Info Service on WTO and Trade Issues (Sept13/07)
Investment: Civil society coalition demands moratorium on US–India treaty
New Delhi, 30 Sep (K M Gopakumar) – Public opposition to the US-India bilateral investment treaty (BIT) negotiation has mounted with a moratorium demand by the Forum Against Free Trade Agreement.
The coalition of over 75 organizations, farmers groups, trade unions and development activists, has written to the Prime Minister Dr. Manmohan Singh to review and rescind its decision to negotiate a BIT with the US. This was on the occasion of Dr. Singh’s meeting with US President Barack Obama on 27 September in Washington DC.
The letter dated 26 September makes the following four demands with regard to BITs in general and the US-India BIT in particular:
The Forum questioned the rationale of BIT negotiations with the US at this stage. A prominent activist of the Forum, Dr. Kavljit Singh, Director of Madyam said, "At a time when India is officially reviewing its existing bilateral investment treaties, it would be premature on the part of New Delhi to advance the negotiations with the US on the India-US BIT. What if the internal review concludes that India should not include investor-to-state dispute settlement mechanism or include a restricted most favored nation clause? Both the trading partners should not prejudge the outcome of the ongoing review".
[According to India’s Finance Ministry website as of July 2012, India “signed BIPAs with 82 countries out of which 72 BIT have already come into force and the remaining agreements are in the process of being enforced”. A series of investor-state disputes forced the Government of India to review its approach to BIT. The Minister of State, Ministry of Finance confirmed this through a statement in the Parliament that India has initiated a review of its bilateral investment agreements and also declared a moratorium on new negotiations of BIT. The Government’s approach to finance the huge current account deficit through attracting more foreign direct investment (FDI) led to speculation regarding the Government’s position on BIT. According to news reports United Arab Emirates (UAE) and US corporate lobbies are demanding a conclusion of the BIT to increase the flow of FDI. The US-India Business Council (USIBC) is the main group lobbying for the US-India BIT. The newspaper reports increased the speculation on India’s position regarding BITs. News reports quoted India’s Commerce Minister that India has agreed to negotiate a BIT with the US during his visit to the US in July 2013.]
According to the Forum’s letter, the US-India BIT contains provisions on most favored nation (MFN) treatment; fair and equitable treatment, not under Indian laws but under ‘international law standards’; no expropriation without due process and full compensation; prohibition on performance requirements such as domestic content requirement, export performance. The right to financial transfers is expected from India in order to provide a ‘stable’ environment for US investors in India. Further the letter states, “Sources also suggest that the US government would expect pre-investment protection i.e. providing market access even before the actual investment.”
The letter requests the Prime Minister of India to take a position against the US-India BIT based on the following facts.
First, the letter cites the investor state dispute provisions in the BIT as a major reason against the proposed treaty. It stresses that India’s BITs so far have “seriously undermined the government’s ability to tailor foreign investments according to India’s development needs and pose serious threats to the authority of the Indian Parliament and Judiciary”.
Further, the letter lists the following companies that so far have launched or threatened to launch international arbitration processes against the Government of India. These companies are:
Secondly, the letter cites India’s past experiences with US investors who used investor-state dispute provisions with third countries to extract compensation from the Government of India. According to the letter, “the whole episode of Enron (Corporation) which occurred in Dabhol Power Corporation, already establishes a concrete case against investor protection. Both Bechtel and GE (General Electric) used investor state arbitration processes to pressurize the Government of India.”
Thirdly, the letter emphasizes that, “the present critical economic scenario of increasing trade deficit and current account deficit also provides unique opportunity to revisit some of the major policy stances and to change course”. The letter also states that, “The government’s approach to attract FDI should not prevent it from assessing the consequences of its obligations under various international investment protection agreements.”
Fourthly, many other provisions in the BIT would further “curtail the policy space of the Indian government and tie its hands to pursue a socio economic development policy. Regulation-free ‘transfer of returns’ from investments would increase India’s vulnerability to finance capital. This would also restrict India’s ability to use policy tools like ‘capital control’ to arrest flight of capital at the time of economic crisis. The broad definition of investment can even prevent issuance of compulsory license and thus compromise access to affordable life saving medicines.” Further, the letter also states that the main beneficiaries of India’s BIT are corporations from developed countries at the cost of India’s economic sovereignty.
Echoing the same concerns on 24 September 2013, the international medical humanitarian organization Doctors Without Borders/Médecins Sans Frontières (MSF) warned that “India is facing an onslaught of political pressure from the US government and pharmaceutical industry in retaliation for the country’s entirely legal actions to limit abusive patenting practices and increase access to affordable generic medicines”. According to MSF the “pressure is likely to increase through negotiations of a potential bilateral investment treaty between the U.S. and India, which is on the agenda for the meeting”.
The Forum’s letter of 26 September pointed out that, “US pharmaceutical company Eli Lilly used the very same tactics to start proceedings against Canada in a foreign tribunal, claiming $500 million as compensation on the grounds that a Canadian court’s decisions to invalidate patents on some of the company’s best-selling medicines deprived it of future profits and interfere with the enjoyment of its investments”.
In addition, Leena Menghaney, Manager of MSF’s Access Campaign in India, said, “Even though India is acting completely within its rights, the country must now deal with unrelenting, unwarranted and purposely misleading attacks from the multinational pharmaceutical industry and U.S. government officials.”