Sleeping Lions: International investment treaties, state-investor disputes and access to food, land and water

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Today, the world’s natural resources are under increasing pressure and are often the object of important power struggles between corporations, states and communities. National governments and international institutions are responsible for shaping the environment in which these different interests operate. As foreign investments in land, water and other natural resources grow in number and magnitude, international investment treaties have become more and more relevant. The international investment legal framework prioritizes the protection of investors’rights over almost any other consideration. Will this system weaken developing countries’ capacity to regulate their food, land and water sectors and introduce policies that promote food security and poverty reduction? What lessons can be learnt from the past? This paper sets forth the principal elements of this debate through the analysis of eleven international cases of state-investor disputes.
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    Oxfam Discussion Papers Sleeping Lions International investment treaties, state-investor disputes and access to food, land and water Javier Perez, Myriam Gistelinck, Dima Karbala Oxfam May 2011 Oxfam Discussion Papers Oxfam Discussion Papers are written to contribute to public debate and to invite feedback on development and humanitarian policy issues. They are ’work in progress’ documents, and do not necessarily constitute final publications or reflect Oxfam policy positions. The views and recommendations expressed are those of the author and not necessarily those of Oxfam. For more information, or to comment on this paper, email Karolien Debel (kde@oxfamsol.be) or Matilde Sambade (msambade@intermonoxfam.org) www.oxfam.org  ‘Sleeping Lions’ Oxfam Discussion Paper, May 2011 www.oxfam.org 2 Contents Executive Summary ........................................................................................................ 3   Introduction...................................................................................................................... 4   Putting natural resources at the service of the public interest ............................... 4   Increasing pressure on food-related natural resources in developing countries 5   Climate change ................................................................................................................. 5   More people, larger cities, more demand for food ...................................................... 6   Food geopolitics ............................................................................................................... 6   Agricultural sector as new investment opportunity ................................................... 6   The importance of the regulatory framework ........................................................... 7   The national regulatory framework .............................................................................. 7   The international investment rules framework ........................................................... 8   Investment treaties’ risks – building on lessons from the past ............................ 12   Access to Land ................................................................................................................ 13   Case 1 – Sawhoyamaxa vs. Paraguay ................................................................ 13   Case 2 – Glamis Gold Ltd. Vs. USA ................................................................... 14   Access to Water .............................................................................................................. 15   Case 3 – Pacific Rim Mining Corp. vs. El Salvador ......................................... 16   Case 4 – Aguas del Tunari vs. Bolivia ............................................................... 17   Case 5 – Aguas Argentinas S.A. vs. Argentina ................................................ 18   Case 6 – Biwater vs Tanzania ............................................................................. 19   Other Cases ..................................................................................................................... 20   Case 7 – Italian and Luxembourgish Investors vs. South Africa................... 21   Case 8 – CMS Gas Transmission Company vs. Argentina ............................. 22   Case 9 – Ethyl Corporation vs. Canada ............................................................ 23   Case 10 – Cargill Incorporated vs. Mexico ....................................................... 24   Case 11 – Vattenfall vs. Germany ...................................................................... 25   Questions for debate .................................................................................................... 27   Transparency .................................................................................................................. 27   Level of detail of provisions ......................................................................................... 27   Investor responsibility ................................................................................................... 28   Cost of arbitration .......................................................................................................... 29   Protection of strategic sectors ....................................................................................... 29   Conclusion ...................................................................................................................... 30   Notes ................................................................................................................................ 32    ‘Sleeping Lions’ Oxfam Discussion Paper, May 2011 www.oxfam.org 3 Executive Summary Today, the world’s natural resources are under increasing pressure and are often the object of important power struggles between corporations, states and communities. National governments and international institutions are responsible for shaping the environment in which these different interests operate. As foreign investments in land, water and other natural resources grow in number and magnitude, international investment treaties have become more and more relevant. The international investment legal framework prioritizes the protection of investors’rights over almost any other consideration. Will this system weaken developing countries’ capacity to regulate their food, land and water sectors and introduce policies that promote food security and poverty reduction? What lessons can be learnt from the past? This paper sets forth the principal elements of this debate through the analysis of eleven international cases of state-investor disputes.  ‘Sleeping Lions’ Oxfam Discussion Paper, May 2011 www.oxfam.org 4 Introduction Managing and accessing land and water will be even more important in the coming years for ensuring food security and poverty reduction. However, these natural resources are often the object of important power struggles between corporations, states, and communities. These struggles do not take place in an institutional vacuum. On the contrary, national governments and international institutions are responsible for shaping the environment in which these different interests operate. Together, they create national and international regulations that enable foreign and domestic corporations to invest in land, water and other natural resources in their home countries and abroad. This paper focuses on one part of the international framework: international investment treaties 1 The main objective of this paper is to evaluate the international investment regulatory framework and its implications for poor people’s access to land and water in their struggle for food justice. Can the fight against hunger be won while the system is still ruled by these norms? Can the challenge to this framework represent a turning point in the fight against hunger and global injustice? Are there feasible reforms that could be made within the existing framework that would bring about tangible improvements in the balance of power between foreign investors, on the one hand, and host country governments and communities on the other? . International investment treaties are relevant because they reach almost all the corners of the globe and are gaining more and more importance as nearly the only binding instruments regulating global investment flows. Moreover, most of them enable foreign investors to initiate international legal proceedings against host states when they feel their interests are being affected. In some cases, legitimate public policy objectives have been questioned before international arbitration tribunals, forcing host states to pay hundreds of millions of dollars in compensation. According to UNCTAD, the number of international arbitration cases has grown from five in 1995 to 337 in 2010. In sections one to three both the context and the regulatory framework in which this power struggle is taking place will be described. In section four a selection of 11 cases will be presented (out of an initial selection of 26 cases of similar compiled made by Oxfam) that are relevant from the standpoint of regulating access to land and water. It’s important to note here that these cases are only the tip of the iceberg as many arbitration cases are deliberately hidden from the public or are resolved informally even before becoming official disputes, with host countries giving in to firms’ demands out of fear of the possibility of having to pay out millions in settlements. The cases selected are also very relevant because they give us a look at what may well be happening shortly, once the many current investment projects in land, water and agricultural sectors mature and conflicts between investors and host countries begin to arise. In section five, some important questions for debate are raised on changes that should take place within the international investment law system in order to ensure that it does not represent a barrier to regulation of access to natural resources in the public interest. The conclusion raises a small set of key recommendations in this respect. Putting natural resources at the service of the public interest Most human activity relies in one way or another on natural resources. In developing countries this relationship is particularly strong and relevant. A wealth of natural resources and the historical context of their economies’ development help to explain certain countries’ social, economic, and financial dependence on natural resources.
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