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

Debate between Lord Alton of Liverpool and Lord Livingston of Parkhead

Wednesday 30th July 2014 Grand Committee

[The Minister of State, Department for Business, Innovation and Skills & Foreign and Commonwealth Office (Lord Livingston of Parkhead) (Con)]

My Lords, I thank the noble Lord, Lord Stevenson, for proposing this debate and I thank other noble Lords, particularly on the last day of the session, for their contributions. I know that many in this House take a close interest in Colombia, the progress that that country has made and the challenges it has faced over recent years. As I think noble Lords will be aware, this matter has also been debated in the other place.

I make it clear at the outset that the Government believe that the UK-Colombia investment treaty will benefit both countries. It will encourage increased levels of investment that will contribute towards economic growth, which I believe is in everyone’s interests. This view is shared by the democratically elected Colombian Government. They ratified this treaty in 2013 and have been pressing since then for the UK to ratify it as soon as possible. They have stated that they believe it will stimulate investment flows, guarantee the transparency and protection of investments within the standards recognised by international law, strengthen Colombia’s commercial ties with the rest of the world and guarantee equal treatment to Colombian investors in the UK.

In the next few years, there will be significant investment opportunities in Colombia in sectors where British companies are world leaders, including infrastructure, extractives, education, science and innovation. With the investment treaty in place, I believe that British companies are more likely to invest in projects which will help to deliver the right answer for Colombia. Colombia has investment treaties with many other major trading partners, including the US, China, India and Spain. They have also recently reached an agreement with France and it is right that UK investors should enjoy similar protections.

A number of concerns have been expressed in this debate and in other fora. I believe that some fears are exaggerated, but I understand them. First, it is suggested that the treaty will harm Colombia by impacting on the ability of the Colombian Government to regulate because of the risk of having to compensate investors who may bring compensation claims under the agreement, particularly through the ISDS clause, which has been mentioned.

Before I deal with individual questions, some facts are useful. For example, the UK has 94 such agreements. In aggregate, if you add them all together, they have been in existence for more than 2,000 years. There have been two cases and neither of them have been successful. The point about ISDS clauses is that they kick in only when there is not sufficient domestic process to deal with such matters. ISDS clauses are instead of adequate domestic processes. In that context, it is worth pointing out that I do not believe that Colombia has ever faced an ISDS claim.

However, despite the fact that history tells us that that is not a route for corporates to override domestic policy—a view that many have expressed—we have sought to modernise the ISDS clause to protect the state. Several noble Lords have mentioned TTIP and CETA. Although this agreement was made before they were, it contains many of the items raised in relation to TTIP. We cannot replicate the TTIP clause—not least because the TTIP clause does not exist. In fact, there is some debate in the EU whether there will ever be an ISDS clause in TTIP. I think that there may well be.

I would like to go through some of the protections in the treaty. First, it excludes shell companies from investment protection. That is important because some of the more egregious uses of ISDS clauses between third-party countries have been through the use of shell companies. There are also measures to prevent vexatious or frivolous claims. The scope of what is deemed to be fair and equitable treatment is limited; that is important. Indirect expropriation is explicitly defined; I will mention that later in relation to public policy matters. Investors must pursue resolution through the domestic legal system first for six months before submitting the claim. Having read through the treaty again, it aims to cover many of the issues raised.

Taken as an overall package, this is designed to discourage speculative claims. The Colombian Government and the UK Government negotiated it at some length. Investors should rightly have grounds for a claim if they have suffered discriminatory and genuine mistreatment. It has been used in other countries in that manner. By prioritising domestic resolution, ISDS itself would represent a last resort.

The noble Lord, Lord Alton—and, I think everyone else—raised issues about human rights. Of course, in Colombia, this issue is complex and difficult. The Government recognise the progress that the Colombian Government have made in tackling human rights issues, but clearly they are not there yet. There are still challenges and more that can be done to improve the situation in Colombia, especially for human rights defenders, victims and land restitution claimants and to prevent sexual violence. The UK Government will continue to discuss the matter and raise it with the Colombian Government.

The continuing armed conflict is one of the major issues—

[Lord Alton of Liverpool]

Before the Minister leaves that point about monitoring the situation, several noble Lords suggested having a formal mechanism in the department and within the Foreign and Commonwealth Office to log each year our assessment of human rights in Colombia and how they are being impinged on by business interests. Will he do something more formal than simply saying that it is an issue that concerns the Government?

[Lord Livingston of Parkhead]

I was going on to talk about the FTA, which covers a number of human rights issues and discussions. I will discuss with my colleagues in the Foreign Office the monitoring and reporting of human rights in Colombia as a more general issue. It is clearly one area of the world—regrettably, there are many—which has been a challenge.

The armed conflict is one of the main sources of the problems in Colombia. Like the noble Lord, Lord Monks, I support the efforts of the Colombian Government to find a solution through a negotiated peace process. Three or four months ago, I was in Colombia and had discussions with the Colombian Government. I do not doubt their genuine approach to finding a peace solution. In many cases, they will have to take some of the people of Colombia with them during this process. Some have made the corollary with some of our efforts in Northern Ireland and there is, of course, a lot of hurt over the years to make up. I hope that they make progress, which would lead to a number of better solutions.

