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This article was published in the Myanmar Times on 30 August 2013 at: http://www.mmtimes.com/index.php/opinion/22221-reconciling-investment-protection-and-human-rights.html 

This month the newly elected Myanmar government released its economic policy and announced that it will seek to attract even more foreign investment than under previous administrations. But the new policy did not outline how it will ensure that foreign investment will contribute to the protection of human rights and sustainable development.

Myanmar’s previous military government was committed to investment protection treaties. Will the new government follow suit? These treaties between states enable foreign investors to challenge new laws and policies by the host government – potentially including those protecting human rights and the environment – through international arbitration if they believe these may adversely affect their profits.

Foreign governments want their investors to benefit from the opening up of Myanmar’s economy. Myanmar has already entered into investment protection treaties with Japan, South Korea, the Philippines, China, Laos, Vietnam, Thailand, Israel and India and is party to the ASEAN Comprehensive Investment Agreement. Myanmar is negotiating a new treaty with the European Union and exploring options with Singapore, among others.

These investment treaties grant investors equal standing with Myanmar’s government in disputes over national laws and policy in international arbitration. Their broad provisions fail to reconcile investment protection with the host state’s right and duty to regulate for the benefit of human rights and sustainable development. Myanmar must ensure that provisions on the treatment of foreign investors limit their rights to challenge legitimate, non-discriminatory, public purpose legislation.

Seeking to attract investment by giving foreign businesses more economic security should not compromise government’s ability to regulate in favour of the rights of its people. Protection of investments must not be given priority over protection of human rights and the environment. The UN Guiding Principles on Business and Human Rights urge governments to maintain adequate domestic policy space to meet their human rights obligations when pursuing investment treaties.

Before agreeing to further investment treaties, Myanmar should commit to adopting and enforcing new laws in line with international human rights and environmental standards. It should evaluate whether these investment treaties are necessary to attract foreign investment to Myanmar. It should follow the regional trend and revisit old treaties that empower foreign investors at the expense of local rights holders.

The National League for Democracy-led government came to power promising change, to establish the rule of law and to protect human rights. In order to do so, the government will need to create new laws and policies in line with international laws and standards in the public’s interest. For example, Myanmar has recently signed the International Covenant on Economic Social and Cultural Rights, signalling its willingness to put in place policies to progressively achieve universal healthcare, education and social security. These rights are also protected in Myanmar’s constitution.

But new policies designed to fulfil these rights may give rise to disputes under investment treaties. For instance, it is possible that foreign investors will claim that a new policy on public health (for instance by requiring plain packaging for cigarettes) or minority rights (calling for affirmative action for minorities) or strict environmental protection standards (improved environmental impact assessment regulations) would harm their expected profits or other rights that are broadly defined in the investment protection agreement.

These are not outlandish examples. There are a number of cases where new laws and regulations passed by democratically elected governments have been challenged by foreign investors before arbitral tribunals. In Canada, a foreign investor successfully challenged an environmental impact assessment board’s decision to deny it a permit and asked for more than US$100 million in damages. Affirmative action policies in South Africa and environmental protection standards in Germany have been challenged. Just the threat of arbitration can lead to a “regulatory chill”, forcing back public interest legislation and preventing environmental protection measures.

These are costly disputes – some arbitral awards run into the billions of dollars against host governments. Recent challenges by tobacco giant Phillip Morris against Australian and Uruguay plain packaging cigarette laws, designed to protect public health, were unsuccessful but cost millions in lawyer’s fees. Australia reportedly paid $50 million to defend its law. Myanmar cannot defend repeated challenges by deep-pocketed investors. In Myanmar, this money could be better spent improving the dire state of health and education.

Around the world, people are demanding that negotiation and adoption of investment treaties be transparent; increasingly, people are opposing treaties that grossly favour the interests of investors over the interests of the public. Investment treaties are often negotiated behind closed doors with little public or parliamentary oversight. These are important decisions that impact on the rights of people in Myanmar. Myanmar’s civil society has not yet had the opportunity to participate in genuine and informed consultation.

Many states have turned against international dispute resolution in investment treaties. South Africa, Bolivia, Ecuador, Venezuela and Indonesia have started to cancel or phase out existing treaties. Others, including India, are reviewing current treaties and rethinking future negotiations. Brazil, Russia, India and China are considering an alternative system that considers issues relevant to emerging economies.

