Thursday, June 9, 2022

Parliamentary Ratification of MCC

The then Finance Minister of Nepal and acting CEO of Millennium Challenge Corporation (MCC) signed a “Millennium Compact” in September 2017 under which Nepal will receive a grant of US $500 million (the question as to why Nepal’s minister stooped beneath his status to sign the compact in which the acting CEO of MCC had signed, has yet to be answered). The requirement of ratification by the parliament has rendered the compact controversial. Interestingly, annex IV and V of the compact have listed numerous condition precedents but parliamentary ratification is not one. In this backdrop, it is imperative to study and analyze the Articles 278 and 279 of the Constitution of Nepal, promulgated in September 2015, related to execution of agreements and parliamentary ratification thereof. Constitutional Provision Article 278 (1) has invested right to execute treaties and agreements (agreements) in the government of Nepal (GoN). Further, Article 279 (1) has stipulated that the ratification of (including accession to, acceptance of or approval of) such agreements shall be done in accordance with a legislation to be promulgated. Furthermore, Article 279 (2) has specified that ratification of agreements on following subjects shall be done by two-thirds majority of both houses of federal parliament: a) Peace and friendship, b) Security and strategic alliance, c) The boundaries of Nepal, and d) Distribution of Natural resources as well as their use Moreover, according to the proviso clause of Article 279 (2), agreements that do not have pervasive, grave and long-term impact on the nation, a simple majority of the House of Representatives can ratify. However, no legislation as directed by Article 279 (1) has been promulgated yet. It is incumbent upon the same legislation to delineate which agreements have pervasive, grave and long-term impact on the nation and which do not. The governments to date have demonstrated dereliction by failing to table a bill in the parliament in this regard. In sum, under Article 278 (1) GoN has authority to execute all kinds of agreements and only the agreements covered by four subjects mentioned in Article 279 (2) require parliamentary ratification. Furthermore, even if any agreement has pervasive, grave and long-term impact on the nation, but do not deal with the subjects listed in Article 279 (2), constitutionally such agreement does not require to be ratified. Millennium Compact and other grant agreements As pointed out above, under article 278 (1), GoN is authorized to execute all sort of agreements, including to receive grants from any nation or multilateral or any other donor agency for any amount and for any purpose. Even if the subject of the grant does cause a pervasive, grave and long-term impact on the nation, no ratification is required unless the grant agreement is related to the subjects listed by article 279 (2). MCC grant is for (i) electricity transmission and (ii) road maintenance projects. As both these “subjects” do not find place in the list in article 279 (2), no ratification is required. Besides, this compact is for a 5 year period (no long-term impact) and its objectives are neither pervasive nor have any grave impact. Therefore, it is preposterous to demand its parliamentary ratification. Nepal has received hundreds of billion dollars in grant since the dawn of democracy in 1950 from numerous countries, multilaterals and other donor agencies, but none of these grant agreements were required to be ratified by the parliament. Just last year Nepal received a total grant of US $ 1.756 billion (equivalent to Rs 210 billion) and none of these grant agreements were ratified. Ratification of MCC compact would set a precedent and other countries, multilaterals and other donor agencies too would demand ratification of their respective agreements and parliament’s main business would turn into ratification of numerous grant agreements. Main function of a legislature is to promulgate legislation for the country; not to ratify grant agreements. If the compact is ratified, there will be no time for the parliament to promulgate legislation. History of Parliamentary Ratification There is no need for parliamentary ratification of the treaties executed by the Indian government. In Nepal too under the Panchayat system, till March 1990, the then legislature, called Rastriya Panchayat did not have any authority to ratify. Because the sovereignty of the country was vested in the King and he was the source of all executive, legislative and judiciary authorities under the constitution of Nepal promulgated in December 1962. Before December 1962 too, there was no provision to ratify agreements including under the multiparty constitution promulgated in February 1959. While drafting a new constitution following the people’s movement in 1989/90, the commission charged with the responsibility decided to vest in the parliament authority to ratify agreements related to certain subjects. Accordingly, article 126 was inserted in the Constitution of Nepal 1990, which was incorporated verbatim in article 279 of the Constitution of Federal Republic Nepal in, promulgated in 2015. In 1991 an agreement on Tanakpur was signed with India. As the then government did not table this agreement for parliamentary ratification, there was huge uproar and public interest lawsuit was filed in the Supreme Court against the said agreement. The court delivered verdict saying parliamentary ratification is required. But the government did not comply with the verdict and instead signed Mahakali treaty in 1995 that incorporated most provisions of the Tanakpur agreement, which was ratified by the parliament in 1996; the first and last time the parliamentary ratification provision was invoked till-date. However, it was not an unconditional ratification. A stricture motion was also passed along with the ratification comprising following points: 1. Mahakali