The Multilateral Agreement on Investment (MAI):
Basic Facts
What is the Multilateral Agreement on Investment (MAI)?
The MAI is a new international economic agreement being negotiated
at the Organization for Economic Cooperation and Development (OECD).
The MAI is designed to make it easier for individual and corporate
investors to move assets - whether money or production facilities
- across international borders. The MAI would take the investment
provisions of the NAFTA, amplify these provisions, and apply them
world-wide.
What is the status of the MAI?
Confidential negotiations have been underway since May 1995
within the OECD and are now at an advanced stage. The agreement
was originally scheduled to be completed by May 26, 1997, but
the deadline is being extended for one year. When complete, the
MAI will be presented to the U.S. Congress and to other OECD countries
for approval. Developing nations will also be encouraged to join.
Despite the importance of the agreement and the advanced state
of negotiations, few outside of government and international business
circles are aware of the MAI.
What would the MAI do?
Countries that sign the MAI will be required to:
1- Open all economic sectors, including real estate, broadcasting,
and natural resources to foreign ownership;
2- Treat foreign investors no less favorably than domestic
firms;
3- Remove performance requirements, which are laws that require
investors to behave in a certain way in exchange for market access;
4- Remove restrictions on the movement of capital;
5- Compensate investors in full when their assets are expropriated,
either through seizure or "unreasonable" regulation;
6- Accept a dispute-resolution process allowing investors
to sue governments for damages before international panels when
they believe a country's laws are in violation of MAI rules; and
7- Ensure that states and localities comply with the MAI.
Proponents of the MAI claim that the agreement will provide
needed protections for U.S. and other international investors
against discrimination and expropriation, open new markets to
U.S. investors on favorable terms and help businesses, consumers
and workers in the long-run by improving the efficiency of the
global economy. The most prominent non-governmental proponents
are business groups, including the U.S. Council for International
Business, the National Association of Manufacturers and the European-American
Chamber of Commerce.
Opponents of the MAI argue that the proposed agreement will
accelerate an economic and environmental "race to the bottom"
as countries feel new pressure to compete for increasingly mobile
investment capital by lowering wages and environmental safeguards.
Opponents also claim that the MAI will allow investors to challenge
legitimate regulatory safeguards that enjoy widespread public
support but are viewed by investors as impediments to the free
flow of capital. The public is just beginning to learn about the
MAI, but there is already substantial concern about the agreement
from a number of environmental, labor, consumer, and women's organizations.
Key Provisions
There is no dispute about the intention of the MAI. Its drafters
seek to remove obstacles to the increasing integration - i.e.
globalization - of the world economy. In order to accomplish this
goal, the agreement would establish a set of rules limiting the
ability of governments to regulate foreign investment.
These rules include:
National Treatment, which requires countries to treat foreign
investors and investments no less favorably than domestic ones.
Under National Treatment, countries may not, for example, place
special restrictions on what foreign investors can own, maintain
economic assistance programs that solely benefit domestic companies
or require that a corporation hire a certain percentage of managers
locally.
Most Favored Nation, which requires governments to treat all
foreign countries and all foreign investors the same with respect
to regulatory laws. Laws prohibited by MFN would include economic
sanctions that punish a country for human rights violations by
preventing corporations from doing business there.
Limitations on performance requirements, which are laws that
require investors to meet certain conditions if they want to establish
an enterprise in a particular locale or if they want to be eligible
for tax incentives or other government aid (for example, low-interest
development loans). Performance requirements would be banned even
where they do not discriminate against foreign investors.
A ban on uncompensated expropriation of assets. The MAI would
require governments, when they deprive foreign investors of any
portion of their property, to compensate the investors immediately
and in full. Expropriation would be defined not just as the outright
seizure of a property but would also include governmental actions
"tantamount to expropriation," which could include some
regulatory laws.
A ban on restrictions on the repatriation of profits or the
movement of capital. Countries could not prevent an investor from
moving profits from the operation or sale of a local enterprise
to that investor's home country. Nor could countries delay or
prohibit investors from moving any portion of their assets, including
financial instruments like stocks or currency. Negotiators are
debating the question of whether an exception will be made in
the case of national financial crises.
Investor-to-state dispute resolution. The MAI would enable
corporations to sue national governments, and seek monetary compensation,
in the event that a law violates investor rights as established
in the agreement. International investors would have the option
to sue a country before an international tribunal rather than
in the country's domestic courts. This investor-to-state dispute
mechanism is a significant departure from previous international
economic agreements like GATT, which allow only governments to
bring complaints against other governments (although NAFTA employs
investor-to-state dispute resolution in a narrow range of cases).
The MAI will include "roll-back" and "standstill"
provisions that require nations to eliminate laws that violate
MAI rules (either immediately or over a set period of time) and
to refrain from passing any such laws in the future. Countries
would have the right to exempt a number of existing laws.
In its current form, the MAI does not contain language on
the responsibilities of investors regarding fair competition,
treatment of employees, environmental protection or other issues.
There is discussion of including an existing OECD code of corporate
responsibility in the MAI, but this code would be non-binding.
The Preamble Collaborative / The Preamble Center for Public
Policy
1737 21st Street, N.W.
Washington, D.C. 20009
(202) 265-3263
Fax (202) 265-3647
E-mail: preamble@rtk
net: http://rtk.org/preamble
50
Years Is Enough