The Indian government intends to replace existing investment treaties with new ones designed to balance investor’s interests, regulatory space and investor responsibilities. It seeks to limit protections for foreign investors, drop controversial aspects of treaties and narrow the scope of others to reduce disputes. While it allows access to international dispute settlement, foreign investors will have to pass through the domestic courts first. The new investment treaties will also include an exhaustive list of economic, environmental and social measures to be exempt from challenge by foreign investors.

Myanmar would do well to follow this approach. Improving its human rights situation and maintaining sustainable development require sweeping legal reform. The threat of costly legal challenges by foreign investors could dissuade policy makers from making necessary changes, discouraging them from fulfilling human rights and environmental obligations in order to promote investment.

This month the National League for Democracy released its new economic policy, and stated it seeks to attract more foreign investment. Given that the NLD has inherited inadequate land regulation and an ineffective judiciary, it is unclear how increased investment would be reconciled with NLD policy to address the land rights of people in Myanmar.

Foreign governments want their investors to cash in on the investment boom but have no confidence in Myanmar’s regulatory framework and its judiciary. Many, such as the European Union (EU), are busily negotiating Bilateral Investment Treaties (BITs).

These treaties guarantee investor’s interests as ‘rights’ and give their investors access to Investor-State Dispute Settlement (ISDS) mechanisms outside of Myanmar. ISDS enables foreign companies to challenge new laws and policies that they view adversely affect their profits, including future land reforms.

Myanmar has entered into BITs with Japan, South Korea, the Philippines, China, Laos, Vietnam, Thailand, Israel and India and is party the ASEAN Comprehensive Investment Agreement, all of which include ISDS provisions that undermine the sovereign “right to regulate”.

Myanmar has a land regulation problem requiring legal reform. For decades the government expropriated land with impunity. Doling out land to crony businessmen and unscrupulous foreign investors became the norm. An influx of recent investment has increased demand for land, raised prices and further enriched those with connections. Poor land regulation means that some investors continue to be granted land obtained illegally or under dubious circumstances.

Under the current land laws more than half of Myanmar’s land users do not have legal tenure leaving them vulnerable to land grabs and forced eviction. The current land laws were designed to encourage large-scale land use and promote economic growth. The procedures for land acquisition under antiquated laws in Myanmar are rarely followed in practice. People have little or no access to justice, as the courts have proven reluctant to address sensitive cases. Instead, many communities find themselves charged with trespassing on land on which they have lived for generations.

The NLD government was swept into power promising to reform the land law and deal with widespread land grabbing. In order to protect land rights, the new government will need to create new law and policy restricting such practice and holding those who benefitted accountable.

But new law and policy on land redistribution and the recognition of communal land rights may conflict with the interests of foreign investors and give rise to costly disputes under BITs. In relation to ‘land grabbing’, ISDS could protect one-sided land deals that complied with bad national law and resulted in forced evictions. Investors could obtain market value compensation even if they acquired the land at less than market price.  Just the threat of litigation may be enough to dissuade needed land reform.

There are a number of international examples where new laws and regulations passed by democratically elected governments have been challenged by foreign investors through ISDS. These are costly disputes – some arbitral awards run into the billions of dollars. Recent challenges by tobacco giant Phillip Morris against Australian and Uruguay plain packaging cigarette laws were unsuccessful but cost millions in Lawyer’s fees. Australia reportedly paid 50 million USD to defend its law.

Myanmar lacks the legal and financial capacity to defend repeated challenges by deep-pocketed investors. In Myanmar, this money could be better spent improving the dire state of health and education.

Many states have turned against the inclusion of ISDS in BITs. South Africa, Bolivia, Ecuador, Venezuela, and Indonesia have started to cancel or phase out existing BITs. Others, including India, are reviewing current BITs and rethinking future negotiations. From Australia to Europe and North America, BITS are now part of public debate. Civil society is voicing its concerns with the ISDS system, questioning the rationale of the global investment protection system itself. Besides, there is not even clear evidence that ISDS and BITs actually increase foreign investment.

Economic investment should contribute to the rule of law and human rights. In order for this to happen, Myanmar must align policies with a vision of development based on local and national aspirations, placing people, and their rights, at the centre of the process. BITs are often negotiated behind closed doors with little public or parliamentary oversight. These are important decisions that impact on the rights of people in Myanmar.

Public participation is essential to the law reform process. Try telling farmers that investors should have access to special courts to protect their interests while their land can be taken without adequate compensation and without due process. Civil society has not yet had the opportunity to participate in genuine and informed consultation on Myanmar’s BITs. Relying on EU consultation procedures, for example, is not good enough.

