MAI --- Constitutional Validity in the High Court
(Appendix)
      PART 3 of  3 PARTS

[ 81 ] [ Back ] [ Contents ] [ Home ] [ Open Letter ] [ Foot ] [ Concise Overview ] [ 83 ]                                     By David Keane
August 1998

It is suggested in this article, that most State government powers and rights, including control over public instrumentalities such as public hospitals, schools or universities, or other utilities such as water supply, electrical power or train services, would be endangered to such a degree as possibly passing totally out of State government control. This represents an extraordinary claim, but then again the MAI document is extraordinary. Let us then examine such claims in more detail, looking specifically at some of the more contentious articles within the MAI document. The entire MAI document is lengthy, including not only draft articles, but also notes and commentary. The draft and notes alone extend to about 100 pages. It is at present only in intermediate draft form. The final voting on all articles is due to be negotiated from October 1998, and so here is presented extracts from the most recent publicly available draft. For those who wish to examine the entire MAI document, it may be accessed on:
http://mai.flora.org/

The word State has a different meaning in the MAI document to that which it has in the Australian Constitution. In the MAI document, it refers to nations who sign the MAI agreement. In the Australian Constitution, it refers to the geographical areas and governmental entities that were formerly British colonies.

Here are some relevant extracts from the most recent publicly available MAI draft of October 1997:

SELECTED EXTRACTS FROM THE MOST RECENT MAI DRAFT

II DEFINITIONS
2. Investment means:

Every kind of asset owned or controlled, directly or indirectly, by an investor, including:

(i) an enterprise (being a legal person or any other entity constituted or organised under the applicable law of the Contracting Party, whether or not for profit, and whether private or government owned or controlled, and includes a corporation, trust, partnership, sole proprietorship, branch, joint venture, association or organisation);

(ii) shares, stocks or other forms of equity participation in an enterprise, and rights derived therefrom;

(iii) bonds, debentures, loans and other forms of debt, and rights derived therefrom;

(iv) rights under contracts, including turnkey, construction, management, production or revenue-sharing contracts;

(v) claims to money and claims to performance;

(vi) intellectual property rights;

(vii) rights conferred pursuant to law or contract such as concessions, licenses, authorisations, and permits;

(viii) any other tangible and intangible, movable and immovable property, and any related property rights, such as leases, mortgages, liens and pledges.

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III. TREATMENT OF INVESTORS AND INVESTMENTS
NATIONAL TREATMENT AND MOST FAVOURED NATION TREATMENT

1 . Each Contracting Party shall accord to investors of another Contracting Party and to their investments, treatment no less favourable than the treatment it accords [in like circumstances] to its own investors and their investments with respect to the establishment, acquisition, expansion, operation, management, maintenance, use, enjoyment and sale or other disposition of investments.

2. Each Contracting Party shall accord to investors of another Contracting Party and to their investments, treatment no less favourable than the treatment it accords [in like circumstances] to investors of any other Contracting Party or of a non-Contracting Party, and to the investments of investors of any other Contracting Party or of a non-Contracting Party, with respect to the establishment, acquisition, expansion, operation, management, maintenance, use, enjoyment, and sale or other disposition of investments.

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III PERFORMANCE REQUIREMENTS

1. A Contracting Party shall not, in connection with the establishment, acquisition, expansion, management, operation or conduct of an investment in its territory of an investor of a Contracting Party or of a non-Contracting Party, impose, enforce or maintain any of the following requirements, or enforce any commitment or undertaking:

(a) to export a given level or percentage of goods or services;

(b) to achieve a given level or percentage of domestic content;

(c) to purchase, use or accord a preference to goods produced or services provided in its territory, or to purchase goods or services from persons in its territory;

(d) to relate in any way the volume or value of imports to the volume or value of exports or to the amount of foreign exchange inflows associated with such investment;

(e) to restrict sales of goods or services in its territory that such investment produces or provides by relating such sales to the volume or value of its exports or foreign exchange earnings;

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III PRIVATISATION

Paragraph 1 (Application of National Treatment/Most Favoured Nation)

1 . The obligation on a Contracting Party to accord National Treatment and Most Favored Nation Treatment (as defined above) . . . . applies to:

a) all kinds of privatisation, irrespective of the method of privatisation (whether by public offering, direct sale or other method); and

b) subsequent transactions involving a privatised asset.

