New Study Shows Dangers of Trade Agreements that Help Corporations Sue Governments

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

As the Obama administration negotiates new trade agreements with European and Pacific nations, a battle has emerged over the agreements’ egregious rules that grant giant corporations unreasonable powers to subvert democracy. These rules, dubbed “investor rights” by the corporations, allow firms to sue governments over actions—including public interest regulations—that reduce the value of their investments.

Oxfam, the Institute for Policy Studies, and four other non-profits are releasing a new study that explains why these rules are so dangerous to democracy and the environment. We are among the co-authors of this study, titled “Debunking Eight Falsehoods by Pacific Rim Mining/OceanaGold in El Salvador.” The report offers a powerful case study of everything that is wrong with this corporate assault on democracy.

“Debunking Eight Falsehoods” is a careful refutation of the arguments of a giant Australian/Canadian mining firm, Pacific Rim/OceanaGold, that is suing the government of El Salvador over that government’s decision to stop issuing new mining licenses. The Salvadoran government did this precisely because its citizens deemed the environmental and social costs too high. Pacific Rim’s proposed gold mine was in the fragile and already compromised watershed of the key river that supplies water to over half the country’s people.

Pacific Rim/OceanaGold is, according to a 2013 IPS study, one of 31 oil, gas, and mining corporations suing governments in Latin America in the International Centre for the Settlement of Investment Disputes (ICSID), based at the World Bank. ICSID is the most frequently used tribunal under existing pro-corporate, anti-democratic trade and investment rules.

Groups such as Oxfam, the Council of Canadians, and MiningWatch Canada that are releasing the study feel that this case should be a “poster child” of what is wrong with such existing rules and why trade agreements incorporating such rules should not be passed. The study shows how corporations use their 1% muscle (and threats of suits) to attempt to force governments into giving them mining licenses. If this doesn’t succeed, then they file the suits at ICSID and then attempt to distort reality to justify their view of why their rights to mine must prevail.

For example, the “8 Falsehoods” study details how Pacific Rim/OceanaGold, soon after filing its suit, attempted to paint its opponents as “rogue” NGOs that are “anti-development.” Yet, the reality is that El Salvador’s decision to stop issuing new mining permits came after strong public outrage over the devastating impacts of mining. As the study reveals:

• An independent poll showed 62.4% of the public opposed to mining.
• The highest echelons of the Catholic Church publicly came out against mining.
• The government’s office of Ombudsman for Human Rights opposes mining.
• Over 260 international groups have called for the dismissal of the suit.

In other words, as the study stresses, the groups inside and outside of El Salvador opposing the mining are anything but “rogue.” Moreover, the “rogue” label used by Pacific Rim/OceanaGold is reckless amidst the conflict that Pacific Rim’s proposed mine has brought to the area. Indeed, since 2009, at least four people opposed to mining have been assassinated in the area where the company wants to mine.

The study also refutes Pacific Rim/OceanaGold’s claim that it went above and beyond the guidelines required for mining permits back when the government was still issuing them. Instead—and this should be key to the World Bank-based tribunal hearing the case—our study found that the firm never completed or submitted a feasibility study, nor did it ensure it had purchased ownership or authorization to use the surface land over the proposed mine. Rather, Pacific Rim relied on lobbying government officials to try to get the permit.

The study’s authors contend that for those concerned with democracy and basic rights, this El Salvador case stands as a potent reminder of how important it is that we fight such unjust corporate lawsuits. It is vital not only to support the people in El Salvador and other countries under assault, but to rally the groups and governments trying to halt new trade and investment agreements built from this same cookie-cutter mold. The governments of Chile and other countries are already raising critical questions about these pro-corporate rules in the proposed Trans-Pacific Partnership (TPP). Social movements in several European nations are making common cause with their governments in raising similar concerns in the trans-Atlantic talks. The Pacific Rim/OceanaGold case is an advertisement of the dangers of such rules.

As we write these words, the Canadian mining company Infinito Gold has filed a suit (again in the World Bank’s ICSID) against the government of ecotourism powerhouse Costa Rica. Infinito claims that Costa Rica’s executive, legislative, and judicial branches are all incorrect in banning open-pit mining and denying the corporation a license.
It is time to stop the expansion of undemocratic agreements and support the governments that are seeking alternatives that respect their sovereignty, their peoples’ rights, and their environment.

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About David Dayen

David is a contributing writer to Salon.com. He has been writing about politics since 2004. He spent three years writing for the FireDogLake News Desk; he’s also written for The New Republic, The American Prospect, The Guardian (UK), The Huffington Post, The Washington Monthly, Alternet, Democracy Journal and Pacific Standard, as well as multiple well-trafficked progressive blogs and websites. His has been a guest on MSNBC, CNN, Aljazeera, Russia Today, NPR, Pacifica Radio and Air America Radio. He has contributed to two anthology books, one about the Wisconsin labor uprising and another on the fight against the Stop Online Piracy Act in Congress. Prior to writing about politics he worked for two decades as a television producer and editor. You can follow him on Twitter at @ddayen.

