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Governments and Activists are Fighting the Corporate “Right” to Sue Governments

Yves here. This post contains several troubling examples of how investors have used provisions in existing trade deals to attack the laws of nations that attempt to enforce environmental, labor, and consumer protections, or simply discipline bad-faith behavior. However, it’s important to understand the logic of these rules. It isn’t just any investor that can sue governments to try to obtain damages for them having the temerity to enforce their laws; it’s foreign investors who enjoy this privilege. The concern, supposedly, is that outsiders are at risk of having their assets expropriated or otherwise being abused by powerful locals and being unable (as furriners) to obtain redress in presumed-to-be-cronyistic courts.

Now it’s actually pretty amusing that foreign direct investors (people who build factories or set up other types of physical operations in a country, or buy an interest in an existing enterprise) acted as if this sort of additional protection was important to them. Yet Western companies went full bore into China, with a living, breathing Communist government (you know, the sort that has a history or nationalizing privately-owned businesses) without this sort of safeguard.

What this article skips over is how these provisions would be expanded and extended under the proposed trade deals, the TransPacific Partnership and its ugly Western sister, the TransAtlantic Trade and Investment Partnership. Even though they look to be dead for 2014 thanks to considerable Democratic and Republican opposition in the House and Senator Majority Leader Harry Reid’s refusal to table the fast-track authorization which the Administration deems necessary from a negotiating standpoint, it would be a mistake to declare victory. Obama has been resourceful about finding weaknesses in the opposition and exploiting it. We’ve already suggested he could push to get fast track passed in the lame duck session at the end of this year. So it is important to keep the heat on. Two ways to keep the momentum going:

Continue to show support for Reid (letters and emails, and if you are in his district, letters to the editor of your local paper too)

Put pressure on Nancy Pelosi, who has only made some weak statements expressing concern about Fast Track rather than going into opposition. As a party leader, Pelosi is a legitimate target for out-of-district Democrats (with the missives of the form: “I’m deeply troubled by these toxic trade deals because they will weaken labor, consumer, and environmental regulations. Continued support by Democrats in Congress will lead me to reduce/stop contributing to the party. I hope you’ll take a firm, public stand against fast track authority.”). And as with Reid, if you are in her district, letters to the local media are particularly powerful.

By Robin Broad, a Professor of International Development at the School of International Service, American University. Originally published at Triple Crisis

Over the past several decades, multinational corporate Goliaths have helped to write and rewrite hundreds of rules skewing tax, trade, investment and other policies in their favor. The extraordinary damage these policies have caused has become increasingly apparent to the communities and governments most directly affected by them. This, in turn, has strengthened the potential of a movement that’s emerging to try to reverse the momentum. But just like David with his slingshot, the local, environmental and government leaders seeking to revise rules to favor communities and the planet must pick their battles carefully.

We have come to believe strongly that one of the most promising of these battles takes aim at an egregious set of agreements that allow corporations to sue national governments. Until three decades ago, governments could pass laws to protect consumers, workers, health, the environment and domestic firms with little threat of outside legal challenge from corporations. All that changed when corporations started acquiring the “right” to sue governments over actions—including public-interest regulations—that reduce the value of their investments. These rights first appeared in little-known bilateral investment treaties. Twenty years ago, corporate lawyers embedded them in the North American Free Trade Agreement (NAFTA). Today, more than 3,000 trade and investment agreements and even some national investment laws grant foreign investors these powers.

The Obama administration is attempting to insert similar anti-democratic investor protections in new trade and investment agreements with countries that border the Pacific and with the European Union. Hoping to expedite the so-called Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP), in early 2014, U.S. congressional leaders introduced fast-track trade promotion legislation that would severely limit Congress’s ability to amend such agreements. The widely anticipated move set off a storm of protest from unions, environmentalists, liberal members of Congress and others, and will likely remain a high-profile fight in the United States in the coming months.

