TPPA veiled behind lies by MITI’

PETALING JAYA: International experts have quashed the International Trade and Industry Ministry’s (MITI) argument that the Investor-State Dispute Settlements (ISDS) in the Trans-Pacific Partnership Agreement (TPPA) is harmless.

In defending the ISDS, Miti had said the provision, which allows foreign investors to take up cases against governments while bypassing court decisions, had already existed in Malaysia’s past treaties and was of little use.

But trade and international law experts told FMT in an exclusive interview that the rising awareness of the ISDS among foreign investors and law firms looking to make a hefty profit made the argument a ‘false reassurance.’

“No one was really aware, no one was really using these mechanisms until about 15 years ago…since then it has grown from a little fledgling tree into a gigantic plant that’s expanding everywhere,” said international investment law expert Dr Gus Van Harten.

“Companies are much more willing to use those mechanisms; they continue to be even more and more popular.”

The ISDS provision enables three arbitrators — one appointed by the state, the other by the foreign investors, and the third, if not agreed upon by both sides, is appointed by the World Bank – to overrule court decisions in cases brought up to them.

If the foreign investors win, the government will have to pay millions in compensation and loss of future profits. On the other hand, if the government wins, it gains nothing but must still foot the legal fees, which could cost around USD8 million or RM25.5 million.

One prominent case is that of tobacco company Philip Morris, which brought a claim against the Uruguayan and Australian governments for requiring the company to display graphic health warnings on its cigarette packs. The firm claimed that such warnings would affect its profits in the two countries.

Miti had previously said Malaysia has already signed 74 Investment Guarantee Agreements (IGA) since 1963, all of which contain a provision on ISDS.

“To date, only two cases have been brought against Malaysia under ISDS. One was decided in favour of the government while the other was annulled,” it said.

But Van Harten pointed out that none were bilateral treaties with the United States, and all were with countries whose investors were unlikely to sue Malaysia.

TPPA may open floodgates to claims

“The TPPA by far and away is the most likely to lead to claims, more likely than all of Malaysia’s other bilateral investments treated combined,” he said, adding that this was due to the key players involved in the trade pact.

The TPPA is a multi-lateral trade agreement that the United States – the leading negotiator in the talks – hopes will serve its role in developing a broader platform for trade liberalisation particularly throughout the Asia-Pacific region.

Malaysia is currently negotiating with 11 other countries comprising Australia, Brunei, Canada, Chile, Mexico, New Zealand, Peru, Singapore, the US, Vietnam and Japan to conclude the TPPA.

Van Harten also cast doubts on Malaysia’s track record of claims, pointing out that there was a possibility the government had settled disputes behind the scenes.

“One of the challenges we researchers find is how often the government backs down behind the scenes because of the threat of a claim or worry over a claim.

“That could be the explanation for Malaysia – the government has a different approach for handling these disputes, and, faced by a dispute or threatening claim, prefer to deal with that outside the public eye,” he said.