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6. Special share arrangements which explicitly discriminate (i.e. dejure) against foreign investors and their investment are contrary to obligations on National Treatment/Most Favoured Nation treatment. It is also understood that when, in their application, special share arrangements lead to defacto discrimination they are also contrary to National Treatment/Most Favored Nation treatment.

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9. "Privatisation means the sale or other disposal by a Contracting Party, in part or in full, of its equity interest in, or the assets of, a (state] enterprise or government entity.

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III B i) Draft text for an anti-circumvention clause

Alternative 1

1. Each Contracting Party shall ensure that any state enterprise that it maintains or establishes acts in a manner that is not inconsistent with the Contracting Party's obligations under this Agreement wherever such enterprise exercises any regulatory, administrative or other governmental authority that the Contracting Party has delegated to it.

Alternative 2

1. Each Contracting Party shall ensure that any entity to which a national or subnational government authority has delegated a regulatory, administrative or other governmental authority acts in a manner that is not inconsistent with the Contracting Party's obligations under this Agreement wherever such entity exercises that authority.

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NOT LOWERING STANDARDS

Alternative 1

The Parties recognise that it is inappropriate to encourage investment by lowering [domestic] health, safety or environmental [standards] [measures] or relaxing [domestic] [core] labour standards. Accordingly, a Party should not waive or otherwise derogate from, or offer to waive or otherwise derogate from, such [standards] [measures] as an encouragement for the establishment, acquisition, expansion or retention of an investment in its territory of an investment or an investor. If a Party considers that another Party has offered such an encouragement, it may request consultations with the other Party and the two Parties shall consult with a view to avoiding any such encouragement.

Alternative 2

A Contracting Party [shall] [should] not waive or otherwise derogate from, or offer to waive or otherwise derogate from [domestic] health, safety or environmental [measures] [standards] or [domestic] [core] labour standards as an encouragement for the establishment, acquisition, expansion or retention of an investment or an investor.]

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IV. INVESTMENT PROTECTION
1. GENERAL TREATMENT

1. 1. Each Contracting Party shall accord to investments in its territory of investors of another Contracting Party fair and equitable treatment and full and constant protection and security. In no case shall a Contracting Party accord treatment less favourable than that required by international law.

1.2. A Contracting Party shall not impair by [unreasonable or discriminatory] [unreasonable and discriminatory] measures the operation, management, maintenance, use, enjoyment or disposal of investments in its territory of investors of another Contracting Party.

2. EXPROPRIATION AND COMPENSATION

2.1. A Contracting Party shall not expropriate or nationalise directly or indirectly an investment in its territory of an investor of another Contracting Party or take any measure or measures having equivalent effect (hereinafter referred to as "expropriation") except:

a) for a purpose which is in the public interest,

b) on a non-discriminatory basis,

c) in accordance with due process of law, and

d) accompanied by payment of prompt, adequate and effective compensation in accordance with Articles 2.2 to 2.5 below.

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V DISPUTE SETTLEMENT
D. DISPUTES BETWEEN AN INVESTOR AND A CONTRACTING PARTY

16. Final awards

a. The arbitral tribunal, in its award shall set out its findings of law and fact, together with the reasons therefor and may, at the request of a party, provide the following forms of relief:

i. a declaration that the Contracting Party has failed to comply with its obligations under this Agreement;

ii. pecuniary compensation, which shall include interest from the time the loss or damage was incurred until time of payment;

iii. restitution in kind in appropriate cases, provided that the Contracting Party may pay pecuniary compensation in lieu thereof where restitution is not practicable; and

iv. with the Agreement of the parties to the dispute, any other form of relief.

b. In appropriate cases where the loss or damage was incurred by an investment which remains a going concern, the tribunal may direct that the compensation or restitution be made to the investment.

