Ramifications of MCC’s “interpretive declaration”

MCC Compact (agreement) signed in 2017 to build 400 kV transmission line from Lapsiphedi and Ratmate in Kathmandu valley to Hetauda and to Damauli-Butwal through to Indian border as well as to repair and maintain some roads with a grant of US $500 million in 5 years had become controversial as it was heavily criticized from a number of perspectives. Grounds of criticism The road repair and maintenance part of the compact was not criticized. But the transmission infrastructure component was highly criticized as Nepal herself is languishing for lack of transmission infrastructure to increase electricity consumption within Nepal. The transmission infrastructure from Kathmandu to Butwal and eventually to Gorakhpur in India is obviously for export. Prima facie same to Hetauda seems to be for domestic use of electricity. Actually, it too is for export as the 400 kV transmission infrastructure from Hetauda to Dhalkebar is under construction while the 400 kV transmission infrastructure from Dhalkebar to Mujaffarpur in India was operationalized in 2016. Prudent course would have been to export electricity only after meeting Nepal’s electricity need to saturation level. This facet was completely ignored by the Compact. Not only Karnali and Sudur Paschim provinces are lagging behind economically for lack of access to industrial quality electricity, even 4 industrial corridors in Tarai belt, which are accessible by road, lack requisite transmission infrastructure and electricity requirements of industries there have yet to be fully met. Nepal’s per capita electricity consumption last year was 300 kWh only while the same was 1,200 and 2,800 kWh respectively in India and Bhutan. Nepal’s goal should be to make industrial quality electricity available in each of 753 municipalities of the country and increase per capita electricity consumption by industrializing the country massively and electrifying transportation to displace imported fossil fuel. This was one main reason that attracted criticism. MCC was also criticized as it planned to build 400 kV transmission line at the cost of Rs 150 million per kilometer while NEA had already built same from Dhalkebar to Bhittamod in Jalwshwar, which is connected to Mujaffarpur in India, at the cost of less than Rs 40 million per kilometer. Since the transmission line planned by MCC entailed building it over hilly terrain, at most it should have cost Rs 60 million per kilometer. Additionally, instead of having NEA, capable and experienced in building 400 kV transmission line cost effectively, build the transmission line, MCC had set up a new institution for the purpose, which was not wise from any angle. In this respect the deafening silence of NEA is surprising. MCC was categorically mentioned as the economic pillar of Indo Pacific Strategy (IPS) in the document published by the US State Department in 2019. In this backdrop GoN accepting MCC grant and affiliating herself with ISP entailed Nepal renouncing her non-aligned foreign policy, which she was adhering to since 1955, and this was stridently criticized. Most ministers, MPs, politicians, bureaucrats, media persons, etc. denied that MCC is related to ISP. But US secretary of state Michael Pompeo had mentioned in 2018 that Nepal already is part of ISP. Similarly, Acting Deputy Assistant Secretary for South Asia at the US Department of State David J Ranz had said that “MCC was one of the most important initiatives being implemented in Nepal under the US Indo-Pacific Strategy” in 2019 during his Nepal visit. Additionally, various Articles of the Compact were also criticized. However, most ministers, MPs, politicians, bureaucrats, media persons, etc. claimed that there were no provisions in the Compact detrimental to Nepal. Parliamentary ratification The then finance minister Sharma tabled MCC and “interpretive declaration” thereto for the ratification by the House of Representatives (HoR) on February 27, 2022. The interpretive declaration attempted to amend some Articles of the Compact that had become controversial. It is surprising that GoN tried to explain away some of the controversial Articles of the Compact through interpretive declaration, while initially it had failed to see any problem with any Article of the Compact. This action on the part of GoN proved the critics right. Finally, MCC and the interpretive declaration were ratified by HoR pursuant to Article 279 of Nepal’s Constitution. It is interesting to note that there are a number of “condition precedents” stipulated in the Article 7.2 and Annexes 4 and 5 of the Compact. But parliamentary ratification finds mention nowhere in the Compact. In this backdrop the Law, Justice and Parliamentary Affairs ministry advising GoN that Compact needs parliamentary ratification also became highly contentious. Question in the mind of everyone was why is it necessary to have an ordinary grant agreement ratified by the parliament, especially when no grant agreement signed so far have ever been ratified by the parliament. In the considered opinion of the critics, having MCC Compact ratified by the parliament impairs dignity of the parliament. The provision of Clause (d) of Article 279 (2) of Nepal’s Constitution had been flouted time again by not ratifying agreements related to division of natural resources and its use except for the Mahakali treaty. But surprisingly MCC Compact was ratified to receive a grant of merely $10 million/year. Last fiscal year Nepal had received $1.756 billion as grant from