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News / 17 februari 2011

European Parliament will vote on Bilateral Investment Treaties

The European Commission is about to take important decisions about Bilateral Investment Treaties (BITs). These agreements are designed to protect corporations that invest in a foreign (often developing) country. These international agreements are binding, but often undermine the social and environmental regulations that developing countries want to implement. On march 3, the European Parliament will vote on reforming these policies.

 

Corporations wanting to invest in foreign countries are very often protected by Bilateral Investment Treaties (BIT's). The problem with these BITs is that the rights they grant to foreign investors are very far reaching and often conflict with governments' own plans for social and environmental regulation. If they think such social and environmental regulations might jeopardise their profit, investors can object to them.

This happened for example in South Africa, where in 2007 a group of European investors in the mining industry claimed that a South African law would run counter to South Africa's 'obligation' to guarantee them 'fair and equitable treatment'. The law, which required a re-licensing of all mining-companies, was designed to increase the percentage of individuals who were disadvantaged during the apartheid regime, in the mining industry. In 2010, the case was settled with the South African government: the investors who filed the complaint will now no longer be required to comply with this law.

Another example is the group of European investors who operated a 30-year concession to provide water and waste water services in and around Buenos Aires. When Argentina was hit hard by the crisis in the late 1990's, its government took various actions to reduce the damage. These actions, according to the investors, reduced the value of their investment and thus violated Argentina's obligation to protect their interests. They took their complaints to the ICSID Tribunal, which judged that Argentina could have taken measures without violating the investors rights.

These are only two of many examples. In the past decades, individual EU member states have signed over 1200 BITs, mostly with governments of developing countries, where many have had serious social and environmental impacts. Since December 2009, when the Lisbon Treaty went into force, international investment agreements such as the current BITs fall under the responsibility of the EU instead of the individual member states. The European Commission, Council and Parliament are therefore discussing the future of their investment policies. Not only will policies regarding new treaties have to be adjusted, the European Commission will also have to look at possibilities to reform already existing BITs in a more sustainable and transparent way.

Both ENDS and partner organisations have been warning about the effects of BITs for quite some time, and have been able to get the issue on the agenda of European authorities. For more information on this matter, please see the following documents:

S2B investment briefing January 2011

Reader: EU Investment Agreements in the Lisbon Treaty Era (July 2010)

 

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