BITs should refer to the various legal regimes, including international human rights law, to which Myanmar has legal obligations. This will help ensure that ISDS cannot be used to override Myanmar’s other legal commitments. Myanmar has recently signed the International Covenant on Economic Social and Cultural Rights, signalling its willingness to put in place policies to progressively achieve healthcare, education and social security. These rights are also protected in Myanmar’s constitution. ISDS threatens the ability of government to fulfil these rights.

Before agreeing to further BITs, Myanmar must adopt and enforce a new land law in line with international standards recognising the tenure of land users. In future BITs, Myanmar must prevent ISDS being used to challenge legitimate public purpose legislation. It should revisit old BITs that already allow investors to do so.

Ensuring legal certainty for foreign investors does not require empowering companies to challenge public-interest policies. Attracting foreign investment should not compromise government ability to regulate in favour of the rights of its people.

This Myanmar Case Study will demonstrate the connection between an inadequate regulatory system—where land law is incomplete or ignored and the judiciary does not provide access to remedy—and land related human rights violations. In the context of ethnic and religious violence, these violations increase conflict. Using examples of several large-scale investment projects in Myanmar, the Case Study shows that inadequate regulation and an ineffective judiciary result in forced evictions and other land related human rights violations. These can indicate further rights violations and potential conflict.

GOVERNANCE OF TENURE: INADEQUATE LAND LAW

Myanmar’s land law does not adequately prevent human rights violations against the rural people who comprise 70% of Myanmar’s population. Myanmar’s constitution makes the State the ultimate owner of all land. New Laws enacted in 2012 such as the Foreign Investment Law (FIL), the Vacant, Fallow and Virgin Land Law (VFVL) and the Farmland Law aim to increase investment, encourage large-scale land use and promote agricultural income. These laws undermine land tenure security to promote development. More than half of Myanmar’s people do not have land title under these new laws and instead rely on customary land rights and shifting cultivation on communal lands. Communities engaged in traditional farming practices or other communal activities occupy much of the land declared VFV by the government.

The land law remains a patchwork of at least 34 new and old laws governing different aspects of tenure. This patchwork creates overlapping legal regimes that have their own implementation committees. As of yet, Myanmar lacks an Umbrella National Land Use Policy and consolidated National Land Law, although a drafting process is currently underway.

Myanmar lacks detailed procedures on land acquisition, relying primarily on the colonial era Land Acquisition Act of 1894. The Act lacks modern common law substantive and procedural protections and reference to recent international standards. (It has, however, been recently updated to increase fines and jail sentences for those who interfere with government officials.) Its application is inconsistent and the procedure lacks transparency. While the law sets out procedures for undertaking preliminary investigations, notification, and objections—which would help mitigate land related human rights abuses—in practice these procedures have rarely been followed.

Inadequate compensation is a common complaint. When people are relocated, they are not compensated at market value for the land. Instead they are given alternative homes that inadequately compensate for lost livelihood. Even compensation provided for crops is allegedly insufficient. This is despite requirements in the 1894 Land Acquisition Act for fair compensation at market value.

Villagers lack access to justice, as no formal means are available to appeal decisions. Myanmar’s judiciary is not independent from political and executive branches of government, and lacks the resources or the capacity to deal with complex land cases. Decisions by the implementing bodies related to various land laws, such as the Farmland Management Body and VFV’s Central Committee, are often considered final. This means that in practice lawyers do not challenge their rulings and that the judiciary does not fulfill its role in overseeing executive decisions.

In Myanmar, there is still ambiguity about the roles of environmental impact assessments and environmental management plans. The Environmental Conservation Law enacted in 2012 requires significant refinements. Even though impact assessments are required for all major development projects under the Foreign Investment Law, the precise environmental and social standards expected for investors have yet to be articulated. The procedures for impact assessments remain in draft form.

Investors continue to be granted land obtained illegally or under uncertain circumstances. Many local communities suddenly find themselves trespassing on land they have farmed for generations. Those living there and in the surrounding communities are routinely charged with trespass while their environment and livelihoods are degraded. This is bound to cause local conflict. In conflict zones, this situation exacerbates existing tensions.

LAND RELATED HUMAN RIGHTS VIOLATIONS: MYANMAR CASE STUDIES

Inadequate land tenure and land regulation in Myanmar result in land related human rights abuses as people are relocated to make way for large investment projects. Forced evictions and environmental degradation result in a variety of economic, social and cultural rights violations as people lose access to land, livelihoods and housing. Their civil and political rights are violated in turn as they lack access to justice, a right to remedy and basic fair trial rights. They are often wrongfully charged with trespass and imprisoned for protesting, violating their right to free expression and assembly. Where violations occur in conflict zones or areas of ethnic/religious tension, militarization occurs and conflict escalates, disproportionately affecting vulnerable communities.

