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What are Bilateral investment treaties (BITs)
These are agreements between two countries that aim to promote and protect foreign direct investment (FDI)of the investors. BITs typically include provisions on fair and equitable treatment, (FET), National Treatment (NT), Most Favoured Nation (MFN), protection from expropriation, and the right to free transfer of funds.
In recent years, there has been growing concern about the impact of BITS on developing countries. It is known that bits give foreign investors too much power and can constrain governments’ ability to regulate in the public interest. The main goal of BITs is to protect investments abroad for instance Canadian Mining companies in Tanzania are protected by BIT between Canada and Tanzania of 2013.
BITs restrict how Tanzania regulates foreign investment—including for environmental protection or human rights reasons—and impede efforts to negotiate fair royalty regimes or otherwise ensure mining benefits the Tanzanian people, BUT it allows[1] Canadian firm to challenge Tanzanian government measures before private investor-state dispute settlement (ISDS) tribunals rather than in Tanzanian courts. ISDS is recognized globally as a threat to the achievement of human rights, including Indigenous rights, and our ability to address the climate emergency. More than 70% of ISDS cases launched under Canadian BITs come from Canadian oil, gas, and mining companies.
WHY DO COUNTRIES SIGN BITS?
The myth that BITs attract FDI
The main purpose that host countries sign BITs is the fact that they are told that it will attract FDIs, but it has been concluded that BITs have failed to deliver, instead, they bite due to over-protection of their investment. Governments are frustrated since they cannot terminate their treaty obligations. The other reason why the country opts to sign BITs is a gesture of diplomatic goodwill among the two contracting States.
The available data suggest that there have been trade imbalances between the two countries (Canada and Tanzania) FDIs went down tremendously from $472 Million in 2013 to $3.8 in 2017, Tanzania is a growing market for Canadian businesses, and Canadian mining companies are among the largest foreign investors in Tanzania, but how many Tanzanians are really benefiting from these mining activities? Evidence shows that there are countries that have a huge inflow of FDIs to Tanzania and yet do not have any BIT in place like Vietnam.
TANZANIA ISSUED A LETTER TO TERMINATE ITS BIT WITH CANADA
The said BIT was signed on the 17th of May 2013 and came into force on 09th Dec 2013 it was for 10yrs if no intention for termination was issued by either party, then it would continue for an indefinite term, but if terminated then it would remain in force for 15more years, serving its sunset clause making it 25yrs (remember with the same laws and regulation that was in place when signed in 2013). BITs contain clauses that are not beneficial to the host countries most especially one that has a regulatory chill to the state's ability to regulate or change its laws governing investments, (a ‘stable regulatory environment’ entitlement to ‘fair & equitable treatment (FET)’ or protection of their ‘legitimate expectations’ in relation to their investments) lest we forget that BITs protect investors investments abroad.
It is without a doubt that Tanzania is a popular destination for foreign investment due to its rich natural resources. To ensure the Tanzanian people benefit from this investment, the government passed the Permanent Sovereignty Act in 2017, which prohibits foreign courts or tribunals from making decisions related to the extraction, exploitation, or acquisition of the country’s natural wealth. A subsequent Review and Re-negotiation of Unconscionable Terms Act, and a law prohibiting international arbitration for settlement of disputes involving public-private partnerships, further strengthen the Tanzanian government’s role in setting the terms of mining investment.
Tanzania is taking opportunities to terminate international investment agreements, like the Canadian BIT, that are incompatible with these domestic laws. This is not Tanzania's first BIT to be terminated, In September 2018, Tanzania announced it was terminating its bilateral investment treaty (BIT) with the Netherlands, which triggered an effort to renegotiate the treaty. This effort failed, resulting in the BIT expiring on April 1, 2019. Tanzania’s mining reforms stem in part from the government’s conflicts with Barrick Gold and its subsidiaries. Two separate Canadian mining firms have challenged Tanzania’s cancellation of so-called retention licences (for future extraction on prospected territories) before investor-state arbitration under the BIT with Canada.
Why Tanzania should terminate the BIT?
Although Canada has been providing financial support to Tanzania, the BIT between Tanzania and Canada does not provide fair terms to Tanzania. We argue the URTZ to stand its ground and terminate the BIT as its initial 10 years have been reached and let's not forget that this BIT has a 15-year sunset clause.
Canada is holding on to the re-signing of the BIT only because it has adopted the new Model BIT in 2021. There shouldn’t be any hurry to resign as the 10 years coming to an end just yet, let the country explore other strategic avenues of trading with Canada, just as India and Canada's strategic trade relationship.
In its consultation on priorities for a future Canada-Africa Economic Cooperation Strategy, Canada wants to avoid “anything that even suggests or hints at neocolonialism.” If this is true, the government should find ways to terminate or rework its overtly neocolonialist investment treaties on the continent. Leaving the treaties in place will frustrate the chances that African nations will see social benefits from today’s infrastructure and “critical resource” boom. It would also maintain a double standard with respect to “rules-base” trade—one that puts African nations at a significant disadvantage. Also, they should avoid double standards that arise from recent steps by rich countries to withdraw from investment treaties that include ISDS. Canada did not consent to ISDS in the renegotiated Canada-U.S.-Mexico Agreement.
Conclusion and advice to Tanzania.
Countries like South Africa, and India have terminated all their BITs, and FDIs are still flowing in, Tanzania can follow the example due to the fact that it has what it takes for the FDIs to flow in terms of raw materials in natural resources.
[1] Winshear Gold Corp. v. United Republic of Tanzania (ICSID Case No. ARB/20/25) – Public Hearing | ICSID
These are agreements between two countries that aim to promote and protect foreign direct investment (FDI)of the investors. BITs typically include provisions on fair and equitable treatment, (FET), National Treatment (NT), Most Favoured Nation (MFN), protection from expropriation, and the right to free transfer of funds.
