Acceptance of discriminatory conditions in BIT with US: BoI decision irks Commerce Ministry

Commerce Ministry is reportedly infuriated at Board of Investment (BoI) for accepting a couple of conditions in the Bilateral Investment Treaty (BIT) with the US, which are not only discriminatory but also Pakistan specific, sources close to Secretary BoI told Business Recorder here on Tuesday.
Chairman BoI, Saleem Mandviwala, initiated the BIT with controversial clauses in Washington recently during a stopover on his way home from Canada, which generated a strong controversy amongst the stakeholder Ministries. Initially Ministry of Foreign Affairs, sources said, protested over the Chairman BoI's initialing of the BIT and now Commerce Ministry has followed suit. The sources said that Prime Minister Syed Yousuf Raza Gilani, who is in charge Minister of the BoI, did not clear the draft agreement and directed that it should be submitted before the Federal Cabinet.
"We have received a very strong worded letter from Secretary Commerce, Zafar Mahmood for accepting some of the conditions which according to the Commerce Ministry are against Pakistan's interests," the sources added. The sources said Commerce Ministry is also trying to get legal opinion as to what does initialing mean as opposed to actual signing.
According to sources the treaty document initialed by representatives from Pakistan and the US was shared with other stakeholders albeit without annexes pertaining to Non-Conforming Measures (NCMs), on 16th March, and comments were sought with the caveat that in case no response is given by 19 March, it would be construed as concurrence.
"Commerce Ministry also claims that despite short timeframe, it reiterated it's support for conclusion of the treaty and simultaneously initiated a review of the document," the sources continued. The sources said article 2 of the proposed BIT expands scope and coverage of the treaty to investments that already exist in the territory of "a party", on the date of its entry into force. Thus US companies already having a presence in Pakistan would be entitled to avail benefits extended under this treaty, including compensation in case of any damages caused to them through any physical loss or even new taxation measures.
"Investment decisions made by these companies were based purely on economic parameters and were not contingent upon the benefits now proposed to be extended through this treaty," the sources quoted Commerce Ministry as saying in its letter. Furthermore, given the MFN related clauses in Pakistan BITs with other countries, other countries may validly claim similar concessions be extended to their investments. As such, undertaking financial obligations on account of such investments might not be a prudent decision, both in legal and economic terms. It is, therefore, imperative that the coverage of this treaty should be confined only to investments made with prospective effect.
Commerce Ministry has also written a letter to the Secretary BoI, a copy of which was obtained from the BoI, which states that given the pronounced legal and financial implications of such provisions, a detailed review is warranted before the Government moves further on this account.
Commerce Ministry argues that such a review may be based on the following parameters: (i) revisiting provisions regarding scope and coverage, as the main beneficiaries of the proposed BIT are likely to be US companies which already have presence in Pakistan, the likelihood of getting new US investments, in the current security situation, being slim; (ii) assessment of financial implication of provisions regarding compensation in case of any damages caused to investors, through any physical loss and even any new taxation measures; (iii) revisiting provisions that restrict our policy space and dilute relevance of domestic government, institutions, (especially, Articles 20 and 21) and ; (iv) review of articles governing the grounds, procedures, forums and modalities for arbitration as highlighted in the enclosed analysis, some of these provisions are unique to this BIT and might be legally more restrictive.
Commerce Ministry, sources said, has undertaken a detailed comparative analysis of the proposed Pak-US BIT with BITs that have been entered into by US as well as Pakistan with other countries. "Provisions of the BIT initialed by the BoI appear to be significantly more demanding and are restrictive of the policy space available to the government in multiple areas," the sources quoted Commerce Ministry as saying.