Znet의 아지즈 초드리가 양자간 투자협정과 FTA에 대해 쓴 글입니다. 최근에 
양자간 협정들이 급증하고 있는데, 미국과 초국적 자본의 이해를 철저히 반영
하고 있는 이 협정들에 대한 대응이 너무 소극적이다, 보다 적극적인 대응이 
필요하다...라는 내용입니다. 

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June 13, 2003 

Sleeping Beauty And Prince Charming: Bilateral Deals Are No Fairytale 

By Aziz Choudry 

The recent explosion of bilateral investment and trade agreements and 
investor-state disputes is of growing concern. Many mobilisations 
against the World Trade Organisation (WTO) aim to stop attempts by 
industrialised countries to kickstart talks on a multilateral investment 
agreement at September’s Cancun Ministerial meeting. But strategies to 
confront neoliberal globalisation must integrate action on these lower-
profile agreements, and acknowledge how they are being used by 
governments and corporations for their economic and geopolitical aims. 
They attract little attention and scrutiny, eclipsed as they are by 
regional and global negotiations. Yet they are being used as leverage in 
multilateral negotiations, to get faster, deeper free trade and 
investment commitments than is possible in a divided WTO. 

WTO negotiations are grinding slowly. Many member governments – 
especially from the global South - oppose any resurrection of the 
Multilateral Agreement on Investment (MAI) at the WTO. But expanding the 
liberalization agenda through bilateral agreements is a stealthy step-by-
step approach which could prepare a multiple launchpad for more 
comprehensive multilateral agreements. Once countries are enmeshed in 
webs of bilateral investment agreements, it will be harder to resist an 
MAI-type agreement at the WTO. 

Chapter 11, NAFTA’s powerful investment chapter provides foreign 
corporations with rights to sue governments for enacting public policies 
or laws which they claim to affect their profitability. Too bad if they 
protect the environment, health and safety, support local small 
businesses or jobs. Many bilateral free trade and investment agreements 
contain similar provisions as well as “national treatment” clauses 
which state that foreign companies and investors must be treated no less 
favourably than local companies and investors. Before this can be 
expanded to bind 34 countries under the Free Trade Area of the Americas 
(FTAA), countries are being sued under obscure bilateral investment 
treaties (BITs). Transnational water giant Bechtel is currently suing 
Bolivia under a 1992 Holland-Bolivia BIT for loss of profits after the 
reversal of Cochabamba’s water privatization following a popular 
uprising. 

William D. Rogers of Washington, DC law firm Arnold and Potter argues 
that investment treaties are “an open invitation to unhappy investors, 
tempted to complain that a financial or business failure was due to 
improper regulation, misguided macroeconomic policy or discriminatory 
treatment by the host government and delighted by the opportunity to 
threaten the national government with a tedious expensive arbitration” 
(speech to Inter-American Development Bank Conference, October 26-27, 
2000). 

NAFTA dispute horror stories such as the Ethyl Corp.- Canada case were 
vital in campaigning against the ill-fated OECD MAI. “It seems the high-
profile disputes under the NAFTA appear to have inspired many litigators 
to dust off the NAFTA’s more obscure predecessors,” writes Luke Eric 
Peterson (Changing Investment Litigation, Bit by BIT, Bridges Between 
Trade and Sustainable Development 5, No. 4, May 2001), commenting on the 
recent upsurge in investor-state disputes under bilateral agreements. In 
many bilateral agreements where a dispute cannot be settled amicably and 
procedures for settlement have not been agreed within a specified 
period, it can be referred to a body like the World Bank’s private 
arbitration body for investment disputes, the International Centre for 
Settlement of Investment Disputes (ICSID) or the UN Commission on 
International Trade Law (UNCITRAL). NAFTA lets unhappy investors choose 
between the two. Either way, they represent the privatisation of 
commercial justice. 

Founded in 1966, over half of ICSID’s cases were filed in the past six 
years, mainly under investment treaties. Today, there are some 2000 
BITs. UNCTAD describes them as “the most important protection of 
international foreign.investment” to date. 

