TUESDAY 17 NOVEMBER 1998

MS MARIA ELENA HURTADO, MS JAYANTI DURAI AND MS JILL JOHNSTONE

  40. Consumers International have quite a reputation for showing a great deal of interest in the pharmaceutical business, for example. In that particular area would your judgment be particularly interested in the investment aspect of it or perhaps the marketing side of it? Whereas I would go along with the view that some of the marketing processes of some companies are, to say the least, a little bit dubious, where would you see yourself standing on that one? Which direction are you coming from, the investment side or which one?
  (Ms Hurtado) Of course, there is certainly a need for investment. However, I would say one thing. In the developing world, investment in research and the development of drugs—malaria, in particular, which affects only those countries—are not being developed because of economic factors so, therefore, you would need investment. But, on the other hand, as we have been saying, you would need to balance it out with the responsibility of companies to make sure that the safety of the products, information provided to consumers, the way they market it and so on, is for the benefit of people.

  41. Perhaps a notable one that is around is the issue of marketing baby milk, etcetera, into the third world.
  (Ms Hurtado) The issue is about the promotion of baby milk substitutes to nursing mothers in hospitals, which then dissuade them from breast feeding their babies. In fact, Consumers International was at the centre of the proposals which led to this International Code on Breast Milk Substitutes. Obviously we support the code. We think that companies should not use their power to press their products in a situation, which will be very unhelpful for the baby basically. We work with a partner organisation, which has been monitoring the observance of this code. I am sad to say that many of the companies are not really observing the code and they have really fought tooth and nail very strongly against it. If you are interested in more information on that, we could provide it to you.

  42. That would be useful. May I lead you back to an issue about ten minutes ago or thereabouts, which we started to touch upon. This was the issue of the Ethyl Corporation of Canada and the discussion there. There is a view that if the MAI were to be signed and agreed to, that this could be in conflict with the normal regulatory practices of governments. Can you describe to us some aspect of regulation or British law that could be caught perhaps by the MAI and be deemed, in their view, as being expropriation or something of that nature? Is there an example because the Ethyl Corporation issue of Canada is a little bit hazy. There are another couple of cases around as well that equally are still in the process of being pursued, are there not, but have not come to a conclusion yet. Can you think of any examples?
  (Ms Durai) On the United Kingdom legislation side. It is very difficult to work out now, where a company is going to deem that there is the equivalent effect on its expropriation due to a certain United Kingdom regulation. The problem that we had with the MAI is the use of the broad definitions of investment, or the vagueness of what constitutes expropriation. It is difficult to predict where, for some reason, a foreign company might think that they are being discriminated against because of a certain law. I cannot think in advance of ones. I know there are a lot of institutions within the United Kingdom who are worried about their ability to regulate on a local basis because of this. But I am not sure.
  (Ms Johnstone) I find it very hard to think of a British example. Also, it is not an area which has been actively researched by us.

  Mr Laxton: So it is hanging around in the air? People say, "This could be a possibility but it is difficult to pull out an example."

  43. The point surely is that before expropriation is established, it is for a court to decide. We often get complaints from businesses that the Government is putting them out of business for one reason or another, but short of bankruptcy such charges are never really substantiated in any way. We realise it is difficult but it is important that we do not lose sight of the question. Concerns of expropriation are, as yet, unsubstantiated.
  (Ms Durai) But it seems to me—I think you are right that we do not know exactly what these different clauses which are effectively in the agreement, how they will interact and what the result would be—but it seems that if this is a possibility, then why would you want to leave yourself open to that possibility? Under the MAI the company would not need as much as bankruptcy to challenge regulations. It is just wherever the assets of their company are affected. The impact is on the future or potential profits, let alone the current profits.

  44. Can I deal with your concerns about the dispute procedures under the proposed MAI. You have said that they constituted "inequity"; that third parties cannot be involved in making representations to the members of a tribunal, for example. However, they are the same, are they not, as were incorporated in the NAFTA Treaty. First of all, there have not been very many cases brought under the NAFTA Treaty. People thought there would be a great flood of cases brought against governments but that has not proved to be the case, so I would be interested to know why you are so concerned about the issue. More particularly, it is not a general principle of law, that third parties can intervene in a dispute of this nature. If we look at our domestic law we do not permit third parties to become third party to an action in this way. We regard it as being the role of government to act as the defender of the consumer interest and to enforce their legislation. So why do you think that third parties should have a locus and why are you so concerned about the whole issue?
  (Ms Durai) I think again it is an issue of balancing the powers and it was felt that if you were to go above the normal state-to-state dispute mechanisms within the international agreement to include investor-to-state, then why would it be that they and their interests were allowed to be represented in a way that maybe other interests were not. I do not think there is any kind of hard and fast rule that third parties should be involved, but it just seemed very strange that you would want to give investors those rights and the ability to challenge legislation and not others.

