an economic agreement of this type and we have stood out against these moves.'

Currently, the only reference to environment relates to measures necessary to protect human, animal or plant life or health, or conserve living or non-living exhaustible natural resources. Such measures must not be arbitrary, must be justifiable and must not act as disguised restrictions on international trade and investment. US pressure for a stronger environmental clause is a major issue in the negotiations.

Environmental groups are concerned that governments will be restrained in their ability to pass stricter environmental laws and that the MAI will conflict with, and potentially override, multilateral environmental agreements. The World Wildlife Fund has called for a comprehensive assessment of the environmental implications before negotiations proceed. Lockwood Smith considers that unnecessary.

Similar concerns arise in the area of labor laws and instruments of the ILO.

Any references to the MNE guidelines, or labor or environment provisions, which are included in the agreement are likely to be marginal and ineffectual, probably based on the labor and environment side-agreements in NAFTA.

In response to parliamentary questions from Jim Anderton, and in media interviews, the Deputy Prime Minister Winston Peters has conceded that the process for signing international agreements is constitutionally untenable. However, he is not prepared to take steps to ensure that this agreement is opened to parliamentary and public scrutiny. That reticence undermines confidence in the government's assurances that the agreement and its reservations are benign. It also presumes that the country should be locked into current government policies for the next 20 years, irrespective of what might change.

Mr Peters claims there are too many international agreements to debate and ratify each one. On 22 July Mike Moore suggested that Parliament should set aside one morning a year to debate such treaties, which Mr Peters considered eminently reasonable.

That tokenist position is unsustainable in the face of growing calls for open and effective debate on these agreements. The undemocratic process for treaty negotiations has been criticized in recent years by the President of the Law Commission, now Court of Appeal Judge, Sir Kenneth Keith; the Clerk of the House, David McGee; and the Justice Department in its 1996 post-election briefing papers. The same process in Australia has drawn criticism from the Senate there.

A number of moves are currently before the house:

A recommendation from the Clerk of the House for parliamentary debate of international treaties is before the Standing Orders Committee.

Private member's bills from the Alliance and from ACT are in the ballot.

The issue is on the Foreign Affairs, Defense and Trade Select Committee agenda for consideration.

In a memorandum to MPs Mike Moore has suggested Select Committee consideration of treaties entered into by the government of the day, with report back to Parliament for two half days of debate each year where MPs would 'debate and ratify or reject the select committee report, treaties and agreements'.

This is an issue which calls for a cross-party response.

While New Zealand First's leader has vehemently defended the current situation, some of his colleagues-especially Maori-must feel deeply compromised.

The Alliance has strongly criticized both the process and the substance of the agreement, and has so far been alone in seeking to force a public debate.

ACT supports the goals of the MAI, but has strong concerns about the process for negotiating international treaties; however, it has so far been silent in relation to the MAI.

While Mike Moore appeared in Parliament to support the Peters position, the views of others in Labor remain unknown. There appear to be clear conflicts with Labor's commitments in the 1996 election manifesto, and the constitutional issues must cause some MPs concern.

Parliaments and peoples in a number of OECD and non-OECD countries have condemned the secrecy surrounding the MAI. For example, on 14 April 1997 an MP in the British Columbia Parliament moved:

That this Assembly request the Government of Canada to immediately withdraw from any further negotiations on the proposed Multilateral Agreement on Investment until the Government of Canada has (a) convened a public meeting of first ministers to discuss any such agreement and (b) has completed a process of public consultation with industry, labor, small business and any other Canadians who are concerned about the impact of such an agreement on the future of the country.

Irrespective of views about foreign investment, the Multilateral Agreement on Investment has such far-reaching implications that it must be subjected to full, open and democratic debate within Parliament, with the Crown's Treaty partner and among the general public. The delay in finalizing the agreement-possibly until May 1998-allows time for this to occur. If the government is confident in the assurances it has given, it has nothing to lose by doing so, and the constitutional process has everything to gain.

Jane Kelsey has discovered a pending agreement and it's effect on New Zealand. She has given her permission to post this information for worldwide distribution, and I thank her for this permission. The important fact is that this agreement will effect EVERY nation in the world once it is passed. This is just one more step in the Elite's efforts to completely destroy national sovereignty in favor of their borderless Global Union. I suggest that you inform your network of Internet friends as to the location of this information, so that they can understand what is taking place and the effect that it will have on them personally. Jane Kelsey deserves our gratitude for finding and analyzing this far-reaching agreement, and is the sole source of this analysis.

The above legislation was not enacted because so many patriots gave it sunshine. However, it will reappear one of these days in a slightly different format, and under different conditions. The Elite will eventually get this passed into law, one way, or the other.