7 November 2013

For immediate release

South Africa quits investment treaties, NZ wants to sign more … lucky Chorus?

Chorus’s US shareholders could easily use the investment rules proposed under the Trans-Pacific Partnership Agreement (TPPA) to sue the government for hundreds of millions of dollars if the Commerce Commission’s ruling on broadband pricing stands and the agreement is in place by then, says Professor Jane Kelsey of The Auckland University Law Faculty.

JP Morgan Chase holds 32 million or 8% of the shares. Entities related to Citibank and Citicorp control around 13 million shares. 

‘The mere threat of such a case would give the company huge leverage - and it would give National the excuse to back down on the Commerce Commission’s action or hand out further funds to Chorus’, Professor Kelsey said.

‘Even worse, it would undermine the credibility of Commerce Commission and similar regulatory actions against other firms with significant overseas shareholdings.’

Professor Kelsey accused the TPPA’s cheerleaders who are pushing for a deal in December of ‘playing Russian roulette with our regulatory sovereignty and taxpayers’ money’.

‘Phil Goff assured the Labour Party conference that the answers from Trade Minister Tim Groser to a list of parliamentary questions satisfied him that the TPPA’s investment chapter would not undermine New Zealand’s right to regulate in the national interest.’

‘Groser’s answers were carefully constructed to appear to give assurances while avoiding the crucial issues. As a former minister, Goff must know that’, says Professor Kelsey.

While New Zealand politicians portray these investment rules as benign, other countries are trying to extricate themselves from them.

South Africa is leading the way after a foreign mining company sued the government over post-apartheid laws that are designed to bring more equality to the lucrative industry, using very similar investment provisions to the ones proposed for the TPPA.

A review of South Africa’s investment agreements decided they are outdated and pose growing risks to policymaking in the public interest. The government has recently moved to terminate many of them.

Nobel prize winning economist Joseph Stiglitz this week applauded South Africa’s stand, describing the agreements as the most serious threat to democratic decision-making.

South Africa is not alone. India says it will sign an investment agreement with the US only if the dispute-resolution mechanism is changed. Latin American countries are systematically reviewing their agreements. Brazil has deliberately never signed one.

Professor Kelsey said the complacency of Groser and Goff about similar provisions in existing agreements, such as with China, could also prove short-lived.

Late last year the first known investment dispute taken by a company from mainland China was lodged against Belgium. China’s second largest insurer Ping An held 5% of the shares in Dutch-Belgium bank Fortis, which faced critical problems in late 2008 and was nationalised, and then broken up. Ping An wants US$2.3 billion to match the indemnity payments for losses that Belgium paid to the European Union shareholders.

Labour thinks it protected New Zealand from similar challenges in the New Zealand-China FTA. Those protections were never robust, and the main one has gone. China’s investors now receive the more favourable treatment given to Taiwan’s investors in the new free trade and investment treaty with Taiwan. Both countries’ investors would be entitled to the more favourable rules in the TPPA once it was ratified.

Jane Kelsey called it ‘naïve and reckless’ to say New Zealand would not face such challenges. ‘We should follow South Africa’s example and revisit our existing agreements, and say no to the investment chapter in the TPPA,’ she advised.

ENDS

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