The Myanmar Stark Prestige Plantation (MSPP) project is a palm oil plantation joint venture between the Myanmar company Stark Industrial and the Malaysian company Prestige Platform Sdn Bhd in Tanintharyi Region, southeast Myanmar. The plantation has been granted 40 000 acres and approved by the Myanmar Investment Commission. Villagers have reported uncompensated land expropriation. MSPP has responded by stating that the land was declared legally vacant before the company entered.

In Myanmar villagers lack such documentation but are required by the 2012 Farmland Law to demonstrate the legality of their tender. In absence of documentation, the government may label land ‘vacant, fallow, or virgin’. Even where land is unoccupied, it is often used in traditional shifting cultivation practices, which is not acknowledged under the 2012 Vacant Fallow and Virgin Lands Management Law. For MSPP, villagers allege their land was allocated as VFV to the company without consultation. The area is controlled by ethnic armed group the Karen National Union (KNU), stoking tensions further.

The Ban Chaung coalmine is located in Tanintharyi Region, southeast Myanmar. The KNU has given permission to Mayflower Mining Enterprise to operate only within a sixty-acre area, while the government has permitted more. In Ban Chaung, an area marked by ethnic conflict, it is normal for farmers to have their land rights unacknowledged, and for ‘VFV land’ to be owned or used by local villagers. There are conflicting claims based on a variety of tenure arrangements that are not recognized by the government. Villagers allege the mining companies are responsible for land grabbing, environmental damage, and health and safety concerns and that companies misrepresented community consent for the project. Community members have engaged in several acts of protest against the mining operation, and have petitioned both the KNU and government officials to have the mine closed.

Both Ban Chaung and MSPP bring up issues of lack of informed participation and consultation for affected communities. Where the government allows business activities to effectively push villagers off their land without access to legal or other protections it amounts to forced evictions.

The Letpadaung copper mine is a joint venture between Chinese company Myanmar Wanbao and the military-owned Myanmar Economic Holdings Limited. In order to make way for the mine the government forcibly evicted thousands of people, depriving them of their main source of livelihood, after nationalising their land in 1996 and 1997. The government used colonial-era land laws and provisions of Myanmar’s Code of Criminal Procedure to push people off land they farmed and to evict entire villages with no compensation, consultation or legal remedies.

Further forced evictions were carried out for the Letpadaung mine between 2011 and 2014. In this case the government deliberately misled people, telling village meetings that they would be given compensation for damage to crops while not mentioning land acquisition. Residents have complained for years about unlawful land confiscations and environmental damage caused by the mine’s operations. In November 2012, dozens of protesters, including monks, were severely burned when riot police allegedly used white phosphorous to disperse them.

The land related human rights abuses at Wanbao’s mine should have been prevented by a regulatory system that demands thorough Environmental and Social Impact Assessments (ESIAs). ESIAs are important before a project is approved in order to identify potential impacts, assess alternatives, and avoid or mitigate serious human rights and environmental violations. Typically, they would lead to the formulation of environmental and social management plans to be applied throughout the duration of a project to identify specific risks and deal with them effectively. Proper ESIA regulations should reveal land related human rights abuses that indicate potential for conflict.

Although Myanmar lacks legislation on ESIAs, Myanmar Wanbao conducted and published its own on 25 June 2014. According to the company’s website, the Letpadaung project “will play as a role model in environmental conservation sector of the Union of Myanmar”.

Myanmar Wanbao’s ESIA outlines its commitment to local laws as well as international standards on law enforcement in securing its operations. The company has acknowledged the concerns associated with project security in weak governance zones. Wanbao has repeatedly claimed that it has gone beyond its legal requirements. Despite the continued allegations of human rights abuse at the Letpadaung mine, Wanbao is yet to demonstrate that it has conducted due diligence and undertaken the remedial measures outlined in its ESIA. This demonstrates the importance of a regulatory system in which the government of Myanmar monitors the implementation of ESIAs to ensure that these are meaningful commitments and not just exercises in public relations.

LAND RELATED RIGHTS ABUSES AND INCREASED VIOLENCE AND CONFLICT

Myanmar is undergoing rapid economic change fuelled by investment, both foreign and national, with ramifications beyond economic growth. Investment requires access to land. The government wishes to provide land for investors. The problem is that many people in Myanmar do not have formal land tenure, rely on customary land use and dispute resolution, or have had their land confiscated without due process. Much of the land sought after by investors is located in conflict zones characterized by ethnic tension. Land confiscation and forced evictions have resulted in a wide range of human rights violations. Where this takes place in conflict zones, violence has increased.