River is basically a boundary river (the treaty had defined Mahakali River as a boundary river on major stretches between the two countries); 2. Nepal and India have equal right over Mahakali River water (article 3 of the treaty states that the two countries have equal entitlement in the utilization of the waters of the River “without prejudice to their respective existing consumptive uses”); 3. Electricity tariff of Pancheshwar project shall be fixed on the basis of avoided cost principle (article 3.4 of the treaty stipulated that price shall be fixed by mutual agreement); and 4. Mahakali River Commission will be formed after reaching a consensus with the main opposition party and other parties of national level of Nepal (the treaty had left it to the discretion of the government of Nepal). Parliament is not a rubber stamp It is evident from the fact that as the Mahakali treaty was ratified by passing a 4 point stricture motion simultaneously, the parliament cannot be taken for granted and is not a rubber stamp. In the legislative procedure too, each Bill is deliberated by the parliament before passing them into Acts. During the process, each parliamentarian is entitled to propose amendments to the Bills and a number of Bills have been modified before their passage by the parliament. Whereas US and MCC officials have said on record that not even a comma or stop can be changed in the Compact. This will in effect render Nepal’s parliament a mere rubber stamp, which is not acceptable at all. Because this will undermine the authority of the sovereign parliament of Nepal and thereby impair Nepal’s sovereignty. Ratification vs. implementation of MCC Subsequent to execution of the compact in 2017, Millennium Challenge Account Nepal (MCA-Nepal) was established in 2018 under Development Board Act 2013, which has already reportedly spent about Rs 5 billion. However, Article 279 (3) of the Constitution stipulates that no agreement that requires parliamentary ratification can be implemented without the ratification. If the compact requires parliamentary ratification, its implementation as such and spending billions of rupees without the ratification contravenes Article 279 (3) of the Constitution. This is highly irregular, bordering on corrupt practice. Agreements executed by Nepal As explained above Nepal has signed numerous agreements after the provision of parliamentary ratification was enshrined in the constitution in 1990. But to date only the Mahakali treaty was ratified. Upon expiry of the transit treaty with India in 1989, India imposed (third) economic blockade on Nepal lasting 16 months. Nepal’s economy and her populace suffered heavily by it and it also culminated in abolition of the Panchayat system. Therefore, transit treaty with India has grave impact on Nepal. The transit treaty in force now was executed in 1999 for 7 years with an automatic 7 year extension clause, which was repeated once more in 2020. Although it has such grave impact on Nepal, but it was not ratified by the parliament. Nepal has signed double taxation avoidance agreements with 11 countries so far with Norway, Thailand, Sri Lanka, Austria, China, Pakistan, South Korea, Qatar, India, Mauritius and Bangladesh. As the date of termination of most of these agreements are not specified, these agreements have a long term impact on the nation. However, none of these agreements were ratified. Notwithstanding widespread opposition, a bilateral investment promotion and protection agreement (BIPPA) was signed with India in 2011. Similarly, such agreements have been signed with the UK, Finland, Germany, France, Qatar and Mauritius. However, none of these agreements were ratified by Nepal’s parliament. Treaties on water resource In 1997 Power Trade Agreement was signed with India, including article 8 stating that the agreement would come into force upon ratification by Nepal’s parliament. However, no attempt was made to have it ratified. Instead another Power Trade Agreement was executed in 2014, devoid of parliamentary ratification requirement, effectively circumventing ratification. Similarly, agreements were signed with Indian private sector entities for export-oriented hydropower projects like West Seti, Arun 3, Upper Karnali, Upper Marsyangdi etc. None of these agreements were ratified by parliament, although clause (d) of Article 279 (2) has included the distribution of natural resources as well as their use in the list of agreements that require ratification. Based on precedent manifested in the verdict related to the Tanakpur agreement too, these agreements should have been subjected to ratification. Had these agreements been signed with the Indian government, ratification would have been mandatory in the light of Tanakpur precedent. In this backdrop Dr. SD Muni, India’s Nepal expert, had admitted that the Indian private sector was involved in Nepal’s water resources to circumvent parliamentary ratification. Conclusion US and MCC officials are insisting on parliamentary ratification of the compact; whereas neither it is a condition precedent of the compact nor is it required to be ratified under Article 279 (2) of the constitution. Therefore, its ratification will undermine the sovereign authority GoN to execute such agreements under article 278 (1) and this will in effect amend the provision of article 279 (2). As not even a comma or stop can be changed in the process of ratification, its ratification would render Nepal’s parliament a rubber stamp. As the parliament is elected by the people of Nepal, in whom the sovereignty and state authority are vested under article 2 of the constitution, the parliament reflects the sovereignty and state authority of the country. Therefore, ratification of the compact to receive merely Rs 12 billion a year would amount to exchanging Nepal’s sovereignty for such a small amount. Published in Peoples Review on February 10, 2022

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