The Multilateral Agreement on Investment (MAI) was a draft agreement negotiated in secret between members of the

Organisation for Economic Co-operation and Development The Organisation for Economic Co-operation and Development (OECD; french: Organisation de coopération et de développement économiques, ''OCDE'') is an intergovernmental organisation with 38 member countries, founded in 1961 to stimulate e ...

(OECD) between 1995 and 1998. It sought to establish a new body of universal investment laws that would grant corporations unconditional rights to engage in financial operations around the world, without any regard to national laws and citizens' rights. The draft gave corporations a right to sue governments if national health, labor or environment legislation threatened their interests. When its draft became public in 1997, it drew widespread criticism from

civil society Civil society can be understood as the "third sector" of society, distinct from government and business, and including the family and the private sphere.France announced in October 1998 that it would not support the agreement, effectively preventing its adoption due to the OECD's consensus procedures.

Background

International direct

investment Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort. In finance, the purpose of investing is ...

has been taking place in various forms and to different degrees for over a century. Attempts to establish a framework for the protection of foreign investments dates back to the 1920s, most notably negotiating a

League of Nations The League of Nations (french: link=no, Société des Nations ) was the first worldwide intergovernmental organisation whose principal mission was to maintain world peace. It was founded on 10 January 1920 by the Paris Peace Conference that ...

draft convention. Starting from the second half of the twentieth century, the investment protection was developed through the bilateral investment treaties (BIT), which are signed between two countries and which state the desired conditions under which investment can take place between them. The first BIT, between

West Germany West Germany is the colloquial term used to indicate the Federal Republic of Germany (FRG; german: Bundesrepublik Deutschland , BRD) between its formation on 23 May 1949 and the German reunification through the accession of East Germany on 3 ...

and

Pakistan Pakistan ( ur, ), officially the Islamic Republic of Pakistan ( ur, , label=none), is a country in South Asia. It is the world's fifth-most populous country, with a population of almost 243 million people, and has the world's second-lar ...

, was signed in 1959 and their numbers have grown steadily since then, although research suggests that BITs do little to increase foreign investment. In 1965, the International Centre for Settlement of Investment Disputes (ICSID) was established in the framework of the

United Nations The United Nations (UN) is an intergovernmental organization whose stated purposes are to maintain international peace and security, develop friendly relations among nations, achieve international cooperation, and be a centre for harmonizi ...

, and in 1967, the OECD prepared the Draft Convention on the Protection of Foreign Property although this was not adopted. The number of bilateral investment agreements increased rapidly during the 1990s as countries and

investors An investor is a person who allocates financial capital with the expectation of a future return (profit) or to gain an advantage (interest). Through this allocated capital most of the time the investor purchases some species of property. Typ ...

sought more

regulation Regulation is the management of complex systems according to a set of rules and trends. In systems theory, these types of rules exist in various fields of biology and society, but the term has slightly different meanings according to context. For ...

for security, certainty and mobility for their investments after it became clear that the

Uruguay Round The Uruguay Round was the 8th round of multilateral trade negotiations (MTN) conducted within the framework of the General Agreement on Tariffs and Trade (GATT), spanning from 1986 to 1993 and embracing 123 countries as "contracting parties". The R ...

's Agreement on

Trade Related Investment Measures The Agreement on Trade-Related Investment Measures (TRIMs) are rules that are applicable to the domestic regulations a country applies to foreign investors, often as part of an industrial policy. The agreement, concluded in 1994, was negotiated ...

(TRIMS),

Agreement on Trade-Related Aspects of Intellectual Property Rights The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) is an international legal agreement between all the member nations of the World Trade Organization (WTO). It establishes minimum standards for the regulation by nat ...

(TRIPS) and

General Agreement on Trade in Services The General Agreement on Trade in Services (GATS) is a treaty of the World Trade Organization (WTO) which entered into force in January 1995 as a result of the Uruguay Round negotiations. The treaty was created to extend the multilateral trading sy ...