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IX. RESERVATIONS
LODGING OF COUNTRY SPECIFIC RESERVATIONS

A. 2 Article X (National Treatment), Y (Most Favoured Nation Treatment), [Article Z, ..., and Article ... ], do not apply to:

(a) any existing non-conforming measure that is maintained by a Contracting Party as set out in its Schedule to Annex A of the Agreement;

(b) the continuation or prompt renewal of any non-conforming measure referred to in subparagraph (a); or

(c) an amendment to any non-conforming measure referred to in subparagraph (a) to the extent that the amendment does not decrease the conformity of the measure, as it existed immediately before the amendment, with Articles X (National Treatment), Article Y (Most Favoured Nation), [Article Z, ..., and Article ...].

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WITHDRAWAL

1. At any time after five years from the date on which this Agreement has entered into force for a Contracting Party, that Contracting Party may give written notice to the Depository of its withdrawal from this Agreement.

2. Any such withdrawal shall take effect on the expiry of six months from the date of the receipt of the notice by the Depository, or on such later date as may be specified in the notice of withdrawal. If a Contracting Party withdraws, the Agreement shall remain in force for the remaining Contracting Parties.

3 . The provisions of this Agreement shall continue to apply for a period of fifteen years from the date of notification of withdrawal to an investment existing at that date.

(End of selected extracts from MAI draft document)
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Let us now proceed with the demonstration of why the MAI agreement endangers all State government instrumentalities and functions.

We begin by looking at the definition of Investment. The phrases used in this definition are so all-embracing as to include all segments of Australian government. Note especially the phrases, "directly or indirectly", "whether or not for profit" and "private or government owned or controlled".

Let us then examine the leading paragraph regarding Treatment of Investors and Investments: National Treatment and Most Favored Nation Treatment. The impact of this article is that once there is any element of private ownership in a function, enterprise or administration, then according to the MAI, it is no longer permitted to refuse foreign ownership. That is, once even a tenth of a percent of ownership of an administration or facility is privately owned, then private interests will invariably gain part control, and therefore a toe-hold to force application of the MAI treaty to that instrumentality.

There then follow a host of articles which list the rights of investors (including foreign owned multi-national corporations, even if they have only a tiny part share in an instrumentality). A few articles, from Performance Requirements and Privatisation, are here reproduced, but the MAI document is literally flooded with such investor's rights. Note that privatisation must, according to the MAI agreement, be unconditionally open to foreign investors, but the reverse is not true. Governments do not have the right to nationalise private investments, except in rare instances where the "public interest" can be proved before an international tribunal, and even in such cases full compensation must be paid at an amount determined by the international tribunal.

The Anti-Discrimination Clause is not yet finalised, but it is likely to remain all-embracing and extremely powerful. The effect of the non-discrimination clause, is that once there is even partial privatisation, and in some cases this may be indirect, then the MAI agreement forbids any regulation to prevent foreign entry or which discriminates against foreign investors. In effect, any government law about an instrumentality which has the slightest part of private ownership, direct or indirect, can be challenged by multi-national corporations by them first buying up a part ownership, and then by bringing the government law before an international tribunal to complain against any element of regulation.

There are two checks in the present MAI draft to protect government rights. But they both are weak, and will in October be under strong attack, as certain lobby groups are aiming for the total removal of both checks from the final MAI agreement.

The first check is the section on Not Lowering Standards. The terms of this section are intentionally weak, and a lesson should be learnt from the NAFTA treaty, and the case in which the Canadian government banned a toxic petrol additive for reasons of protection of public health. Ethyl Corporation sued for $251.million (US) damages against the Canadian government and to escape having to pay massive damages, the Canadian government is being forced to make a public statement that the petrol additive is perfectly safe, and to permit the free commercial sale of this additive. The point is that the onus has shifted onto the Canadian government to prove toxicity.

