TPPA: Leaked investment chapter confirms CAP’s fears
Online Publication Date: 19 June 2012
Malaysia has since October 2010 been negotiating a Trans-Pacific
Partnership Agreement (TPP) with the United States and seven other countries
involved in the negotiations including Australia, Brunei, Chile, New Zealand,
Peru, Singapore and Vietnam.
On June 13, the proposed investment chapter for the TPP was
leaked and posted online by the Washington-based non-governmental organisation
After perusing the leaked document, the CAP feels compelled
to express its grave concern at some of its provisions.
The leaked text shows that Malaysia has agreed to provisions
that give extended rights and privileges to foreign investors and private
corporations and limit the power of our government to regulate how those firms
operate within our borders. This is tantamount to placing foreign corporate
interests above the welfare and interests of our own citizens.
The leaked investment chapter confirms the fears expressed
by CAP in a letter to the press in December 2011 that the TPP would create a
two-track legal system that would empower foreign firms to skirt our domestic
courts and directly sue our government in foreign arbitration tribunals for
taxpayer-funded monetary compensation if they deem that the domestic financial,
health, environmental, land use and other laws put in place to regulate their
investments have harmed their investments.
This means the Malaysian government has agreed that if an
investor feels his/her rights have been violated by a law, regulation, policy
or programme – even if it were put in place in the interests and welfare of the
citizenry – the investor can sue the Malaysian government at an international
tribunal, for unlimited monetary compensation and interest.
As revealed in Section B of the leaked text, furthermore,
these tribunals would not meet standards of transparency, consistency or due
process common to any of the TPP countries’ domestic legal systems or provide
fair, independent or balanced venues for resolving disputes between sovereign
nations and private investors. The tribunals would be staffed by private sector
lawyers that rotate between acting as ‘judges’ and as advocates for the
investors suing the governments.
It is instructive to note that while all the other TPP
countries agreed to this oppressive provision, Australia refused to do so. If
the Australian government could reject this provision, why could not the
Malaysian government have done the same?
The leaked investment chapter reveals that Malaysia has
already agreed to give foreign companies a number of extensive rights
·A broad definition of ‘investment’ that includes
protecting: existing investments in Malaysia, shares and derivatives,
public-private partnerships, intellectual property rights, mining and
manufacturing licences and permits and expected future profits of other TPP
·Abiding by the principle of ‘fair and equitable
treatment’ (FET), which has been interpreted by these international tribunals
to mean that regulations cannot be changed and no new regulations can be
imposed on investors from TPP countries for as long as they are in Malaysia.
This would greatly restrict Malaysia’s ability to continue developing its
regulations including in response to new threats such as climate change and
financial crises or to new information (on, for example, the toxicity of a
chemical or food ingredient).
·An ‘expropriation’ provision which requires
governments to give fair market value compensation and interest for any
government actions that have been found to reduce the value of the investment
from other TPP countries, including reducing the investor’s profits.
·A ‘Most-Favoured Nation’ provision that requires
Malaysia to provide the protection it has given foreign investors in other
treaties to TPP investors as well, unless TPP governments including the US
agree to allow it as an exception. This would circumvent any exceptions that
are put into the TPP by allowing other treaties which do not have these
exceptions to override the TPP.
·Binding state and local governments and
authorities to the commitments made by the Malaysian government.
The above means, for example, that in the area of tobacco
control (an area where CAP has been active for many years), tobacco companies
could challenge Malaysia’s regulations (as they have already been doing, using
equivalent treaty provisions to sue Uruguay and Australia for their tobacco
control measures). Other than the damages an international arbitral panel may
award against Malaysia that may amount to hundreds of millions of dollars, even
just the prospect of such suits would have a ‘chilling effect’ on regulations including
tobacco control measures seeking to regulate the production, distribution,
marketing or consumption of tobacco- and tobacco-linked products.
Given all the above, CAP calls for:
·The TPP negotiations to be suspended until the
texts and all relevant documents have been disclosed for public scrutiny by the
Malaysian public, and a publicly-disclosed and comprehensive cost-and-benefit
analysis has been carried out over the areas covered by the TPP.
·The investment chapter to be removed from the
However, if the government persists in negotiating an
investment chapter in the TPP, CAP calls on the government to:
·Insist on being exempted from investor-to-state
dispute settlement, as Australia has in the TPP
·Not agree to the investment chapter until the issues
above have been effectively fixed in the main text of the investment chapter.
The Ministry of International Trade and Industry to clarify
whether it is asking for:
·restrictions on performance requirements to
apply to all investments, even those by non-TPP countries
·restrictions on performance requirements to
extend to services; andrestrictions on technology transfer