(GATS) addressed only part of investment-related concerns and did not provide enough security for investors nor strong controls on host governments to regulate

multinational corporations A multinational company (MNC), also referred to as a multinational enterprise (MNE), a transnational enterprise (TNE), a transnational corporation (TNC), an international corporation or a stateless corporation with subtle but contrasting senses, i ...

. In addition to these instruments, in 1992 the

World Bank The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Interna ...

adopted Guidelines on the Treatment of Foreign Direct Investment. In 1994 the

Energy Charter Treaty The Energy Charter Treaty (ECT) is an international agreement that establishes a multilateral framework for cross-border cooperation in the energy industry, principally the fossil fuel industry. The treaty covers all aspects of commercial energy ...

provided an example of a multilateral investment agreement, though limited to the energy sector.

Noam Chomsky Avram Noam Chomsky (born December 7, 1928) is an American public intellectual: a linguist, philosopher, cognitive scientist, historian, social critic, and political activist. Sometimes called "the father of modern linguistics", Chomsky i ...

argued that the OECD, as an organization made up solely of rich countries, was more susceptible to direct influence by transnational corporate forces than alternative fora with more universal membership such as

United Nations Conference on Trade and Development The United Nations Conference on Trade and Development (UNCTAD) is an intergovernmental organization within the United Nations Secretariat that promotes the interests of developing countries in world trade. It was established in 1964 by the ...

(UNCTAD) and the

World Trade Organization The World Trade Organization (WTO) is an intergovernmental organization that regulates and facilitates international trade. With effective cooperation in the United Nations System, governments use the organization to establish, revise, and e ...

(WTO).

Purposes and provisions

While authorizing the negotiations, the OECD Ministerial Council aimed to reach a "broad multilateral framework for international investment with high standards for the liberalization of investment regimes and investment protection and with effective dispute-settlement procedures". The aim was to create more consistent, secure and stable investment conditions and to regulate investment in a more uniform, transparent and enforceable manner. Although the agreement was to be negotiated between the member states, the intention was to have an open agreement to which non-OECD members could accede on a negotiated basis. According to MAI supporter Sergio Marchi, who was Canada's Minister of International Trade at the time, one of the main purposes of the agreement was to eliminate the "patchwork" of investment rules enshrined in the then-1300+ bilateral investment treaties. Contrary to many critics, he argued that the MAI would help prevent a "

race to the bottom Race to the bottom is a socio-economic phrase to describe either government deregulation of the business environment or reduction in corporate tax rates, in order to attract or retain usually foreign economic activity in their jurisdictions. While ...

" that would undermine high standards of Canadian regulation. More specifically, the agreement would: * Minimise the diverse state regulations in governing the conditions under which investments by foreign corporations could take place. (In this connection, the agreement embodied acceptance of a compliance regime under which liberalization must proceed forward with no ability to be wound back — the so-called ''

ratchet effect A ratchet effect is an instance of the restrained ability of human processes to be reversed once a specific thing has happened, analogous with the mechanical ratchet that holds the spring tight as a clock is wound up. It is related to the pheno ...

''. This would be enforced by so-called ''

rollback In political science, rollback is the strategy of forcing a change in the major policies of a state, usually by replacing its ruling regime. It contrasts with containment, which means preventing the expansion of that state; and with détente ...

'' and ''standstill'' provisions, to ensure that investors would have access to markets. These provisions required nations to eliminate regulations that violated MAI provisions — either immediately or over a set period of time — and to refrain from passing any such laws in the future.)Mechanisms for standstill, rollback and listing of country specific reservations
Note by MAI Negotiating Group chairman, OECD, 15 February 1996 * Enable compensation to corporations for proven unfair or discriminatory investment conditions causing loss of profit. * Allow states and corporations recourse to international

arbitration Arbitration is a form of alternative dispute resolution (ADR) that resolves disputes outside the judiciary courts. The dispute will be decided by one or more persons (the 'arbitrators', 'arbiters' or 'arbitral tribunal'), which renders the ' ...