The medical profession had conclusive proof that tobacco was injurious to health, a generation before it was proven so in court. But it had to establish a case before a court to a degree of total certainty. Such evidence took a generation to accumulate. So it is also with the MAI document. Governments will not be able to regulate simply because they know that a certain practice is harmful, or that public sentiment is opposed to a practice. They must prove before a tribunal with scientific experts that it is certain that a practice is harmful. The onus of proof in a scientific and legal sense is imposed upon a government before it is permitted under the MAI agreement to pass any regulatory law.

The second check concerns provisions for nations for the Lodging of Specific Reservations. In a document released by the Australian Treasury on Feb 20th 1998, there are 16 headings of areas in which Australia is claiming special reservations. However details about these claimed reservations have not been made available to the public, and possibly not to the States either. It remains to be seen how many of these special areas submitted by Australia will be accepted by the negotiating committee, thus being appended to Australia's legal obligations under MAI. Also there is a strategy to be inserted into the final MAI document that special reservations granted to nations should be rolled back with a fixed deadline for complete removal. How this rollback works in practice has yet to be decided in October.

The section on Investor Protection, Expropriation and Compensation, very clearly indicates that all governmental regulations concerning part-privatised instrumentalities shall be subject to the MAI agreement. Any "discrimination" against private investment will be forbidden except in circumstances where the "public interest" can be proven. In this circumstance, the onus of proof is upon the governing body to prove before an internationally-appointed tribunal, and to a point of certainty that public interest requires such regulation. The verdict of the international tribunal is normally binding. Even where such regulation is permitted in the public interest, prompt, adequate and effective compensation, to be awarded by the international tribunal, must be paid by the government to the investor.

Let us now consider what would happen if Australia signs MAI and within a year of the agreement coming into force, there is such a strong public reaction that the Commonwealth has no option but to withdraw from MAI. Now under the rules for withdrawal, notice of withdrawal cannot be lodged until 5 years after MAI comes into force, and withdrawal is effective, at earliest, six months later. That is, even if the Commonwealth government very soon after signing is forced to recognise the foolishness of its entry into MAI, it is still contracted to 5 1/2 years of payment of any damages awarded by international tribunals. These damages come into effect "from the time of loss or damage", that is, a suing multinational would back-date its claim from the date of MAI coming into force.

Now among OECD nations, Australia is rather unique in its strong tradition for democracy, its strong promotion (at least among NGO groups) of green issues, and its having a Constitution which clearly grants State governments freedom to make whatever laws and regulations they choose, within their sphere of general residue of powers as allocated in the Constitution. This constitutionally guaranteed freedom of the States is in sharp contrast to the terms of MAI, in that State laws and regulation must not regulate in such a way as to discriminate against investor interest. For all these reasons it is quite possible that Australia will become the battleground for MAI following signing, attracting more litigation from investor groups than any other nation. It will be inevitable the States will want to continue to legislate for the good and health of their citizens, rather than in subservience to investment group interest, and so very many cases against Australia are likely to be initiated by multinationals and taken to the international tribunals. The States in return, to defend their Constitutionally guaranteed rights, will most certainly challenge any restraint upon their right to govern through the High Court. And so for the many years during which legal battle continues in both international tribunals and the High Court, the Commonwealth government will be powerless to implement MAI in practice until all these legal battles are resolved. And international investors, perceiving Australia will become politically unstable through the extended political and legal crisis, may choose to avoid investment in Australia.

There will be so many potential areas of claim against Australia, (principally because of strong resistance by the States) that the aggregate sums of money contested by the multinationals in the international tribunals may many times exceed the amount of money claimed in the Ethyl Corporation v Canadian government case. As previously demonstrated it is inevitable that The High Court will rule that the MAI agreement is invalid in its application to State law and regulation.

