TUESDAY 17 NOVEMBER 1998

MR RICHARD BATE

  80. Would they be enforceable in ways that at the present moment they are not?
  (Mr Bate) I believe that is one of the objectives of an MAI.

  81. You said that there were some criticisms, a small number of reservations claimed by the UK of the MAI when compared to the US and others. Was UK business satisfied with the Government's approach to the reservations or were there demands for more?
  (Mr Bate) I think the UK reservations were very mild ones centring around defence policy and things like that, I think. We certainly found in our discussions with the DTI, which we had going on for a long period of time, that they listened to anything that we said very intently and took notice of most of the things we said and we got the feeling that they were listening to other groups as well within the UK.

  82. Do you feel there has been a change in the DTI, that they are now listening to and taking on board your views?
  (Mr Bate) I would not have said that there has been a change because, as far as I am concerned, over the whole of the MAI period of the last two or three years, they have been listening to our views and seeming to us to be listening to them very well. We have had a lot of meetings with them and so on and have no complaints whatever.

  83. So you are happy?
  (Mr Bate) Yes.

  84. The ICC expressed support for the dispute settlement mechanism proposed under the MAI on the basis that very large companies are sometimes able to negotiate with governments without the need for arbitration in a way that smaller firms are not able to. Can you give me some examples of how larger firms could carry out this negotiation in the way that smaller firms could not?
  (Mr Bate) Well, I have not got any examples. I think one of the points about the dispute settlement regime recommended under the MAI was that there would be available arbitration between state and investor and I believe that that is the right way for it to happen, independent, effective arbitration.

  85. Do you honestly think that that would change the way that multinationals behave if they work through an arbitration mechanism?
  (Mr Bate) Yes, I do. The ICC International Court of Arbitration has been going for nearly 76 years based on the fact that it is a very effective way of settling disputes.

  86. Do you have any examples through that that would demonstrate why that would work more effectively?
  (Mr Bate) Well, I cannot say that it would work more effectively. All I can say is that ICC arbitration has been going on for 76 years now and is one of the most successful courts of arbitration. It is an accepted method of settling commercial disputes.

  87. Have you had instances where companies have just bypassed you and gone straight to the Government and said, "Look, you know that Britain needs us more than we need Britain and if you don't accede to our demands, we will take our business elsewhere"?
  (Mr Bate) That might well happen. We are not aware of when companies decide to ignore normal channels and use their own. I am sure that companies are using their own channels of communication and if they want to, that is up to them.

  88. In the 1970s Tony Benn, when he was Minister for Energy, tells of how he almost felt like walking around the other side of the desk and saying, "You sit on that side and I will listen to you" when the multinational oil companies came in saying how they wanted to exploit the North Sea. These sort of things are fairly well, sometimes frivolously, documented, but at the same time, they are matters of record. What volume of business does your disputes procedure get or how many cases a year do you deal with?
  (Mr Bate) I do not know. I could go and look at the records, but hundreds of cases a year, varying from ICC arbitrations, which is only one of the many courts of arbitration in the world obviously, but our arbitration tends to be the bigger cases, and I would not say that we would not have an arbitration for less than $50,000 or $100,000, but we tend to be in arbitration where there are millions of dollars involved, but there are many, many courts of arbitration in the world. Arbitration, and there are experts in this room which I am not, but arbitration is the accepted way of settling disputes.

  89. The arbitration procedures that you have, which are well established and fairly well supported, involve only international companies coming into the UK, inward investors or exporters into the UK, but there is no role in this procedure for indigenous companies. Is that correct?
  (Mr Bate) No, indigenous companies can, anyone can use arbitration. The point of the MAI was that in the dispute settlement mechanism we wanted to make sure that there were effective dispute settlement mechanisms for investor to state and we are not saying we want special treatment for investor companies, but that they should have the same treatment available to them as domestic companies have.

  90. If a domestic company is in dispute with the Government, can they use your good offices for arbitration?
  (Mr Bate) Yes, I do not see why not.

  91. And do they?
  (Mr Bate) I am not sure. I do not know the answer to that question, I am afraid, Chairman.

  92. Do you think you could give us some information about that?
  (Mr Bate) Yes, I will.

  93. One of the issues that I am concerned about is whether or not the institution of such a dispute settlement mechanism could lead to a rash of claims which were frivolous and which were actually working against legitimate government legislation that we are seeking to influence to change through this process or even to delay.
  (Mr Bate) Companies would only want to go to arbitration in a dispute if there was a genuine dispute between the investing company, and I am talking in the context of the MAI, and the national government and if there was an MAI, there would be certain rules laid down and it ought to be fairly clear that somebody is breaking rules, either the government or the investor, and that is when an arbitration would come forward. If there are no rules, if there is not an MAI or no bilateral treaty or whatever, that is when the waters get muddy and people do not know whether there is an argument or not, but if there is an MAI or a framework of rules, then people at least know where they stand which is one reason why we are looking for an MAI.

  94. But there is always the temptation for people to push as far as possible the advantage within a legislative framework and earlier you were talking about the legitimate desire of business to test whether or not local government legislation was negotiable or changeable. Do you not believe that this same process would be used as one of the vehicles in that?
  (Mr Bate) I do not think an arbitration process is there to be used as a lever or a mechanism to accomplish anything. An arbitration, a dispute settlement mechanism is just that; where an argument does arise, then investors need a route whereby their grievances can be heard.

  95. How would you see a resolution of that possibility? Your organisation has a lot of experience of working through a dispute settlement, so would you see a process that would need to take place in the first place before things could go through to arbitration?
  (Mr Bate) Only that when we get a request for arbitration, and we get requests for arbitration on a fairly regular basis just as we have had a couple this week already, we only get a dispute when parties have been to lawyers and established that there is an argument. All we are doing is putting ourselves forward as one of the dispute resolution mechanisms because we know we have a reputation for dispute resolution and it is an internationally accepted one which is why the ICC would like to see our dispute resolution mechanism as one of the ones available under MAI.

  96. In your memorandum you said that you did not have any problem in principle with the regulatory action by the Government on environmental or health grounds, but I think you probably heard the previous evidence where it was suggested that the threat of legal action against governments might actually deter governments from enacting some otherwise necessary regulations. Do you think that is a real fear and have you any evidence that that might be the case?
  (Mr Bate) No, none at all.

  97. You do not think there are any cases where governments have been deterred by the fact that they might get action taken against them, and we have got NAFTA as an example?
  (Mr Bate) I am not aware of any governments, no.

  98. You might perhaps write to us if you find any that might fit that bill.
  (Mr Bate) Yes.

  99. In your memorandum you qualify your statement that you do not have a problem in principle by saying that as long as there is a "complete lack of discrimination, that any regulations be fully justified by compelling scientific evidence and that the entitlement to full compensation be maintained", but there must be some circumstances surely though where scientific evidence is not actually compelling, but there is a reasonable balance to believe that public health, for example, might be in danger. There are all sorts of areas where we are nervous about something, but we do not have the full scientific evidence. Would you say in those circumstances that it justifies that action be taken?
  (Mr Bate) I would think so, yes. In the general drift of what you are saying, yes, and it is up to local governments to enact legislation. All we are saying in this context is providing that legislation applies equally to domestic companies and investing companies.