From: Chantell Taylor <ctaylor@citizen.org>
Newsgroups: misc.activism.progressive
Subject: MAI and the World Bank
Followup-To: alt.activism.d
Date: 15 Jan 1998 01:20:44 GMT
Originator: rich@pencil.math.missouri.edu

Dear colleagues:

BIC is pleased to forward you the following brief on the link between the
Multilateral Agreement on Investment and the World Bank Group. While it must
be emphasized that the Bank Group holds no official status in the OECD MAI
negotiations, it is nevertheless useful to understand the link and shared
interests that have drawn the Bank Group to the table as an MAI advisor.
Furthermore, once the MAI is ratified the Bank Group's dispute settlement
arm will be one of the instruments used to hear MAI-related arbitration.

This brief falls short of recommending actions or claiming that there is
indeed the opportunity for MAI advocacy through the Bank Group's advisory
role. Yet BIC does feel that NGOs who are working on the MAI should assess
this potential: whether Bank Group participation in the MAI may open a door
for public input as the Agreement nears ratification.

As always, comments and questions are welcome.

--Chris Chamberlain
Bank Information Center
January 13, 1998
----------------------------------------------------------------------------

                        The Role of World Bank Group
                in the Multilateral Agreement on Investment
                      Negotiations and Administration

     By Christopher Chamberlain
     Bank Information Center
     January 12, 1998

       1. Introduction Over the last year, the Multilateral Agreement
          on Investment, or MAI, has generated a great deal of concern
          among members of the NGO community. However, MAI critics have
          yet to focus on the World Bank Group's quiet role in advising
          MAI negotiators on certain aspects of the proposed Agreement.
          While the Bank Group is not an official negotiator of the
          treaty, it is acting as an "observer" during the
          negotiations, and is playing an advisory role through its
          little-known fifth arm, the International Center for the
          Settlement of Investment Disputes, or ICSID.

          This brief does not attempt to explain the problems and
          issues raised by the MAI, as this area is well covered by
          other NGOs.(1) Rather, it explains the role that the World
          Bank Group is playing behind the scenes in helping shape the
          MAI treaty, and the role that it will play in administering
          the MAI once it is ratified. The brief concludes that while
          the Bank Group is not a negotiator, but only an "observer" to
          the MAI negotiations, it nevertheless provides a potential
          entry point for NGOs conducting MAI advocacy through its
          advisory role in the negotiation process.

          The MAI, which is being established under the auspices of the
          Organization for Economic Cooperation and Development (an
          association of the world's richest countries), essentially
          provides the private sector a set of guaranteed rights
          regarding investment and a standardized means of seeking
          recourse against host governments in investment disputes. For
          example, if a multinational corporation based in North
          America felt that it had been discriminated against by the
          government of an African country through excessive taxation
          and regulation, nationalization, or expropriation, it would
          have distinct rights and means to seek recourse under the
          proposed MAI. The MAI negotiations are scheduled to be
          finalized in April 1998, but this deadline may be
          unattainable. In February 1998, negotiators will convene to
          decide whether the April target can be met.

          The proposed MAI includes the following key components:

            1. Non-discrimination: guaranteeing that "host states" (ie
               states where the investment is taking place) grant
               foreign investors equal or comparable rights to host
               state (national) investors;

            2. Restrictions on certain performance requirements: this
               would prohibit states from imposing special targets or
               other conditionalities on the activities of investors;

            3. Transparency: ensuring that investment-related laws,
               guidelines, and procedures are publicly available to
               ensure predictability;

            4. Funds transfer guidelines: ensuring that host states
               will not restrict certain investment-related financial
               transactions, such as the transfer of profits back to an
               investor's home country;

            5. Tight controls on expropriation: setting international
               limits and laws governing expropriation and subsequent
               compensation; and

            6. Dispute resolution: establishing binding arbitration
               procedures to settle investment-related disputes between
               states and investors and between host and home states.

          There is nothing new about investors seeking recourse from
          host governments for alleged discriminatory treatment.
          Historically, these disputes have been fought out in national
          judicial systems in the host country or country of the
          business's origin, or through various third-party arbitration
          and conciliation mechanisms. The implication of the MAI lies
          in the fact that it seeks to create an international treaty
          which, by recognizing new rights of investors and
          establishing standardized provisions for binding arbitration,
          further strengthens the upper hand of the private sector in
          the increasingly deregulated global economy.

