Thursday, March 28, 2024

Violation of Parliamentary Ratification Provision

Each country has different practices regarding parliamentary ratification of treaties. It is constitutionally mandatory in the Netherlands, Japan, USA, Bhutan, etc. While there is no provision for parliamentary ratification in the constitutions of UK, Australia, India, etc. In Nepal, provision for parliamentary ratification was introduced in 1990 in Article 126 of the Constitution of the Kingdom of Nepal, which was repeated verbatim in Article 156 of Interim Constitution of Nepal 2007 and in Article 279 of Constitution of Nepal 2015. Mahakali Treaty was the first bilateral treaty ratified by the then parliament in September 1996, which was signed in February 1996. Upper Karnali Hydropower Project After a memorandum of understanding (MoU) was signed between Government of Nepal (GoN) and the GMR-ITD Consortium for 300 MW Upper Karnali Hydropower Project in January 2008, a public interest writ petition was filed at the Supreme Court in February 2008 praying the Court, amongst others, to direct GoN to have it ratified by the parliament pursuant to the then prevalent Article 156 of the Interim Constitution. But the petition was rejected by the Supreme Court in July 2012. After this, the anti-national activity of handing over attractive sites on Nepal’s rivers as export-oriented hydropower projects to Indian companies was begun, without having to sign bilateral treaties between the governments of Nepal and India. Developers from any country could have implemented the projects that are awarded through competitive bidding, but electricity was to be exported. So far, 7 hydropower sites with a total capacity of 4,649 MW have been made export-oriented and handed over to Indian companies. Meanwhile, on the basis of the MoU, GoN issued a survey license for Upper Karnali project in May 2008 for an upgraded capacity of 900 MW in the name of GMR Upper Karnali Hydropower Ltd. (GMR). Later, GoN signed a project development agreement (PDA) with GMR in September 2014. Verdict of Constitutional Bench Deliberating few public interest writ petitions filed against GoN for failing to get the PDA ratified by the parliament, the Supreme Court's constitutional bench issued its verdict in May 2023 saying that “the PDA does not appear to fall under the category of treaty described in Article 279 of the Constitution”. Treaty or Agreement The Constitutional Bench basing its verdict on Section 2(a) of Nepal Treaty Act, which stipulates that a “Treaty means an agreement concluded in writing between two or more states, or between any state and any intergovernmental organization” said that since PDA was not signed with another state or intergovernmental organization, it does not constitute a treaty and, therefore, no ratification required. It implies that if the other party to that PDA was another state, parliamentary ratification would have been mandatory. A closer examination of Article 279 will reveal that the intention of the constitution framers was different. Article 279 (1) of the Constitution stipulates that "a treaty or agreement to which the State of Nepal or the Government of Nepal is a party" will require parliamentary ratification if it deals with matters specified in Clause (a) through (d) in Article 279 (2), which includes natural resources and division of its use. Article 279 (1) has not stipulated that the other party must be another state or government or intergovernmental organization. Nor has it stipulated that the other party must be a foreign natural or artificial person. Therefore, Article 279 is applicable if the government of Nepal enters into a treaty or agreement with Nepali or foreign natural or artificial persons in addition to another state or government with regard to Nepal’s natural resources which would benefit countries other than Nepal. In other words, the provision of Section 2(a) of the Nepal Treaty Act is applicable only in case of a treaty signed between two or more states or a state and an intergovernmental organization. However, it is not applicable in the case of agreements other than treaties in which the other party is not another state or intergovernmental organization. Because according to Sub article (1) of Article 1 of the Constitution, the Constitution is the basic law of Nepal and it supersedes any and all law to the extent it conflicts with the Constitution. Further, the constitution framers did not use the words treaty or agreement as synonymous in Article 279; the word “or” is used by the constitution framers by way of either treaty (under Nepal Treaty Act) or agreement (other than treaty). Therefore, agreements other than "treaties" signed by GoN fall outside the purview of Section 2(a) of the Nepal Treaty Act. Because the intention of constitution framers was that the agreements other than treaties also must be ratified by the Parliament in accordance with Article 279, if the subject of the agreement is related to clauses (a) through (d) of sub-Sub article (2) of Article 279. The Judiciary does not have the authority to interpret the constitutional provision, with overarching meaning, narrowly on the basis of any Act. Only limitation is provided in the proviso clause of Sub Article (2) of the said Article with respect to agreements or treaties related to (1) peace and friendship and (2) natural resources and division of its uses. Treaties or agreements on these two subjects can be approved by a simple majority of House of Representatives if it does not pose an extensive, serious or long-term impact on the nation. In other words, the parliamentary ratification of the treaties or agreement related to above two subjects, although mandatory, could