The Multilateral Agreement on Investment (MAI) was a draft agreement negotiated in secret between members of the Organisation for Economic Co-operation and Development (OECD) between 1995 and 1998. It sought to establish a new body of universal investment laws that would grant corporations unconditional rights to engage in financial operations around the world, without any regard to national laws and citizens' rights. The draft gave corporations a right to sue governments if national health, labor or environment legislation threatened their interests. When its draft became public in 1997, it drew widespread criticism from civil society groups and developing countries, particularly over the possibility that the agreement would make it difficult to regulate foreign investors. After an intense global campaign was waged against the MAI by the treaty's critics, the host nation France announced in October 1998 that it would not support the agreement, effectively preventing its adoption due to the OECD's consensus procedures.
Background International direct investment has been taking place in various forms and to different degrees for over a century. Attempts to establish a framework for the protection of foreign investments dates back to the 1920s, most notably negotiating a League of Nations draft convention. Starting from the second half of the twentieth century, the investment protection was developed through the bilateral investment treaties (BIT), which are signed between two countries and which state the desired conditions under which investment can take place between them. The first BIT, between West Germany and Pakistan, was signed in 1959 and their numbers have grown steadily since then, although research suggests that BITs do little to increase foreign investment. In 1965, the International Centre for Settlement of Investment Disputes (ICSID) was established in the framework of the United Nations, and in 1967, the OECD prepared the Draft Convention on the Protection of Foreign Property although this was not adopted.
The number of bilateral investment agreements increased rapidly during the 1990s as countries and investors sought more regulation for security, certainty and mobility for their investments after it became clear that the Uruguay Round's Agreement on Trade Related Investment Measures (TRIMS), Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and General Agreement on Trade in Services (GATS) addressed only part of investment-related concerns and did not provide enough security for investors nor strong controls on host governments to regulate multinational corporations. In addition to these instruments, in 1992 the World Bank adopted Guidelines on the Treatment of Foreign Direct Investment. In 1994 the Energy Charter Treaty provided an example of a multilateral investment agreement, though limited to the energy sector.
Noam Chomsky argued that the OECD, as an organization made up solely of rich countries, was more susceptible to direct influence by transnational corporate forces than alternative fora with more universal membership such as United Nations Conference on Trade and Development (UNCTAD) and the World Trade Organization (WTO).Domestic Constituencies Z Magazine May 1998, at chomsky.info
Purposes and provisions While authorizing the negotiations, the OECD Ministerial Council aimed to reach a "broad multilateral framework for international investment with high standards for the liberalization of investment regimes and investment protection and with effective dispute-settlement procedures". The aim was to create more consistent, secure and stable investment conditions and to regulate investment in a more uniform, transparent and enforceable manner. Although the agreement was to be negotiated between the member states, the intention was to have an open agreement to which non-OECD members could accede on a negotiated basis.
According to MAI supporter Sergio Marchi, who was Canada's Minister of International Trade at the time, one of the main purposes of the agreement was to eliminate the "patchwork" of investment rules enshrined in the then-1300+ bilateral investment treaties. Contrary to many critics, he argued that the MAI would help prevent a "race to the bottom" that would undermine high standards of Canadian regulation. More specifically, the agreement would:
Minimise the diverse state regulations in governing the conditions under which investments by foreign corporations could take place. (In this connection, the agreement embodied acceptance of a compliance regime under which liberalization must proceed forward with no ability to be wound back — the so-called ratchet effect. This would be enforced by so-called rollback and standstill provisions, to ensure that investors would have access to markets. These provisions required nations to eliminate regulations that violated MAI provisions — either immediately or over a set period of time — and to refrain from passing any such laws in the future.)Mechanisms for standstill, rollback and listing of country specific reservations Note by MAI Negotiating Group chairman, OECD, 15 February 1996 Enable compensation to corporations for proven unfair or discriminatory investment conditions causing loss of profit. Allow states and corporations recourse to international arbitration (for instance, through the International Centre for Settlement of Investment Disputes) to settle any disputes arising under the agreement,OECD, Negotiating Group on the Multilateral Agreement on Investment, Draft Consolidated Text of 11 February 1998, document DAFFE/MAI (98)7, pp. 58-64. instead of national courts in the host state.
The MAI was supported by both the Business and Industry Advisory Committee to the OECD (BIAC) and the Trade Union Advisory Committee to the OECD (TUAC). While BIAC was interested in stable and consistent treatment of investment, TUAC was interested on setting standards on employment and industrial relations.
