S.K. sent U.S. risky details before free trade talks

Posted on : 2007-02-01 14:23 KST Modified on : 2019-10-19 20:29 KST

In addition, task force, assembled after the fact, warned about possible constitutional violations

The South Korean government sent the United States a draft relating to investor-state dispute (ISD) terms in April last year, two months before the two nations launched official negotiations on a free trade agreement (FTA), according to records obtained by The Hankyoreh.

In addition, it was not until four months after the draft was sent to the U.S. side and two months after the start of official South Korea-U.S. FTA talks that President Roh Moo-hyun formed a task force to examine the possible effects of the ISD terms, the records said.

The task force, consisting of ministry officials and civil professionals, raised the possibility that the ISD terms and South Korea’s Constitution might clash, according to the records. Under the ISD terms, in the case of a suspected unfair advantage, individuals or private companies would be able to file for international arbitration against the government, legislature, or judiciary of the other nation.

Between August 7 and October 10 of last year, the task force held five meetings, and reported the results at a meeting of financial ministers presided over by President Roh Moo-hyun.

The task force’s meeting minutes, obtained by The Hankyoreh on January 31, said that it was President Roh who ordered the formation of the expert group to discuss potential problems with the ISD terms, citing their controversial nature. Through the task force’s minutes, it was confirmed that the body was established in August 2006, after South Korea-U.S. FTA negotiations had begun in June, and also after those protesting the potential FTA took serious issue with the ISD matter, calling into serious question the government’s public assertions prior to the FTA talks that it had extensively prepared for the negotiations.

During the task force’s meetings, members from several of the involved ministries, including the Ministry of Justice, Ministry of Transportation and Construction, and Ministry of Finance and Economy, pointed out that the ISD terms might violate South Korea’s Constitution, and eight of the nine civil professionals on the task force said that the ISD terms were full of problems.

In fact, the possibility of the ISD terms’ breaching the Constitution was raised even at the task force’s first meeting. According to the body’s minutes, those that took issue with the ISD terms said that if South Korea were to lose a lawsuit and be made to pay compensation to foreign investors, the situation would be unconstitutional in that it would go beyond the limits of compensation granted by due legal process according to the Constitution. This would thus breach the right to equality by discriminating against South Korean law, the task force members said.

"Under the South Korean Constitution, compensation for expropriation must be stated in the letter of the law. To acknowledge compensation for indirect expropriation" - through which public regulation may infringe upon the private interest of the investor, either directly or indirectly - "is a violation of the National Assembly’s legislative power," said Kim Yeong-jun, an official of the Ministry of Justice.

At the third meeting of the task force, held on August 28, 2006, Choi Jeong-ho of the Ministry of Construction and Transportation and Jeong Su-bong, an attorney, wrote, "Unless the U.S. suggests complementary measures [to help eliminate the potential legal loopholes], South Korea should demand the complete removal of the ISD terms." In response, Choi Gyeong-rim, an FTA negotiator from the Ministry of Foreign Affairs and Trade, who presided over the third meeting, said that they had raised the possibility of ruling out the ISD terms during the first round of FTA negotiations in June 2006. Choi added, however, "a draft which we sent to the U.S. [two months before the first round of official talks] already contained a section regarding the ISD terms."

The task force concluded that, "We have reached an agreement to some extent to accept the ISD terms on the condition that the U.S. will prepare complementary measures to solve the concerns on the behalf of South Korea, in order to get through the talks."

Since the third round of FTA negotiations in September 2006, the South Korean delegation has been urging the United States to accept a revised plan under which public policies regarding real estate, taxation, and monopoly regulation, as well as expropriation based on public policy, would be excluded as possible targets of international lawsuits. The U.S. has refused to accept these terms.

Lee Hae-yeong, professor at Hanshin University, said that the U.S. will most likely not accept South Korea’s revision because Korea had already sent its concessions on the matter to the U.S. side even before the start of the official talks. "The U.S position is firm that their investors must be protected through their own legal system," he added. "If the agreement is struck as is, it will be tantamount to a handful of buraucrats deciding on matters which may conflict with the Constitution."

South Korea and the U.S. went through six rounds of talks on the proposed Free Trade Agreements, starting June 5, 2006. They are slated to resume talks on the twelfth of this month.

Please direct questions or comments to [englishhani@hani.co.kr]

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