       2. Introducing the Bank Group's ICSID (2)

          The World Bank Group's involvement in the MAI is largely
          being carried out through the International Center for the
          Settlement of Investment Disputes (ICSID), the Bank Group's
          third-party mediation body. With a mere handful of staff and
          an administrative budget of less than one million USD, ICSID
          is the lowest-profile, least-known member of the Bank Group.
          Created in 1966, ICSID, like the Bank's private sector arms,
          was established as an autonomous (ie legally separate) entity
          from the World Bank. ICSID's Secretary-General is Ibrahim
          Shihata, the World Bank's Legal Vice President and General
          Counsel, and its chairman is Bank President James Wolfensohn.

          Why Does ICSID Exist?

          According to its introductory homepage, the Bank Group
          created ICSID with "...the belief that an institution
          specially designed to facilitate the settlement of investment
          disputes between governments and foreign investors could help
          to promote increased flows of international investment." In
          this capacity, ICSID acts as a conciliation and arbitration
          body for such disputes that involve its 126 member states.

          ICSID offers an impartial alternative to the potentially
          biased approach of settling investment disputes through
          national legal systems. If, using our example above, the
          dispute between the North American company and African
          government was heard in the investor's home country
          judiciary, there would be a risk--or perceived risk--that the
          judiciary was biased towards the investor. The converse
          option of hearing the dispute in the African country's
          judicial system would also raise the same questions of
          partiality.

          How Does ICSID Work?

          It is important to note that ICSID is a voluntary mechanism:
          both parties of an investment dispute must give their written
          consent to proceeding through the ICSID mechanism. However,
          once both parties give their consent in writing, neither
          party can unilaterally withdraw from the process. Many of
          ICSID's member countries have provided their general, ongoing
          consent to settling through ICSID as part of bilateral and
          multilateral trade agreements and investment laws.

          ICSID hears cases through both conciliation and arbitration
          procedures. Since its inception, ICSID has registered 41
          cases, 38 of which have been handled through arbitration and
          3 through conciliation.

          Conciliation

          When conciliation cases are registered through ICSID, ICSID
          assembles a Conciliation Commission to hear the case. The
          role of the Commission is limited to clarifying the dispute
          between the parties, recommending settlements, and working to
          resolve disputes. At the end of a proceeding, the Commission
          prepares a report which documents any settlement which is
          agreed to between the parties, or notes that the parties
          failed to reach agreement.

          Arbitration

          Arbitration cases are far more involved. The main distinction
          is that ICSID's Arbitration Tribunals have the authority to
          decide judgements and award damages resulting from the
          proceedings.

          To consider a case, the Tribunal uses laws agreed to by both
          parties to decide judgements, or by default uses the law of
          the Contracting State (host country) and applicable
          international law. Once the Tribunal hears the case and makes
          an award, the award can be appealed, and possibly upheld,
          revised, or annulled. Final awards that are given by ICSID
          Arbitration Tribunals are binding.

          Under its articles of agreement, ICSID maintains broad Panels
          of both conciliators and arbitrators. Each contracting state
          of ICSID can designate up to 4 members to these panels.
          Panelists are typically distinguished experts in
          international trade and investment law. By maintaining large
          Panels comprised of members from a wide range of countries,
          ICSID ensures that it can appoint conciliators and
          arbitrators who will operate without a conflict of interest
          for every claim that is filed.

          ICSID's Other Applications

          ICSID's role extends beyond its caseload. Like the other arms
          of the World Bank Group, ICSID also plays an advisory role,
          conducts research, and produces publications. Its advisory
          role is especially significant in the context of the MAI
          negotiations.

       3. ICSID and the MAI

          Why Would the Bank Group be Interested in the Establishment
          of the MAI?

          Long before the MAI had gained the attention of the NGO
          community, the ICSID published an article in its Fall, 1995
          Foreign Investment Law Journal entitled "Towards an
          International Agreement on Foreign Direct Investment?"
          Written by University of Athens Law Professor A.A. Fatouros,
          the article discusses the need, as well as a proposed
          methodology for establishing an international treaty on
          investment.