10 comments

  1. allcoppedout

    Great post that says most of what needs saying David. Even the anti-movement in the UK is feeling ike Canute trying to keep the tide back on this one. Our strategy is ‘depressive’ in that we are rallying around an ‘exclude the NHS’ flag, feeling there is no point in throwing ourselves in front of the neo-liberal tanks.

    I think economics has a deep data problem, partly revealed in what you say here. The opinion and wishes of ordinary people just don’t matter. They don’t in the kind of hard science I used to do either, but that’s different and doesn’t mean scientists would discount such in social study. It’s budget day here and much of the news is dumbed-down to pictures of our new pound coin, a throw-back to the good old days when our similarly-shaped threepenny-bit would buy half-a-dozen eggs. No discussion of trade agreements, food and fuel inflation, potential private debt jubilee for ordinary folk or the actual jubilee for the banks and rich. Don’t task their tiny little minds. Soon Osbourne, our Chancellor, looking like a refugee from the Hell Fire Club, will be seen flashing the magic red briefcase that turns economic bulldung to gold.

    At some point we need the organisational learning made concrete in our institutions, corporations and law. We seem like Tank Man in Tiananmen Square against the mobilised power of the same.

  2. MikeNY

    The last thing we need is a pseudo-trade agreement that is just more giveaways to the corporatocracy. The beast of corporatocracy must be tamed. It must be TAXED, with some of its $1.25 trillion increase in annual profits since 2001 given back to workers, on whose backs those profits are made.

  3. Eureka Springs

    “subvert democracy”

    “dangerous to democracy”

    “assault on democracy”

    This all might be true about “democracy” but I don’t understand the concern since we nor any of the countries concerned have a democracy? I grow increasingly impatient with seemingly smart people who reiterate such mythical falsehoods.

    The very fact these whole affairs are conducted in secret (any and all secrecy) is the antithesis of democracy. None of this will be decided by the people. Read your Constitution… the word democracy does not exist by design and intent. It’s almost as if people who suggest democracy exists as a method want to perpetuate the democracy lie so those in power can keep on keeping on.

    I don’t worry about my estate in Marthas Vineyard anymore than I worry about democracy… because I don’t have either.

    1. R Kelman

      But it does start with ‘we the people’. You should read the Declaration of Independence which establish the basis of government as being laid on principles ‘deemed by the people to be of such form most likely to effect their Safety and Happiness.’ While the founders rejected ‘direct’ democracy, a republic still depends of the people and must have the well being of the people as its concern. I do not see the word corporation in the Constitution either. And no, a corporation is not a person. Courts can be wrong. They set precedent, not truth.

      1. Eureka Springs

        Declaration of Independence is neither the law, precedent nor principle of the Constitution.

        We the people… Ha! If you didn’t see that lie by the Whiskey and Shays rebellion then you certainly missed the people voting to ratify the Constitution itself. Oh wait!

        1. susan the other

          what a good point! where does our claim reside? and if we cannot establish it, where does any other claim reside? if a nation’s claim is illusory, then all else is even more illusory – and the most illusory claims come from totally unmoored and unaligned NGOs and international corporations who merely serve their own narrow special interests…. power resides in the most cooperation for the most desired outcome…

        2. human

          The US Declaration of Independence was the height of the Enlightenment, emulated and used as the voice of popular revolution for decades (iindeed, centuries) afterwards by peoples as diverse as Venezuelans and Vietnamese. The US Constitution marks its’ decline.

        3. R Kelman

          And the constitution is not gospel but rather a second attempt at establishing a framework for the American political structure. It was but a political compromise made in keeping with republican principles. Those who ‘make up the people’ is a key question for today. Are we reverting to people of property or expanding it to all citizens? It makes a difference.

  4. steelhead23

    Some say that transnational corporations are, in effect, replacing the state. This article shows that the coups that diminishes the state (and with it, the People) comes in the form of “liberal” trade agreements. It is well past time for the counterrevolution. We must do more than stop trade agreements, we must tear down the apparatus of control, including the international Centre for the Settlement of Investment Disputes (ICSID) AND the World Bank, at least as they are now constituted. The will of the people must trump the quest for profit or we are all doomed to subservience and environmental destruction.

  5. Ulysses

    I’m with you steelhead! Are we lemmings to keep marching into the abyss of corporate tyranny? Or are we savvy skunksters who will use whatever means necessary to stand our ground and establish a far better world that we can all enjoy? Maybe this May Day will launch a new season of open rebellion from Madison, Wisconsin to Palermo, Sicily. The time for politely requesting the kleptocrats stop their looting has passed. The time for demanding drastic, immediate reforms has come. We must refuse to allow “business as usual” to continue until our demands are met! If they could do it in Seattle in 1919, we can do it now.

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