The Dark Side of Investment Agreements

16 December 2011
Article

Signing international investment treaties, in the hope of attracting foreign investments, has been a central strategy for governments looking to improve economic development. The less known side of this story is that by signing investment treaties, governments are giving away the sovereign right to regulate in the interest of people and the environment. They also expose themselves to the risk of spending millions in law suits that could have been used to serve public needs. It’s time that the dark side of investment is put under the spotlight.

How many times have you heard politicians, economists, business men or journalists saying, if a country wants to develop, it just need three things: investment, investment and investment! This statement follows one of the basic premises of neoliberal economics: “Foreign Direct Investment (FDI) is a pre-condition for development”. And the formula laid out was very simple:

To develop, you need growth > to grow, you need FDI > to attract FDI you need to protect investors > the only way to protect investors is by signing investment agreements.

Governments around the world adopted the recipe wholesale and Investment Treaties have mushroomed over the last 2 decades.

But the dark side of these Investment Agreements has been long overlooked.

  • Investment agreements allocate to one side (the governments) all the duties and obligations and to the other (the corporations) all the rights and protection.
  • Investment agreements allow multinationals to sue governments at secretive international arbitration tribunals when these governments try to regulate in favour of the public interest. However, governments can not take any action at international level against multinationals if they commit human rights abuses or environmental damage, or simply fail to fulfil their commitments.
  • Investment agreements grant corporations risk-free investments

Download the full article to read more (please note that the original version published on 16 December has been revised).