Multi-lateral Agreement on Investment (MAI)
The Multi-lateral Agreement on Investment (MAI) is a draft international treaty, initially for member-States of the OECD, which is scheduled to be finalised by May 1998. The objective of the MAI is to prohibit discriminatory treatment within signatory States of foreign investment relative to domestic investment, in any contestable area. Discrimination pertains to treating foreign investors less favourably than domestic investors in respect of the establishment, acquisition, expansion, operation management, maintenance, use, enjoyment and sale or other disposition of investments, regardless of whether the investment occurred before or after the signing of the treaty.
Foreign investment is broadly defined and includes portfolio investment, intellectual property rights, property and other physical assets, foreign ownership, etc. Discrimination may arise due to a government policy or regulatory framework having discriminatory impact or effect, notwithstanding the absence of discriminatory intent. Contestable areas would be defined more by exclusion or exemption: the draft treaty makes provision for signatory States to specify areas and Acts as not subject to the operation of the basic provisions of the treaty. Reservations at the time of signing cannot be extended or added to subsequently, and the expectation is that the list of reserved areas will be reduced progressively as a result of phase-out or sunset clauses, and further liberalisation negotiations.
The draft treaty prohibits, apart from limited exemptions, the imposition of performance requirements on foreign investors. Performance requirements include technology transfer, domestic equity participation, domestic content in production, location of corporate regional or market segment headquarters, and research and development.
Foreign investors are to be protected from and compensated for expropriation, direct or indirect nationalisation, or measures "having equivalent effect". This definition encompasses sell-offs as a result of re-regulation and may also extend to cases where the value of an investment is reduced as a result of new environmental laws and regulations.
The treaty would bind sub-national as well as national Governments. It enables aggrieved investors, not just other signatory States, to initiate enforcement action. A signatory State cannot withdraw from the treaty for a period of five years but even after withdrawing, extant investors enjoy the benefits of the treaty for a further fifteen years.
The treaty has been under negotiation since 1995 but has attracted little debate in Australia, despite significant discussion of the matter by labour organisations in Canada and New Zealand. The Australian Government has provided the OECD with a list of reserved areas, including the Banking Acts, Airport Act of 1996, Airlines, Sale of Telstra, Fisheries, Foreign Acquisition and Takeover Act of 1995, film assistance and television content. The list is not comprehensive enough, however, and is likely to be scaled back in some areas as negotiations conclude. Moreover, although a list of headings of the reservations notified by Australia has been leaked, the text in respect of each heading has neither been released nor leaked, so it is impossible to gauge the adequacy of the reservations.
The ramifications of the treaty are not confined to the private sector as traditionally understood. By way of illustration, health is obviously "contestable" because of the number of private hospitals but, conceivably, so too is higher education because of the existence of Bond University and of government grants to a couple of private providers. Other areas of apparent public monopoly of service provision may also be contestable for similar reasons, or become so because of the increasing application of competition policy.
The Australian labour movement needs to extend its horizons to debate this treaty, the World Trade Organisation's Financial Services Agreement which member-States have until 31.1.1999 to ratify, and others which are likely to emerge as part of the process of globalisation. Our focus needs to move beyond the issue of labour rights clauses (MAI has one, but as usual it's a non-binding exhortation) to the broader terms and direction of supranational regulation of social and economic activity.
Ted Murphy
National Assistant
Secretary
National Tertiary Education Union
For further information, contact (03) 9254 1910 or tmurphy@nteu.org.au
Further information:
| ACTU Decision on MAI | ACTU Decision on the Multi-lateral Agreement on Investment |
| MAI letter to the Government | Letter to Peter Costello, Treasurer, on the Multi-lateral Agreement on Investment |
| MAI Submission | NTEU submission to the Joint Standing Committee on Treaties'Inquiry into the Multi-lateral Agreement on Investment, 30 April 1998 |