Blog / 20 November 2013

“Zombie Treaties” cripple international trade

“Zombie Treaties” cripple international trade

This silence is indicative of how the Dutch often operate in the area of international trade relations – shrouded in darkness. This darkness is disturbing. The Netherlands currently has 98 active BITs and has yet to open any of these up to discussion. This is strange, indeed, because we now know that these treaties can have consequences for our own freedoms to implement policy. So, it has now become conceivable that the BIT with Canada will make it impossible for the Netherlands to prohibit the drilling for shale gas.


In fact, the main aim of BITs is to attract foreign investors by ensuring them of their profitability. Under the terms of a BIT, it becomes increasingly difficult for a government to pass environmental and social policies because any change may increase company expenditures. Nonetheless, if a government does decide to introduce new legislation, the involved company can actually sue the government if it sees fit. In recent years, companies have filed some 500 lawsuits, mostly against the governments of developing countries.


There are all sorts of snags attached to these BITs: for instance, they limit the scope or ability of governments to protect the environment and society; the costs of lawsuits and related fines are outrageously high; the law in this area remains very unclear; and, as icing on the cake, they are almost impossible to terminate. And, if a country does decide to terminate a BIT, the existing investments remain protected for years to come, thanks to the so-called “zombie clause”. This provision ensures that a treaty will continue to protect future investments for sometimes decades after a BIT has been terminated.


We should thus be thankful to South Africa for having the courage to engage in a public debate about the effectiveness of their trade policies with all of the consequences attached to them. This could ultimately save us a lot of trouble, especially since many of the involved countries where we used to invest in the past, are increasingly handling their own international affairs and thus increasing the likelihood that the Netherlands will eventually incur some significant lawsuits. And now that trade has emerged as a subject in this nation’s policy coherence discussions, it is high time that we open up these zombie-like treaties to public debate.

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