Dawn of human rights in BWIs and WTO?

by Someshwar Singh

Geneva, Aug, 12 -- Multilateral institutions like the World Bank, IMF and WTO need to be continuously reminded to "respect, protect and fulfil" human rights obligations established by international law, says a report to the Human Rights Sub-Commission in session here.

The report makes clear that both categories of human rights are involved -- civil and political, and economic, cultural and social.

A working paper on "Human rights as the primary objective of international trade, investment and finance policy and practice," prepared by experts Mr. J. Oloko-Onyango (Uganda) and Ms. Deepika Udgama (Sri Lanka), contains a damning critique of the procedures and substantive dimensions of the failed negotiations (at the OECD) for a Multilateral Agreement on Investment.

The sub-commission which has been discussing the conceptual and empirical dimensions of the issues of international trade, investment and finance policy, and their implications for human rights, at its meeting last year had mandated the two experts to prepare the working paper, including in it an analysis of the MAI.

The two experts note that the already under discussion in the sub-commission also encompass both categories of human rights -- civil and political, and economic, cultural and social. Any future such negotiations must take place within a human rights framework, the experts say in their working paper.

"There is a real threat that the unmitigated promotion of increased international trade, investment and finance at the expense of the observance and protection of fundamental human rights and sustainable human development is adopted as a mantra guiding many governments and development economists as was amply demonstrated in the MAI process."

"The growing influence of global actors," the document adds, "like multilateral institutions (MLIs) and transnational corporations (TNCs) on the political economy of trade, investment and finance necessitates heightened scrutiny and oversight of the way in which they operate."

In the area of international finance and investment, the experts say that of main concern are the Bretton Woods organizations comprising the International Monetary Fund (IMF) and the World Bank.

"Although these institutions have come some way from outright rejection (characteristic of their position in the 1960s and 1970s) of the applicability of human rights standards to their operations, they still adopt a rather ambivalent approach to the notion of human rights... Thus, they selectively apply certain aspects and leave out others."

In a paper on democracy and development, the General Counsel of the World Bank, Ibrahim Shihata, presents the classic justification as to why the Bank should not be pushed too far in the concern for issues that may be considered outside its mandate, among which human rights are regularly included:

"There is the need to honour the charter of each organization and to respect the specialization of different international organizations as reflected in the statutory requirements of their respective charters. Such is the case, in particular, with the charters of specialized UN agencies, such as the World Bank, which delimit the mandate of each organization," the working paper quotes Shihata as arguing in an article in the International and Comparative Law Quarterly.

'Honouring the charter' of the World Bank, comment the experts in their paper, "is thus placed above any international obligations which the Bank may have by virtue of membership in the United Nations family. Such an approach could imply that any action permitted by the Bank's charter may appropriately be pursued regardless of the adverse human rights or other consequences that may result or the fact that it may offend the Charter of the United Nations or the Universal Declaration of Human Rights."

In 1998, the Bank published a report entitled, Development and Human Rights, in which for the first time it lays out the Bank's position on the kinds of human rights it is supposed to foster, the relationship between governance and development, equality and development and the protection of vulnerable groups.

This, says the experts' paper, is a welcome development and its translation into concrete action is awaited, particularly in the light of the operations of the IMF.

The role of the IMF has even more serious implications for the observance and protection of human rights in the area of international financial policy, especially since it has imposed provisions in its loan agreements ("conditionality") and bail-out packages that are very similar to those found in the MAI (Multilateral Agreement on Investment).

Ironically, the Articles of Association of the IMF do not have a bar similar to that invoked by the World Bank whenever the issue of human rights is pursued in a direction found uncomfortable.

"Paradoxically, the Fund is even more adamant that its operations have nothing to do with human rights, and its methods of work amply demonstrate this," the working paper notes.

Some observers have nevertheless pointed to a "changed stance" on the part of the IMF which, under pressure from organizations like UNICEF and some States, has begun to discuss the distributional aspects of its policies with a view to the protection of the well-being of vulnerable groups.

Nevertheless, even those who have observed such changes come to the conclusion that the "hard core" of IMF programmes has remained largely intact, with a "focus on measures that tighten domestic credit, enhance fiscal revenues, reduce government expenditures, and adjust the exchange rate."

"The principal problem with the 'honouring the Charter' or 'privileging the Articles' approach to the issue is that it subordinates the international human rights instruments to the charters of the agencies in question when, as a matter of law, the reverse should be the case."

Human rights obligations emanate from the Charter of the United Nations and the Universal Declaration, and have come to represent a standard that in over 50 years of existence signifies a holistic approach to the human condition.

