opinion

If we sign the TPPA, will we give up our sovereignty?

Rama Ramanathan

In this, my third article about the Trans-Pacific Partnership Agreement (TPPA), I'll summarise what I've learned about the answer to the question: "will we give up our sovereignty if we sign the TPPA?"
If the answer is "yes", then every country which negotiated the TPPA – the USA, Japan, Mexico, Canada, Australia, New Zealand, Singapore, Brunei, Peru, Malaysia and Vietnam – will also surrender its sovereignty.

Claims of loss of sovereignty are rooted in ISDS, the Investor-State Dispute Settlement procedure contained in Chapter 28.

ISDS gives foreign investors the right to seek damages from our government. An investor can seek damages if our government takes actions which the investor believes will reduce the expected benefits from the investment.

Opponents of TPPA often refer to three companies, Occidental, Vattenfall and Philip Morris, which have made claims under ISDS provisions in other trade agreements.

This is what the UK paper, The Guardian, says of the Occidental case: "In 2006, Ecuador cancelled an oil-exploration contract with Houston-based Occidental Petroleum; in 2012, after Occidental filed a suit before an international investment tribunal, Ecuador was ordered to pay a record US$1.8 billion." (Ecuador has since lodged a request for the decision to be annulled.)

A United Nations website says the first Vattenfall case arose "out of the conduct of the Hamburg government authorities relating to the...  issuing of permits for a new power plant being constructed by Vattenfall Generation ...." Vattenfall received compensation of US$1.4 billion.

The Economist says of the second Vattenfall case: "Following the Fukushima disaster in Japan in 2011,... the German government decided to shut down its nuclear power industry. Soon after, Vattenfall, a Swedish utility that operates two nuclear plants in Germany, demanded compensation of €3.7 billion (US$4.7 billion), under the ISDS clause of a treaty on energy investments."

The Sydney Morning Herald says Philip Morris (PMA) "argued that Australia's tobacco plain packaging measure... was in breach of its commitment... to accord fair and equitable treatment to PMA's investments... (and) constituted an unreasonable and discriminatory measure." PMA lost the arbitration; it cannot appeal the decision.

Were those decisions wrong?

Let's say China awarded to Tenaga Nasional (TNB) the contract to build, own and operate a coal-fired power station in Beijing. Let's say China then committed, under the Kyoto protocol, to amend some environmental laws. Let's say the impact of the amendments is reduced profits for TNB. Should TNB be given compensation by China?

If you care about TNB and justice, you will agree that China should pay TNB. What then is the problem with ISDS?

Opponents of TPPA say the problem is that ISDS bypasses the established legal system and national laws, since ISDS requires disputes to be settled by arbitration according to international protocols.

It is common for business agreements in Malaysia to require disputes to be resolved by arbitration. The cited cases show that arbitration is common even in agreements between nations. Also, who would want to invest in Brunei, China, or Vietnam if the only legal recourse was their courts?

I'll move on.

Malaysian activists imply that ISDS is a novel provision in the TPPA. So, I was surprised to hear opposition MPs in New Zealand say that there are over 3,000 Bilateral Investment Treaties and Free Trade Agreements globally, and that many of them contain ISDS provisions.

I also learned that till December 2014, only 608 ISDS claims have been lodged worldwide, and of 356 claims which have been concluded, only 25% resulted in compensation; and, investors received only three cents for every dollar they claimed.

The TPPA include nations which have gained experience of ISDS. This probably explains several noteworthy differences between the TPPA-ISDS and prior ISDS. I'll mention just four.

I'll quote directly from the TPPA documents:

Right to regulate.
New TPP language underscores that countries retain the right to regulate in the public interest, including on health, safety, the financial sector, and the environment.

Burden of proof.
TPP explicitly clarifies that an investor bears the burden to prove all elements of its claims, including claims on the minimum standard of treatment (MST).

Transparency.
TPP requires ISDS panels to "conduct hearings open to the public" and to make public all notices of arbitration, pleadings, submissions, and awards.

Public participation.
Members of the public and public interest groups – for example, labour unions, environmental groups, or public health advocates – can make amicus curiae submissions to ISDS panels "regarding a matter of fact or law within the scope of the dispute."

Will we give up our sovereignty if we sign the TPPA? The answer may be "less than previously".

A bipartisan parliamentary select committee should be telling you this, not me. Without a select committee, a parliamentary vote is just another rubber stamp of another decision by an arrogant Cabinet which won't curb cronyism and corruption. – January 18, 2016.

* This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insider.