Business states its views on OECD investment agreement
Paris, 16 January 1998 - A delegation brought together by the Business and Industry Advisory Committee to the OECD (BIAC) presented business views to governments on the Multilateral Agreement on Investment (MAI), now in its final stages of negotiation.
The business case was submitted at a consultation on 15 January 1998 with government representatives taking part in the negotiations at the Organisation for Economic Cooperation and Development (OECD) in Paris.
In addition to BIAC, the 40-member delegation represented the following organizations: the International Chamber of Commerce, the European American Business Council, the Fdration Bancaire de l'Union Europenne, the International Organisation of Employers, the Union of Industrial and Employers' Confederation of Europe (UNICE), and the World Business Council for Sustainable Development.
Delegation Chairman Herman van Karnebeek, Deputy Chairman, Akzo Nobel NV (Netherlands) pointed out that companies represented around the table accounted for "billions of dollars of foreign direct investment around the world. We are thus all very interested in seeing this project succeed". The business representations were made as the negotiations entered their critical final phase to meet a deadline for conclusion at the OECD ministerial meeting on 27-28 April.
Opening the business presentations, Mr van Karnebeek, who is also Chairman, ICC Netherlands, said there were disturbing signs that many of the elements business hoped to see in the final agreement may not be possible. He asked: "What then, we are beginning to ask ourselves, is in the MAI for us?"
Business speakers expressed concern that as negotiations progressed, the agreement was being watered down. There was a danger that its effectiveness in increasing investor confidence would be greatly reduced. Business was looking for a more certain environment for foreign direct investment. Companies hoped for genuine "added-value" from the agreement that would raise standards of non-discrimination, protection, and dispute settlement from those currently provided by the existing network of hundreds of bilateral and regional investment treaties.
Several business speakers pointed out that the treaty would have to be passed by national legislatures, including the United States Congress, and that business support would be essential to win the necessary political backing to ensure its ratification.
Business support would depend on how effective the final package would be in meeting business requirements on non-discrimination, protection, and dispute resolution.
The business representatives made the following specific observations:
- Exceptions: these should be kept to a minimum, clearly listed, and subject to the disciplines of the MAI. Business warned against resorting to general "carve-outs" of entire sectors - e.g. cult
ural industries - as well as open-ended exceptions.
- Taxation: taxation should be included in the agreement in order to prevent governments from using tax measures to circumvent their MAI obligations. Without the inclusion of taxation, or at least an anti-abuse clause, the MAI would set a lower standard than that of many existing bilateral investment treaties.
- Environment: the MAI is not the right place in which to set specific levels of environmental protection. The agreement should not prevent signatories from adopting domestic measures they consider necessary to promote national environmental protection objectives. However, such measures must not discriminate against foreign investors.
- Labour: any attempt by OECD governments to use the MAI as a basis for defining and promulgating core labour standards would pre-empt ongoing discussion on these issues at the International Labour Organization. This would introduce considerable uncertainty by raising the spectre of disputes where signatories could use the new language as an excuse for administrative delays or outright discrimination against foreign investors.
- Expropriation: business maintains that a broad definition of expropriation is necessary to give international investors the greatest possible confidence that the resources they commit to a foreign investment will not be taken or rendered worthless as a result of discriminatory host government actions without due process of law and appropriate compensation.
- Dispute settlement: an effective mechanism for resolving disputes between investors and host governments is essential to give investors confidence that MAI signatories will comply with their treaty obligations. Any effort to remove or diminish the coverage of the investor-state dispute settlement mechanism would raise serious questions for business about the value of the MAI.
- Accession by non-OECD countries: most of the problems addressed under the agreement occur outside the OECD membership. It is thus crucial that as many non-OECD countries as possible accede to the agreement. There is a danger that intrusion by the MAI into environmental or labour standards could reduce prospects of MAI accession by these countries.
Business expressed concern that negotiators' attempts to respond to conflicting pressures by various interest groups would undermine prospects for a meaningful agreement. During the discussion, business representatives expressed the hope that many of these issues could still be resolved satisfactorily. A successful agreement would be of enormous benefit in increasing flows of foreign direct investment around the world by creating a secure and favourable investment climate.
ICC Commission on International Trade and Investment
Steven Bate, Executive Director,
BIAC,
Tel +33 1 42 30 09 60
Fax +33 1 42 88 78 38
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