The forces aligned against these proposed agreements in the United States are not alone. In The Nation, John Cavanagh and I have written about activists across the globe who are developing creative and increasingly effective strategies to push back against investor assaults on their communities, environment and national sovereignty. An important front has opened up in El Salvador, where the Canadian/Australian firm Pacific Rim/OceanaGold is using investor powers to sue the government over the “right” to mine gold.[1] This case represents an extreme assault on democracy: local communities, the majority of the Salvadoran public, and the Salvadoran government all oppose gold mining. But what’s happening in El Salvador is not an anomaly. There are crucial battles brewing in several other Latin American countries—including Argentina, Venezuela, Bolivia and Ecuador—as well as in other parts of the developing world.

As the strategies for asserting investor rights proliferate across the globe, new alternatives are sprouting up as communities, activists, and governments confront the challenge with increasing urgency.

In the 1990s, a conservative Bolivian government privatized the water system of its fourth-largest city by granting the concession to the U.S. corporation Bechtel. When Bechtel hiked the rates for consumers, tens of thousands rose up in what became known as the “water war.” After Bechtel abandoned the contract as a result of the opposition, it sued Bolivia under a bilateral investment agreement. Following a creative global campaign that included protests outside the company’s San Francisco headquarters and a shaming strategy, Bechtel finally caved, settling the case for a mere $1.

In the case of El Salvador, groups as diverse as the Council of Canadians, MiningWatch Canada, U.S. and Australian unions, Oxfam, and the Institute for Policy Studies have come together to do with Pacific Rim what those activists did with Bechtel. They’ve started a petition drive to pressure Pacific Rim and its parent company OceanaGold to “drop the suit,” and they’ve organized several hundred labor and other citizen groups to push the World Bank to sever its ties with the International Centre for the Settlement of Investment Disputes (ICSID) tribunal.

Several Latin American governments are also challenging corporations’ rights to sue them in international tribunals. Brazil has never accepted such rights in any international agreement. Bolivia, Venezuela, and Ecuador have withdrawn from the ICSID tribunal and are rethinking their bilateral and multilateral investment deals. In an important development, Ecuador hosted these governments and several others last April to discuss an alternative to such agreements. Twelve governments are now on record supporting the creation of a regional mechanism “to ensure fair and balanced rules when settling disputes between corporations and States,” while laying out a framework for continuing the negotiations and bringing in other governments.

South Africa is terminating its bilateral investment agreements and establishing a new investment law that allows foreign corporations to bring such claims only to domestic courts rather than international tribunals. India is conducting a review of its treaties in the face of several corporate lawsuits. Australia refused to include these corporate rights in the 2005 Australia-U.S. Free Trade Agreement, and so far it has not agreed to subject itself to them in the secretive negotiations surrounding the Trans-Pacific Partnership agreement. Recently leaked documents suggest that several of these governments are attempting to at least scale back investors’ rights in the TPP trade deal.

The diverse set of groups that fought NAFTA two decades ago have remained united through the Citizens Trade Campaign, which is trying to stop the fast-track legislation for the TPP and the TTIP. Opponents have gained significant traction by raising questions about the corporate interests behind the proposed agreements.

These fights are critical. If the momentum of corporate investment rules can be slowed or halted, the power of global corporations would be significantly curtailed.  Rules protecting investors’ rights are a key strategic front where progress against corporate rule is possible. A victory in the David versus Goliath battle between El Salvador and Pacific Rim/OceanaGold would be huge—both symbolically and substantively—in the fight to shift the momentum back toward the rights of people and the environment they inhabit.

This post was drawn from a new article regular TCB contributor Robin Broad wrote with John Cavanagh, “A Strategic Fight Against Corporate Rule,” The Nation, February 3, 2014.

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[1] Our Nation article also details the environmental, social and economic havoc wrought by OceanaGold’s Didipio mine in the northern Philippines (based on our 2013 research there).

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15 comments

  1. TomDority

    Yes, the article above is spot on.
    At one time, the commons were more important than the ‘privates?. I hope for the return of the commons as a keystone of civilization.

