The Bilateral Agreement for the Promotion and Protection of Investments between the United Kingdom and Colombia

Debate between Baroness Hooper and Lord Stevenson of Balmacara

Wednesday 30th July 2014 Grand Committee

[Lord Stevenson of Balmacara (Lab)]

My Lords, the UK-Colombia bilateral investment treaty, or BIT, is designed to provide important protections to British investments in Colombia. My purpose in raising the issue today is to draw attention to the fact that these protections are controversial. Without putting down this Motion there would have been no chance to discuss these issues, which many people inside and outside Parliament would like to see raised. These concerns include a feeling that the balance of the treaty may be wrong, in that it gives excessive protection to investors while limiting the ability of the host country to regulate the FDI, and a question about whether the treaty deals with business and human rights, in the light of the growing impact of the UN’s generally accepted principles on business and human rights.

However, it is important to note at the start of the debate that UK business does not appear to need this agreement to encourage investment in Colombia. Colombia is one of UKTI’s 20 high-growth markets and the UK is already the second largest foreign investor, much of it in the extractives industry. Between 2009 and 2012, UK exports of goods and services to Colombia rose by 126%, the highest level of any of our major markets. Over the next four years, it has been predicted that Colombia will invest £50 billion in oil and gas and, over the next eight years, around £60 billion in infrastructure.

I am extremely grateful to the noble Lord, Lord Livingston, for providing some background information about the treaty, which has been very helpful to me in preparing for this debate. From this I note also that he has been active in working on various other things. I think that we all got these documents this morning and it is very good to see them, following a discussion where we felt that more could be done to try to proselytise for TTIP and other work in this area. I am glad to see that these documents have come round. However, the background information supplied suggests that the BIT was actually negotiated during 2008-09 but that ratification has been delayed as the treaty of Lisbon, which transferred exclusive competence for FDI to the European Union, entered into force before the agreed text was signed.

In view of this, some people have argued that the text of the treaty is out of date and should instead reflect the direction of travel as envisaged in more recent treaty negotiations, such as TTIP. It is also the case that during the time that has elapsed since the treaty was negotiated, the UK has embraced the UN Guiding Principles on Business and Human Rights and is one of the first countries to produce an action plan, which we certainly welcome. However, we accept that the debate on how future BITs should be structured to ensure a satisfactory balance between protection of investments and the right of local Governments to regulate in the public interest is not new. We also accept that the text of the current treaty departs substantially from previous UK practice, although I suspect that some of the changes made are not necessarily going to be made more acceptable as a result.

It is interesting to note that the BIT was ratified by the current Colombian Government in 2013 and that they have subsequently been pressing the UK Government strongly, at both ministerial and official level, to complete their ratification process at the earliest opportunity. This suggests that the Colombian Government view the entry into force of the BIT as positive, bringing benefits to Colombia through helping attract new foreign investment, and have considered that these benefits outweigh the risks of investor claims and impacts on public policy. But in the unlikely event that anyone thinks that these are hypothetical risks, Colombia’s neighbours Ecuador, Peru and Mexico have been the subject of 14, three and 10 claims respectively. I am told that $81.4 million is the average compensation paid to investors over the 83 known ISDS awards in favour of the investor to July 2013. Indeed, last year’s award of $1.17 billion to Occidental from Ecuador was the equivalent of the country’s entire education budget.

I am sure that the Minister will seek to persuade us, when he comes to respond, that despite the time that has elapsed the Government believe that the signed text reflects the current public debate and is fit for purpose in that context. However, some substantial concerns remain and I hope that the debate will help persuade the Government of the need to reflect carefully on whether the treaty correctly balances providing protection for investors and giving the Colombian Government the space they need to regulate in the wider public interests.

Other noble Lords, I am sure, will raise other points around this topic. I will therefore limit myself to two examples. The first is land reform. The treaty includes a form of investor-state dispute mechanism—narrower, as we are told—which will allow Columbia to be sued in an international arbitration tribunal. These tribunals take place behind closed doors and grant investors the right to sue democratically elected governments. However, neither the host government nor communities affected by such investments have rights to challenge that investment. As the Minister knows, land issues have been at the heart of the Colombian internal conflict, and nearly 6 million people have been forcibly displaced, so many people think land reform is the key to the peace discussions with FARC, which are currently taking place in Havana.

Will the Minister explain why the treaty will not prove challenging to the Colombian Government in pursuing land reform issues? Will he also reassure us that it will not put at risk implementing the land and victims law passed in 2011, under which land is due to be returned to victims of the recent conflict? Will he also comment on the suggestion that the solution to the problems posed by ISDS mechanisms would be to enact proper domestic legislation to protect FTI investors, as is happening in South Africa?

