Session FT 1.01
Water and free trade agreements
International Development Research Centre (IDRC)
United Nations Comisión Económica para América Latina y el Caribe (CEPAL)
Comité Operativo de la Américas
Very few water experts are aware that water resources and water services may be subjected to the terms of investment and trade agreements, the circumstances and conditions of trade accords change perceptions about national jurisdiction and control of water resources and public utilities in ways that are often not anticipated and can have negative social and economic impacts.
Yet, Argentina, Bolivia, and Peru are currently being sued under the terms of investment and trade agreements, for conflicts resulting from water utilities and control of water resources. These cases are not heard by national courts but by arbitration tribunals, which apply international investment law and procedure, but with many outcomes that occur locally.
The objective of the session was to discuss the links and impacts between integrated water management and Free Trade Agreements, Bilateral Investment Agreements, and the international dispute systems established under such agreements. Discussion topics included local level impacts in terms of environmental protection, access to water supply and sanitation, protection of local and indigenous rights, affordability of water services, income distribution and the regulatory systems addressing these issues. The session aimed to create awareness about the relation between FTAs, BITs and integrated water resources management, to identify provisions and principles that would balance the contents of FTA’s and Bit’s in relation to human, environmental and social concerns and to Identify and suggest criteria to be applied by arbitration courts to balance economic, social and environmental concerns.
We had three case papers presented from speakers from the USA, Bolivia, and Costa Rica, one theme, presentation on International Law and Water, and commentators on IWRM and trade and investment, and on the policy issues raised by trade and investments agreements and water and its services.
Lessons learned and key messages
- There is a connection between local water management, and trade and investment agreements. Trade and investment agreements can seriously affect local water rights and management, unless appropriate caveats are built into agreements and legislation.
- There was an uncontested concern regarding the neutrality, transparency, and consistency of arbitration tribunals. Means to improve them were suggested, including appeals, legislative and judicial controls and oversight, and better regulation of conflicts of interest.
- The need to have a more equitable system for the protection of investments was also uncontested. Until now the legal treatment of investment treaties has exclusively focused on the protection of investors, largely ignoring the rights on the nations where the investments take place.
- There was an uncontested concern regarding the ability of governments to act on behalf of public interests, unless arbitration tribunals have greater regard for internationally accepted water management principles and regulatory practices. They would include, inter alia, policing power, quality and openness of contracting process, good faith in contract execution, duty of diligence and constructive notice, and duty of efficiency of private providers (no transfer price, indebtness levels, economic crisis, transparency, and other public interests principles).
Orientations for action
- The domestic institutional capacities to guarantee the quality of domestic decision making of most countries are not sufficiently well developed. Therefore, there is a need to upgrade national capabilities for monitoring and control. This includes monitoring and controlling basic water resources as well as regulating the services associated to water.
- There is a need to establish a better balance to guarantee citizen and national rights, including the duties and obligations of investors vis-à-vis the countries where investments take place.
- The discussion stressed the need to develop concrete guidance and provisions regarding the contents of treaties as well as upgrading of national institutions.
This should target regulators, attorneys generals offices, public utility regulators, and water management authorities. Emphasis should be placed on improvements regarding transparency and neutrality; and also ensure the identification and development of legal principles to be applied to water management and the regulation of water services, particularly under conditions of economic crisis.
Local Actions presented
Free trade agreements and water
Assessment of the possible impacts of the Andean Free Trade Agreement may have on water management in Colombia, Peru, Ecuador and Bolivia
Disposiciones TLC relacionadas con el agua
Assessment of the possible impacts of Central America Free Trade Agreement may have on water management in Central America
North America Free Trade Agreement and Water
Assessment of the impact of the decisions of the NAFTA arbitration courts in the US may have on local water and environmental issues such METHANEX