Why Tanzania should send the Dutch government a letter in the next two days.
In 2001 Tanzania and the Netherlands signed a treaty only known to a few; a so-called Bilateral Investment Treaty aimed "to extend and intensify the economic relations between them and to stimulate the flow of capital and technology and the economic development of the Contracting Parties". But signing the treaty was in fact mainly a symbolic act which since then has had little if any effect in this respect. In fact, a report by the Netherlands Bureau for Economic Policy Analysis found that BITs have no positive effect on investment in low and lower middle income countries located in Latin America and Sub-Saharan Africa, including Tanzania.
Bilateral Investment Treaties (also known as BITs), and in particular the type of treaties the Dutch negotiated at that time, have now become highly controversial.
The key element of these BITs is that a foreign investor (a Tanzanian Investor in the Netherlands or a Dutch investor in Tanzania) is given additional rights concerning their investment, which are not available for national investors. If, for example, the Tanzanian government should "take any measures depriving, directly or indirectly, investors of their investments" Tanzanian investors would be obliged to get their rights under Tanzanian law in Tanzanian courts. However, under the Dutch- Tanzania BIT this does not apply for investors from the Netherlands investing in Tanzania. Under this BIT, the Dutch investors get a privileged position: they would not be obliged to seek their right under Tanzanian law, but would be allowed to use the Bilateral Investment Treaty and sue the Tanzanian government directly. For this, a somewhat questionable arbitration process called Investor to State Dispute Settlement -in brief ISDS- would be started under the rules of the International Centre for Settlement of Investment Disputes (ICSID).
The scope of the Dutch BIT with Tanzania is extensive and the meaning of "depriving investors of their investments" can be interpreted in many ways. In Article 1 of the treaty it is stated that the term investments "means every kind of asset" and this includes not only -as one would expect - "movable and immovable property" or "claims to money", but also "any performance having an economic value". This means that Dutch investors could even sue Tanzania if they can show that a measure taken by Tanzania has caused a loss of their brand value or any other "intangible assets".
Of course all which has been said here about the privileged rights of Dutch investors in the Netherlands also applies to Tanzanian investors doing business in the Netherlands. In fact any foreign company or investor can do so, as long as they have "a legal presence" in one of the two countries, from where they invest in the other. This also includes such artificial legal constructions like the so called "letter box offices" which are frequently used by foreign companies to avoid paying taxes in their home state.
Many bilateral investment treaties between other countries have followed the Dutch model and it therefore is not surprising that more and more countries are cancelling or revising them.
This treaty between the Netherlands and Tanzania is special
All BITs have a special article which regulates the termination of the treaty; but the Dutch agreement with Tanzania is special. While the Dutch BIT with Nigeria, like most other BITs, can be cancelled at any time, terminating half a year after its cancellation, this is not the case for the Dutch BIT with Tanzania.
For this particular BIT a deadline was set; if Tanzania does not cancel the treaty before the 1st of October 2018, the treaty will automatically be extended until April 2029 and will continue not only to protect current "investment" but also any future investment that might be made until that date.
In addition, the BIT with Tanzania will not stop after it has been cancelled, due to the so called "survival clause" found in Article 14.3 of the BIT with Tanzania and the Netherlands:
"In respect of investments made before the date of the termination of the present Agreement the foregoing Articles shall continue to be effective for a further period of fifteen years from that date."
This means that even if either the Tanzanian or the Dutch parliament would decide today to cancel this agreement, they could still be sued based on this treaty in the next 15 years. And if both sides miss the 1 October deadline we would be stuck with this treaty - which nobody really wants or needs - until the first of April 2044. No matter how we vote in the future, no matter what any of our future governments might want, the rights granted to foreign investors in this treaty would be enforceable under international law until this date.
However, as awareness in the Netherlands about the problem with BITs is only rising slowly, it is expected that there will be no intervention from the Dutch side before the 1st of October.
All hope now rests with the government of Tanzania.
Recently, amendments to legislation covering Public Private Partnerships (PPPs) have been tabled in the Tanzania's parliament, seeking to ensure that all disputes arising from government contracts with private entities are conclusively dealt with by Tanzanian courts and not via Investor-to-State-Dispute-Settlement (ISDS) mechanisms at international arbitration bodies. This is good news, but one hopes that Tanzania is aware that taking ISDS out of contracts on its own will be insufficient: if the contract is covered by a BIT -such as the one with the Netherlands- that would also give the investor the right to file ISDS cases about any contract related conflicts.
So let's cross our fingers and hope that such a letter arrives in The Hague in time!
Dr. Burghard Ilge is senior policy officer at the Dutch NGO Both ENDS where he works on international trade and investment policies and their implications for sustainable development.
Sander Hehanussa LL.M. is policy officer at Both ENDS working on the same issues.