But how will the international tribunals rule? They must note that Australia is a signatory of the MAI agreement yet continues to be in breach of its obligations under MAI. That the Australian government is restrained by the Australian Constitution from conforming to its MAI obligations, is not a concern of the tribunals, for no such escape clause is in the present MAI draft, nor is likely to be in the final draft. The MAI agreement clearly states that where damages accrue due to a nation's failure to conform to the obligations under MAI, then the tribunal must award any damages to investors for discrimination against them. And as Australia will be legally contracted to MAI rules for 5 1/2 years, then these damages will be awarded for at least 5 1/2 years following the date that MAI comes into force. Besides the initial awarded damages, the terms of award specify the addition of interest from the time the loss or damage was incurred until time of payment. Compound interest may therefore accrue from the date MAI comes into force. Payment will not be made until the time of resolution of the legal cases which are likely to take some 5 years or more due to their complexity. At what interest rate? We cannot know what interest rate the future will reveal, but if there is an extended world recession, the world interest rates could jump to 3 or more times their present rate. In short, we may soon be looking at a colossal national debt due to MAI awarded damages, and a debt accruing of similar proportions, due to unpaid interest. This whole scenario may put us into a situation of a Third World nation, in which payment of interest becomes the greater part of national debt. And all this even if, on the very day after signing MAI, the Commonwealth government realises it has made a colossal mistake and wants to withdraw but under MAI rules cannot for 5 1/2 years.

There is another sub-section of the Withdrawal conditions under MAI that further complicates matters.

Sub-section 3 . The provisions of this Agreement shall continue to apply for a period of fifteen years from the date of notification of withdrawal to an investment existing at that date.

If the situation is not sufficiently horrific with Australia withdrawing after 5 1/2 years, this clause seems to indicate that investors can sue the Australian government for a period of 5 + 15 = 20 years. That also applies to interest accumulating at compound rates at the future interest level during the next 20 years. Is it possible that during the next 20 years there is such a massive global depression that interest rates will exceed 20% per annum? We cannot know for sure, but the way stock exchanges and foreign currencies ride on speculation, things are not promising. To whom will the sub-section apply? It will apply to all investors in Australia at the time of Australia's notice of withdrawal from MAI, perhaps in 5 years time after MAI comes into force. So MAI will give rights to all investors in Australia to sue the Australian government for any type of regulation whatsoever, anything which can be shown before an international tribunal to diminish their company profits. This includes companies which would have gone bankrupt anyway without MAI, but perceiving a way of remaining solvent by suing the Australian government, it will be natural for companies to work out how much more profit they would have made if they were not regulated.

And as if this situation is not enough, the very signing of MAI will introduce into Australia a very dangerous element --- cowboy investment schemes. From the day MAI comes into force, a number of investment schemes will come to invest in Australia knowing and actually planning to go bankrupt within 5 or 20 years. But they will never admit this is their plan. Their purpose is either to sue the Australian government for as much money as they can, or to break regulatory restrictions on ideological grounds. In order to enforce bankruptcy their aim is to actually invest specifically in those areas that most violate the environment or native rights or endanger public health, while paying all executives twice the salaries and perks that would be paid if their motive was honorable. Their aim is to force governments (particularly State governments and local councils, because these are protected by the Australian Constitution) to regulate against them, in such a manner that they know the regulations will be in breach of MAI, while the actions of the investors are so indirect as to not be perceived by the MAI corporate tribunals as lowering standards within Australia. And so even after they go broke, having already ruined the environment, toxified the area or desecrated tribal sites, they know they will be reimbursed through awards made under the MAI agreement, and those awards must pay for all executive salaries "lost" even if at twice the going rate.

And what then, if in the first year of signing MAI, the Commonwealth government, realising its colossal mistake, withdraws straight away unilaterally and in total breach of the MAI agreement? For nations that come in breach of MAI there are clearly defined provisions in the agreement, for breaching nations to be penalised. The nature of penalty is undefined in the MAI text, and is to be determined by the MAI party members (that is, judicial bodies appointed by the other OECD nations). A general principle is however clearly defined in the MAI text, in that the degree of penalty shall be proportionate to the degree and seriousness of breach. Now if (as seems quite possible because of Australia's special constitutional situation) Australia becomes in extreme breach of MAI, by not complying with MAI obligations, and then unilaterally withdrawing from MAI and paying no damages issued by international tribunals, then such breach may be perceived as the most extreme possible. And so the most extreme penalty will have to be implemented by the remaining members of OECD. What sort of penalty? One can be sure that various powerful lobby groups, representing the most powerful of the multinationals, will be out to teach Australia the hardest lesson possible, that is to so deprive Australia of investment, and to drive us into Third World status, with immense international debt and most of our tax going towards repayments of interest just to survive. Australia may well be the first such test example, and the resolve of both democratic righters in Australia and international corporate lobby groups may be strong, because if multinationals cannot teach the other nations that they cannot do likewise and leave MAI unilaterally, then the MAI agreement will fall to pieces as a long term treaty. And so the first test case nation (Australia?) may well be make or break.