“In a way…bilateral and multilateral investment treaties are to ICSID 
what Prince Charming was to Sleeping Beauty, having stirred the 
activities of the Centre,” ICSID lawyer Eloïse Obadia told the Swiss 
Arbitration Association Conference on Investment Treaties and 
Arbitration in Zurich in January 2002. 

“During the first 30 years of its existence, ICSID was somewhat of a 
“Sleeping Beauty,” with an average of one or two cases being 
registered each year. It is with the widespread development of bilateral 
and multilateral investment treaties that the activities of ICSID have 
awakened”, she said. 

Unless you are a successful corporate claimant, investor-state disputes 
are no fairytale. 

Pakistan currently faces three investor-state dispute claims pending at 
ICSID totalling around US$ 1 billion. Swiss company SGS, whose board of 
directors includes former WTO Director-General Mike Moore, is claiming 
$120 million from Pakistan for premature termination of a contract to 
provide pre-shipment inspection services, an alleged breach of a 1996 
Switzerland-Pakistan BIT. An ICSID panel met in Paris in February to 
consider the case but reserved its judgement. 

Italian construction firm Impregilo, which headed the consortium to 
build the controversial Ghazi Barotha dam, part of a major hydroelectric 
project, wants $450 million. Using a Pakistan-Italy BIT, Impregilo 
claims Pakistan’s Water and Power Development Authority (WAPDA) 
seriously breached its contractual commitments. Turkish company Bayinder 
filed a similar-sized claim over termination of its motorway 
construction contract. Like many other BITs, the definitions of 
“investment” and other terms in the agreements which Pakistan signed 
are very broad and afford investors ample opportunity to claim against a 
frighteningly wide range of actions or omissions by the government and 
its agencies. 

This March, an UNCITRAL tribunal awarded $353 million to Central 
European Media (CME) in its dispute with the Czech Republic under a 
Netherlands-Czech Republic BIT. CME claimed that the Czech Republic’s 
Media Council had deprived it of its stake in TV Nova, a Prague English 
language TV station. It claimed that the government failed to ensure CME 
fair and equitable treatment, and failed to accord full protection and 
security to CME’s investment, and that its acts constituted measures 
tantamount to expropriation of its investment. The Czech Republic faces 
other disputes. Saluka Investments, a Dutch subsidiary of Japanese 
banking corporation Nomura has filed an arbitration claim seeking over 
$1 billion, claiming discriminatory treatment relating to its investment 
in the privatised IPB Bank which collapsed in 2000. Several other 
disgruntled foreign companies announced their intention to file 
international cases against the Czech government following the CME 
ruling. 

Domestic courts can be sidestepped by investors’ recourse to 
international arbitration panels. ICSID and UNCITRAL only allow for the 
investor and government parties to the dispute to have legal standing. 
The public has no right to listen to proceedings or view evidence or 
submissions. Both bodies require only minimal disclosure of the names of 
the parties and a brief indication of the subject matter. That makes 
such disputes very difficult to track, let alone mobilise around. There 
is little incentive for investors to settle disputes amicably given the 
highly favourable outcomes for corporations which have initiated 
proceedings under such agreements. 

Who will pay these massive costs? International business law firms which 
specialize in such cases are laughing all the way to the bank. The Czech 
Republic spent an estimated $10 million in legal fees alone over the CME 
dispute. Although the government is appealing the ruling, some officials 
propose to hike value-added tax on goods and services so that all 
taxpayers would absorb the costs. Regardless of how ICSID rules, these 
cases will cost Pakistan millions of dollars. Ordinary people will 
shoulder these costs which will increase their indebtedness to 
international financial institutions, while compliance will be linked to 
future foreign aid commitments and loans. 

Alongside this proliferation of BITs, many bilateral free trade 
agreements (FTAs) contain similar investment provisions, besides 
expansive coverage of sectors like services, intellectual property, 
government procurement, and agriculture. Many of these provisions go 
well beyond WTO commitments. 

With “fast track” Trade Promotion Authority under its belt, the Bush 
Administration is aggressively pursuing bilateral trade and investment 
agreements. It wants to stitch up bilateral and regional deals just as 
the EU has been doing, to secure greater access and control for US 
companies. 