be ratified by a two-thirds majority of the total members existing in both houses or by a simple majority of the House of Representatives depending upon whether it poses extensive, serious or long-term impact on the nation. It was for the federal government to promulgate a law to determine what kind of treaty or agreement will pose an extensive, serious or long-term impact on the nation, which has yet to be done. Therefore, various benches of the Supreme Court and the Constitutional Bench have misinterpreted the provision of Article 279 and all judgments deeming parliamentary ratification of agreements related to export-oriented hydropower projects unnecessary is unconstitutional. Tanakpur Precedent The Constitutional Bench, quoting Section 2(a) of the Nepal Treaty Act, stated that parliamentary ratification is required only for treaties in writing. However, in December 1992, a special bench of the Supreme Court had issued mandamus directing GoN to arrange ratification of the understanding reached by the then Prime Minister Girija Prasad Koirala with Indian government regarding the Tanakpur dam as it is related to the ‘natural resources and division of their use' specified in Clause (d) of Sub article (2) of Article 126 of the Constitution of Nepal 1990, although no formal treaty in writing was signed. It was merely published as a notification of the Ministry of Water Resources in Part 4, Section 41, Number 36 of the Nepal Gazette in December 1991. From this perspective, although the Nepal Treaty Act states that there must be a "written" treaty, the Supreme Court has established constitutional supremacy and set a precedent that parliamentary ratification is mandatory even in the absence of a formal written treaty if the matter is related to Nepal’s natural resources and division of its use. Therefore, when considering parliamentary ratification, it should be done on the basis of Article 279 of the Constitution, not be limited to Section 2(a) of the Nepal Treaty Act. Foreign Company The Constitutional Bench opined that since the other party to the PDA was not another state or government, but a company established in Nepal under Nepal law, its parliamentary ratification is unnecessary. GMR is definitely a company established in Nepal. But 73% of its equity is held by GMR Lion Energy Limited registered in Mauritius. In other words, GMR is a subsidiary of a foreign company and the equity will also be injected from abroad. Further, most of the profits earned by it will be repatriated abroad. Therefore, even though the company is registered in Nepal, in spirit it is a foreign company. Besides, the PDA was signed as a result of GoN’s endeavor to mobilize foreign investment. Similarly, the Department of Industries had approved foreign direct investment to be injected into the project. From these perspectives too, GMR is foreign company registered in Nepal in order to circumvent parliamentary ratification. Moreover, clause (f) of the preamble of PDA mentions that it is based on the MoU signed between GoN and GMR-ITD Consortium in January 2008, which had only following 3 foreign partners: (1) GMR Energy Ltd. and (2) GMR Infrastructure Ltd. (both registered in Bangalore, India, under the Indian Companies Act, 1956), and (3) Italian-Thai Development Public Company Limited with an office in Bangkok, Thailand. Furthermore, the first writ petition filed in February 2008 was against the MoU signed by GoN with those foreign companies. From this, it is clear that the GMR was registered as a Nepali company only to circumvent the constitutional provision of parliamentary ratification. Besides, according to Article 279 (1) the PDA could have been signed with any Nepali or foreign natural or artificial person besides another state and an intergovernmental organization, but parliamentary ratification is mandatory if it is related to Nepal’s natural resources and division of their use. Basically, as the PDA has handed over a hydropower site on a river in Nepal for a fixed period to export most electricity generated therefrom, parliamentary ratification is mandatory. In other words, the agreements to harness Nepal’s water resources and supply electricity mainly in Nepal and export the surplus electricity that cannot be consumed in Nepal, no parliamentary ratification is necessary. Hydropower isn’t Natural Resource The Constitutional Bench’s verdict had stated that the PDA is not related to natural resources or division of its use, rather to export hydropower. The verdict adds that if hydropower is to be considered natural resources, then the food-grain produced from land will also have to be considered natural resources. Of course, electricity, food grain, etc. on their own are not natural resources. But the river from which electricity is generated and the land that grows food-grain are Nepal’s natural resources. There is a huge difference between handing over the food-grain producing land for a certain period of time to export food-grain grown therefrom, and allowing export of the surplus food grain. Similarly, handing over the hydropower project site on Nepal’s River for a fixed period in order to export most electricity generated therefrom is different from exporting surplus electricity that would have been wasted. The Constitutional Bench’s attention should have been focused on the distinction between exporting electricity whenever there is surplus versus handing over a site on Nepal’s river for a specific period. The context can be illustrated by comparing the agreement signed by Nepal Electricity Authority (NEA) to export up to 655 MW of electricity to India from 14 powerhouses, including up to 321 MW from NEA owned 5 powerhouses and up to 