The Deeper, Uglier Side of TPP

Yves here. If you have friends or colleagues who would might be new to the topic of how dangerous the investor state dispute settlement process is for not just regulation but national sovereignity, this Real News Network show provides a fine introduction. Even though this short but crisp segment will be largely old hat to regular readers, it does also discuss a device often used successfully in these kangaroo courts, called “stacking.” which increases the odds of win by the corporation suing for compensation.

HOMAS HEDGES, TRNN: Last night, President Obama used a portion of his 2016 State of the Union address to lobby for the Transpacific Partnership agreement or TPP, which is slated to be passed this spring in Washington.

PRESIDENT BARACK OBAMA: It cuts 18,000 taxes on products made in America, which will then support more good jobs here in America. With TPP, China does not set the rules in that region, we do. You want to show our strength in this new century? Approve this agreement. Give us the tools to enforce it.

HEDGES: But critics of the TPP say the United States-China contention is a red herring. Instead, the TPP represents a huge victory for multinational corporations that have devised a complicated system where they can sue foreign governments for interfering with their profits.

MELINDA ST. LOUIS: Even though the treaty is negotiating between governments, it’s a private corporation that can then try to enforce this treaty, outside of the courts in private tribunals.

HEDGES: Melinda St. Louis is part of Public Citizen’s Global Trade Watch, and says that the TPP’s accountability system under what’s called Investor State Dispute Settlement or ISDS heavily favors corporations by allowing them to sue governments if they pass laws that threaten a company’s profit margin.

ST. LOUIS: They’re made up of three private lawyers who determine whether the extreme investor rights that have been included in the treaty have been violated. And then that tribunal of three private lawyers, who are not bound by precedent, who are not bound by typical conflict of interest rules that you would expect for judges, they decide whether they will award damages to the corporation, which is taxpayer money from the governments. And it has been in the order of millions or even billions of dollars in taxpayer damages, compensation, to corporations. And the violations of the rights that they are claiming are our laws, our judicial decisions, our administrative acts.

HEDGES: Proponents of the TPP say it’s the most progressive deal in history because it protects labor and environment. But deep inside the rabbit hole are another set of rules called Most Favored Nation rules or MFN rules, which allow multinationals to circumvent almost any regulation from existing trade deals, including the quote-on-quote “most progressive” ones from the TPP.

ST. LOUIS: And what that means is that a government has to provide the same treatment to an investor from, from a TPP country as they provide to any other country in any other treaty that they have. And so through that mechanism it’s actually possible for investors to sue through one treaty, but say we actually want the protections that were included in a third treaty that we’re not even, that our government isn’t even a part of.

HEDGES: ISDS and MFN rules are bolstered by the fact that they are privileges only corporations can enjoy.

ST. LOUIS: It is only corporations that can bring cases. Governments can’t bring cases. They can–they are defendants. But a government cannot challenge a corporation.

HEDGES: As if the balance couldn’t be tipped any more, corporations increase their odds of winning lawsuits by engaging in a practice called “stacking”.

ST. LOUIS: What corporations will do when they launch an investor state case is they’ll stack, and they’ll basically say we, the violations of our rights, have been indirect expropriation, minimum standard of treatment, you know, proportionality–they’ll basically list all of the standards that are in the treaty hoping that at least one of them sticks. That, in fact, has happened a lot. In fact, the minimum standard of treatment is the standard by which most investors have received awards and kind of positive outcomes for the investor, because it is so broad and can be interpreted so broadly.

HEDGES: Put all those privileges together and you get a judicial system that allows for some absurd lawsuits that are completely legal. Take the case of Phillip Morris and Australia for example.

ST. LOUIS: Phillip Morris International, which is a U.S. tobacco company, decided to incorporate its Australian holdings into its Hong Kong subsidiary because Australia and Hong Kong had a bilateral investment treaty that had investor state dispute settlement, or ISDS. The treaty that the United States had with Australia did not have ISDS in it. So they incorporated, their subsidiary took the Australia holdings from Hong Kong, and then launched their investor state dispute settlement through the Hong Kong-Australia bilateral investment treaty.

