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