VOL. 05, NO. 09, November 11, 2011 (Kartik 25, 2068)

By Paras Kharel

The brouhaha surrounding the Bilateral Investment Promotion and Protection Agreement (BIPPA) between Nepal and India signed during Prime Minister Baburam Bhattarai’s October visit to India presented a spectacle true to the form of present-day Nepal. From a PhD-SLC topper head of government apparently failing to appreciate the substance and implications of the pact, to a lack of open debate before its signature, to coverage by the mainstream media in a consent-manufacturing mode bent on projecting the pact as the sine qua non for attracting Indian investment.

Signing Bippa Aggrement in New Delhi

The national treatment and most-favoured-nation (MFN) treatment provisions in the BIPPA reinforce preferential treatment for Indian investors, who in practice are already treated on a par with domestic investors and enjoy more rights than do other foreign investors, thanks to the 1950 Treaty. A treaty that the Maoists, with “intellectual” fire-power from Bhattarai, once upon a time wanted to be scrapped but now are willing to accept in an adjusted and updated form. Nepal’s strategy should be to treat all foreign investors alike, regardless of their nationality.

The provision on compensation for losses (Article 6) requires each government to compensate the investors from the other country for any losses they incur due to war, state of emergency, insurrection or riots on a national and MFN treatment basis. This is, for practical purposes, more than national treatment, unless the Nepal government decides to compensate domestic investors similarly. Replacing “civil disturbances” with “riots” was trumpeted—with cheerleaders in the media—as a sterling achievement of the Nepali side, when in fact it does not require a brilliant lawyer to prove the equivalence of the two in many a circumstance, during international arbitration. A government of a least-developed country in perennial transition that is unable to maintain law and order has the cheek to pledge compensation to foreign investors for losses from its absence!

Media reports had it that the BIPPA would allay India’s concerns about the disruption of Indian investment projects, including the Upper Karnali hydropower project. The pact will not be able to address concerns related to disruption due to, say, load shedding, militant labour unionism, strikes, shutdowns, extortion etc, which are major concerns of all investors, domestic and foreign. Some “leading” dailies reported that whether to provide compensation for losses arising from incidents like strikes and shutdowns will be decided by a joint industrial committee comprising both Indian and Nepali businesspeople. The biased reportage was riddled with contradictions: the pact will encourage Indian investment by addressing security concerns; to show that Nepal has not given away much through the agreement, it is emphasized that compensation is confined to losses arising from war, emergency, insurrection and riots (thereby contradicting the hype about the agreement being key to attracting Indian investment into Nepal); and then it is let on that a committee shall decide on compensation for other types of losses. Since the agreement makes no mention of such a committee, what led the media to refer to it? Whose wishes were they articulating? Was there a letter of exchange to that effect?

Worst of all, the BIPPA could entrench a patently anti-development policy. Choice hydropower projects have been awarded to foreign investors to be built as export-oriented ventures even as the country is starved for electricity. There have been protests, including by a faction of the Maoists, against such projects. The means of protests have been violent at times, no doubt regrettable. But the policy that prompted such protests is also condemnable. The provision of compensation in the BIPPA gives the government a veneer of legitimacy in the form of “international obligation” to use force against such protests and/or use the state treasury to compensate foreign investors affected by the protests although such investment is not in the national interest in the first place. It may not be difficult to interpret the protests and associated vandalism as rioting. Or perhaps it is the putative joint committee that is to decide on compensation should they not be interpreted as rioting. The justification that the BIPPA will help bridge the huge trade deficit with India, which stood at 200.87 billion rupees in the first 11 months of FY 2010/11, is absurd. The immediate focus should be on channelizing all potential domestic resources, including remittances, into the productive, tradable (export and import-substituting) sector. Where foreign investment is essential (e.g., huge hydropower projects) it must be guided into priority sectors and uses (e.g., electricity for domestic use, not exporting away the multiplier benefits). Besides restoring law and order, developing hydropower for domestic use (load shedding is cited as the biggest constraint in business climate surveys), addressing other supply-side constraints, securing the removal of market access barriers faced in India and elsewhere, and obtaining improved transit facility are critical to increasing exports to India and beyond.