[Within the WTO, the European Community has been campaigning to initiate far-reaching investment negotiations, a la the OECD MAI; but after the failure of the OECD talks, and the opposition of some key developing countries, the EC, with support from Japan and a few others has been trying to introduce the issue into the WTO, and trying to entice developing country support by calling initially for 'transparency', 'national treatment after investment' and recourse to the WTO's dispute settlement mechanism. The US has been ambivalent on including this issue in the next round -- seeking on the one hand same 'high standards' of rights for investors as in the MAI, but not wanting the next WTO round to be engulfed by it. There are some indications that the US Treasury is reviving the idea of using IMF and providing for capital convertibility to achieve same purpose.]

Many observers view WTO as the most logical area in which to conduct future debate on a multilateral investment arrangement, although a growing lobby against such a proposal is already coalescing, according to the working paper.

Responding to this challenge, the experts say, the WTO's Working Group on the Relationship between Trade and Investment recently produced an extensive report outlining the major issues of concern, and also touching on some of the controversies raised by the MAI.

The Working Group has determined that there is no right to invest under customary international law, and that investor's rights are essentially the result of international treaties. The Working Group has also addressed the standard of National Treatment.

Significant questions nevertheless remain as to the appropriateness of WTO as a negotiating forum on account of the inequality of bargaining strengths between members and the automatically binding character of all WTO treaties once ratified, accompanied by drastic measures imposed for non- compliance.

WTO also suffers from one of the major problems that afflicted the MAI process in the OECD - the absence of a framework for incorporating civil society and other third-party participation in its deliberations.

Finally, the paper adds, although the Working Group stipulated that any discussions on investment agreements in WTO should consider the "development impact", this by no means confirms that the perspective adopted will be human rights-sensitive one.

"It is instructive to note that the report makes no reference to the Declaration on the Right to Development, let alone to any other human rights instrument."

In its analysis of the MAI process, in which the OECD had excluded both developing countries and NGOs altogether, the paper says "it smacked very much of double standards: do as I say but not as I do."

"In other words, the concepts of inclusion, non-discrimination and equality that the OECD urges for others do not apply to the OECD itself. This has been a running critique of both multilateral institutions like the World Bank and the IMF, and of governments which espouse doctrines like free trade but enforce the dictum in only one direction."

Outlining some of the substantive issues, the paper notes that the MAI sought to boost significantly the rights of investors without introducing any countervailing obligations. In short, its vision conceptually privileged the "rights of investors" while negating investors' responsibilities to the individual or the State.

Secondly, the treaty proposed to place fairly extensive restrictions on domestic activity with regard to investment, which would amount to the imposition of serious limitations on the sovereign ability of States to respond to domestic concerns, including those in the areas of labour, the environment and human rights.

"In this way, States faced the danger of being transformed into the hand-maidens of investment as opposed to protectors of the people - their primary human rights obligations - and in the process forced to contravene or to relegate to a secondary position the obligations contained in a host of international human rights agreements."

Lastly, the dispute resolution and expropriation provisions respectively raised concerns about the lack of transparency and the imposition of unjustifiable restrictions on host countries' freedom of action in the interests of development.

The experts are of the view that "investment cannot be promoted at the expense of the healthy growth of the human being, or of sustainable human development."

"Economic growth and liberalization should not occur at the expense of governmental power to protect all persons within its territory. Human rights are often best guaranteed by strengthening governmental power to protect resources and the human rights of all persons resident within the territory of a State."

Also, say the experts, "it could be said to amount to a violation by the respective member states of the OECD of the obligation to respect, protect and fulfil international human rights standards," because "in form and in substance, the MAI represented the ultimate negation of all the basic principles of fundamental international human rights."

In their recommendations, the experts call for the establishment of mechanisms to carry out appropriate human rights impact assessments of the effects of the implementation of policy decisions made in multilateral and intergovernmental organizations.

Secondly, there is a need for the process by which policy on international trade, investment and finance is discussed and opened up, first and foremost, to all states that make up the family of nations; it must also be made fully accessible to non- state actors.

"MLIs and intergovernmental agencies, including the OECD, WTO, the IMF and the World Bank, need to more critically address the issue of the 'right to participation' in formulating policy. Indeed, the suggestion that such organizations need themselves to be guided by a code of conduct for their operations should be seriously considered."

According to the experts, the Sub-Commission should outline in greater detail the basic human rights principles on a which alternative multilateral regime governing international trade, investment and finance should operate. They also call for steps to advance the processes of improving and implementing the OECD guidelines on MNEs, and reviving and discussing the enforcement of the United Nations Code of Conduct for Transnational Corporations.

"Such measures must ensure that there is an appropriate balance between the objective of facilitating enhanced investment and establishing a solid human rights-based framework for the operation of TNCs."

According to the experts, all the treaty bodies and other institutions concerned with human rights must intensify their respective scrutiny of the processes taking place in the various multilateral institutions and the intergovernmental organizations that are involved in the matter.

The experts suggest that the Human Rights Sub-Commission take up all the above issues in greater detail in the forthcoming session in year 2000. issues in greater detail in the forthcoming session (SUNS4498)

The above article first appeared in the South-North Development Monitor (SUNS).

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