In recent years, there has been growing concern about the impact of BITS on developing countries. It is known that bits give foreign investors too much power and can constrain governments’ ability to regulate in the public interest. The main goal of BITs is to protect investments abroad for instance Canadian Mining companies in Tanzania are protected by BIT between Canada and Tanzania of 2013.
BITs restrict how Tanzania regulates foreign investment—including for environmental protection or human rights reasons—and impede efforts to negotiate fair royalty regimes or otherwise ensure mining benefits the Tanzanian people, BUT it allows[1] Canadian firm to challenge Tanzanian government measures before private investor-state dispute settlement (ISDS) tribunals rather than in Tanzanian courts. ISDS is recognized globally as a threat to the achievement of human rights, including Indigenous rights, and our ability to address the climate emergency. More than 70% of ISDS cases launched under Canadian BITs come from Canadian oil, gas, and mining companies.
WHY DO COUNTRIES SIGN BITS?
The myth that BITs attract FDI
The main purpose that host countries sign BITs is the fact that they are told that it will attract FDIs, but it has been concluded that BITs have failed to deliver, instead, they bite due to over-protection of their investment. Governments are frustrated since they cannot terminate their treaty obligations. The other reason why the country opts to sign BITs is a gesture of diplomatic goodwill among the two contracting States.
The available data suggest that there have been trade imbalances between the two countries (Canada and Tanzania) FDIs went down tremendously from $472 Million in 2013 to $3.8 in 2017, Tanzania is a growing market for Canadian businesses, and Canadian mining companies are among the largest foreign investors in Tanzania, but how many Tanzanians are really benefiting from these mining activities? Evidence shows that there are countries that have a huge inflow of FDIs to Tanzania and yet do not have any BIT in place like Vietnam.
TANZANIA ISSUED A LETTER TO TERMINATE ITS BIT WITH CANADA
The said BIT was signed on the 17th of May 2013 and came into force on 09th Dec 2013 it was for 10yrs if no intention for termination was issued by either party, then it would continue for an indefinite term, but if terminated then it would remain in force for 15more years, serving its sunset clause making it 25yrs (remember with the same laws and regulation that was in place when signed in 2013). BITs contain clauses that are not beneficial to the host countries most especially one that has a regulatory chill to the state's ability to regulate or change its laws governing investments, (a ‘stable regulatory environment’ entitlement to ‘fair & equitable treatment (FET)’ or protection of their ‘legitimate expectations’ in relation to their investments) lest we forget that BITs protect investors investments abroad.
It is without a doubt that Tanzania is a popular destination for foreign investment due to its rich natural resources. To ensure the Tanzanian people benefit from this investment, the government passed the Permanent Sovereignty Act in 2017, which prohibits foreign courts or tribunals from making decisions related to the extraction, exploitation, or acquisition of the country’s natural wealth. A subsequent Review and Re-negotiation of Unconscionable Terms Act, and a law prohibiting international arbitration for settlement of disputes involving public-private partnerships, further strengthen the Tanzanian government’s role in setting the terms of mining investment.
Tanzania is taking opportunities to terminate international investment agreements, like the Canadian BIT, that are incompatible with these domestic laws. This is not Tanzania's first BIT to be terminated, In September 2018, Tanzania announced it was terminating its bilateral investment treaty (BIT) with the Netherlands, which triggered an effort to renegotiate the treaty. This effort failed, resulting in the BIT expiring on April 1, 2019. Tanzania’s mining reforms stem in part from the government’s conflicts with Barrick Gold and its subsidiaries. Two separate Canadian mining firms have challenged Tanzania’s cancellation of so-called retention licences (for future extraction on prospected territories) before investor-state arbitration under the BIT with Canada.
Why Tanzania should terminate the BIT?
Although Canada has been providing financial support to Tanzania, the BIT between Tanzania and Canada does not provide fair terms to Tanzania. We argue the URTZ to stand its ground and terminate the BIT as its initial 10 years have been reached and let's not forget that this BIT has a 15-year sunset clause.
Canada is holding on to the re-signing of the BIT only because it has adopted the new Model BIT in 2021. There shouldn’t be any hurry to resign as the 10 years coming to an end just yet, let the country explore other strategic avenues of trading with Canada, just as India and Canada's strategic trade relationship.
In its consultation on priorities for a future Canada-Africa Economic Cooperation Strategy, Canada wants to avoid “anything that even suggests or hints at neocolonialism.” If this is true, the government should find ways to terminate or rework its overtly neocolonialist investment treaties on the continent. Leaving the treaties in place will frustrate the chances that African nations will see social benefits from today’s infrastructure and “critical resource” boom. It would also maintain a double standard with respect to “rules-base” trade—one that puts African nations at a significant disadvantage. Also, they should avoid double standards that arise from recent steps by rich countries to withdraw from investment treaties that include ISDS. Canada did not consent to ISDS in the renegotiated Canada-U.S.-Mexico Agreement.
Conclusion and advice to Tanzania.
Countries like South Africa, and India have terminated all their BITs, and FDIs are still flowing in, Tanzania can follow the example due to the fact that it has what it takes for the FDIs to flow in terms of raw materials in natural resources.
- Tanzanian governments need to implement a range of other policies to attract and retain FDI and to ensure that it is used to promote economic development and social inclusion.
- Ensure that domestic laws and policies are consistent with international human rights and environmental standards.
- Strengthen domestic institutions, such as the judiciary and regulatory agencies, in order to improve the enforcement of these laws and policies
[1] Winshear Gold Corp. v. United Republic of Tanzania (ICSID Case No. ARB/20/25) – Public Hearing | ICSID
