The EU-Myanmar IPA threatens emerging democracy

Ewan Cameron questions why the EU-Myanmar Investment Protection Agreement is being sold as common sense.

Recently, the press had a field day with the leaked footage of British foreign minister Boris Johnson attempting to recite Rudyard Kipling’s colonial-era Road To Mandalay in the grounds of Shwedagon Paya (it could have been worse). While such gaffes that call to mind the bad old days of colonialism are in bad taste, more pertinent stories about the West and its neo-colonial endeavors in Myanmar are going largely unreported. Since the so-called transition to democracy— a transition often misunderstood and much exaggerated— Myanmar has been the centre of a “gold rush”, as businesses from Asia and the West hope to make money from what has been called the “Asia’s last economic frontier”.

The EU accounts for around 10% of foreign direct investment in Myanmar and is keen to raise that number with its planned Investment Protection Agreement (IPA), a wide-ranging agreement on trade that has been in-negotiation in recent years. Yet, it has raised considerable concerns from civil society groups about the lack of transparency in these negotiations, and the potential negative impacts of the treaty. In 2016, over 500 CSOs jointly wrote to the EU commissioner, Cecilia Malmström, expressing their frustration with a “consultation process” run by consulting agency “Development Solutions”— one that amounted to little more than a few “workshops” in Yangon and a scant questionnaire. “…[O]ne key question is missing: the question whether we at all want an IPA”, the letter states.

A key part of the IPA is that it would bring the Myanmar government under an Investor-State Dispute Settlement (ISDS) regime in regards to its dealings with EU companies. ISDS is a mechanism which allows investors to sue governments in independent arbitration courts, and its inclusion in recent multilateral treaties such as the Trans-Pacific Partnership have opened up a public debate about both its effectiveness and fairness towards developing countries.

In theory, an ISDS helps give confidence to foreign investors by protecting them against unstable governments that might renege on investment agreements. However, in practice, the mechanism has often been used to punish governments seeking to regulate industries, even if the regulation is in the interests of public safety. In 1997, over concerns about public health, the Canadian government effectively banned the chemical MMT. Following this, they were challenged by Ethyl, a US corporation that manufactured MMT in Canada. Ethyl argued that banning MMT violated the terms of the NAFTA agreement. Rather than go to an international tribunal, the Canadian government ended up repealing the ban and paying $13 million to Ethyl in a settlement.

In 2016, the Ukrainian government was sued for $820 million by the US pharmaceutical company, Gilead. This was made possible by a 1994 US-Ukraine bilateral treaty which included an ISDS. Gilead, which was selling the anti-hepatitis C drug, Sofosbuvir, in the country was angered by the introduction of cheaper generic versions of the drug and wanted Ukraine to preserve its monopoly within the country. In early 2017, Gilead withdrew the threat and came to an agreement with Ukraine: They would lower their price, but competitors offering lower prices would be banned.

ISDS, once in place, effectively acts to put companies above the law, and this has chilling effects on democracy and on the ability of countries to legislate against and reform damaging corporate behavior. In Indonesia, following the dictatorial reign of Suharto, the government enacted laws against open-pit mining. A recent investigation by Buzzfeed News found that an Australian mining company, Newcrest, made veiled threats to the Indonesian government, stating that unless they were able to continue mining, they would bring in international tribunals. This wasn’t an empty threat as the country had already suffered a $261 million loss at one of these tribunals, when Indonesia was forced to pay a US energy company, Karaha Bodas, for loss of potential future profits after the government closed down a power plant project due to lack of funds.

Concerns over ISDS were a focal point of an open letter in 2016 from almost 200 local CSOs in Myanmar calling for a suspension of the EU-Myanmar IPA: “Inclusion of an investor-state dispute settlement mechanism in the EU-Myanmar IPA will seriously hamper any initiatives for equitable and sustainable development by laying Myanmar wide open to multimillion dollar law suits by foreign investors should the governments introduce new and tighter regulation to protect public health, access to water, access to public services, degradation of the environment and regulation supporting a sustainable peace in Myanmar.”

Yet, the EU seems determined to push through the law. In an interview earlier this year, the eagerness of resident EU Ambassador, Roland Kobia, to see the deal through seemed to be almost tangible as he warned that “Myanmar needs to get its act together” or investors would go elsewhere. Would they really though? There’s no real evidence that such agreements have any effect on the number of investments at all. Even business-centric publications such as the Financial Times have begun to question the usefulness of ISDS in bilateral treaties.

In September, a consortium of Myanmar and international NGOs jointly launched a report Myths and risks of the EU-Myanmar Investment Protection Agreement”. Among other valuable insights, the report showed how the idea that the treaty would encourage investment was without solid grounding in evidence and how claims that it would help workers rights were mere aspirations. In fact, the opposite could be true, as there is already a precedent for companies suing governments for increasing the minimum wage, for example. It also outlined the potential chilling effects of the agreement on democratic and judicial reform, and the peace process, as well as the continued concerns about a lack of transparency.

Myanmar knows what it’s like to have corporations play the bully. The British invasion of Mandalay in 1885, that deposed Thibaw, was kick-started by the actions of the Bombay Burmah Company, which misled the Burmese government about how much teak it was extracting and underpaid its employees. When the Burmese sanctioned them for this, the British suggested arbitration (run by the British, of course), a proto-ISDS, if you will. The arbitration never happened and the rest is history. It was a convenient excuse for the British to invade, yet while the West isn’t going to march armies up the Irrawaddy anymore, it still pays to be cautious when foreign investors come knocking.

Back to the current day, on October 2nd it was reported that the IPA had been suspended, due to the ongoing unrest in Rakhine State. While the reprieve is welcomed, the cynical will see it as merely optics rather than principles. When the EU inevitably resumes work on the IPA, will it finally listen to civil society?

Ewan Cameron is a teacher and writer living in Myanmar. He currently works for the Kachinland School of Arts and Sciences, part of the Humanity Institute.