What is the PM’s position on the export-orientation of the hydropower policy? The media otherwise critical of the Maoists portray him as a pragmatist. There is a thin line between pragmatism and opportunism. Once upon a time he used to write fiery articles about how Nepal was forced into underdevelopment courtesy of the core-periphery relationship with its neighbour. Can he explain how exporting cheap hydropower can spur economic development in Nepal, which in his considered view is essential to strengthen nationalism? He reportedly broke down when visiting his alma mater, JNU, and said that he is what he is because of JNU, where he learnt Marxism. Does JNU Marxism mean keeping one’s own country underdeveloped while allowing its resources to be exploited by its neighbour—if the student happens to be a Nepali? Did he miss an opportunity to tell leftist gurus at JNU and CPI(M) comrades not to demonstrate “hollow” nationalism by protesting against Indian trade liberalization moves, including its free trade agreement with the European Union?  It seems that the Marxism taught at JNU is to be interpreted differently for different folks—one version (pragmatist) for Nepal and the other for serving the interests of its motherland.

Pratyush Nath Upreti
BSc.LLB (Hons)
Email:upretipratyush@gmail.com

An issue which has become the subject of debate is signing of Bilateral investment Promotion and Protection Agreement (BIPPA) between Nepal and India. We have been hearing strong voices of opposition from different institution against the agreement. But I am not against the agreement; I believe the agreement is in interest of Nepalese and National economy. But my concern is government policy in implementing this agreement.

keeping voice of opposition aside the policy makers still have to question what form of protection needs to be strengthened in order to promote economic development. Having mere (BIPPA) agreement does the investor come in Nepal??.

Nepal being developing countries lag far behind in protection and enforcement of IPRs as their level of economic and social development is low. Due to lack of proper domestic law and negotiating skill on part of developing countries they are not able to benefit from favorable provision inside the IP system. Policy makers must keep in mind that whenever firm comes to establish industries or research and developments plants, they want strong Intellectual Property protection to ensure the non disclosure of technologies brought in by the firms. So the firms need trade secrets and contractual protection, firms seeking to establish markets for finished products need strong copyright, patent and trademark protection.

In the global economy, the creation of knowledge and its adaption to product designs and production techniques are increasingly essential for commercial competitiveness and economic growth. Like US, their economies largely depend on Intellectual Property. According to the International Intellectual Property Alliance (IIPA), in 2010 the U.S. industries most dependent on copyright protection which added over $930 billion in value to the U.S. economy, almost 6.4% of the total GDP and employed nearly 5.1 million U.S. workers. This shows the important of strong Intellectual Property Laws.

We have IP laws but that are below the standard. If we analyze the IP laws of different countries with Nepal, similarities are due to come as most of the countries are signatories to the International Convention and the TRIPS Agreement, which establish minimum standards of IP protection. But the national laws differ according to the need and demand of their respective nation. In categories of work eligible for protection are same. Major difference between Indian and Nepalese Copyright Act is in terms of protection of copyright. Indian Copyright law is comprehensive, detail provisions are mentioned like in case of assignment, provision regarding mode of assignment, disputes with respect to assignment is much cleared. Whereas Nepalese copyright law lacks the detail provision relating to assignment, there is no specific provision for mode of assignment and disputes relating to that.

In order to cope with challenge in copyright area with the introduction of various technologies, the present copyright law of Nepal is in sufficient. In recent times violation of copyright is rampant in the cities. Particular because of piracy issue, large no of authors, investors, performer are frustrated in their business. In order to solve this issue and to encourage creators, government should come with strict copyright laws. Thus the current copyright Act need amendment to incorporate provision for cinematographic works, encompassment of the provisions of WIPO internet treaties, coordination among enforcing agencies. In order to solve the burning issue of piracy, there must be a proper taskforce to control copyright infringement; it can be done through introducing copyright cell in police force with well trained officers. With introduction of such bureau it does not give change to infringer to infringement someone copyright as in present scenario when police reaches to crime spot, the infringer will shift to another place, this is because of lack of coordination and untrained officers. Like in U.S. FBI division on complain (like online complaint mechanism) investigate intellectual property crime through (i) cyber division where they investigate intellectual property crimes involving all digital and electronic works including Internet, CDs, DVDs etc. (ii) Financial Institution Fraud Unit, they deals with all other intellectual property crimes.

