Eleven | 31 May 2013
Experts warn Myanmar about risks with investment treaties
International experts have warned that the use of investment treaty ‘Investor-State Dispute Settlement (ISDS)’ for attracting foreign investments into Myanmar is risky as it grants the investors the right to initiate dispute settlement proceedings against the government under international laws.
They advised Myanmar government not to rush with such treaties but it needs to practice transparency and obtain public support before signing agreements as breaching the contracts may cost millions of dollars in compensation to investors.
“ISDSs are usually used to attract foreign investments. But they are dangerous. For example, if the government passes a new policy and it goes against with the treaty, then the investor can sue the government. The government may lose millions of dollars, and that money is the public money. They can use other options than such agreements for investment,” Tom Kramer from Transnational Institute (TNI) said.
He said, “If the issues like Letpadaungtaung case (public protest against Chinese-backed copper mine in central Myanmar) arise, the government needs to review the contract. And if the agreement is a ISDS, then the company may file a lawsuit against the government. Therefore, we suggest the government should not hasten to sign such treaties.”
Great care should be taken with the ISDS as court costs for such cases are generally very expensive and fees for specialized lawyers can be up to millions of dollars, he added.
Pietie Vervest, an expert on International and EU Trade and Investment, said “The weakness of ISDS is the government unable to sue the investor, even if they break human rights or cause environmental damages. This is very dangerous especially for countries like Myanmar. If the government has to pay compensation, they will use the public money.”
The expert gave the example of Indonesian government which signed the treaty with UK-based mining company Charchill, and was sued to claim compensation of US$2 billion for future losses on the company side after the government passed laws restricting mineral exports.
Myanmar has recently opened up, and placed itself on the track towards democracy in recent years. Its political and economic reforms enabled it to re-engage with the global community after decades of isolation. President Thein Sein’s foreign trips have involved signing bilateral trade and investment treaties. Myanmar has also signed investment treaties with China and India. The treaties are usually long term agreements for more than 10 year projects, observers said.