And all because Australia, in a constitutional sense, cannot possibly abide by the current terms of the MAI agreement. If anyone would think that such a scenario is fanciful, then let them read the wording of the MAI draft text. In it they will see so clearly that investors rights are exalted, and there are very clearly defined provisions for penalising nations which continue to discriminate against investors and so come in breach of the agreement.

How will the MAI agreement affect Australian governmental instrumentalities? Let us first consider Telsta. The present national debate about selling up to 49% of Telstra is irrelevant to the effect from MAI when it is signed. The point is that because Telstra is presently 33% privately owned, as soon as MAI is signed, Telstra will be subject to the MAI agreement. A special MAI reservation has been lodged by Australia in the area of telecommunications, but it remains to be seen the exact terms of the reservation claimed and whether it will be accepted by the drafting committee. And even if it is accepted, that reservation may only be temporary until the time it is rolled back. And so once any effective reservations concerning Telstra are rolled back, then Telstra will be totally subject to the MAI agreement. Then any perceived discrimination by Telstra against foreign investors may be immediately challenged by multi-national corporations who have part ownership of Telstra. Special rules presently promised to ensure regulation of Telstra so to favour country citizens, such as untimed local calls and special Telstra equipment to country areas, are likely to be viewed under the MAI agreement, as discriminatory, and therefore illegal. If however such rules are permitted by the international tribunal as being in the "public interest", compensation must still be paid for any losses of profits caused to foreign investors by such regulation. It is suggested that the Australian government know this only too well, for their strategy is such that once MAI is signed and it is recognised that it is too costly for the Australian government to regulate Telstra in any way, they will have the perfect case to present to the people for 100% privatisation of Telstra, which all along has been their aim.

What about State government instrumentalities, such as public hospitals, schools, universities, electricity boards, water supply and so on? Many of these institutions are already partly privately owned. Some hospitals have part private ownership, but regulation permits only Australian or State ownership. Under the MAI agreement, such private ownership must permit foreign entry, and after foreign part ownership, such institutions will be comprehensively subject to the MAI agreement.

It should be noted that besides prevailing rationalist economic reasons to privatise, there is another pressure on the States to privatise at least partially, or to enter speculative fields of investment such as casinos. This stems from the Commonwealth government control over income tax, and their assertion of dominance over the States in any negotiations to distribute national revenue. This leads to a continual shortfall in State government budgets, which can only be offset in the short term by gradual privatisation of the State's assets. Such privatisation looks good and will win elections (it temporarily balances the budget) when there is a strong stock exchange though the real foolishness of such strategy becomes apparent when the stock exchange is weak and we enter recession.

However once MAI is signed, unless the States challenge MAI in the High Court, they will find very quickly, that present State regulations will be found to breach the MAI agreement, and these regulations will either have to be repealed or the States will have to pay exorbitant compensation costs. As the States are already in financial difficulty, the payment of compensation to international corporations will not be seen as a viable option. The choice open to the States will then be either to renounce all independent regulatory authority, and become a servant of the multi-nationals, or to challenge MAI in the High Court.