various countries and none of the grant agreements were ratified by parliament. Topics covered by interpretive declaration The first clause of the interpretive declaration stated that Nepal shall not be a part of any United States' strategy, military or security alliance including ISP. Similarly, it was also stated that the Constitution of Nepal would prevail over the Compact. Moreover, the declaration attempted to amend Articles 2.7, 5.1 (b), 3.2 (f), 3.5, 3.8 (a), 5.1 (a), 5.5, 7.1 and 8.1 of the Compact. Status of interpretive declaration Under contract law of each and every country of the world, any agreement signed between two parties can only be amended by the agreement of both parties. Any such agreement cannot be amended especially by interpreting the provision of the agreement just the opposite of what is written in the agreement. Interpretation can be resorted to in the cases where clarity is called for. But contradictory interpretations cannot be made. Besides, Article 6.2 (a) stipulates that “The Parties may amend this Compact only by a written agreement”. Therefore, no ex parte interpretative declaration can effectively amend any Article of the Compact. Further, Dr Himesh Dhungel, MCC’s former country director for Nepal (and an American citizen), speaking after Nepal’s HoR passed the interpretive declaration said that the interpretive declaration has no value in international law. Moreover, MCC’s office in Washington DC issued a statement welcoming the ratification of the Compact, but did not even acknowledge the interpretive declaration. Basically, MCC ignored the interpretive declaration, thereby impairing dignity Nepal’s HoR. Therefore, the interpretive declaration is one sided and HoR was not able to make any change in the Compact. Similarly, the then law minister opined that treaties can be amended by issuing interpretive declarations by one party under Vienna Convention on the Law of Treaties. However, there is no provision as such in that Convention. Therefore, MCC Compact stands unchanged as it was signed in 2017 and the interpretive declaration has not made any change or amended it. Since MCC and US government did not acknowledge the declaration, Nepal’s contention that the Constitution of Nepal would prevail over the Compact has also become dubious. Meaning MCC Compact supersedes Nepal’s Constitution. This is very ominous. Indo-Pacific Strategy The interpretive declaration disclaimed that Nepal is affiliated to the Indo-Pacific Strategy (ISP). But, since MCC and the US government did not even acknowledge it, it indirectly proves that Nepal has become affiliated to ISP. In other words, Nepal has renounced her nonaligned foreign policy and that is not prudent. Especially due to the geopolitical situation, Nepal affiliating with ISP could be lethal. Ukraine renouncing nonaligned foreign policy to join NATO has proved to be lethal as Russia has invaded her for that very reason. The war has lasted more than one year and there is no certainty when that war will end. By now over hundred thousand civilians have died and many towns and a lot of infrastructure have been completely destroyed. Western countries are supporting the war by supplying armaments, but army personnel of Ukraine are meeting untimely death. Ukraine is not engaged in the war because her sovereignty is at threat. She is waging war to join NATO and renounce non aligned foreign policy, which cannot be deemed wise from any perspective. Similarly, Afghanistan was adhering to non aligned foreign policy till 1973. But after she renounced that policy, the then Soviet Union invaded her in 1979 only to retreat in 1989, after which the Taliban government was formed in 1996. The US invaded her in 2001 to unseat the Taliban government and Islamic Republic was established with the support of western countries. Western countries also deserted her in 2021 and the country is now in shambles. Therefore, since the declaration was not accepted by the other party to the Compact, it could be costly for Nepal to be affiliated to ISP in view of the geopolitical situation, especially since it would not be acceptable to Russia and our northern neighbor China. Even India is maintaining neutrality in the matter of the Ukraine war and Nepal affiliating with ISP could become unacceptable to India after some time. Conclusion As Nepal is not industrialized to the optimum level, there is rampant unemployment and youth are migrating to gulf nations and eastern Asian countries for employment, where they are exploited to the hilt. Further, since USAID has established that use of one kWh electricity results in value addition by 86 US cents, it is not wise to build infrastructure to export electricity. Better use of that grant would have been to build infrastructure to maximize electricity use to industrialize the country, electrify transportation to displace imported petroleum products. Besides, NEA should have been entrusted to build transmission infrastructure instead of establishing new institution to build the same at unnecessarily huge cost. Moreover, MCC and the US government's failure to acknowledge the interpretive declaration, passed by HoR, amounts to contempt of parliament. Furthermore, although the declaration sought to amend controversial provisions of the Compact, the same failure to acknowledge has left those provisions intact. Additionally, it is not wise to renounce the nonaligned foreign policy that Nepal had adopted for almost 70 years. Published in People’s Review of March 23, 2023 Ratna Sansar Shrestha, FCA