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FTA will make foreigners overly powerful

 | October 19, 2011

Foreign investors can bypass local laws and punish the government if the latter stops them from making profits under a FTA, says DAP's Charles Santiago.

KUALA LUMPUR: Local companies may be able to hold the government to ransom if Malaysia signs a Free Trade Agreement with the European Union (EU).

Klang MP (DAP) Charles Santiago said that the EU was forcing Malaysia to accept a “state-investor dispute mechanism”, which he said would protect foreign investors’ interests here.

Coming back as foreign investors, local companies, he warned, would be able to bypass local law and take the government to an international court if the former was challenged.

“Under the liberalisation of 17 sub-sectors, chances are Malaysian companies are going to go overseas and register in other countries, and come back as a foreign company,” said Santiago.

He said that foreign companies would be even able to use foreign law to punish the Malaysian government.

“If a foreign company is unhappy with the Malaysian government on healthcare for example, they can bypass the Malaysian system and go to an international arbitration panel,” he said.

Santiago then cited cigarette company, Philip Morris, as an example.

He said that on Feb 19, 2010, the Swiss-based Philip Morris filed an arbitration request against Uruguay with the International Centre for Settlement of Investment Disputes (ICSID).

Malaysia’s sovereignity affected

At the time, the company allegedly argued that Uruguayan tobacco regulations violated several provisions of the Switzerland-Uruguay bilateral investment treaty (BIT).

These regulations included the placing of gruesome pictures over the consequences of smoking, and health warning labels on cigarette packs.

“They used the Swiss law to go after Uruguay,” Santiago said, adding that more than 300 cases have been referred to international arbitration since the 1990s.

Governments in turn, he added, have had to pay millions to foreign investors as a result.

Malaysia’s sovereignity, Santiago said, would be affected and that Parliament would have no power over the matter.

He said that the government should follow Australia’s example and oppose greater rights for foreign companies, as well as the inclusion of the state-investor dispute mechanism.

Asked why the Malaysian government would agree to such an idea, Santiago said: “I don’t know. You have to ask them.”

He claimed that Malaysia was currently in its fifth round of FTA negotiations with the EU in KL today, but was unable to disclose the location of these talks.


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