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Finance: The National Assembly is reviewing the National Council’s resolution that recommended against ratifying the European Investment Bank (EIB) framework agreement the government signed last December.

Council rejects European Investment Bank framework agreement

The house of review reasoned that the framework undermines Bhutan’s sovereignty

Finance: The National Assembly is reviewing the National Council’s resolution that recommended against ratifying the European Investment Bank (EIB) framework agreement the government signed last December.

The Council reasoned that the framework agreement is not in consonance with the country’s external commercial borrowing guidelines and that it could undermine Bhutan’s sovereignty.

Chairperson of the Foreign Relations Committee, which is reviewing the Council’s resolution, Rinzin Dorji, said the committee has already held preliminary discussions with stakeholders. “The committee will call all stakeholders including members from the Council and immigration officials to sort out the differences,” he said.

The Council recommended rectifying the clauses that it felt were not in the best interest of the nation. However, the chairperson said there was less chance of the framework agreement being amended.

However, he said that although it was a privilege for Bhutan to be a partner of the EIB, the agreement Rinzin Dorji personally felt does not make Bhutan an equal partner.

“For example, the EIB can withdraw anytime but Bhutan should give a notice of six months,” he said. “This is my personal view and we are yet to hold further discussions with stakeholders.”

The Council’s Economic Affairs Committee had outlined serious reservations against ratifying the agreement.

Chairperson of the Council’s Economic Affairs Committee, Pema Tenzin, said the agreement risks overriding numerous other national laws and regulations pertaining to the economic and financial sectors.

For instance, he said the agreement is not in consonance with the external borrowing guidelines. He said the Council was also not happy with the clause that provides for sovereign guarantee for private sector borrowing from external sources.

“The Council’s resolution is against government providing sovereign guarantee for private sector borrowing,” he said.

The Assembly had passed the agreement in its last session.

However, he maintained that the Council’s move was not intended to hurt the relations between EIB and Bhutan. “We want to maintain a cordial relation with the EIB,” Pema Tenzin said.

National Assembly member Dorji Wangdi, who was one of the two members to vote “no” for the framework agreement, said he was not surprised by the Council’s decision to withdraw the framework agreement. “The Council has done its homework,” he said, adding that the framework agreement is not in line with the debt management policy.

The framework agreement states that the EIB can enjoy full legal personality in the territory of Bhutan, including in particular the capacity to contract, to acquire and dispose of movable property and to be party to legal proceedings.

In particular, the bank will have free access to the national financial market in Bhutan.

The framework agreement also provides that the EIB will enjoy privileges and immunities for the bank’s representatives. For instance, the assets of the Bank shall be exempt from search and all forms of expropriation.

Under the agreement, Bhutan should exempt representatives of the bank, while they are engaged in activities connected with or in implementation of this Agreement, from immigration restrictions and alien registration formalities.

In respect of all matters not specifically contemplated above, representatives of the Bank shall be granted the level of immunities and privileges which is no less favourable than that granted to officials of the most favoured international institution in Bhutan.

The Council pointed out that the agreement is an affront to Bhutan’s sovereignty as the agreement openly undermines national laws, regulations, policies and guidelines. Further, the resolution states that it undermines the supremacy of the courts of Bhutan, including the Supreme Court by subjecting it to the decisions of the European Court of Justice.

“Once the agreement is ratified by both houses, it becomes a law of the country,” states the Council’s resolution. “No amount of money, whether loan or even grant, can justify any person or institution, let alone the National Council from undermining the laws of the country.”

Upon scrutiny and analysis, the Council observed that the framework agreement seems like a method designed to circumvent the External Commercial Borrowing Guidelines, 2010. “This guideline has been framed in view of the economic situation of the country and the circumstances of the financial sector must be upheld at all times.”

The resolution states that the government must ensure that the operations of the EIB in Bhutan are in line with the relevant laws governing the financial sector. Considering the nascent financial sector and the present macroeconomic and financial sector problems, opening the entire financial sector to external players could worsen the present problems.

“The unreasonable privileges granted to the European Investment Bank through this agreement will set the precedent for other similar institutions to seek similar privileges and immunities,” the Council’s resolution stated. “The Agreement is unclear if sovereign guarantee shall be granted for private sector borrowings from the Bank.”

By MB Subba

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One comment

  1. I say that the council really did a great job here. Kudos to the council.

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