The Regional Comprehensive Economic Partnership (RCEP) is being negotiated in secret by 16 countries and a leaked copy of its investment chapter includes proposals to allow foreign investors to sue governments at an international tribunal.
These investor suits can be for unlimited cash damages and compound interest. If the proposals are accepted, this investor-to-state dispute settlement (ISDS) would allow foreign investors to sue RCEP governments if they regulate in ways that disadvantages the foreign investor, eg by reducing its profits, including by introducing new laws/policies or changing their laws/policies, even if it is for public interest reasons.
Past ISDS cases have successfully challenged health, environmental, tax, financial regulation and many other laws and a losing government in one case had to pay an investor as much as US$40billion. This is difficult enough for any government to afford, but RCEP includes three least developed countries: Cambodia, Laos and Myanmar who would find it particularly burdensome to pay foreign investors this much.
There are 696 known ISDS cases against 107 countries and the number filed each year has been rapidly increasing (the most ever were filed in 2015). These cases which broadly interpret investors’ rights and restrict governments’ ability to regulate have caused many developed and developing country governments to rethink their support for these investment protection provisions (including ISDS) in bilateral investment treaties (BITs) and free trade agreement (FTA) investment chapters. For example in RCEP countries alone:
- India and Indonesia are withdrawing from their BITs,
- Singapore’s Attorney General and the Chief Justice of Australia’s highest court have expressed concerns about ISDS and
- The New Zealand Chief Justice noted that human rights based determinations of domestic courts may give rise to ISDS claims.
In countries outside RCEP there is also opposition to ISDS including:
- Other countries such as South Africa and Ecuador are withdrawing from their BITs,
- Germany’s Economic Minister opposes ISDS in Europe’s FTA negotiations with the USA,
- the Dutch, French and Austrian Parliaments oppose ISDS in their FTA negotiations with Canada and the USA and
- All US state-level parliaments oppose ISDS in any treaty.
Various United Nations (UN) human rights bodies have also stated their serious concerns about ISDS including 10 UN Special Rapporteurs/Independent Experts on human rights who said that the ISDS cases demonstrate ‘that the regulatory function of many States and their ability to legislate in the public interest have been put at risk’ and governments have been chilled from regulating. They recommended that in negotiations of FTAs like RCEP, the negotiating texts are published and the negotiations are conducted transparently with the participation of stakeholders including civil society.
RCEP Trade Ministers will meet in Laos on 5 August 2016 to try and resolve some of the issues that are stuck in the negotiations. Given this, the xxx RCEP civil society organisations listed below strongly urge RCEP countries to reject ISDS in the agreement.
Note: The RCEP countries are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Viet Nam, Australia, China, India, Japan, Korea and New Zealand