Proposed EU-Myanmar Investment

Protection AgreementVicky Bowman, Director, Myanmar Centre for Responsible Business

Consultation on Indigenous Peoples and Investment Treaties

Bangkok 2 May 2016

www.mcrb.org.mm

myanmar.responsible.business

Update of presentation given in December 2015 at SIA consultation meetinghttp://www.myanmar-responsiblebusiness.org/news/eu-myanmar-investment-protection-agreement.html

1. A transparent consultative process based on full knowledge of the proposals

2. Increase in responsible investment in Myanmar, including from the EU, as this will have a positive impact on jobs, growth and poverty alleviation, and raise standards of responsible business

3. ‘Policy space’ for the Myanmar government and people i.e. freedom to legislate to raise standards of social, environmental and human rights protection

4. A treaty which does not expose Myanmar to significant and expensive litigation risks and damages (claims by companies in $$billions) as a consequence of the current uncertain regulatory climate, thereby reducing public funds available for health, education etc

December meeting and the online consultation www.eu-myanmarsia.com were positive steps, as are regular briefings for civil society by the EU Delegation. But these have stopped since negotiations were paused in November 2015.

For the purposes of a Sustainability Impact Assessments (SIA), how can stakeholders meaningfully comment on the impacts of a draft agreement which they have not seen?◦ A leaked version following the 2nd round of negotiations in May 2015

is in circulation, but not readily available or provided as part of the SIA; furthermore, this may not reflect changes following the 3rd round in September. It is available from MyLAFF documents database

◦ In contrast, the EU published a draft text for the investment chapter of TTIP on 18 September 2015 http://trade.ec.europa.eu/doclib/docs/2015/september/tradoc_153807.pdf

There has been no consultation in Myanmar since December 2015 – however consultations were held April 2016 Brussels. Local stakeholders were not actively made aware of 19 April deadline for comments on draft SIA

The Myanmar government also needs to ensure its citizens –business and civil society - are consulted

There is no clear evidence whether or how much IPAs affect company decisions to invest ◦ See Analytical Framework For Assessing Costs And

Benefits Of Investment Protection Treaties, March 2013, LSE

European companies have already invested in Myanmar in the absence of an investment treaty◦ e.g. TOTAL, Shell, ENI, BG, Unilever, Carlsberg,

Heineken, BAT, De Heus, Lafarge, Ericsson

Large companies have negotiated protections in Production Sharing Contracts (oil and gas), Licence Agreements (telecoms) or can access protection by investing via Singapore and benefitting from the ASEAN Comprehensive Investment Agreement

Factors other than an IPA are more important for companies considering whether to invest in Myanmar

EU investment can bring jobs and growth, technology transfer, higher standards of safety, social and environmental protection

However, this will only be the case if European companies invest responsibly and in line with international standards such as

OECD Guidelines for Multinational Enterprises UN Guiding Principles on Business and Human Rights (UNGPs) IFC Environment, Health and Safety Guidelines and Performance

Standards The first two standards are namechecked in Chap 4, Art. 6(3) of the

draft EU/M IPA. This (welcome) reference does not create binding requirements on either Party, but a shared ‘commitment to foster adherence

Furthermore, it is essential that Myanmar strengthens and enforces its regulation of responsible business conduct in NATIONAL LAW◦ In addition to enhancing social and environmental protection, Myanmar

could also require all investors receiving a permit from Myanmar Investment Commission to be transparent and respect human rights – see MCRB proposal for MIC to require operational grievance mechanism, consistent with the UNGPs, and annual sustainability reporting.

A few of the gaps in the Myanmar legal framework relating to social and environment protection….. Rights of Indigenous Peoples and Free Prior and

Informed Consent ResettlementMany standards for environment e.g. pollution, waste

With a lot of gaps in policy and regulation, Myanmar needs a lot of ‘policy space’…..

Protection of People with Disabilities (2015) Competition Law (2015) Law on Protection of National Races (2015) Revision of Foreign Investment Law and Citizens

Investment Law to delegate investment decision-making to sub-national governments (2015)

Revised Mining Law (2015) Cultural Protection (2015) EIA Procedures (2015) Arbitration Law (2015)

New and untested laws related to business

Draft Myanmar Investment Law Draft revision to Companies Act Land laws that need to be revised to follow up

adoption of Land Use Policy

….and many others....

Some forthcoming draft laws related to business

Myanmar needs a lot of ‘policy space’…..

Draft EU/M IPA has text in the pre-amble (as with Canada and Singapore/EU IPAs)◦ “RECOGNISING the right of the Parties to take non-

discriminatory measures to achieve legitimate public policy objectives on the basis of the level of protection that they deem appropriate;”

Article 8(3) (on indirect expropriation) says◦ “For greater certainty, non-discriminatory measures by a

Party that are proportionate in light of the above-mentioned factors and designed and applied to protect legitimate public policy objectives do not constitute indirect expropriation”

The draft EU-M IPA draft also has a ‘Place Holder Article’◦ Does the EU plan to propose the same ‘right to regulate’

Article as in the draft EU/US TTIP (Section 2, Article 2)?

