Draft Inter-American Investment Corporation (Immunities and Privileges) Order 2022

David Rutley Excerpts

Tuesday 8th November 2022 General Committees

[The Parliamentary Under-Secretary of State for Foreign, Commonwealth and Development Affairs (David Rutley)]

I beg to move,

That the Committee has considered the draft Inter-American Investment Corporation (Immunities and Privileges) Order 2022.

It is a pleasure to serve with you in the Chair, Mr Gray. It is also a great honour to be here with esteemed colleagues, and I want to highlight my appreciation of the amazing work that a number of hon. Friends have done in the Foreign, Commonwealth and Development Office, and it is honour to serve in this Committee in their presence. And of course it is also an honour to be here with my hon. Friend the Member for Castle Point, with whom I served in the Whips Office for a long time. She is one particular Whip of whom we should take notice, and I will always be present when she wants me to be.

The statutory instrument, which is subject to the affirmative procedure, was laid before Parliament in draft on 11 October 2022. It will be made once it is approved by both Houses. It confers immunities and privileges on the private sector lending arm of the Inter-American Development Bank Group, the Inter-American Investment Corporation. That arm of the bank is known commercially as IDB Invest, and I shall refer to it as such.

The Inter-American Development Bank Group works to promote greater security and stability within Latin America and the Caribbean. The bank is a key partner as we work towards our objectives in the region. Those objectives include promoting democracy and economic growth, preventing organised crime and taking action on climate change, which I know is a huge issue for many members of the Committee. We are also working to deepen trade and investment relationships and to prevent and prepare for the next pandemic.

The Inter-American Development Bank Group is an international financial institution, headquartered in Washington DC. The bank group is the largest source for development finance for Latin America and the Caribbean, and it provided $22.9 billion in 2021. It shares similar policy objectives with other international financial institutions, such as the World Bank Group, to accelerate economic and social development.

The UK has been a member of the Inter-American Development Bank Group since it was established in 1959 and we have used our shareholding to shape it. That includes securing a commitment from the bank, ahead of COP26, to align with the Paris agreement by 2023, and to increase the volume of finance that it provides to tackle climate change.

The bank plays a critical role in providing loan finance to Governments across the region to support development objectives and projects, including in infrastructure, health and education. However, private sector investment across Latin America and the Caribbean region is also critically important for driving growth, creating jobs and tackling climate change. To strengthen the bank group’s focus on investing in the private sector, it agreed with shareholders in 2015 to “merge out” its private sector operations to form IDB Invest. That is now a separate legal entity within the bank group, with its own board and shareholding structures. Today, IDB Invest provides around $6 billion of finance per year to businesses, with a focus particularly on small and medium-sized enterprises. The UK voted in favour of the merge out and agreed to transfer $7 million of UK capital from the bank to IDB Invest. In 2018, the IDB Invest Treaty was presented to the UK Parliament. The final stage in the process to join IDB Invest is to ratify the treaty.

As we have joined an international organisation, we are required under international law to grant it the necessary immunities and privileges. The International Organisations Act 1968 allows His Majesty to do that by Order in Council. It is a long-standing UK policy to only grant immunities and privileges where they are needed. I can assure hon. Members that the immunities and privileges afforded to persons connected with IDB Invest are strictly limited to those required for them to conduct their official activities. They are not for any personal benefit. Hon. Members should note that they are also in line with those offered to officials of other international financial institutions, with which they will be familiar and of which the UK is a member. They include immunity from suit and legal processes for staff in respect of their official acts, and tax exemption. Members should note that the income tax exemption does not apply to British citizens.

The order confers only those immunities and privileges on IDB Invest staff and secondees that are necessary for the institution to function effectively and to conduct its official activities in the UK. Immunities and privileges will be granted only to official visitors from IDB Invest. It does not currently have a UK office.

In granting the immunities and privileges in taking up membership in IDB Invest, the UK will be better placed to influence a major pool of development finance in a region of strategic importance. I commend the order to the Committee.

--- Later in debate ---

[David Rutley]

I welcome the comments and broad support offered by hon. Members for the order. Clearly, as the hon. Member for Leeds North East highlighted, the key priority is the economic prosperity of our partners and stability in the region. There is clear alignment there. He raised a number of issues, to which I know I am not supposed to respond, so I will not, but needless to say and to reassure members of the Committee, we will be meeting next week to discuss those items in more detail, in a more appropriate setting. We will leave those issues for then, but we are very mindful of issues in Haiti and we know that we need to do more to tackle climate change in the region. Interacting with those partners, they understand the influence of the UK when other strategic players are in operation in the region, such as China.

To reassure hon. Members about the funding of IDB Invest, we are agreeing to transfer $7 million of UK capital in annual instalments from the bank to IDB Invest. That is a transfer of funds, just to make that clear.

Questions were understandably raised about the immunities and privileges. I will provide more detail in writing to the hon. Members for Hayes and Harlington and for Huddersfield. The primary focus is on the legal and suit processes, and tax exemption, although that does not apply to British citizens. On the specific point raised by the hon. Member for Huddersfield, I will come back to him in more detail, but there is a precedent for waivers in such situations. But I will put that in writing to him so that he can be assured on the specific point he raised.

Without further ado, I should like to conclude by saying that in taking up our membership of IDB Invest, we will be better placed to influence the investment that it makes to support private sector development. That will allow us to support the UK’s goal of promoting development and reducing poverty in a region of strategic importance. I thank hon. Members for their contributions and I commend the order to the Committee.

Question put and agreed to.