(for instance, through the International Centre for Settlement of Investment Disputes) to settle any disputes arising under the agreement, instead of national courts in the host state. The MAI was supported by both the Business and Industry Advisory Committee to the OECD (BIAC) and the

Trade Union Advisory Committee to the OECD The Trade Union Advisory Committee to the OECD (TUAC) is the interface of the Organisation for Economic Co-operation and Development (OECD) with organized labour. TUAC has 59 affiliated trade union centres in 31 OECD countries, representing more ...

(TUAC). While BIAC was interested in stable and consistent treatment of investment, TUAC was interested on setting standards on employment and

industrial relations Industrial relations or employment relations is the multidisciplinary academic field that studies the employment relationship; that is, the complex interrelations between employers and employees, labor/trade unions, employer organizations, a ...

Negotiations

The negotiations on the Multilateral Agreement on Investment were formally launched by the OECD's Ministerial Council in May 1995 and they commenced in September 1995. The negotiations were carried out by a high-level negotiating group consisting of officials from the OECD member states, but working outside the OECD committee structure consulting with the non-member countries. The chairperson of the negotiating group was Frans Engering (Netherlands) and vice-chairpersons were Al Larson (United States) and A. Saiki (Japan). The target deadline to finish the negotiations, set by the OECD Ministerial Council, was mid-1997. There was little public awareness of the details of MAI negotiations until a draft of the agreement was leaked in March 1997. The leaked material prompted criticism from different NGOs globally. As a result, the negotiations failed in 1998 when first France and then other countries successively withdrew after pressure from a global movement of NGOs, citizens' groups and a number of governments of developing countries. In April 1998, the negotiations were formally suspended for six months. On 3 December 1998, the OECD announced that "negotiations on the MAI are no longer taking place".

Protest movement

Multinational corporations (MNCs) enjoy enormous structural and resource advantages over employees and citizens. Yet when the MNCs and major governments tried to expand those advantages through the Multilateral Agreement on Investment (MAI), they were stymied by a global alliance of activists. MAI opponents made heavy use of electronic mail and the World Wide Web in raising the alert, sharing information and coordinating actions. They worked collaboratively, flexibly and imaginatively towards their goals while MNCs and governments were working secretively and within more traditional hierarchical models.

The international protests against the MAI were the first example of such mass-activism to deploy the

Internet The Internet (or internet) is the global system of interconnected computer networks that uses the Internet protocol suite (TCP/IP) to communicate between networks and devices. It is a '' network of networks'' that consists of private, pub ...

. The internet was central both in gathering information and in promulgating critical materials among members of a vast worldwide network. The movement's main argument was that the most influential

mass media Mass media refers to a diverse array of media technologies that reach a large audience via mass communication. The technologies through which this communication takes place include a variety of outlets. Broadcast media transmit information ...

and

politician A politician is a person active in party politics, or a person holding or seeking an elected office in government. Politicians propose, support, reject and create laws that govern the land and by an extension of its people. Broadly speaking, a ...

s had vested interests in the MAI. Even their opponents ruefully acknowledged that the activists possessed highly qualified, eloquent analysts and leaders—and were able to use the new internet technology to devastating effect. French MEP Catherine Lalumière stated: "These organisations have refined and diffused to all countries an anti-MAI position which is now expressed in similar terms throughout the diverse countries of the OECD."

Active opposition

According to Theodore H. Cohn in ''Global Political Economy Theory and Practice'' (2005), " e most effective opposition to the MAI was launched by a wide-ranging coalition of civil society NGOs. These NGOs argued that the MAI would threaten protection of

human rights Human rights are moral principles or normsJames Nickel, with assistance from Thomas Pogge, M.B.E. Smith, and Leif Wenar, 13 December 2013, Stanford Encyclopedia of PhilosophyHuman Rights Retrieved 14 August 2014 for certain standards of hum ...

labor Labour or labor may refer to: * Childbirth, the delivery of a baby * Labour (human activity), or work ** Manual labour, physical work ** Wage labour, a socioeconomic relationship between a worker and an employer ** Organized labour and the labour ...

and

environmental standard Environmental standards are administrative regulations or civil law rules implemented for the treatment and maintenance of the environment. Environmental standards are typically set by government and can include prohibition of specific activities, ...

