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.


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