“Just as modern business markets rely on the integration of networks, 
we need a web of mutually reinforcing regional and bilateral trade 
agreements to meet diverse commercial, economic, developmental and 
political challenges”, said Robert Zoellick, US Trade Representative, 
in his March 2003 “Overview and the 2003 Agenda”. “They also promote 
the broader U.S. trade agenda by serving as models, breaking new 
negotiating ground, and setting high standards….” 


Early this month, the US and Chile signed an FTA. A similar deal with 
Singapore has already been signed. FTAs with Morocco and Australia are 
in the pipeline. 

The Bush administration is “rewarding” countries like Singapore, 
Morocco and Australia for support in the “war on terror” by 
negotiating bilateral FTAs. Some believe that the US-Chile FTA signing 
was delayed over Washington’s displeasure at Santiago’s lack of 
support on Iraq. In New Zealand last month, opposition MPs and business 
leaders crowed that Helen Clark’s criticism of the invasion of Iraq had 
cost the country an FTA with the US – though Zoellick’s statements 
indicated it had more to do with objections from the powerful US farming 
lobby. 

While an FTA with a “moderate” Muslim country like Morocco offers much 
political capital for the USA, US corporations are open about their own 
capitalistic interests. The US-Morocco FTA Coalition, comprising US 
corporations and pro-free trade organisations, wants to lock in Morocco’
s economic reforms and get access to Morocco’s markets, including its 
telecommunications, tourism, energy, entertainment, transport, financial 
services and insurance sectors. It wants a tighter Moroccan intellectual 
property regime, and better market access for US agribusiness. 

In FTA negotiations with Australia, the US seeks the removal of all 
restrictions on investment like Australia’s Foreign Investment Review 
Board and limits on foreign investment in airlines, media and 
telecommunications. US negotiators, urged on by American pharmaceutical 
industries, want to get rid of Canberra’s Pharmaceutical Benefits 
Scheme which sets price controls for many prescription medicines. US 
drug companies want more profits from higher pricing and full market 
access for their products. These are some of the “rewards” for John 
Howard’s loyal support for the US war on Iraq! 

The US-Chile FTA aims to add momentum to FTAA negotiations and counter 
growing opposition from a number of governments and social movements to 
the proposed agreement. 

The Chile and Singapore FTAs with the US have “NAFTA-plus” broad 
definitions of investment which throw the door wide open for disgruntled 
investors to take a case to a dispute tribunal. Intellectual property 
provisions go even further than the WTO’s TRIPS (Trade-Related aspects 
of Intellectual Property rights) agreement, severely limiting the 
grounds for allowing use of compulsory licensing of medicines, and 
effectively extending the 20-year term of drug company patent monopolies 
by an additional five years, threatening access to affordable medicines, 
not least HIV/AIDS drugs. 

Both agreements impose alarming new limits on the use of capital 
controls. Kavaljit Singh, Director of Delhi’s Public Interest Research 
Centre, argues that Chile’s controls on capital inflows have helped 
insulate it against financial crises. It “stands to reason that the 
probability of occurrence of a financial crisis in Chile and Singapore 
would increase manifold with the removal of capital controls as 
envisaged in the bilateral trade agreements with the US.“ (Trading Away 
Capital Controls, Asia-Europe Dialogue, 13/04/03) 

Even free traders have slammed this aspect of these FTAs. Jagdish 
Bhagwati and Daniel Tarullo wrote: “The intention of the Bush 
administration to use these two agreements as "templates" for other 
trade agreements, possibly including the Doha round, means that 
acceptance of the capital control provisions could engender a trade 
policy that causes far-reaching damage. The prohibition on capital 
controls has the makings of a US foreign policy debacle. Imagine that a 
government imposes short-term capital controls in order to manage 
financial problems. Compensation will ensue, but only for American 
investors. The citizens of the developing country will then see a rich 
US corporation or individual being indemnified while everyone else in 
the country suffers from the crisis. One would be hard-pressed to think 
of a better prescription for anti-American outrage.” (A Ban On Capital 
Controls Is A Bad Trade-Off, Financial Times, 17/03/03) 

When it comes to bilateral trade and investment agreements, we can’t 
afford to be Sleeping Beauties. It’s time to get ugly about them.