Not only copyright law, Patent Design and Trademark law has to revised and there is needed a Landmark changes as there Law are below the standards lay down by TRIPS agreement. As a Policy maker government has to give more importance to small scale industries. IPR system is not only for big companies it is an important instrument also for small and medium sized enterprise (SMEs) for strengthening and enhancing their business in this globalize and knowledge based economy. In order to promote SMEs government can come with the concept of Utility Model principle/Petty Patent. Petty Patents can be granted for less period of time and requirement of patentability will be low. Use of utility model as a means of protection may be useful alternative to patent protection and obtaining protection this way is often much less expensive than proceeding through the traditional patent route. SMEs plays an important role in the growth of the country. It contributes nearly 40% of the total industrial value added in the Indian economy. IP enhance the market value of SMEs by generating income through the licensing, sale or commercialization of the IP protected products or service that may significantly improve an enterprises market share or raise its profit margins. This will ultimately enhance the value of your SMEs in the eyes of investors and financing institution. Thus IP plays important role in SMEs and government should not only think of investor, it should try to come out with strong IP regime to encourage and promote small scale industries.

It is very important to create awareness about Intellectual Property, as IP plays an important role in economy of the country. At present there is a need of provision IP Laws regarding alternative dispute resolution, so that disputes can be settled through negotiation. Separate Court for Intellectual Property in China, Taiwan, and Malaysia has helped them in terms of effective protection of copyright. Nepal can also come with separate IP court, not immediately but in future this can be introduced or else separate bench can be introduced for IP matters. Due to open boarder between Nepal and India, has become the medium of piracy and entry of counterfeit goods which have made author and investor frustrated so government of Nepal has to come with new policy to cope up with this issue.

Because of lack of awareness and difficulties to access the work, and lack of IP laws like Geographical Indication, Biodiversity Acts, Protection of Plant Varieties and Framer Rights it seems that Nepal has still long way to go to have a strong and proper IP regime.

In the proper policy context, IPRs are an important component of the general regulatory system including taxes, investment regulations, production incentives, trade policies and competition rules. End of the day how many treaty/agreement government sign, what matter is pro-competitive business environment, that can be received through IPRs and IPRs are an important component of the general regulatory system including taxes investment regulations, production incentives, trade policies, and competition rules. The IPRs may encourage competition and Lawyers of strong IPRs maintain that they create competition with long run consumer benefits. Thus with strong IP Policy we need more IP expertise lawyers for industrial revolution which just started with agreement like BIPPA and I suggest government to come out with strong IP Policy before signing Bilateral Investment Promotion and Protection agreement with China.

By PRATYOUSH UPRETI

The Bilateral Investment Promotion and Protection Agreement (BIPPA) signed between Nepal and India has generated debates in various circles. We have been hearing strong voices of opposition to BIPPA from different institutions. Nevertheless, the agreement is in the interest of the Nepalese and their national economy. My concern here will be to discuss the government policy about implementing this agreement. Various kinds of treaties and accords are needed in conducting the state to state relations. The treaty regimes guide the patterns of relations between any two countries.

One of the objectives of entering into the BIPPA with India or any other country was to promote industrialization, create employment in the manufacturing and services sector, increase government revenues and export trade and reduce trade imbalances that will finally help promote the welfare of Nepal and the Nepali people.

Surya Government

As Nepal and India have already signed the agreement, the important duty of all would be to explore ways and means on how the agreement could be utilized in the best manner for the promotion of Nepal’s interests. If Nepal wants to have foreign investment, it must sign this kind of treaty with other countries as well.

