Moving together toward a balanced investment policy

European member states transferred powers pertaining to foreign investments to the European Union when the Treaty of Lisbon came into effect. This development creates opportunities to adjust existing practices where investors possess far-reaching rights but lack obligations. In the event of conflicts about social or environmental regulations in developing countries, for instance, bilateral investment treaties (BITs) protect foreign companies and grant them the right to lodge a complaint against the countries. SOMO researcher Roos van Os tells us why a new European investment policy must be drafted in a different way.

’SOMO research into foreign investments always has focused on the consequences for sustainable development and human rights in southern countries,’ Roos van Os(opens in new window) explains. ‘The investment treaties of most EU member states pay little or no attention to these areas. Even though the Netherlands makes much of the role of Dutch companies as international pioneers in corporate social responsibility, its prime interest is to remain attractive to foreign investors as a country where they can establish themselves.’

Sidestepping

BITs between countries give companies the right to lodge complaints against governments’ social, economic and environmental rules if these could damage their expectations of profit on investments. Companies thus can sidestep the national judicial process and submit their complaint against guest countries directly to international arbitration tribunals. (1)

Van Os: ‘EU member states have concluded approximately 1200 BITs in recent decades. European investment treaties go much further than those of the United States and Canada, which have experienced complaints by foreign investors. This has curtailed some rights of investors. We must get rid of the outdated European models that still proceed from a post-war world order.’

Seattle to Brussels Network

SOMO and the Dutch NGOs Both Ends and TNI are part of the European Seattle to Brussels Network (S2B). Van Os: ‘Together with other S2B members, we have been lobbying since 2009 for a more balanced European investment policy. In the Netherlands, within the Dutch Coalitie voor Eerlijke Handel, SOMO provides Dutch politicians and policymakers with relevant information about necessary changes in investment policy.’

The members of S2B intend to organise a meeting in November at which organisations from all continents have the opportunity to reflect on alternatives to and resistance to the present investment regime. ‘Governments of southern countries will have to challenge or terminate investment treaties as Bolivia did back then with the Netherlands. SOMO itself works with southern organisations in the investments area, for example, by organising training sessions with partners in Indonesia (Institute for Global Justice) and western Africa (GRAPAD).”

Contrast

’If you talk about corporate social responsibility,’ Van Os continues, ‘small, but positive steps were made in the form of revised OECD guidelines for multinationals and the so-called Ruggie principles, which address issues of companies and human rights and which were accepted by the United Nations. However, there is still a marked contrast between the vague principles and guidelines for companies, with their lack of any real commitment, and the well formulated rights international investment treaties stipulate!’

According to Van Os it is hopeful that the European Parliament (EP) is attempting to create a better balance by means of a resolution referring to the OCDE guidelines and important labour rights. Additionally, the EP wants the Commission to research the so-called ‘broad definitions’ of the investor in the BITs of member states. Van Os says: ‘We’ve already gone ahead and done this for the Netherlands.’

The publication about Dutch investment treaties will appear in Oktober.

(1) Based on the investment treaty between Bolivia and the Netherlands, the company Bechtel Corp tried to enforce a compensation when enormous popular protests resulted in the reversal of the privatisation of water. Ultimately, after years of protests against it, Bechtel withdrew its demand for damages amounting to 25 million dollars in 2006.

Links:

• Seattle to Brussels Network(opens in new window)
• Time for a fair investment policy(opens in new window)