Mr. Speaker, I will be speaking against implementing this International Centre for Settlement of International Investment Disputes and I will tell the House why.
A recently released report entitled, “Challenging Corporate Investor Rule”, shows that nearly 70% of cases brought to the investment dispute centre, an institution of the World Bank group by the way, settled in favour of the investor, with compensation being awarded against the country where the investment failed.
The report notes that in 7 out of 109 cases filed with ICSID, the investor's revenues exceeded the gross domestic product of the country they were suing. The case I will be describing may add to the number of these cases. These developing countries must pay fines that far exceed the gross domestic product.
The Center for International Environmental Law says that the arbitration raises a number of problems. I will describe to the House what is currently one of the big cases in front of this settlement dispute centre.
The U.K. based British investor, Biwater Gauff, is demanding $25 million from the Government of Tanzania after the latter terminated its contract with City Water Services in 2005, allegedly because the company had failed to provide clean drinking water to millions of people in Dar es Salaam. Paying $25 million to this British company is a tremendous amount of money for a very poor country like Tanzania. Biwater's 10 year contract to provide water service in this city was terminated by the Tanzanian government in 2005, only two years after it began operations in 2003. Why was that the case? It is because the Tanzanian government said that the company had not been able to provide clean water as it was supposed to for its citizens.
Normally one would think that engaging a private operator for running water service commercially is a radical departure from the free service tradition in place in that country since 1991. Why did Tanzania privatize its drinking water? It was one of the conditions imposed by the World Bank and the International Monetary Fund in order for Tanzania to qualify for debt relief under the heavily indebted poor countries initiative. Similarly, the World Bank's 2000 country assistance strategy made the signing of a concession agreement assigning the assets of this place to a private management company one of the conditions Tanzania had to meet in order to qualify for enhanced annual loans.
How did these heavily indebted poor countries get indebted in the first place? It was because the World Bank was lending them money with huge interest rates and they could not provide the debt repayment. It is an absurd situation where poor countries are sending more money to rich countries. The World Bank is telling them that in order for it to lend them even more money they must privatize their water.
This U.K. based British investor Biwater then goes in and privatizes their water. It tells the poor folks in Tanzania that it will deliver clean water but it did not do so after two years of operation. The government rightly said that it would not continue with the contract but the company took the dispute to the international centre. Seventy per cent of these cases end up in favour of the investors. It is biased against a lot of these poor developing countries.
Another organization, the Center for International Environmental Law, says that the arbitration case I am talking about raises a number of issues of vital concern to the local community in Tanzania, as well as for other developing countries that have privatized or are contemplating a possible privatization of water and other essential infrastructure services. Another organization, Public Services International, says that this dispute shows how problematic it is to include investment rules in trade investment agreements, particularly if they include investor-state provisions which allow the investor to sue host governments at international tribunals.
One of the problems with this dispute settlement mechanism is that the public has no way of knowing how the decisions are taken. The decision is not transparent. It is not clear how much the government is expected to pay if the government ends up losing. As a result, the public cannot hold a government or foreign corporate entities to account, or judge the legitimacy of the decisions. This erodes democracy.
Furthermore, because the decision is made in a body that will not be disclosed to the public, it has far reaching effects. It would seriously erode the sovereign authority of the Canadian state, and Canadians would have no say in the course of proceedings.
Instead of rushing in without any discussion with our public environmental groups and all the other NGOs, we should look at this situation very carefully.
In the case of Tanzania, what we have now is the Center for International Environmental Law from Switzerland, the Lawyers' Environmental Action Team, the Legal and Human Rights Centre, and the International Institute for Sustainable Development filing support letters and helping Tanzania in defending its case before the dispute settlement centre.
Instead of rushing in, we should ensure there is better international investment, which can bring substantial benefits to developing countries. We need to develop a comprehensive regulatory framework that actively promotes sustainable development and ensures that environmental limits are preserved.
We need to create the right regulatory framework for sustainable investment. It would require action at the regional, national and international levels.
We need frameworks that would provide host countries with the flexibility and ability to control investment flows that undermine their sustainable development targets as developed through transparent and consultative processes.
At the international level, there needs to be cooperation between states in consultation with civil society to ensure that existing and future bilateral or regional investment treaties allow host countries to set minimum environmental standards and prohibit the lowering of environmental standards to attract investment.
We need to make sure that legal barriers to suing foreign investors and forcing judgment in home countries are removed. We need to make sure detailed binding regulations are developed in environmentally sensitive industries, for example, in the chemicals and minerals industries, and that restrictive business practices such as transfer pricing, investment incentives, and bribery and corruption are addressed.
The host or recipient countries, supported by development assistance and in consultation with civil society, should strengthen their environmental and economic governance structures to support sustainable investment. That means taking measures to integrate environmental objectives into key sectoral policies such as energy, transport and agriculture and develop integrated policy packages that balance investors' rights with public needs.
Measures are needed to ensure foreign investors and domestic companies disclose any environmental and social impacts. We should also make sure that investment related activities are fully covered by environmental laws and policies including the polluter pays principle.
Home or investing countries should create mechanisms to lever additional funds from investors for projects aimed at sustainable development. Assistance to investors should be conditional on good environmental performance, for example, through export credit agencies. Development assistance that supports recipient country efforts to develop good environmental and social governance should be provided.
There also should be a mandatory code of conduct for companies to prevent those following environmental best practice from being undermined by unscrupulous competitors. At a minimum, companies must adhere to the existing OECD guidelines for multinational corporations.
Taken together, these measures and others should ensure that a proper balance is struck between protecting the rights of investors and promoting public goods. Once these measures are in place, perhaps Canada would be in a position to discuss the implementation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States. If we do not have that, we would be prematurely rushing in a World Bank mechanism that is now hurting a lot of developing countries.