s, and least developed countries. A particular concern was that the MAI would result in a "race to the bottom" among countries willing to lower their labor and environmental standards to attract foreign investment. The origin of organised opposition was traced by Katia Tieleman in her 2000 UN case study: Using a variety of websites, NGOs mobilized a strong and diverse opposition composed of human rights groups, labor and environmental groups, and consumer advocates. p. 350

Arguments

MAI opponents pointed to a perceived threat to

national sovereignty Westphalian sovereignty, or state sovereignty, is a principle in international law that each state has exclusive sovereignty over its territory. The principle underlies the modern international system of sovereign states and is enshrined in the ...

and democracy and argued that it would involve participating nations in a "race to the bottom" in environmental and labor standards. The MAI prompted criticism that it appeared to establish a new body of universal investment laws to guarantee corporations excessive powers to buy, sell and undertake financial operations all over the world, severely diluting national laws, e.g., on environmental protection, regulation of labour standards and human rights established in developed countries. By their arguments, the draft proposed a

North American Free Trade Agreement The North American Free Trade Agreement (NAFTA ; es, Tratado de Libre Comercio de América del Norte, TLCAN; french: Accord de libre-échange nord-américain, ALÉNA) was an agreement signed by Canada, Mexico, and the United States that crea ...

-style

investor-state dispute settlement Investor-state dispute settlement (ISDS) or investment court system (ICS) is a system through which countries can be sued by foreign investors for certain state actions affecting foreign direct investment (FDI). This system most often takes the ...

tribunal in which corporations could sue governments if legislation (e.g., for national health, labor or environment), threatened their interests or were considered to expropriate actual or potential assets and/or profits. Mark Vallianatos, of

Friends of the Earth Friends of the Earth International (FoEI) is an international network of environmental organizations in 73 countries. The organization was founded in 1969 in San Francisco by David Brower, Donald Aitken and Gary Soucie after Brower's split with ...

, argued that: * The MAI would restrict governments' ability to limit the participation of foreign multinationals in industries. "For example," he wrote, "the Philippines currently bans foreign investment in rural banking, and Honduras limits foreign investors in forestry to a minority stake". These restrictions would not be acceptable within the MAI. * The agreement would establish the principle of "national treatment" (in which government must treat foreign companies as favorably as domestic companies) as the norm for international investment. Indeed, in some cases, foreign corporations might have stronger protections than domestic investors. "The MAI bars many types of performance requirements, or conditions, even if those conditions are imposed on local companies. Examples of forbidden conditions include requiring investors to form a partnership with a local company and requiring a minimum number of local employees—the types of policies governments use to help ensure that local people benefit from foreign investment." * "The MAI matters because its rules can be enforced. If a foreign investor thinks a country where it has invested is violating the MAI, the investor has a choice: to complain to its own government, which can take the host country to binding international arbitration, or to directly challenge the host country. In either case, the arbitration process is closed.

Some component country campaigns

Canada

Contributors to the MAI-NOT newsgroup, including

Maude Barlow Maude Victoria Barlow (born May 24, 1947) is a Canadian author and activist. She is a founding member of the Council of Canadians, a citizens' advocacy organization with members and chapters across Canada. She is also the co-founder of the Blue ...

, mounted a campaign with the active backing of

the Council of Canadians The Council of Canadians is a Canadian non-profit organization that advocates for clean water, fair trade, green energy, public health care, and a vibrant democracy. The organization is headquartered in Ottawa, Ontario with regional offices in ...

which had earlier opposed the 1994

(NAFTA) between the USA, Canada and Mexico. In Montreal, on May 25, 1998, the Montreal Conference on Globalized Economies was nonviolently blockaded for five hours by hundreds of activists in what was called Operation SalAMI, based on the French acronym of the proposed agreement, AMI, referring not only the sausage, but also to a "dirty friend". Operation SalAMI demanded that Canada withdraw from the negotiations on the MAI. The presence of one key MAI player, Donald Johnston (General Secretary of the OECD) at the conference helped to focus the action, one of the three most important anti-MAI events in the world. These mobilizations on an international scale actually led to the shelving of the agreement. The award-winning documentary ''Pressure Point: Inside the Montreal Blockade'' recorded the drama of this action where 100 people were arrested.

