It is now just over a month since Malaysia ratified the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
The agreement came into force on 29 November, after then international trade and industry minister Azmin Ali submitted the ratification documents in September.
Despite many memorandums and appeals, the new multi-coalition government has not hit the ‘pause button’ for the CPTPP, and several civil society groups are getting increasingly worried.
The Socialist Party of Malaysia (PSM) was against the bilateral free trade agreement with the US, the Trans-Pacific Partnership Agreement and now the CPTPP.
All these economic agreements worsen the current imbalance in society by further enhancing the position of big foreign businesses at the expense of the people’s welfare and the environment.
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The investor-state dispute settlement (ISDS) mechanism that is stipulated in the CPTPP is just one example of the excessive bias in favour of foreign investors. ISDS provisions grant foreign investors the option of bypassing Malaysian courts to sue our government in one of several international tribunals, if any action or policy of the government affects the profits of the foreign investor.
The ISDS provision in a bilateral investment treaty between France and Egypt was used by Veolia, a French company that won a waste management contract in Alexandria, to sue the Egyptian government for raising the minimum wage.
Veolia’s gripe was that the increase in minimum wage reduced its profits and thus “expropriated” the company. They requested payment of €175m as compensation. The case went on for six years before the tribunal ruled in favour of Egypt. (Yes, it is good that Egypt won, but the fact that the case went on for six years says a lot.)
In a similar vein, Chevron used ISDS provisions in the US-Ecuador bilateral investment treaty to sue the Ecuadorian government after the country’s Supreme Court ordered Chevron to pay a hefty compensation to indigenous communities who alleged that the company’s mining activities had polluted the river system that they depended on for water and food.
Chevron argued that the free trade agreement in place obliged the Ecuadorian government to ensure that this sort of suit could not be filed against the company. Chevron demanded that the compensation ordered by the Supreme Court be borne by the Ecuadorian government. Chevron won – and was awarded costs!
Nearer home, in 2011 Philip Morris, a cigarette company sued the Australian government using ISDS provisions in a bilateral investment treaty with Hong Kong.
Though a US-based company, Philip Morris used its Hong Kong subsidiary to demand multi-million compensation for its future loss of profits arising from the Australian government’s requirement that cigarette packets carry pictures of cancer lesions.
The pattern that emerges from the instances above reveals the value system underpinning economic agreements such as the CPTPP – that the profits of large investor companies should be at the apex of the system of rights, far above the welfare of ordinary workers (minimum wage in Egypt), the environment (Chevron’s case in Ecuador) and public health (cigarette packages). Surely this is not acceptable to all right-thinking citizens.
PSM agrees that foreign investors have rights too. It would be unfair to expropriate their investments, and they should have legal recourse if they feel they are being treated unfairly by the government or their local business partners.
But why allow them to bypass the courts in the host country and go directly to international tribunals, which are the province of some clever ‘vulture’ lawyers who specialise in suing governments for millions of US dollars? Surely a better system can be put in place.
PSM feels that the privileges granted to foreign investors in the CPTPP are excessive and detrimental to the wellbeing of the people of Malaysia. Thus, we join civil society organisations in asking that Malaysia withdraws from the CPTPP as soon as possible so that a proper in-depth and balanced assessment can be carried out about the risks and benefits of the CPTPP.
Article Four of the preamble to the CPTPP document allows any participating country to withdraw from the agreement by giving six months’ notice. Our new government can explain that having just taken over, they need some time to re-assess such an all-encompassing agreement – 30 chapters and multiple annexes spanning 2,000 pages.
It is crucially important that Malaysia indicates we intend to withdraw from the CPTPP while we conduct due diligence. The more days that elapse after the date of ratification, the higher the risk that one or more investors who come in after the date of ratification will sue us in an international tribunal. They could argue that they invested in Malaysia because of certain provisions in the CPTPP, which were then summarily withdrawn when Malaysia exited the agreement – ie they could allege they were ‘cheated’ by the Malaysian government. They could also argue that they have a right to use the ISDS provisions, as these provisions were in force when they made their investments.
PSM calls on the new multi-coalition government to listen to the voices of the people and take the CPTPP issue seriously. Withdraw immediately so that a proper cost-benefit analysis can be carried out.
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- Lawan rasuah dan kronisme
I fully support your goal of having Malaysia withdraw from the CPTPP. Not one of the participating governments has actually commissioned or published a proper cost/benefit study indicating long-term advantages to accrue to the country.
There are a few errors in the discussion of ISDS. Take Veolia, for example. It was the city of Alexandria that increased wages, not that of Egypt. Veolia took issue with this because it was written into their contract that certain expenses, including wages, would be reimbursed if they rose. Good grounds for arbitration.
Investors cannot bypass domestic courts, if they breach the country’s laws. Arbitration is for alleged breaches of the investment treaty.
(Out of space …)