TPPA and investor-state disputes, learn from Libyan ‘shocker’

After saying "yes" to the Trans-Pacific Partnership Agreement (TPPA), the Malaysian government agrees that the Federal Constitution is second class to the TPPA.

Some may agree that the Constitution has been binned repeatedly, especially in recent times, but after Parliament zapped through the TPPA, it is now official.

Malaysia's Federal Constitution is useless.

Now, we have to roll-out the red carpet for the TPPA.

And one of the most nightmarish parts of this mammoth deal has been the often-debated tool which can be used by foreign investors to sue Malaysia and other countries in the TPPA.

The Investor-State Dispute Settlement (ISDS), an arena where governments - Parliament, Executive and Judicial arms – can be unsettled for making decisions we empower them to do.

Australia's experience with tobacco giant Philip Morris has been talked about at length, after their government was hauled up upon making it law that all cigarette boxes must contain warnings on the health impact of smoking.

First, the country's health ministry invited health groups, studied the proposal and drew up a law they called the Tobacco Plain Packaging Bill 2011.

Then, this bill was put through the Australian parliament, debated and made into law, and went on to become the Tobacco Plain Packaging Act 2011.

Philip Morris challenged this in Australia's courts claiming unfair practice which dented its profits but lost in 2012, after the Supreme Court of Australia said 'plain packaging is a health policy which should be decided by government and parliament."

What did Philip Morris do? They dragged Australia to this ISDS system in Washington D.C, after the Supreme Court decision.

In short, a law proposed by the executive branch, made into law by parliament, then ruled upon by Australia's highest courts, was challenged in a private arbitration centre by this tobacco company.

After this suit, at least 13 other countries (see graphic below) have faced similar suits by tobacco companies for implementing this health measure, while three others, including Malaysia, have opted to wait for the ISDS case before deciding on plain packaging.

Another case which has gone under the radar but should serve as a major warning involves the shocking experience of Libya's government.

Libya signed a deal to allow a Kuwaiti company – Al-Kharafi & Sons Co – to construct a beachfront tourism project on Libya's coast in 2006.

However, villagers who were living on that coast petitioned the government against this move as their livelihoods would be affected as they would be displaced.

Further, studies pointed that there would be severe impact on Libya's environment if that project was "green-lighted".

Libya's Tourism Authority decided in favour of its people and was sued through the ISDS system after the Kuwaiti conglomerate yelled "injustice" and claimed for future lost profits.

On July 31, 2013, an arbitration panel based in Cairo delivered a stunning 392-page verdict which should have sent shockwaves to all governments… US$ 935 million was awarded to the Kuwaiti company for 83 years of future lost profits.

And this, when not even a single brick was laid on Libya's coast.

To make matters worse, the tribunal placed a 4% interest rate on the amount for compensation, and the final award now stands at beyond US$1.05 billion.

Any right thinking government should have looked at experiences of other nation states and decided against such a system which is a "democracy-free" zone.

We do not have access to the ISDS system and are not able to apply public pressure to ensure that this system is accountable.

Now, the government will be thinking, "Will we be sued if this law is implemented?", instead of deciding on a particular law in public interest.

Some may think, "It is good that my government is sued because these bunch need to be taught a lesson."

But, it is our money, public funds, which will be used to pay for these "punishments".

To correct a flawed system, we have to do it internally. Let us not make a mistake by privatising democracy.

Australians and Libyans have experienced shockers. We should not be going through the same nightmare. – February 3, 2016.

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