  2. OpenThePodBayDoorsHAL

    Obomba on the march again with his fascist TPP. Don’t look at me, you voted for him. The fruits of the Vichy Left…Because Obama.

    1. Yonatan

      The IRA once said to the British Government. We have to be lucky once, you have to be lucky every time. An interesting parallel.

      1. Yonatan

        Hmm, why did the comment above appear here? It was meant as a general observation rather than a specific comment to the OP.

      1. Vatch

        A President Rmoney would be terrible, perhaps even worse than Obama. But Rmoney wasn’t the only alternative to Obama in 2012. I tried to encourage friends and relatives to vote for one of the third party candidates, but I don’t think I managed to convince anyone to do so. No third party candidate had a chance of winning, but some of them might have received enough votes to embarrass the Democratic and Republican parties. But that didn’t happen; the third party numbers were quite dismal.

        1. Massinissa

          Actually, the Libertarians got like .96% of the vote or something: Almost 1%!!!!

          Am I the only one who sort of misses the days when Ross Perot could spend a relatively small amount of money and get over 10%? 20 years later someone would have to spend at least 10x or 20x as much money to get that high.

  3. Paul Tioxon

    http://www.opic.gov/

    OPIC is the U.S. Government’s development finance institution. It mobilizes private capital to help solve critical development challenges and in doing so, advances U.S. foreign policy. Because OPIC works with the U.S. private sector, it helps U.S. businesses gain footholds in emerging markets, catalyzing revenues, jobs and growth opportunities both at home and abroad. OPIC achieves its mission by providing investors with financing, guarantees, political risk insurance, and support for private equity investment funds.

    Established as an agency of the U.S. Government in 1971, OPIC operates on a self-sustaining basis at no net cost to American taxpayers. OPIC services are available for new and expanding business enterprises in more than 150 countries worldwide.

    ———————————————————————————————————————-

    This is the US Government already insuring global investment against any loss for any reason. Political instability? not a problem, you will be made whole! Need anything at all to become a trans-national operation beyond the reach of US law, here’s the taxpayer money and full faith and credit of the US Government. Go forth and be fruitful. But it seems redundant features make markets, and markets make profits. So why not treaty terms that become the enforceable law of the US, again in the favor of global capitalism. You can never be too rich, or too certain in stacking the deck in your favor. The rule of law, priceless. If you can expand the number of laws, you can numb political opposition. What is more legitimate than the precious rule of law, voted upon by lawyers, overseen by former lawyers who become judges, as interpreted by, lawyers? United Amalgamated General Consolidation Unlimited, Inc.

    1. Fiver

      Excellent point re one of the chief reasons for our dire predicament – the perversion of the legal system by a treasonous State on behalf of a demented corporate sector.

  4. allcoppedout

    The EU ‘consulted us’ on TTIP last year. This took the form of questionnaire on their relevant website, set up a bit like a bomb defusing exercise. You got 90 minutes to complete it or your data melted into air. The advice was to do your prep beforehand and cut and paste. I looked for the results yesterday (12 months on) and couldn’t find any trace of what we had said. Now they are going to ‘consult us again’ after the unelected commission release a draft in early March. One can hardly wait to be ignored.

    Yves probably knocks the nail on the head with the ‘China comment’ above. The second half of Keiser 560 has the gist – http://rt.com/shows/keiser-report/episode-560-max-keiser-047/ – and hints all we can do is damage limitation such as exempting the NHS from likely damage. No one ‘down the pub’ has heard of TTIP, a common problem in our ‘engaged democracies’.

    I suppose we could ramp up the academic level here by regarding TTIP as an example of an ongoing ‘legitimation crisis’. This term is very 70s/80s and supposedly exemplified itself in a ‘debate’ between Jean-François Lyotard (witty, droll) and Jurgen Habermas (dull Freudian-Marxist). What fun we had missing the point entirely, wearing post-modernism like a fashion logo. We defined it as ‘post-modernism is incredulity towards metanarratives’, quickly forgetting Lyotard had prefaced this with ‘over-simplifying to the extreme’ and never knew what a metanarrative was. I travelled well on the junk writing papers no one could understand (let alone me) to escape the dull university settings I worked in. I have a gift set of these available – the sort of gift you’d give a former spouse after an acrimonious divorce.