In today’s globalised economy no country can survive without getting involved in trade deals with other countries. No sane industrialist can invest money in another country without receiving an adequate assurance on the protection of their investment. Wisdom lies in harnessing the potential benefits from the globalizing pace of Nepali economy by generating complementarities and forging mutually reinforcing economic ties with neighboring countries and others. In this context, the present BIPPA agreement signed between Nepal and India is beneficial to both the countries. There is no reason to make a hue and cry without understanding the clauses and implications of the treaty.

Every treaty can be defined in various ways and there are always pros and cons in the bilateral treaties. BIPPA is not an exception. There is no reason to make such a hue and cry except for gaining political mileage. International treaties and relations have their own courses and actions. They must not be interpreted politically and under narrow slogans of so-called nationalism. Clauses included in BIPPA have protected Nepal’s interests too.

Keeping voices of opposition aside for the moment, policy makers still have no clues as to what form of protection they want strengthened in order to promote economic development. Does an investor come to Nepal just because of the BIPPA agreement?

As a developing country, Nepal lags far behind in protection and enforcement of IPRs due to its low level of economic and social development. In the absence of proper domestic laws and negotiating skills on the part of the developing countries, they are not able to benefit from favorable provisions inside the IP system.

Policymakers must keep in mind that whenever a firm comes to establish industries or research and developments plants, it wants strong intellectual property protection to ensure the non-disclosure of technologies, brought in by the firms. So the firms need trade secrets and contractual protections, firms seeking to establish markets for finished products need strong copyright, patent and trademark protection.

Being a close neighbor, India remains the single-largest trading partner of Nepal. After the revision of treaty of trade in 1996, it has given a big push for increasing the export trade of Nepal in the Indian market. Duet to this, Nepal’s export to India increased by seven folds after that. But, the momentum was lost after the revision of the treaty in 2002. The pace of export growth between 2002 and 2007 was around 10 percent and it was more or less stunted after 2007. Due to unstable trade regime and unstable political scenario, many Indian investors left Nepal creating a huge trade gap.

In Nepal, we have the IP laws but they are below the standards. If we analyze the IP laws of different countries with those of Nepal, similarities are there as most of the countries are signatories to the International Convention and the TRIPS Agreement, which establish minimum standards of IP protection. But the national laws differ according to the need and demand of their respective nation. In categories of work, eligibility for protection are the same. Major differences between Indian and Nepalese copyright acts are in terms of protection of the copyright. Indian copyright law is comprehensive, with detailed and clearer provisions for assignment, mode of assignment, disputes with respect to assignment. The Nepalese copyright law lacks the details relating to assignment, there is no specific provision for mode of assignment and disputes relating to that.

It is very important to create awareness about Intellectual Property, as IP plays an important role in the economy of the country. At present there is a need of provision IP laws regarding alternative dispute resolution, so that disputes can be settled through negotiations. Separate courts for Intellectual Property in China, Taiwan, and Malaysia have helped them in terms of effective protection of the copyright. Nepal can also come with separate IP court, not immediately, but in future. This can be introduced as a separate bench for IP matters. The open border between Nepal and India has become a medium of piracy and entry of counterfeit goods, which have made authors and investors frustrated. So government of Nepal has to come with a new policy to cope up with this issue.

Because of lack of awareness and difficulties to access the work, and lack of IP laws like Geographical Indication, Biodiversity Acts, Protection of Plant Varieties and Farmer Rights, it seems that Nepal has still a long way to go to have a strong and proper IP regime.

In the proper policy context, IPRs are an important component of the general regulatory system including taxes, investment regulations, production incentives, trade policies and competition rules. At the end of the day, irrespective of how many treaty/agreement the governments signs, what matters is pro-competitive business environment, which can be had through IPRs as they are an important component of the general regulatory system including taxes investment regulations, production incentives, trade policies, and competition rules. The IPRs may encourage competition and lawyers of strong IPRs maintain that they create competition with long run consumer benefits. Thus with strong IP Policy we need more IP experts lawyers for our industrial revolution which starts with agreements like BIPPA.

I suggest the government should come out with strong IP Policy before signing a similar Bilateral Investment Promotion and Protection agreement with China.

(Upreti is an LLM student)