334 MW from 9 private sector powerhouses with the said PDA. The agreement signed by NEA is definitely for the purpose of exporting excess (surplus/spill that cannot be consumed in Nepal or would go waste) electricity. This means, NEA has not handed over the above-mentioned 14 powerhouses; only surplus electricity generated therefrom gets exported, which is comparable with exporting surplus food grain produced in Nepali land. But the PDA was signed to hand over a site on Nepal’s river to GMR in order for it to export most of the electricity generated. Thus, the Constitutional Bench did not distinguish between exporting merely surplus electricity with handing over a site on a river in Nepal for a specific period in order to export most of the electricity generated therefrom. During the hearing at the Constitutional Bench there was a long debate as to whether hydropower generation is the use of natural resources or not. Hydropower is definitely generated by using natural resources (water resources). Further there is no doubt that Nepal receiving 12% electricity and allowing 88% (almost all) to be exported is a division of the use of natural resources. In other words of the 3,153.6 GWh of hydropower that this project would generate annually Nepal would receive only 378.4 GWh (12%), while depriving Nepal from 2,775.2 GWh (88%), which is much required for Nepal for her industrialization (thereby creating highly required employment), electrification of transportation (thereby displacing imported petroleum product that pollutes local environment and make people sick), etc., which would have raised living standard of people in Nepal. Speaking in terms of multiplier effect, as a USAID study has concluded that “average value addition per unit (kWh) of electricity use is approximately US$ 0.86/kWh”, by exporting 88% of hydropower generated by this project Nepal stands to be deprived of $ 2.38 billion/year (Rs 317.423 billion/year at currently prevalent exchange rate) in value addition in Nepal’s economy. Therefore, this PDA results in huge economic loss to Nepal as it is for an export-oriented project. Further, the term specifically used in Clause (d) of Sub article (2) of Article 279 is “natural resources and division of its use”. If the intention of the constitution framers was that only treaties or agreements related to the division or sharing of natural resources is to be ratified by the Parliament, they would have simply written the phrase “division/sharing of natural resources” in clause (d) Sub article (2) of Article 279. However, since the constitution framers used the phrase “natural resources and division of its use", it encompasses treaties or agreements (1) related to natural resources and/or (2) related to division of natural resources and both types require parliamentary ratification. Hence, the intention of the constitution framers is that all treaties or agreements should be ratified by the Parliament if it benefits a foreign country by using Nepal’s natural resources. Foreign Investment and Hydropower Export Besides, the intention of the constitution framers is not to require parliamentary ratification of all agreements signed with foreign investors. In case a foreign investor signs an agreement to implement a hydropower project mainly to sell electricity in Nepal, it does not require parliamentary ratification. For example, the issue of parliamentary ratification did not arise when agreements were signed with foreign investors for Khimti and Bhote Koshi hydropower projects, because these are not export-oriented; parliamentary ratification is required only when a treaty or agreement is signed for an export-oriented project. In the same way, even when an agreement is signed with Nepali investors for export oriented projects, parliamentary ratification would still be mandatory under Article 279. Conclusion Therefore, the intention of the constitution framers was to make parliamentary ratification mandatory for all treaties and agreements related to the Nepal’s natural resources and/or division of their use that benefits another country/ies irrespective of whether the other party to the agreement is another state, intergovernmental organization, or Nepali or foreign natural or artificial person. While no parliamentary ratification is required in the case of the treaties or agreements signed with anyone related to Nepal’s natural resources that do not benefit another country. The executive arm of the state went on a spree of signing agreements for export-oriented hydropower projects without having them ratified by the parliament. While the Compact to receive a small grant ($100 million/year) from MCC, an American corporation, to build 400 kV transmission line was ratified by the Parliament with great fanfare, although grant agreement find no mention in Article 279 (2) and it did not require ratification constitutionally. Further, the Compact does not even constitute a treaty according to Section 2(a) of Nepal Treaty Act to require parliamentary ratification. Also, parliamentarians not only object to minor matters in the parliament but even obstruct the parliamentary proceedings for months on small pretexts. But while GoN signed agreements related to Nepal’s natural resources or division of its use but did not submit them to the parliament for ratification, no parliamentarian objected. While the executive arm of the state acted in contravention of the Constitution, the legislature became an accomplice by demonstrating indifference. And, the Supreme Court has repeatedly mis-interpreted the constitutional provision in this respect. Published in People’s Review of March 28, 2024

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