Negotiations The negotiations on the Multilateral Agreement on Investment were formally launched by the OECD's Ministerial Council in May 1995 and they commenced in September 1995. The negotiations were carried out by a high-level negotiating group consisting of officials from the OECD member states, but working outside the OECD committee structure consulting with the non-member countries. The chairperson of the negotiating group was Frans Engering (Netherlands) and vice-chairpersons were Al Larson (United States) and A. Saiki (Japan). The target deadline to finish the negotiations, set by the OECD Ministerial Council, was mid-1997.
There was little public awareness of the details of MAI negotiations until a draft of the agreement was leaked in March 1997. The leaked material prompted criticism from different NGOs globally. As a result, the negotiations failed in 1998 when first France and then other countries successively withdrew after pressure from a global movement of NGOs, citizens' groups and a number of governments of developing countries. In April 1998, the negotiations were formally suspended for six months. On 3 December 1998, the OECD announced that "negotiations on the MAI are no longer taking place".
Protest movement Multinational corporations (MNCs) enjoy enormous structural and resource advantages over employees and citizens. Yet when the MNCs and major governments tried to expand those advantages through the Multilateral Agreement on Investment (MAI), they were stymied by a global alliance of activists. MAI opponents made heavy use of electronic mail and the World Wide Web in raising the alert, sharing information and coordinating actions. They worked collaboratively, flexibly and imaginatively towards their goals while MNCs and governments were working secretively and within more traditional hierarchical models.Varney W; Martin B. Net Resistance, Net Benefits: Opposing MAI in Social Alternatives, Vol. 19, No. 1, January 2000, pp. 47-51.
The international protests against the MAI were the first example of such mass-activism to deploy the Internet. The internet was central both in gathering information and in promulgating critical materials among members of a vast worldwide network. The movement's main argument was that the most influential mass media and politicians had vested interests in the MAI. Even their opponents ruefully acknowledged that the activists possessed highly qualified, eloquent analysts and leaders—and were able to use the new internet technology to devastating effect. French MEP Catherine Lalumière stated: "These organisations have refined and diffused to all countries an anti-MAI position which is now expressed in similar terms throughout the diverse countries of the OECD."
Active opposition According to Theodore H. Cohn in Global Political Economy Theory and Practice (2005), "[t]he most effective opposition to the MAI was launched by a wide-ranging coalition of civil society NGOs. These NGOs argued that the MAI would threaten protection of human rights, labor and environmental standards, and least developed countries. A particular concern was that the MAI would result in a "race to the bottom" among countries willing to lower their labor and environmental standards to attract foreign investment. The origin of organised opposition was traced by Katia Tieleman in her 2000 UN case study:
Using a variety of websites, NGOs mobilized a strong and diverse opposition composed of human rights groups, labor and environmental groups, and consumer advocates. p. 350
Arguments MAI opponents pointed to a perceived threat to national sovereigntyLeslie Sklair, "The Transnational Capitalist Class" (Blackwell, 2001), p. 90. and democracy and argued that it would involve participating nations in a "race to the bottom" in environmental and labor standards. The MAI prompted criticism that it appeared to establish a new body of universal investment laws to guarantee corporations excessive powers to buy, sell and undertake financial operations all over the world, severely diluting national laws, e.g., on environmental protection, regulation of labour standards and human rights established in developed countries. By their arguments, the draft proposed a North American Free Trade Agreement-style investor-state dispute settlement tribunal in which corporations could sue governments if legislation (e.g., for national health, labor or environment), threatened their interests or were considered to expropriate actual or potential assets and/or profits.
Mark Vallianatos, of Friends of the Earth, argued that:
The MAI would restrict governments' ability to limit the participation of foreign multinationals in industries. "For example," he wrote, "the Philippines currently bans foreign investment in rural banking, and Honduras limits foreign investors in forestry to a minority stake". These restrictions would not be acceptable within the MAI. The agreement would establish the principle of "national treatment" (in which government must treat foreign companies as favorably as domestic companies) as the norm for international investment. Indeed, in some cases, foreign corporations might have stronger protections than domestic investors. "The MAI bars many types of performance requirements, or conditions, even if those conditions are imposed on local companies. Examples of forbidden conditions include requiring investors to form a partnership with a local company and requiring a minimum number of local employees—the types of policies governments use to help ensure that local people benefit from foreign investment."