CURRENT INVESTMENT CONCERNS
Elpidio V. Peria
22 February 2017
from : http://philnews.ph
The mining companies in the Philippines whose operations were closed by DENR Secretary Gina Lopez recently should now be content that their due process rights are being taken cared of by the Office of the President. While they may be hoping that the President may reverse the decision of the DENR Secretary, there was one distraught-looking lawyer of a mining company on TV we saw last week who vowed they will sue the Philippine government for affecting their investments in the country.
When we heard this, our first reaction was, this fellow is not bluffing – he appeared to be determined in doing it and most likely he is already researching the legal arguments that he will use that will go beyond the due process argument they are saying were violated by Sec. Gina Lopez. With the Office of the President already reviewing the DENR Secretary’s decision, the due process argument is passé, or to put it in legal terms, that point is moot and ineffective.
When that lawyer talked about laws protecting investments in the country , the immediate legal principle that will be put in play in this soon-to-be suit that will most likely be filed, among other legal arguments, but for this post we will only focus on this, is the fair and equitable treatment or FET principle.
According to Prof. Moshe Hirsch of the Hebrew University of Jerusalem writing in the Journal of World Investment and Trade (Research Paper No. 07-13, June 2013), the FET clause has existed as a ‘sleeping beauty’ in bilateral treaties since the end of World War II but it is only since 2000 that investment tribunals have applied it to a broad range of circumstances. Currently, this principle is included (though in diverse contexts and different wordings) in the great majority of bilateral investment treaties (BITs) as well as in major multilateral investment treaties (such as the NAFTA and the Energy Charter Treaty) and it is the most frequently invoked standard in investment disputes.
In the case of the Philippines, one regional agreement where this principle is found is the ASEAN Comprehensive Investment Agreement (ACIA) signed by the Philippines with other ASEAN member-states in 2009 and in that regional treaty, fair and equitable treatment requires each Member State not to deny justice in any legal or administrative proceedings in accordance with the principle of due process.
Considering our earlier point that the due process argument is already moot given that President Duterte through the Office of the President has already provided that relief and is currently reviewing the DENR Secretary’s decision, the FET principle is one legal argument that may still be pursued by the mining companies.
The United Nations Conference on Trade and Development (UNCTAD) came up with an update of its backgrounders on key principles of international investment agreements in 2011 and its study of the cases in investment tribunals that dealt with the FET principle identified some state actions that are not considered fair and equitable treatment :
(a) Defeating investors’ legitimate expectations (in balance with the host State’s right to
regulate in public interest);
(b) Denial of justice and due process;
(c) Manifest arbitrariness in decision-making;
(e) Outright abusive treatment.
Of all these actions, it seems the only argument that may be pursued by the mining companies is the item dealing with the investors’ legitimate expectations, but even that has some elements to it as pointed out too by UNCTAD :
(1) Legitimate expectations may arise only from a State’s specific representations or commitments made to the investor, on which the latter has relied;
(2) The investor must be aware of the general regulatory environment in the host country;
(3) Investors’ expectations must be balanced against legitimate regulatory activities of host countries.
We cannot comment, as we don’t have information, on what may have been the representations made by the Government or any of its agencies, to the companies when they made their investments in the country but items (2) and (3) above will make the mining companies’ arguments of legitimate expectations difficult. The UNCTAD update even emphasized that the FET obligation does not prevent host States from acting in the public interest even if such acts adversely affect investments. This is an important qualification to the legitimate expectations approach, according to UNCTAD.
For all intents and purposes, Sec. Gina Lopez was acting in the public interest when she said that these closed mining operations were not complying with the rules set by the DENR, like operating in watersheds, among other violations. Any state action that involves enforcement of existing rules that were violated is something that no legitimate expectation of an investor can overcome. Notwithstanding this, in all likelihood, this FET argument will still be tried and there may be facts that may put other elements of the FET principle in play but for all appearances, this is not one strong argument that may carry the day for the mining companies.