Bilateral investment : Unfair treaties could drain national exchequer
The Express Tribune | December 24th, 2010.
Bilateral investment : Unfair treaties could drain national exchequer
KARACHI: Pakistan has faced claims worth $1 billion and could lose hundreds of millions of dollars more because of international investment treaties that are contrary to the interests of the country, asserted UK-based corporate lawyer Mahnaz Malik.
She was speaking at a ceremony to launch her book titled ‘International Law Protections for Foreign Investment in Pakistan’ on Thursday.
“Pakistan has so far signed bilateral investment treaties (BITs) with 38 different countries, of which 28 have been ratified and implemented,” said the author, adding that all the ratified treaties are implementable and binding in case a foreign investor were to file a claim against Pakistan.
She explained that according to the BITs, all claims against the government have to be decided through the World Bank’s International Centre for Settlement of Investment Disputes (ICSID).
Malik highlighted that judgments issued by the ICSID could not be challenged, even by the Supreme Court of Pakistan and that if an award against the government is not implemented, the treaties allow the affected party to seize foreign assets of the country. “These treaties have been drafted to protect the interests of capital investing countries and not developing countries like Pakistan.”
She highlighted that majority of these treaties were signed in the 1990s but it was not until 2006 that the government prepared its own draft treaty and that all prior BITs were based on treaties written by the former colonisers.
It is known that four claims have been filed against the country to date of which the government has won one legal battle, according to the speaker. “But the government had to spend between $8 and $10 million in legal fees to fight just one of these claims.”
“We must strike a balance when drafting policies and international agreements so that the guarantees provided to international investors do not infringe on the interests of our development,” said Board of Investment Secretary Anisul Hasnain.
He admitted that the government lacked the capacity to keep up with the fast-changing international legal environment in terms of skill and expertise and also acknowledged that issues pertaining to security, energy shortages and regulatory impediments may be cited against the country in litigation under the treaties that have already been ratified by the government.
Ameena Saiyid from the Overseas Investors Chamber of Commerce and Industry stressed the need for a ‘fair and equitable regime’ for foreign investors.
The Pakistani government is currently formulating a similar investment treaty with the United States. “When signing such a treaty with the world’s most litigation-prone economy, it is imperative that the BIT should protect the interests of Pakistan instead of doling out blanket concessions to foreign investors,” warned Malik.
The legal expert urged the government to terminate all treaties that expose the country to the risk of expensive claims and re-negotiate them on terms that protect national interests.