Secondly, on human rights, because of the long period of gestation of this treaty, it was drafted before the emergence of the UN’s Guiding Principles on Business and Human Rights. Rightly, the EU is committed to signing treaties only with countries that meet its values of democracy, the rule of law and respect for human rights. The Colombian Government have made good efforts to strengthen the rule of law, to condemn human rights violations and take action against illegal land appropriation, and there are now significant legislative and public policy initiatives in the field, which we welcome. However, there is more to come and we need to make sure that we support and get behind these initiatives.

Equally, the UK has made significant commitments recently in its action plan to implement the UN’s Guiding Principles on Business and Human Rights. In particular, the UK has undertaken to ensure that,

“agreements facilitating investment overseas … incorporate the business responsibility to respect human rights, and do not undermine the host country’s ability to meet … its international human rights obligations”.

I do not see that wording in the treaty. When the Minister responds, will he point to where the text reflects that sentiment, and explain how the UK will ensure that this treaty does not undermine Colombia’s ability to meet its international human rights obligations?

Will the Government not go further? Given that the situation on the ground is still developing, and bearing in mind our commitment to the UN guiding principles, does the Minister agree that it might be appropriate if he prepared an annual monitoring of the treaty in terms of its human rights impacts, with the results of this monitoring perhaps incorporated into the FCO annual human rights report?

Finally, when this treaty was considered by the Secondary Legislation Scrutiny Committee, the instrument was drawn to the special attention of the House on the grounds of policy interest. The committee had some reservations about the effectiveness of the protection for the investors because of the way the treaty is worded, and picked up on the difficulties these arrangements may create in relation to the human rights of certain groups within Colombia.

The committee’s report goes on:

“We have offered the Government the opportunity to respond and, if received, we will publish the response in our next report”.

I checked the other day and no response had yet been submitted. Will the Minister say whether the Government intend to respond to the Secondary Legislation Scrutiny Committee and if so, when this might be received? I beg to move.

[Baroness Hooper (Con)]

My Lords, as someone with a strong interest in Latin America and as a member of the European Union Select Committee, it is important to question the Government on this bilateral agreement. I congratulate the noble Lord, Lord Stevenson, on having spotted the need and opportunity for this debate, and on setting out the background so clearly.

There are three main areas of concern, which have already been referred to and no doubt will arise in other contributions. First, the treaty excludes important reforms currently being considered at European Union level in relation to the Transatlantic Trade and Investment Partnership between the European Union and the United States, on which the European Union Select Committee has reported. These are designed to mitigate some of the serious problems associated with investor-state dispute settlements.

Secondly, it does not contain human rights obligations on investors in spite of the Government committing to this in our recent national action plan on the United Nations Guiding Principles on Business and Human Rights. Thirdly, it creates legal uncertainty and could undermine the land reforms referred to by the noble Lord, Lord Stevenson, which are vital to the peace process in Colombia. In that, the treaty is inconsistent with other areas of government policy which seek to support human rights and peace in Colombia.

However, I would go further. Although this is a general point which could affect all trade treaties, it has particular significance for Colombia. If we think that United Kingdom companies operate to high levels and standards in other areas which have not been emphasised, we should seek to replicate those standards and levels in our international trade treaties. For example, corporate social responsibility could and should be encouraged, and referred to in these agreements. A company’s involvement in social issues in its neighbourhood and community are well appreciated and are now the norm in the United Kingdom. UK companies equally should feel obliged to follow similar standards in their operations overseas.

By the same token, environmental interests and concerns should be taken into account. I am interested to see that the department’s leaflet referring to the EU-US trade treaty refers to the fact that the high environmental standards and targets which we now have in place in this country are non-negotiable. I believe that in order to encourage that there should be a system of green points for those companies which commit to action in this area. For example, a project in Colombia with which I have become involved focuses on the Media Magdalena valley, an area which during the difficult terrorist periods was completely closed. People moved away and, therefore, flora and fauna had a wonderful time getting on without human interference.

Now that the peace process is proceeding, people are beginning to go back. Illegal gold mining is already taking place, which introduces mercury into the river and waterways, and into the food chain for animal life. This project is being co-ordinated by Neil Maddison, head of conservation at Bristol Zoo. Its aim is to help to preserve wildlife, flora and fauna in general, and to encourage people who go back to live in the area and companies which intend to invest in the area to observe the highest possible standards. That does not go quite as far as a national park regime—it falls a little short of that—but it would gain those companies green points. I believe that that very much is the way forward.

This is an important issue and it is a very good opportunity to ask the Government to comment on not only this trade treaty and any possible changes that could be made to it but to further push our high standards in our overseas commitments.