          In his article, Fatouros says that one of the main
          justifications for an international investment treaty is that
          "there is today no comprehensive instrument covering all
          facets of FDI and encompassing all (or a majority of) home
          and host countries. An international legal framework may in
          fact be said to exist, but it is a patchwork (or mesh)
          consisting of many kinds of norms and instruments, operating
          at several levels, at varying levels of normative intensity
          and with extensive gaps as to coverage of issues as well as
          countries."(3)

          By establishing a "bill of rights" for investors, the
          argument behind the MAI goes, the private sector will be more
          willing to assume risk and do business in the developing
          world. The terms of privately-driven development--the
          regulatory and legal frameworks underlying foreign direct
          investment--will be standardized, clarified, and
          strengthened. The private sector will have internationally
          accepted, transparent, and predictable provisions to invest
          under. If agreements are not honored by hosting governments,
          the private sector will have a set of rights and the means to
          seek recourse under an agreement that supersedes the existing
          "patchwork" of domestic, host-country regulation and current
          international law.

          Given the World Bank Group's mandate to boost economic
          growth, its interest in supporting the MAI is clear. With
          neoliberal economic theory underlying its activities, the
          Bank Group has long worked to encourage foreign direct
          investment, placing faith in an unfettered marketplace as key
          to sustainable development. Indeed, it could be argued that
          the MAI's intended impact on foreign direct investment is
          identical to the mission of today's Bank Group: facilitating
          private investment to promote economic growth. Because the
          MAI will work to achieve this end, it is obviously in the
          Bank Group's interest to support the establishment of the
          agreement.

          What is ICSID Doing to Promote the MAI?

            a. Helping to Define the Terms

               In the executive summary of its 1996 Annual Report,
               ICSID states that "another noteworthy activity was
               ICSID's participation in meetings of an Expert Group
               convened by the OECD to help develop the
               dispute-settlement provisions of the projected
               Multilateral Agreement on Investment." Reportedly
               ICSID's advisory role in the negotiations has been
               fairly central in defining the MAI's dispute resolution
               provisions. While ICSID is only an "observer", as
               opposed to a "negotiator" of the MAI, much of the MAI's
               arbitration procedures are being founded on guiding
               principles and precedents of the ICSID. Thus, while not
               holding any official negotiating status during the MAI
               establishment, ICSID is nevertheless influential in its
               input to the dispute settlement piece of the Agreement.

            b. ICSID as the Main Vehicle for MAI Disputes

               ICSID is currently one of the main mechanisms used for
               the settlement of investment disputes under other
               multilateral treaties, such as the North American Free
               Trade Agreement and the Cartagena Free Trade Agreement.
               While there are different fora for third party
               arbitration and dispute settlement, ICSID is by some
               accounts considered to be the eminent body for dispute
               settlement in the international arena. As one of five
               fora available for the arbitration of MAI investment
               disputes, it is thus likely that ICSID will play a
               significant role in MAI-related arbitration.

       4. Conclusion: Implications

          The Bank Group is both advising the OECD negotiators on the
          design of the proposed MAI and is likely to receive a fair
          amount of business once disputes are raised through its ICSID
          arm under the Agreement. This role of the Bank Group has
          potentially important ramifications that should be considered
          by the NGO community. NGOs may want to consider applying
          their experience with Bank Group advocacy to ICSID and its
          role in the MAI.

          As the Bank Group plays an increasingly influential role in
          facilitating private sector development, it is crucial that
          it must be accountable not only for its own operations--but
          equally for the extensive advice and assistance that it gives
          to governments and to the private sector. ICSID, as a member
          of the Bank Group, must be accountable to the public interest
          in the same way that IBRD, IDA, IFC, and MIGA must be
          accountable. If NGOs have concerns about the proposed MAI
          agreement, they may want to assess whether ICSID could be an
          entry point for advocacy given its advisory role.

          Encouragingly, ICSID claims to operate in a decidedly open
          manner. Its staff, albeit small, has indicated a willingness
          to the few NGOs who have contacted it to communicate with the
          public. Yet despite the fact that it both expresses this
          willingness to communicate and generates an impressive
          quantity of publicly-available materials (and public records
          of its proceedings), ICSID is rarely, if ever, engaged by the
          NGO community.