The draft EU/M IPA could support positive developments concerning sustainability and responsible business conduct in Myanmar. For example, the IPA contains a commitment to transparency in law-making (Chapter III, and Chapter IV Article 8)

◦ Such an improvement would be highly desirable. However similar requirements in the Myanmar/Japan Investment Agreement (Article 8) have not resulted in more transparency in Myanmar law-making. Also 3rd

countries and their companies should not be privileged above citizens in consultation.

Myanmar commits to ‘endeavour to’ ratify remaining fundamental ILO Conventions (Chapter IV, Article 3)

There is support for other cooperation and commitments in the area of environment and sustainability e.g. Article 6(3) includes a welcome reference to EU and Myanmar committing to

“refer and adhere to internationally recognised guidelines and principles on CSR and responsible business conduct, such as the OECD Guidelines for Multinational Enterprises, the UN Global Compact, the UN Guiding Principles on Business and Human Rights, ISO 26000, and the ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy”.

◦ However MCRB advises dropping the reference to (undefined) ‘CSR’

See example litigation scenarios in MCRB’s Dec 2015 presentation◦ http://www.myanmar-responsiblebusiness.org/news/eu-

myanmar-investment-protection-agreement.html

Land ownership, registration Consequences of conflict and post-conflict Delegated powers of States, Regions and Self-

Administered Zones EIA Process does not yet work to identify local

concerns at an early stage Administrative capacity of all levels of government Intra-government coordination and information-

sharing Policy/regulatory change

Myanmar’s politics, policy and regulation relating to business are in flux. This is NOT the right time to finalise an EU-Myanmar IPA.

◦ To do so could result in costly litigation against Myanmar

◦ It is difficult to amend an agreement if problems are later identified

Before completing the negotiations, the Myanmar Government should ensure it undertaken a cross-government assessment of the risk of litigation and ‘regulatory chill’ posed by an EU/Myanmar IPA

◦ This should including through examination of the effect on existing laws, contracts and licences, in consultation with existing investors

◦ Development partners could be asked to provide legal assistance for this

To promote trust and understanding of the purpose of the EU/Myanmar IPA, the EU should:

◦ Immediately publish its proposal for the EU/Myanmar IPA as it did for the US/TTIP

◦ Undertake genuine capacity-building for civil society (consistent with its commitments under the CSO Roadmap), media and business

To attract EU investment, the Myanmar government should focus in 2016 on◦ Regulatory reform and implementation, particularly labour and land law

◦ Better inter-departmental coordination and speeding up processes across government

◦ More consistent law and decision-making

◦ Improved communication and transparency

The EU (and other development partners) should provide (further) assistance for reforms to improve the investment climate

Any future EU-Myanmar Investment Protection Agreement should:

◦ include provisions on the ‘right to regulate’ which take into account the Myanmar context and the ‘do no harm principle’;

◦ Ensure that language for articles on ‘national treatment’, ‘fair and equitable treatment’; and ‘observation of written commitments’ (umbrella clause) reflects the narrower definitions included in the agreement with Singapore, since the current draft appears to expect a higher standard of administrative competence from Myanmar than from Singapore.

Pursue ongoing and genuinely transparent consultation by both EU and Myanmar government with business (Myanmar and foreign) and civil society

See http://www.eu-myanmarsia.com

The SIA finds that the IPA may largely have positive economic impacts, however social and environmental impacts are more difficult to predict, as they will be dependent on how increased EU investment is directed, and the practices of related EU firms.

The project team have proposed policy recommendations to increase potential positive impacts of the agreement and address negative externalities that could arise from increased investment by European investors as a result of the IPA.

Published 18 March 2016

“The European Commission emphasised that the proposed agreement with Myanmar solely covers investment protection and, upon completion, will be the first standalone EU agreement of its kind. The EU-Myanmar IPA is being negotiated independently from any free trade agreement (FTA) and there are no Member States bilateral investment treaties (BIT) with Myanmar.

The European Commission is pursuing its new approach on investment also in the context of the EU-Myanmar IPA.

Besides a new dispute settlement mechanism, the 'investment court system', the EU will also push for precisely drafted provisions, safeguards to the right to regulate (http://trade.ec.europa.eu/doclib/press/index.cfm?id=1396) and include additional elements such as dedicated chapters on sustainable development and transparency.

Extract from minutes of EU Commission-Civil Society Meeting. Brussels, 5 April 2016

http://www.eu-myanmarsia.com/data/info/201604132028593660pic.pdf