The UK Government take a balanced approach. We realise that there are problems. It is very important to recognise the progress and effort of this Government in Colombia. They have made significant progress and we will continue to urge them to make further progress. We will also raise specific issues, and will urge that appropriate investigations take place and that protection measures are afforded.

The noble Lord, Lord Alton, and others raised land reform. We do not agree that the treaty presents a threat to Colombia’s land restitution programme. As noble Lords know, under the programme, businesses can lose their land, or have to pay compensation, if they cannot prove they undertook due diligence to ensure that the previous occupants were not forcibly displaced. However, in practice, the risk of a business owned by a UK investor losing land or having to pay compensation appears to be small. Very few businesses appear to be losing land and we are not aware of any claims against British businesses under the programme.

I support the concerns expressed by the noble Baroness, Lady Hooper, and the noble Lord, Lord Alton, and others that it is very important for British companies to observe international standards, such as those set out by the UN and the OECD. That is reflected in the EU-Colombia FTA, signed in 2012, which is much more the current state of the art. It contains significant commitments relating to human rights, labour rights, environmental protection and sustainable development. The Government also have an existing dialogue with the Colombian Government on these matters.

In view of this, reopening the treaty negotiations would be somewhat superseded by the EU-Colombia FTA. It would lead only to an unnecessary delay in bringing the treaty into force. I must stress that the treaty would be good for Colombia as well as for the UK. I do not believe that reopening the negotiations would add value on human rights. I am also unclear whether an investor could make a claim under the treaty that is in a way detrimental to human rights. The Government are not aware of any cases involving UK investors under any of our 94 treaties.

On the contrary, it is arguable that any state actions which may breach an investment treaty by harming an investor are more likely to damage local communities given the economic benefits, including employment and generating tax revenues, which stable, responsible—I believe that UK companies are responsible—foreign investment delivers.

Environmentally, Colombia is one of the top ecological hotspots in the world. I think that the noble Baroness, Lady Hooper, also mentioned Brazil. I thought that there would be nothing better perhaps than to read the clause relating to the environment in the bilateral agreement, which states:

“Nothing in this Agreement shall be construed to prevent a Party from adopting, maintaining, or enforcing any measure that it considers appropriate to ensure that an investment activity in its territory is undertaken in a manner sensitive to environmental concerns, provided that such measures are non-discriminatory and proportionate to the objectives sought”.

That seems like a reasonably balanced approach to environmental concerns.

In a similar way, on public interest concerns, the same issues have been raised in relation to TTIP. In relation to indirect expropriation, which usually is the basis on which people worry about these clauses, the agreement clearly states:

“For the purposes of this agreement, it is understood that … non-discriminatory measures that the Contracting Parties take for … public purpose or social interest … including for reasons of public health, safety, and environmental protection, which are taken in good faith, which are not arbitrary, and which are not disproportionate in light of their purpose, shall not constitute indirect expropriation”.

I am struggling to understand some of the claims that have been made regarding this treaty. It is a modern addition to historic bids and ISDS. As I said, it was debated between the individual parties. While events in some ways have overtaken it with the FTA, the UK-Columbia investment treaty is still an important milestone in the development of our wider trade and investment relationship. The growth and success of Columbia on a wider scale will be important. It was negotiated and supported by the democratically elected Government of Colombia. It will encourage UK investors to do further business in the region that will be to the benefit of the Colombian people. It will contribute to Columbia’s economic development through the benefits that increased levels of investment will bring. I strongly believe that we should welcome it and the benefits and safeguards that it will bring to the people of both countries.

EU: Free Trade Agreements

Debate between Lord Alton of Liverpool and Lord Livingston of Parkhead

Monday 13th January 2014 Lords Chamber

[Lord Livingston of Parkhead]

My noble friend is correct that EU agreements, including for instance the one with Canada, have standard clauses on human rights. I am not aware that any of these clauses have been invoked, although it is feasible to suspend all or part of the agreement if human rights have got worse in a particular country. I think that the engagement in free trade and the free movement of people, services and goods, is something that should help human rights. I certainly think that ensuring that human rights are on the agenda when we try to negotiate is a major help.

[Lord Alton of Liverpool (CB)]

My Lords, without doubting the importance of free trade agreements to lifting an estimated 800 million people in the world out of starvation, despair or poverty, will the noble Lord nevertheless take into account the exploitation of children in a country like India, for instance, or exploited labour elsewhere in the world? Will he tell the House what balance is struck in determining free trade agreements in relation to protecting the rights of those who are likely to be exploited?

[Lord Livingston of Parkhead]

The challenge of child labour in certain countries can happen irrespective of free trade, but I think that free trade will actually help through the exposure and openness of the economies, which is a major help to improving the conditions of workers in individual countries. That is something we will continue to push for. As I said earlier, we also put human rights clauses in the various agreements and the UN has certain statements on human rights, which we also look to comply with. It is an important subject, but it is not peculiar to free trade agreements.