1. What is the MAI?

The MAI is the first attempt to combine in an international agreement multilateral disciplines on the three corner-stone areas of FDI rule-making, namely investment protection, investment liberalisation and dispute settlement.

Its objective is to provide a "level playing field" for international investors, with uniform rules on both market access and legal security. It aims at eliminating distortions to investment flows and facilitating a more efficient allocation of economic resources.

The MAI is conceived as a free-standing international treaty open to all OECD Members and the European Communities, and to accession by non-Member countries willing and able to meet its obligations.

Negotiations were launched by the OECD Member countries at the May 1995 Ministerial Meeting.

2. How is the MAI shaping up?

The OECD countries have made significant progress on the elements of the Agreement and will be working to conclude the negotiations in the coming months. The objective is a high standards Agreement:

• The coverage of investment will be broad, going beyond foreign direct investment to include portfolio investments and intangible investments;
• Investment protection provisions will be very similar to those found in the best bilateral agreements (BITs) (including fair and equitable treatment, free transfer abroad of profits and dividends and compensation for expropriation);
• National treatment will be assured for the establishment of new investments by non-resident investors and for the operation and expansion of established investments under foreign control;
• Dispute settlement procedures will include both state-to-state recourse as in the WTO and an investor-to-state mechanism as in most BITs.

The MAI will also provide path-breaking disciplines on areas of major interest to foreign investors. In particular, the MAI will apply the National Treatment principle to all privatisation operations -- both initial and subsequent transactions. It will ensure that government-designated monopolies do not use their special position to discriminate against foreign investors. It will call on the Contracting Parties not to lower environment and labour standards in order to attract foreign investment.

During the last few months, the negotiators have embarked on another crucial aspect of the negotiations: the liberalisation of existing investment restrictions and the drafting of country-specific reservations. These discussions have begun and will proceed in parallel with negotiations on finalisation of the text of the Agreement.

A number of issues remain to be solved, of course, and some of them involve difficult policy choices: the treatment of measures taken in the context of regional economic integration agreements such as the EU, the coverage of sub-national measures, the treatment of cultural measures, conflicting requirements and general exceptions including essential security and public order.

3. What interest will non-OECD countries have in signing the MAI?

Non-OECD countries may wish to sign the MAI for exactly the same reasons as OECD countries, i.e.:

• greater attractiveness for potential investors because of acceptance of high standards of protection, treatment and legal security. Compared to bilateral treaties, the MAI will cover all phases of investment, including the entry and post establishment phase, and stronger investment dispute settlement provisions;
• the MAI will offer similar treatment and legal protection to those countries which are also capital exporters. Although some benefits may flow automatically from the MFN provisions of the GATS and bilateral investment treaties, the scope of the MAI is much broader than these agreements as it includes all economic sectors; and
• signing onto the MAI will give access to the "Parties Group" which will be the organ responsible for the implementation and operation of the Agreement. This will be of particular importance for those agenda items likely to be identified in the Agreement for future work. Non-OECD countries will therefore be able to influence such future negotiations conducted under the MAI.

It is, of course, for each country to decide where its national interest lies. It is nonetheless encouraging that a number of non-OECD countries have expressed a general interest in joining the MAI.

OECD countries are holding regular briefing sessions on the negotiations for non-OECD countries. Workshops for non-Members have been held both in Latin America and Asia.

4. Why are these negotiations taking place in the OECD?

OECD countries account for the majority of FDI flows, probably 85 per cent of outflows and 65 per cent of inflows, and accordingly have a major stake in the rules governing international investment.

The decision to launch the MAI negotiation was a logical step to consolidate and complete the existing OECD instruments which have helped promote international investment and economic co-operation for many years. The OECD Codes of Liberalisation have been in place since the birth of the OECD in 1961 and the Declaration and Decisions on International Investment and Multinational Enterprises since 1976.

The MAI will be complementary to the WTO agreements and the MAI negotiators are committed to ensuring that there are no conflicts between these agreements, particularly now that the WTO will undertake work on the relationship between trade and investment as a result of the Singapore WTO Ministerial Meeting. There can be no question of the MAI being transferred to the WTO for adoption on a take-it-or-leave-it basis.

5. What are the OECD countries doing to keep non-governmental organisations and the general public informed about the negotiations?

The OECD internet site has a great deal of information on the MAI. The site provides information on the history of the negotiations, the issues under discussion and the status of the negotiations.

The OECD members consult regularly on the MAI with the OECD Business and Industry Advisory Committee and the OECD Trade Union Advisory Committee which represent the business community and trade unions.

In December, OECD members held a special briefing on the MAI for consumer and environmental organisations.

Member countries have been consulting within their own countries with other levels of government and non-governmental organisations.

6. What are the MAI Negotiators doing to address labour and environmental concerns?

The MAI is consistent with policies on labour standards and environmental protection and preservation and there is broad support for integrating labour and environmental considerations into the Agreement.

The MAI will not interfere with the freedom of governments to implement their own policies concerning labour and environmental standards as long as these standards are not more stringent for foreign investors than for domestic investors.

In addition, the Agreement is likely to specifically call on MAI countries not to lower labour and environmental standards in order to attract foreign investment.

There is also broad support for associating the OECD Guidelines on Multinational Enterprises with the MAI. The Guidelines, which are recommendations by OECD Governments to multinational enterprises operating in their territory, include specific recommendations on labour and environmental issues.

Updated: 29 May 1997