Charles Santiago

EU-Malaysia FTA: National Sovereignty & Policy Making at Risk with State-Investor Dispute Settlement Mechanism.
AHLI PARLIMEN KLANG YB CHARLES SANTIAGO BERKATA “KOS PERUBATAN HOSPITAL SWASTA AKAN MENINGKAT”.
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EU-Malaysia FTA: National Sovereignty & Policy Making at Risk with State-Investor Dispute Settlement Mechanism.

Posted: 18 Oct 2011 09:42 PM PDT

The Malaysia-European Union Free Trade Agreementfifth round of negotiations is underway in Kuala Lumpur. Deputy International Trade and Industry Minister DatukMukhriz Mahathir last month indicated that the present round of negotiation "was getting into specific terms".

One of the most worrying 'specific terms' is the FTAsinvestment chapter that the EU wants Malaysia to adopt.The purpose of the investment chapter is to ensure that interests of investors are protected.

Specifically, the investment chapter contains provisions that allow investors to sue governments directly.

The investment protection chapter allows investors to by-pass the domestic legal system and refers disputes to international arbitration. Most importantly, the state-investor dispute mechanism allows investors to sue governments before international arbitration panels.

More than 300 cases have been referred to international arbitration since the 1990s. Most of these cases have resulted in governments paying millions to investors.

Investors can use the investor-state mechanism to refer governments to international arbitration panels if it perceives that state policies jeopardize company profits.

Here in Parliament, we are making laws in the best interests of the nation. But these laws can be over-turned by an international arbitration panel if judged as detrimental to investors.

On 19th February 2010, Philip Morris filed a request for arbitration against Uruguay with the International Centre for Settlement of Investment Disputes (ICSID). The company argued that recent tobacco regulations enacted by Uruguay violate several provisions of the Switzerland-Uruguay bilateral investment treaty (BIT).

Specifically, Philip Morris is challenging three provisions of Uruguay's tobacco regulations: (1) a "single presentation" requirement that prohibits marketing more than one tobacco product under each brand, (2) a requirement that tobacco packages include "pictograms" with graphic images of the health consequences of smoking (such as cancerous lungs), and (3) a mandate that health warnings cover 80% of the front and back of cigarette packages.

Clearly, Philip Morris is critical of the health policy of the Uruguayan government as it will impact on its profits.

Such investor protection impacts on sovereignty of nations, disciplines governments and limits the state's ability to regulate and develop polices in the best interests of the rakyat.

Thus, it is in the interests of the Malaysia that the government does not give-in to the demands of the European Union.

Malaysia could learn from countries such as Australia.

The Australian government is opposing greater rights for foreign companies and thus opposes the inclusion of investor-state dispute settlement.

Its 2011 Trade Policy says, "the Government does not support provisions that would confer greater legal rights on foreign businesses than those available to domestic businesses. Nor will the Government support provisions that would constrain the ability of Australian governments to make laws on social, environmental and economic matters in circumstances where those laws do not discriminate between domestic and foreign businesses. The Government has not and will not accept provisions that limit its capacity to put health warnings or plain packaging requirements on tobacco products or its ability to continue the Pharmaceutical Benefits Scheme".

The Australian government, with its greater revenue and more lawyers to defend cases, is opposing investor-to-state dispute settlement mechanism. The Malaysian government should take a similar position to protect our regulatory space and sovereignty.

I call on the Malaysian governments to reject all pressure from the EU in the interests of the country.

Charles Santiago

Member of Parliament, Klang.