by MANUEL PEREZ-ROCHA
Pakistan is the latest to start withdrawing from international treaties that give corporations the power to sue governments over environmental and public interest regulations.
Mexican President Andrés Manuel López Obrador, known as AMLO, has often criticized the neoliberal economic model centered on free trade, privatization, and deregulation. If his administration truly wishes to shake off the yoke of neoliberalism and reclaim national sovereignty, one step they should take is to follow other countries that are rejecting excessive powers for foreign investors.
Pakistan, for example, is about to repeal the majority of its bilateral investment treaties (BITs), agreements that restrict governments’ ability to design and create public policies and regulations favoring the public interest.
BITs, as well as the investment chapters in free trade agreements, define countries’ obligations to provide protections and privileges to foreign investors. Most controversial is the obligation to give these private investors the power to sue governments in supranational courts, such as the World Bank’s International Centre for Settlement of Investment Disputes (ICSID).
This allows corporations to claim “compensation” when regulations or policies in favor of the national public interest reduce their expected earnings. The renegotiated NAFTA, now called the United States-Mexico-Canada Agreement, preserved this powerful neocolonial tool for disputes between the United States and Mexico.
Pakistan and Germany signed the world’s first BIT in 1959. Today, beleaguered by a lawsuit of more than $4 billion filed by an Australian mining company, Pakistan has decided to follow the path of many countries that are reforming their “protection” systems (a euphemism for privilege) for transnational investments. Argentina, Ecuador, India, Indonesia, and South Africa have also taken actions to free themselves from these anti-democratic dispute resolution systems.
Mexico is muzzled by rules protecting foreign investors under 29 BITs and 11 trade agreements, and it is one of the most-sued countries in the world. The full investor protections in NAFTA are still in effect for three years. Beyond that period, the current USMCA will still allow investor-state lawsuits between the United States and Mexico related to government contracts connected to the oil and gas, power generation, telecommunications, transportation, and infrastructure sectors. (Cases regarding other types of disputes must first go through domestic courts.)
Mexico is also bound by investor protection rules in the Trans-Pacific Partnership and very probably (because the texts being negotiated are secret) in the renewed Free Trade Agreement between Mexico and the European Union. That deal is expected to include a chapter on investment protection that would substitute for Mexico’s BITs with various European countries.
These treaties offer foreign investors immense privileges, including the possibility of protecting themselves in supranational courts when governments, such as the AMLO administration in this instance, demand “compensation” for “lost profits” of up to billions of dollars.
We are already seeing it happening with First Majestic Silver, which just announced it will sue Mexico in the ICSID under NAFTA. The company is retaliating against the Mexican government for claiming that the Canadian mining company owes more than $500 million in taxes.
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