    While critical theorists and post-structuralists played this irrelevant game, the rich were stealing all the money and removing democratic structures by stealth. ‘We’ were losing everything and stuff like higher education was being turned on the mass population to help this process along. Most of us are likely to see TTIP as part of this process whether we can do Lyotard-Habermas-Derrida speak or not. I was always reminded of Latin Mass or the perverted French that constituted Legal Latin. The legitimation crisis developed a language only priests and lawyers could understand, which is precisely how we have the crisis in the first place (political and legal gibberish systems we have to take the role of supplicant in).

    A key problem is that we can’t justify knowledge. Trust me on this; the literature is vast and you can write 100,000 words before you realise you have said nothing. ‘Trust me’ being key – who can we trust? Most of us don’t trust the people doing the corporatist negotiations on TTIP. But further than this, we don’t trust that argumentation or due process is much more than a sham. We can debate TTIP, but are probably beaten-down enough to think this is merely bearing witness in an inevitable process of being screwed by it. ‘They’ want us like this. I will dutifully make my protest to the EU, thinking it as purposive as filling in a questionnaire in the next Marriott I stay in.

    We don’t need this trade agreement. We need to sensibly raise standards of life for everyone across the planet. The great religious frauds of crony-capitalism (East and West) always promise this (TTIP makes typical rabbit-out-of-the-hat claims on increasing GDP), the long-game claim rooted in a model of comparative advantage that amounts to ‘bigger cake, bigger shares for all’. Saying this makes me a fatuous idealist. Yet the planet burns as we poison it both materially and spiritually through crapification, wealth slides downhill to the rich, we are always at war and the Japanese, perhaps in the most zombie economy, are giving up sex! We have 50% unemployment while there is plenty that needs doing.

    TTIP is a glaring example of the control fraud that prevents us discussing what matters. The gross assumption in this phlogiston theory is that more of what has been failing us will work if we only have faith in the “private sector” (now really the politburo sector) and democratic institutions stacked out with people we can’t vote for and the people we can bought and paid for. Science and even Lyotard’s post-modernism would throw all the cards in the air and try to find facts we can work with and those Idols of cultural and theoretic nonsense that prevent factual thinking and practice. This is an old chestnut, but we have moved on a bit from the divine right of kings (until we witness bankers justifying bonuses on performance one minute and then awarding them on loss-making the next). The trick with TTIP and current politics is to get us talking ‘phlogiston’, the essential trick with immanent argument. It amounts to ‘she’s witch because she ate my dog, burn her – and as someone points out the very much alive dog in question you say exactly, she ate my dog and its alive, she must be a witch, burn her’. Ludicrous to we analytic thinkers who don’t believe in witchcraft, sound reasons to those bewitched by the theory. We have to work in their courtroom.

    One might hope TTIP the straw that breaks the camel’s back. It won’t. I’ll write to the EU knowing my supplication will be marked ‘heretic, note name and address’. What I should do is provide a list of all the work that could be done (and never is) that stupid beliefs underlying such leadership fantasies can’t get done. We have a plague of floods in the South of England. We should be asking how TTIP will put this and much worse around the world right. Instead, we will get secret judgements allowing cigarettes to be sold in gaudy packets.

  5. RBHoughton

    This is the great Western problem right now. We Poms invented the economic / financial system that rules the world; we bequeathed it to USA in our bankruptcy and now USA needs to pass the baton on but none of the BRICS are suitable recipients as they all hold more or less socialist views contrary to our system.

    The decision was to pass the baton to the multinationals themselves hence these empowering trade agreements whereby they can for the first time look governments in the eye with an equality of power.

    Everyone knows the chap with the money calls the shots so this apparently economic and financial coup will fairly quickly become a political one too.

    I cannot take it seriously. Am I getting something wrong?

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