  45. But because they are directly affected by the legislation, they might take the view that the balance of power is all the other way, that governments are very powerful and some investors may be relatively small companies, not particularly powerful and they would regard that as an oppression, would they not?
  (Ms Durai) There are a lot of people who are directly affected, it is not just the investors, but it is also the environment and the communities in which they operate.
  (Ms Johnstone) I would like to make two points really. We are beginning to get third party rights in UK legislation. They are in the Competition Bill which has just become an Act, though I do not quite know how they are going to pan out, and there has been discussion about the potential for group actions taken, for example, by the Consumers' Association to further consumer rights, so we are beginning to get in UK law some third party action rights. I wanted to make also a general point that we have felt that in dealing with these important international economic issues, and most of the work which has been done has been on trade and the World Trade Organisation's role in that, that one actually has to have an open and a much more participative process. In our work on the Uruguay Round of Trade Negotiations, we did put in and hear quite a lot of comments about the dispute settlement mechanism that was being established there, which was a huge improvement on what they had before, and we asked for the ability of third parties to put in evidence to the dispute panels as well, so it is a general policy, and it does not just relate to investors, but it relates to very important international organisations where decisions are being made which will affect all of us in lots of different ways.

  46. Are you satisfied with how it has worked under NAFTA or do you see flaws in the way that NAFTA has worked?
  (Ms Johnstone) I am not a North American consumer, so I have not studied NAFTA. I do not know whether Jayanti has looked at it in detail.
  (Ms Durai) I think under NAFTA, if there is going to be labour legislation and health and safety legislation challenged by investors, then I think that you cannot say that you are satisfied with NAFTA and how it has worked.

  47. Has there been much challenge?
  (Ms Durai) There have been a few cases. It is also not as simple as saying that just because there have not been that many cases, having that clause or the mechanism in there makes the clause redundant or makes the fact that investor-to-state disputes does not add to any distribution of power, et cetera. It is just that by the existence of that clause, it would automatically discourage governments from regulating in a way that might benefit other parts of the community.

  48. Governments would be discouraged from legislating because somebody might choose to challenge the legislation if they felt oppressed by it? That is an extraordinary concept, is it not?
  (Ms Durai) That is what has been happening to some extent in the WTO where the cases which actually go to dispute are very few and they are often dealt with on a bilateral level and dealt with on a national level, a national challenge, where the governments, et cetera, just decide that it is much easier instead of going through the whole mechanism to change the regulation.

  49. But the concerns you have got, this again is puzzling to me because you are not giving concerns about marketing or that sort of thing, but about health and safety. That seems to be again somewhat outside your particular locus as a consumer organisation.
  (Ms Durai) Sorry, health and safety are outside of the locus of consumers?

  50. Yes, the health and safety legislation affecting the way people run their businesses is not exactly directly a consumer interest, is it?
  (Ms Johnstone) It can have a direct consumer impact through quality control systems, especially in the food industry.

  51. That is a different thing, quality control. Health and safety and quality control are quite different items.
  (Ms Johnstone) There are health and safety workers, but the whole way an operation is run will affect the safety of the product. There are links.

  Mr Butterfill: I think you are pushing your remit rather a long way.

  Chairman: I think we have travelled down this lane before and I think that it may be that you have a different perspective on health and safety than that of some of my colleagues. We tend to think of it in the context of the workplace in the context of the legislation which we have in the United Kingdom which tends to be workplace specific, whereas I think you have a broader interpretation of it and I think that is probably where there is a divergence of emphasis. Can I say that this has been an extremely helpful start to this morning and we have covered most of the ground that we wanted to. There was the suggestion that if you had any examples of concerns, then you could submit a supplementary memorandum to us and that would be of some assistance. I am very grateful for your coming here. It has taken longer than we had anticipated, but we are very grateful for the evidence you have given us, so thank you very much.