Free-trade deal with Europe will help MNCs sue India globally

If India signs the free-trade agreement (FTA) with the European Union (EU) in its current form, the country would be opening its doors for getting sued internationally by foreign companies.

EU has proposed a mechanism — investor to state dispute, which gives investors special rights to bypass the domestic legal system and seek redressal before a panel of international arbitrators.

If a multinational feels that a policy of the government concerning health, mining, environment, agriculture, retail etc or any other policy affects its investment, the firm can file lawsuits against the country in the international tribunal and seek millions in damages.

“On the other hand, if the government wants to sue a firm, then it has to go through the domestic courts and not directly to the international law,” said Kavaljit Singh, director, Public Interest Research Centre, New Delhi.

The EU FTA also calls for the “progressive abolition of restrictions on investment, with the aim to ensure highest level of market access.”

India is determined to conclude the FTA with EU this year.
Any firm, big or small, will be in a position to sue the government saying the country has violated provision of the Act by drafting measures which are likely to impact its investment or intellectual property, said Singh.

Last year, tobacco major Philip Morris filed a lawsuit against Latin American country Uruguay under a bilateral treaty between Uruguay and Switzerland, claiming that the Uruguayan health measures involving cigarette packaging amounted to unfair treatment of the company.

Uruguay’s legislation required that 80% of each side of a cigarette packet should be covered with graphic images on adverse effects of smoking.

Although the firm, which manufactures the Marlboro brand is US-based, it has an office in Switzerland and took advantage of the treaty to file its claim.