United States

A strong campaign was led by Lori Wallach of

Public Citizen Public Citizen is a non-profit, progressive consumer rights advocacy group and think tank based in Washington, D.C., United States, with a branch in Austin, Texas. Lobbying efforts Public Citizen advocates before all three branches of the United ...

's Global Trade Watch, and a coordinated network ("50 Years is Enough') including

, the Alliance for Democracy, Witness for Peace, the

Sierra Club The Sierra Club is an environmental organization with chapters in all 50 United States, Washington D.C., and Puerto Rico. The club was founded on May 28, 1892, in San Francisco, California, by Scottish-American preservationist John Muir, who be ...

, the Preamble Center, the

Democratic Socialists of America The Democratic Socialists of America (DSA) is a left-wing multi-tendency socialist and labor-oriented political organization. Its roots are in the Socialist Party of America (SPA), whose leaders included Eugene V. Debs, Norman Thomas and Mich ...

and other groups.

Australia

In November 1997, the Australian Broadcasting Corporation's radio programme "Background Briefing" presente
the Quiet Debate
mdash;a report about the silence of the Australian government and media on an issue which was arousing fierce controversy in the United States, Britain, Canada and New Zealand. However, Australian activists, including supporters of

Pauline Hanson Pauline Lee Hanson (''née'' Seccombe, formerly Zagorski; born 27 May 1954) is an Australian politician who is the founder and leader of One Nation, a right-wing populist political party. Hanson has represented Queensland in the Australia ...

, were already studying the leaked MAI draft and corresponding with the Canadian email discussion group MAI-NOT while deciding how to organise a national campaign to link with those of other countries. In January 1998 a national "STOP MAI" coalition was formed to research issues, lobby parliamentarians and conduct public meetings. In November 1998, prior to the opening of OECD negotiations in Paris, the coalition delivered to the meeting's chairman and to the Australian prime minister a protest letter endorsed by over 500 organisations and individuals. The letter was reinforced by a prominent advertisement in ''The Australian'' newspaper on 11 November 1998.

France

France's withdrawal followed consideration of a report on the negotiations drawn up by a French MEP, Catherine Lalumière. After receiving this report, prime minister

Lionel Jospin Lionel Robert Jospin (; born 12 July 1937) is a French politician who served as Prime Minister of France from 1997 to 2002. Jospin was First Secretary of the Socialist Party from 1995 to 1997 and the party's candidate for President of France in ...

addressed the

Assemblée Nationale The National Assembly (french: link=no, italics=set, Assemblée nationale; ) is the lower house of the bicameral French Parliament under the Fifth Republic, the upper house being the Senate (). The National Assembly's legislators are known a ...

on 10 October 1998 and announced his decision to withdraw. He said the Lalumière Report had identified a number of fundamental problems with the agreement, particularly relating to matters of

. Madame Lalumière had also concluded that so many reservations were being incorporated into the agreement that any value for French investors would be limited. M. Jospin noted that, in February 1998, the French government had identified respect for cultural differences as a requirement for French support for the agreement. In particular, he was concerned that the French film industry needed protection against US imports. Of equal or greater significance was the importance accorded by Mme. Lalumière to the global protest movement which at that time she attributed to the work and influence of

NGOs A non-governmental organization (NGO) or non-governmental organisation (see spelling differences) is an organization that generally is formed independent from government. They are typically nonprofit entities, and many of them are active in h ...

: Mme. Lalumière argued, however, that France should continue to pursue further liberalisation of investment régimes though ''not'' in the OECD. "On the one hand, under these conditions it would be impossible to achieve the balancing of the concessions demanded by the firms and, on the other, the objections of the opponents would be just as fierce." France was followed by a succession of other nations including Canada and Australia whose governments had been under relentless pressure from civil society to abandon or radically revamp the MAI.

