Labour Rights and investment agreements

1. Labour Rights and investment agreements Bill Rosenberg Policy Director/Economist N Z Council of Trade Unions 2 March 2012

2. Union concerns • Union concerns are not limited to a labour chapter, though that is increasingly important. • Joint declaration with other TPPA country union centres includes (but is not limited to) • A new form of agreement recognising need for balance • Process transparency • Investment – investor-state disputes, right to regulate, capital controls • Services – public services, financial services • Environment • Procurement

3. Today Focus on potential impacts on Labour Rights and other Human Rights of Investor-State Dispute Settlement, Expropriation and Minimum Standard of Treatment in Investment agreements Implies the need for an exception for such rights

4. Could investors challenge labour rights? Question arises under ISDS whether investors could challenge labour laws, rights and practices Almost identical arguments apply to other Human Rights. In addition, there are more general findings regarding human rights and trade rules.

5. Bases for investor claims • Government labour measures or practices could form the basis for claims • Indirect expropriation: substantial loss of profitability or value of an investment could be claimed after change that significantly increases labour costs • Fair and Equitable Treatment could provide basis • “obligation to maintain a stable and predictable legal and business framework in line with the investor’s legitimate expectations” • “the most relied upon and successful basis for a treaty claim” according to UNCTAD

6. Bases for investor claims • Examples - • Introduction or significant rise in minimum wage • Introduction or strengthening of collective bargaining • Constraints on use of casual labour • Failure to end industrial dispute

7. Bases for investor claims • New Zealand case: • Warner Brothers threatened to withdraw production of a film (The Hobbit) from New Zealand • Government changed employment law to allow employers to employ workers in film and video recording and gaming industry as contractors without employment rights • Lost rights include to bargain collectively, strike, personal grievance, minimum conditions such as minimum wage, annual leave, sick leave… • What if a future government restored previous labour rights? • Investors in existing and future productions could claim loss either as indirect expropriation or failure to “maintain a stable and predictable legal and business framework in line with the investor’s legitimate expectations”

8. Case examples - 1 • Noble Ventures, Inc. vs Romania • Ref: Investment Treaty News, 26 October 2005 • US firm invested in a privatized steel mill in Romania • Claim of failure to provide full protection and security, fair and equitable treatment, treatment in accordance with international law, expropriation, and to live up to obligations undertaken. • Among specific charges, Noble accused authorities of failing to protect Noble officials from labour unrest • Claim ultimately dismissed but panel did not rule out labour aspect as a cause for claim.

9. Case examples - 2 • UPS vs Canada • Ref: Investment Treaty News, 21 November 2005 • Well known NAFTA Chapter 11 case • UPS alleged that express-courier services provided by Canada’s public postal service received more favourable treatment than UPS subsidiary • Argued inter alia that Canada Post competes unfairly by keeping wages low, due to denial of collective bargaining rights to certain postal workers; that this is inconsistent with obligation to provide “treatment in accordance with international law”. • Dispute Panel found against UPS but did not rule out consideration of labour law.

10. Case examples - 3 • PieroForesti, Laura de Carli & Others v. The Republic of South Africa • Ref: Investment Treaty News, 14 February 2007 and others • European-based investors in South Africa’s mining industry alleged that its Black Economic Empowerment (BEE) mining regime violated the terms of investment protection treaties • New law vested all mineral and petroleum rights with the South African government to allow it to take into account its Constitution’s goal of redressing historical, social and economic inequalities, and the progress of applicant companies in meeting targeted social, labour and development objectives set out in a broad-based socioeconomic empowerment mining charter.

11. Case examples - 3 • Claimants alleged the law extinguished their ownership of mineral rights without “prompt, adequate and effective compensation” • Also alleged they had been denied fair and equitable treatment by virtue of being forced to divest 26% of their investments to Historically Disadvantaged South Africans • Also that they were victims of ‘discrimination’ – contrary to the fair and equitable treatment guarantee – by being treated less favourably than Historically Disadvantaged South Africans. • Eventually settled by agreement, but claimants considered that “had they exhausted the administrative process in South Africa, they would not have received the new order rights on the terms that they have now received them”.

12. Further ... • Further cases affect indigenous rights (e.g. Burlington Resources vs Ecuador) • More general findings regarding Human Rights and trade/investment agreements – e.g. • UN High Commissioner for Human Rights 2002 report on Trade in Services: the state’s human rights obligations must not be subordinated to trade rules; nor should states be subject to sanctions for protecting human rights

13. Conclusion Thank you billr@nzctu.org.nz • Labour rights and other human rights are at risk in ISDS investment disputes • Requires clarification and specific exceptions

14. Further detail on the Warner Brothers case The law change (to the Employment Relations Act) was a clear reduction in the rights of the employees involved • Expressly excluded film production workers from definition of “employee” (s.6(1)(d)) • Unless “the person is a party to, or covered by, a written employment agreement that provides that the person is an employee” (s.6(1A)) – i.e. cannot be an “employee” without explicit employer agreement • So employer can place any workers it wishes on contracts for service • Previously Courts etc had to “determine the real nature of the relationship between them” regardless of the written form of the agreement (s.6(2)) • Such workers lose rights including to bargain collectively, strike, statutory duty of good faith, personal grievance, and gain minimum conditions such as minimum wage, annual leave, sick leave…