It should be noted that even if some of Australia's reservations to the MAI agreement are officially accepted by the MAI negotiating committee and are integrated into the final MAI agreement, then these reservations will be ineffective in any argument in support of MAI, if the States challenge MAI in the High Court. What the MAI document does is to place restrictions upon State rights to implement laws and regulations in a general sense. The listing of Australian reservations to the MAI agreement, with respect to traditionally State areas of power, would have an effect of then granting back States a few special areas of governmental authority. And then for a time only until such special grants are rolled back under the MAI rollback arrangements. It is an outrageous idea that through a Commonwealth administrative action, the general powers of States should be annulled through inevitable economic pressures of liability to pay compensation, and in its place the States should be granted a few (perhaps temporary) special powers listed in the reservations appended to the MAI document. The entire structure of federalism in Australia, as guaranteed in the Australian Constitution, is that the Commonwealth government has the special powers and the States the general residue of powers. The High Court would have no hesitation in ruling as Constitutionally invalid, any attempt by the Commonwealth to make ineffective ( by rulings of international tribunals or by threat of compensation and damages claims) the general powers of States, and substituting a small listing of special powers.

Perhaps this is why the Commonwealth is not making any special reservations to the MAI negotiating committee in the areas of State powers, because they know that this would be an invalid move under the Australian Constitution. And so the preferable strategy of the Commonwealth is to negotiate in secrecy, not considering the rights of the States as a meaningful consideration, and (according to the Joint Standing Committee on Treaties Interim Report) not providing adequate information to the States.

It is instructive to look at the idea of the "level playing field" that is the natural consequence of such freedom of investment unrestrained by regulation. In a level playing field, all goods and services (including from instrumentalities presently owned by the government) will naturally tend to be priced at least as high as the cost price, so that they will not provide any consideration to the needs of the poor, the invalid, the young, the elderly or any other disadvantaged grouping in society. In the past government has regulated to provide a minimum support for disadvantaged groups, but once the MAI agreement comes into full force, any positively discriminatory regulation by governments will be likely to be challenged by multi-national corporations, so that governments will have to subsidize any loss of profits incurred by the multinationals.

Take for example a fully de-regulated banking industry. The banks are presently only partly de-regulated, or are in part self-regulated in apprehension that if they do not provide for the common good, then the public will demand they be regulated. Take for example the banks not charging any fees to poor pensioners and more particularly the fact that under the present system the banks actually accept poor pensioners. The banks know that at present if they forced the poor pensioners away or charge excessive fees, an irate public will demand regulation. But in a level playing field as under MAI, the banks would be immune from government regulation. The principal investors in the bank would aim towards optimisation of their profits. All banking business would therefore become oriented towards those borrowing or investing huge sums of money. No consideration at all would be given towards the poor, the young or the invalid (unless all this multitude of contingencies are written in detail into the MAI document). The effect would therefore be huge fees charged to these disadvantaged groups, with the purpose to force away from the bank all those clients who do not contribute to the profit of the bank. Does this sound unrealistic? Yet if banking if forced under MAI to be unregulated, then it will take just one bank to develop a ruthless policy against the disadvantaged, for all other banks to be forced to do the same so to remain competitive and survive. If the government wants to maintain support for the disadvantaged, it will only be able to regulate the bank fees by compensating the banks for all loss of profits.

The net effect would be that government taxes would be used to support the huge profits going to the purses of multi-nationals, because formerly the banks would have balanced much of their profit to cater for the needs of the disadvantaged and poor. Profits many times the amount permitted in a partially regulated industry would, if MAI is signed, be permitted to go into the purses of the multinationals. It is easy to imagine that such consequences will in time filter through to most instrumentalities presently controlled or regulated by government.

Once MAI is signed, much of the damage will have been done, and it may be a very costly exercise to retreat from MAI, even if the High Court rules against the validity of MAI. The need is for States to immediately place strong pressure upon the Commonwealth government before the negotiating committee on MAI reconvenes in October 1998, to prevent such signing. If the present Commonwealth government delays the next election until after it has covertly signed the MAI agreement, then such extremes of government control by foreign multi-nationals may thus be inaugurated. And so how the electors vote in the subsequent national election will be of lesser consequence, for much government policy implemented after the signing of MAI, will therefore be subject to the MAI agreement.

David Keane
August 1998

Postal address: PO Box 582 Gosnells 6110, W.A.
E-mail address:   keane@nw.com.au

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