ISLAMABAD, March 30: The fate of a bilateral investment treaty (BIT) with the United States is expected to be decided by the prime minister on Saturday.

The move for the controversial treaty was initiated in a hurry in Washington a couple of weeks ago by Saleem Mandviwala, Minister of State and Chairman of Board of Investment.

Washington has already communicated to Islamabad that the treaty may be approved by March 31 or a fresh draft would be negotiated for covering bilateral investment between the two countries.

The treaty had been pending since 2006 because Islamabad had objected to some tough clauses.

The US wanted Pakistan to extend all facilities, both tariff and non-tariff, to US-sponsored NGOs in Pakistan, a facility that Islamabad did not give to any other country in a bilateral investment treaty.

As the deadline approaches, there is enormous activity in various ministries and comments on the treaty are being rushed to the prime minister’s secretariat.

Although the Board of Investment (BoI) shared documents with some ministries in the last couple of days, some annexures of the treaty, explaining certain clauses, were reportedly not shared with relevant stakeholders. The board of investment has already submitted the summary for PM’s approval.

Experts believe that the treaty would provide significant legal protection to US investors in Pakistan and would not attract any fresh investment.

Almost all stakeholders in unison identified their lack of legal expertise to deeply analyse most of the clauses in such a short time, which were not explained in the initialled treaty and could cause harm rather than attracting fresh US investment in the country.

Pakistan has offered standard/minimum internationally required protections to other countries with whom Islamabad signed the investment treaties, including China.

But the US investment treaty has wide scope and coverage regarding security scenario, and compensations, and has more legal and financial implications for Pakistan.

Under the initialled treaty, Washington has squeezed and restricted policy space for Pakistan in formulation of its trade and industrial policies.

Even Washington has investment treaties with Turkey and Sri Lanka but such harsh clauses have not been included that prevent them from formulating sovereign policies regarding promoting domestic industries.

All developing countries often work out policies for developing their own industries by offering various incentives, like deletion/local contents, export performance, technology transfer, etc., but Pakistan has been denied such incentives under the treaty.

Regarding appointment of senior management and boards of directors, Pakistan will not be able to prevent appointment of citizens of India and Israel, to whom Islamabad does not issue visas/work permits.

The most controversial clause is related to the extent of indirect expropriation and compensation mechanism.

Under this clause, the US wanted that in case of any loss to any intended US investor because of change in policy or government or law and order in Pakistan, Islamabad would be responsible for payment of compensation to investors.Similarly, under the non-confirming issues, the US inserted a clause in the agreement which bounds Pakistan from seeking prior approval from US before finalising any export, import or taxation-related policies.

However, documents reveal that annexes on non-confirming measurers and other controversial clauses were not shared by the BoI with the relevant ministries with initialled treaty.

It has been highlighted that the US has included restrictive provisions regarding disputes pertaining to legislation and regulatory measures, dispute settlement mechanism and resolving taxation related issues.

The other thorny issues which remained unresolved over the past six years included taxation and tariff on US investment and regulatory issues; extent of subjects for arbitration and the performance requirements in the light of World Trade Organisation.

The agreement requires the two parties to permit free and timely transfer of funds relating to an investment into or out of their territory. The treaty also includes international standards which require host countries to provide prompt, adequate, and effective compensation if they expropriate an investment.

However, one clause of the treaty also exempts disputes pertaining to environmental and labour laws from such arbitration.

Given the complexity of environmental and labour issues, in a country like Pakistan, the implications of this exemption need to be studied further, suggested by one document.