Subsequent developments

Proponents of MAI (such as the United States, Canada, and several EU members) continue to promote investment provisions similar to MAI through regional trade agreements, bilateral investment treaties, bilateral free-trade agreements and discussion at the World Trade Organization to be incorporated into the General Agreement on Trade in Services. Before the end of 1998, the UK trade minister

Brian Wilson Brian Douglas Wilson (born June 20, 1942) is an American musician, singer, songwriter, and record producer who co-founded the Beach Boys. Often called a genius for his novel approaches to pop composition, extraordinary musical aptitude, and m ...

began to announce that investment negotiations could be shifted to the WTO.

The UK Government appears to be taking a surprisingly complacent approach towards the WTO. When the MAI collapsed, then Trade Minister Brian Wilson appeared to have understood some of the concerns raised. He called for any new negotiations to start with a 'blank sheet of paper' based on objectives which should 'take full account of social and environmental concerns'. Yet despite these undertakings, the Government is pushing for the WTO to cover foreign investment according to the same principles. It is a driving force behind the EU proposal on investment. In doing so it is ignoring the widespread opposition to the MAI and the mounting evidence of the WTO's abject failings.

A senior treasury officer, cited in a 1999 Australian parliamentary report, stated that "any future work on the matter known as the MAI needed to address the OECD Ministers' requirement to protect the sovereign right to regulate and to ensure citizens were not harmed by efforts to liberalise foreign investment. There was also a need to continue to engage "civil society", and to expand participation in the process by countries that were not members of the OECD"''.'' An attempt was made to insert the investment agenda into a new "Millennium Round" of trade liberalisation talks to be hosted by the

(WTO). This led to the historic " Battle of Seattle" protest actions in November 1999. At the WTO Ministerial in

Cancún Cancún ( ), often Cancun in English (without the accent; or ) is a city in southeast Mexico on the northeast coast of the Yucatán Peninsula in the Mexican state of Quintana Roo. It is a significant tourist destination in Mexico and the seat ...

, Mexico, in September 2003, a group of more than twenty developing countries united to block the inclusion of the

Singapore issues The "Singapore issues" refers to four working groups set up during the World Trade Organization Ministerial Conference of 1996 in Singapore. These groups are tasked with these issues: transparency in government procurement, trade facilitation (cust ...

, including investments, in the

Doha Round The Doha Development Round or Doha Development Agenda (DDA) is the trade-negotiation round of the World Trade Organization (WTO) which commenced in November 2001 under then director-general Mike Moore. Its objective was to lower trade barriers ...

of trade talks. One basis of such opposition is outlined in a critical analysis prepared for Canadian universities. The OECD promotes the Declaration on International Investment and Multinational Enterprises and the

OECD Guidelines for Multinational Enterprises The OECD Guidelines for Multinational Enterprises are recommendations on responsible business conduct addressed by governments to multinational enterprises operating in or from the 50 adhering countries. The Guidelines provide non-binding princip ...

, last revised in 2011. In addition, from May 2006, the OECD has promoted a non-binding set of "good practices" for attracting investment, known as The Policy Framework for Investment (PFI).The Policy Framework for Investment (PFI)
at OECD Directorate for Financial and Enterprise Affairs (Accessed 8 June 2008.)

References

External links

* - Official drafts at various stages of the final year's negotiations * - In February 2002, the OECD released a large quantity of documents relating to the negotiations * - Non-official online translation of the report which advised the withdrawal of France from the OECD negotiations it was hosting in Paris * - at

Global Policy Forum The Global Policy Forum (GPF) is an international non-governmental organization founded in December 1993 and based in New York and Bonn (Global Policy Forum Europe). � The aim of the Global Policy Forum is to critically accompany and analyze develo ...

- a summary and update, with collection of links and resources * - (Click on Transcript) * - from UK independent journal Red Pepper * * Oh, Cecili
MAI: Citizen groups say 'no' to its shift to WTO
Third World Network ''Resurgence'' No. 99, November 1998 {{DEFAULTSORT:Multilateral Agreement On Investment OECD treaties Foreign direct investment International factor movements History of international trade Proposed treaties Commercial treaties 1990s economic history