          While public engagement of ICSID should be considered as the
          MAI takes shape, there must be a realization that advocacy
          opportunities may be constrained by several factors. First,
          ICSID staff and resources are extremely limited. Furthermore,
          because ICSID is not a direct negotiator of the MAI, concerns
          that it agrees to in principle may not be translated into the
          terms of the OECD agreement. Finally, the ICSID is presumably
          dealing with only one of the several components of the MAI,
          the dispute resolution provisions.

          Nevertheless, ICSID staff have indicated a willingness to
          discuss both ICSID operations and its role in the proposed
          MAI openly with the public. Given the leadership role that
          the World Bank Group plays today in facilitating foreign
          direct investment, it would be unfortunate for NGOs to
          overlook this potential opportunity for advocacy as the MAI
          approaches completion and ratification. (4)

     Notes

       1. For more information on the MAI and NGO analyses, resources,
          and advocacy coalitions, BIC recommends contacting Mark
          Vallianatos at Friends of the Earth--U.S., email:
          <MValli@aol.com>, address 1025 Vermont Ave NW, Ste 300,
          Washington DC, 20005 USA.

       2. Sources for section 2: ICSID Homepage, ICSID 1996 Annual
          Report, ICSID Convention, Administrative and Financial
          Regulations, Institution Rules, Arbitration Rules, and
          Conciliation Rules.

       3. A.A. Fatouros, "Towards an International Agreement on Foreign
          Direct Investment?" ICSID Review/Foreign Investment Law
          Journal vol. 10 no.2, (Fall 1995): 188.

       4. For information on contacting the World Bank Group, please
          contact the Bank Information Center at cham@igc.apc.org, or
          Bank Information Center, 2025 I St. NW, Ste. 400, Washington,
          DC 20006, USA; tel: +202-466-8191, fax: +202-466-8189.

     --end--

     ------------------------------------------------------------------
     Christopher Chamberlain
     Program Associate, Early Warning System Bank Information Center
     2025 I St NW, Ste. 400
     Washington, DC 20006, USA
     tel: + 202 776-0620, fax: + 202 466-8189
     ------------------------------------------------------------------

----------------------------------------------------------------------------

     From: Chantell Taylor <ctaylor@citizen.org>
     Newsgroups: misc.activism.progressive
     Subject: MAI/World Bank clarifications
     Followup-To: alt.activism.d
     Date: 15 Jan 1998 18:17:46 GMT
     Originator: rich@pencil.math.missouri.edu

     There has been many questions about the last posting - "MAI and
     the World Bank" - so I'm sending this to hopefuly clarify.
     Chantell

     Chris Chamberlain wrote:

     The Bank Information Center is an international nongovernmental
     organization that monitors the policies and projects of
     multilateral development banks, like the World Bank, and acts as a
     clearinghouse for information on the MDBs. BIC is based in
     Washington DC. While not limiting ourselves to any particular
     constituency, our primary mission is to service NGOs and civil
     society groups based in developing countries.

     Definition of the World Bank Group:

     The World Bank Group/World Bank distinction is as follows. The
     World Bank is comprised solely of the International Bank for
     Reconstruction and Development (IBRD) and the International
     Development Association (IDA). These two agencies make loans
     (market-based and concessional, respectively), to the bank's
     borrowing-member governments.

     The World Bank (IBRD and IDA) is part of the World Bank Group--a
     larger "family" of international agencies which, while legally
     separate from each other, share administrative offices, coordinate
     many activities, and have the same President (and largely share
     the same Board of Directors). The other members of the Bank Group
     besides IBRD and IDA are the International Finance Corporation,
     which makes loans and provides other services to private project
     sponsors (ie businesses); the Multilateral Investment Guarantee
     Agency, which provides non-commercial risk insurance to private
     investors; and the International Center for the Settlement of
     investment Disputes, which is covered in my memo. The latter three
     agencies are legally autonomous, and are legally separate from the
     World Bank.

     Collectively these agencies are known as the World Bank Group.

     Hope this clears things up. I haven't received any conference mail
     yet, or else I would be able to respond to questions as well.

     Thanks,

     Chris

     ------------------------------------------------------------------
     Christopher Chamberlain
     Program Associate, Early Warning System Bank Information Center
     2025 I St NW, Ste. 400
     Washington, DC 20006, USA
     tel: + 202 776-0620, fax: + 202 466-8189
     ------------------------------------------------------------------