Read more about this subject
Publication / 4 April 2019
Letter / 10 February 2020
Over 70 organisations worldwide have signed an open letter to call upon the Dutch government to vote against CETA - the 'Comprehensive Economic and Trade Agreement'between Canada and the EU this week. They have serious concerns about the negative global social and environmental impacts of the CETA trade deal and similar upcoming European Union's trade agreements.
Publication / 21 September 2015
News / 14 October 2016
Both ENDS will join the protest against trade treaties TTIP, CETA and TiSA on Saturday October 22nd in Amsterdam. These treaties will have negative impacts, not only in the Netherlands and Europe, but also - and maybe even more so - in developing countries.
News / 19 June 2018
Today, Both ENDS sent a letter, signed by various civil society organisations, to Sigrid Kaag (Dutch Minister of Aid & Trade) reminding her of an important deadline and to urge her to terminate the Bilateral Investment Treaty (BIT) that exists between the Netherlands and Burkina Faso. The treaty, which can be very harmful for a poor country such as Burkina Faso, will automatically be renewed for the next 15 years if it is not terminated before July 1st this year.
Publication / 10 March 2016
Publication / 7 November 2018
Letter / 26 June 2020
Countries could be facing a wave of cases from transnational corporations suing governments over actions taken to respond to the Covid pandemic using a system known as investor-state dispute settlement, or ISDS. 630 organisations from across the world, representing hundreds of millions of people, are calling on governments in an open letter to urgently take action to shut down this threat.
Publication / 19 September 2016
International trade agreements often have far-reaching consequences not only for the economy of a country, but also for people and the environment. It is primarily the most vulnerable groups who suffer most from these agreements.
Investment treaties must be inclusive, sustainable and fair. That means that they must not put the interests of companies before those of people and their living environment.
Publication / 12 November 2020
Letter / 1 April 2020
More than 150 civil society organisations, networks and interest groups from around the world have signed an urgent letter to WTO Director General Roberto Azevedo, in which they call for the WTO to postpone the negotiations until all members are able to participate in them fully - physically instead of online.
News / 11 December 2015
Nairobi, Kenya's capital city, will be the epicenter of international trade from 15 to 18 December 2015. The representatives of the World Trade Organisation (WTO), which currently has 162 member countries, will come together to negotiate. The different countries tend to have very different and often conflicting interests, which makes it difficult to reach agreements. Burghard Ilge of Both ENDS travels with Minister Ploumen as an official adviser and mediator from civil society. His role is to inform the Minister about the views and interests of civil society organisations around the world, in order for her to take these positions into consideration during the negotiations. We asked Ilge some clarifying questions.
Indigenous communities in Paraguay saw their attempts to regain their ancestral lands thwarted by German investors. In Indonesia, US-based mining companies succeeded to roll back new laws that were meant to boost the country’s economic development and protect its forests. This is the level of impact that investment treaties can have on social, environmental and economic development and rights. Why? Because of the ‘Investor-to-State Dispute Settlement’ clauses that are included in many such treaties.
News / 21 January 2019
Today an alliance of more than 150 organisations, trade unions and social movements in countries across Europe is launching a joint programme against unfair trade and investment agreements, and especially against the controversial Investor-to-State-Dispute-Settlement (ISDS) mechanism. Under ISDS, investors can bring complaints against states whose social and environmental legislation pose a threat to their profits.
Publication / 31 December 2020
Event / 7 December 2021, 14:00 - 15:15
The European Union's (EU) foreign trade policy has many implications for the sustainability of food systems in developing countries, heavily impacting farmers, breeders, and citizens. The unhidden promotion by the EU of strong intellectual property rights on plants affects food systems from its very basis, i.e., the seeds that are available for farmers to grow. Amongst these intellectual property rights, the main instrument that is advocated by European authorities is the 1991 Act of the UPOV Convention, which provides exclusive rights to breeders over the propagating material of new plant varieties, while diminishing the rights of others to use the material for further breeding and hampering with the rights of farmers to freely save, use, exchange and sell their seeds.
News / 14 September 2017
Remember the widespread protests against trade agreements TTIP and CETA? One of the main worries was the Investor-State Dispute Settlement (ISDS) mechanism these treaties contain. Now the European Commission has proposed to set up a Multilateral Investment Court. Is that good news?
Blog / 14 April 2020
The World Trade Organization (WTO) is often seen as an institution in crisis, powerless and no longer relevant, and especially after US president Donald Trump decided in 2019 to pull the plug on one of the WTO’s most important bodies (the one dealing with trade disputes). Now, more than 150 civil society organisations, networks and interest groups from around the world have signed an urgent letter to WTO Director General Roberto Azevedo, because they are seriously concerned about the state of affairs within the organization.