The Myanmar military has been at war with dozens of ethnic groups for decades, fueled by competition over natural resources and minority demands for more autonomy. In these areas there is a history of discrimination, abuse and impunity against ethnic villagers resulting from anti-insurgency campaigns. This includes gender-based violence against ethnic women, forced labour, and other serious human rights violations. The fighting between the Myanmar military and ethnic armed groups shows how unregulated investment and forced evictions have inflamed the wars.

For example, the Myanmar military and the Kachin Independence Army (KIA) fought in 2011 near the Taping hydropower dam after negotiations over revenue between the KIA and the investor broke down. Likewise, in the northern Shan State the Myanmar Army has secured territory for the construction of dual oil and gas pipelines led by the state-controlled China National Petroleum Corporation. The impact of these development policies and the accompanying military campaigns against Myanmar’s ethnic civilians has been severe. More than 100,000 Kachin, as well as Shan and Ta’ang, have lost their homes and livelihoods since 2011. Thousands have fled into China.

The proposed series of Salween River Dams run through several different ethnic areas of Myanmar where armed groups contest governance. The Salween River dams will displace dozens of villages and thousands of residents. The Hat Gyi dam in Karen State, for example, may displace 30,000 people. The Salween River Dams have increased militarization and tension between the Burmese Army and non-state armed groups. Repeated calls from civil society to halt the dam projects in order not to jeopardize the peace process have been ignored.

For projects like Salween River Dams, the government maintains authority to use its powers of eminent domain on behalf of corporations if it deems such corporate projects to be in the public interest. The 1894 Land Acquisition Act, and the now defunct 1953 Land Nationalization Act do not have provisions adequately protecting communities’ rights to informed participation.

Unregulated investment in cooperation with the Myanmar Military has directly contributed to conflict. Dams, pipelines and mining projects have been used as a wartime tool to encroach on ethnic lands and dominate local populations. Investment should be delayed in Myanmar’s war zones until durable peace agreements are established.

LAND LAW REFORM

Myanmar has attempted to attract foreign investment by making land available. But without proper environmental and land laws, as well as an effective judiciary to enforce these laws and provide appropriate judicial remedies, these development projects can violate human rights and increase conflict.

Law reform requires two crucial components. First, it must prevent violations before they occur. This includes creating the obligation to undertaken environmental and social impact assessments, particularly human rights impact assessments, and to uphold the rights to informed participation of affected communities. Myanmar must also develop land law that recognizes customary land tenure.

Second, the legal regime must ensure there are robust procedures to ensure justice and effective remedies for those harmed by development projects by strengthening the ability of courts and administrative bodies to hear such cases. Courts or tribunals must provide justice for the victims of forced evictions and other land related human rights abuses before they escalate and contribute to conflict.

Myanmar is currently drafting a National Land Use Policy in conjunction with civil society consultation. There remain uncertainties over how the policy will affect the drafting of a new land law. Ideally, the NLUP will be an umbrella policy under which all laws, rules and procedures conform to the NLUP. While the development of an NLUP itself is a welcome commitment, clearer terms for land laws—and land related rights issues—are required. Legislative reform will be costly and will require restructuring a national network of committees and institutions. Much depends on how this policy informs the drafting of a new law.

Domestic environmental legislation must protect the environment and human rights through ESIAs, address forced evictions and resettlement, and require public consultations with potentially affected communities. Investment permits should be approved only after such strategic assessments are undertaken and the results are publicly and transparently disclosed.

Strengthening the rule of law to prevent land related human rights abuses requires an independent judiciary. Myanmar needs judges and lawyers who are able to operate independently and impartially to provide proper jurisprudence and, importantly, change the public’s poor perception of the system. This requires a systematic and concerted effort from the entire government and in particular from the powerful executive and legislative branches of the administration. It will also require the allocation of significant resources towards training and capacity building for present and future judges and lawyers.

Myanmar’s inadequate land regulatory system and lack of an effective, independent judiciary indicate that future land related human rights abuses and further conflict are likely. Reform of the legal system is underway and the role of civil society will be crucial in determining whether future law protects land tenure and avoids further human rights violations. The reform of the Judiciary is a long-term project. In order for it to provide access to justice for land related human rights violations it will need to assert independence and develop adequate institutional resources. This regulatory void provides an uncertain environment into which investment now flows, bringing economic development but also human rights violations. This situation may lead to further conflict, especially in ethnic areas where control of resources underpins conflict.

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