Phillip Morris International then incorporated as a Swiss subsidiary to sue the government of Uruguay, because there was a Switzerland-Uruguay bilateral investment treaty that they wanted to, that they wanted to use to be able to sue Uruguay because Uruguay, like Australia, had instituted tobacco control legislation that was meant for public health purposes.

HEDGES: Last month, Phillip Morris lost the case in Australia, but St. Louis says that even when corporations lose, they win.

ST. LOUIS: Because just the mere threat of these types of cases can for, especially for a small country, can mean millions of dollars just in legal fees, and so it will make them think twice about enacting a policy that a corporation doesn’t like.

HEDGES: The 12 member countries of the Trans-Pacific Partnership already have a total of 35 investment treaties between themselves. But if the TPP goes through, that number could close to double the number of options multinationals have to sue foreign governments.

The United States hasn’t dished out any money to multinationals from ISDS disputes. But that could change very quickly. Last week, the Canadian energy company TransCanada announced it was suing the United States using the North American Free Trade Agreement over the Keystone XL pipeline rejection.

ST. LOUIS: TPP does expand the liability and the danger much more than we had before, because not only does it increase the number of treaties that companies can use, but it’s he first time that the United States has had this type of mechanism in a treaty with multiple developed countries. Before, the only developed country we had ISDS with was Canada, under the North America Free Trade Agreement, or NAFTA. And so there weren’t that many Salvadoran or Peruvian companies in the United States that could launch these cases. Well, with TPP, now there are Japanese companies, Australian companies, who will be newly empowered to be able to use this mechanism in the United States.

HEDGES: For the Real News, Thomas Hedges, Washington.

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  1. JTMcPhee

    Rather than just assuming that this structure can de operated successfully (for corporate oppression) even if signed by that minion Obama, letbus think about how to blow off any of the boolsheet “awards” that these Tribunals, theses Troikas, write out.

  2. TomDority

    I thought the USA had an equal protection clause. I do not understand why only corps are entitled to sue, more to the point, why only international corporations. With these same corps having already attained a privileged status through writing legislation and grifting themselves huge breaks in a massive bribery scheme, designed to mislead nations into thinking it’s all for ‘free trade’ ‘free market’ ‘freedom’ as opposed to the outright money grab it is…. thought this stuff used to be called one sort of fraud or another.
    This freedom for and, particular favoritism of multinationals to step upon the rights of man and allow theft from him is pretty much like letting the zoo animals out of their cages so they may interact with the school children……….not going to end well.
    Expetc the global economy will do some crashing at election time anyway….so maybe there’s some hope if this thing goes through.

  3. Ulysses

    “It is only corporations that can bring cases. Governments can’t bring cases. They can–they are defendants. But a government cannot challenge a corporation

    This gets to the heart of the proposed new TPP/TTIP/TISA regime. The corporations and their owners are tired of the unseemly grind of buying elections, putting pressure on their bought politicians to stay bought, etc. This new arrangement streamlines the process– so that the only accountability left for the kleptocrats is the demand of their largest investors to efficiently extract wealth from the other 99.9% of humanity. There is no longer any pretense of “democracy” or “national sovereignty”. The only law that will remain is the law of giving more to those who have the most.

    I predict that, if this new regime is established, the kleptocrats will succeed in completely killing off all of the geese that lay the golden eggs that they now enjoy. Some sort of neo-feudal barbarism will then arise from the ashes of the civilization they destroyed.

  4. Malcom

    From the USTR website on ISDS: You gotta love the “spin”

    1. Governments put ISDS in place for at least three reasons (but not to have the authority to sue MNC’s, I wonder why?:

    To resolve investment conflicts without creating state-to-state conflict
    To protect citizens abroad
    To signal to potential investors that the rule of law will be respected

    2. The investment rules enforced by ISDS provide “American” investors in foreign countries basic protections from foreign government actions, which they already enjoy in America.

    3. While ISDS does not provide additional substantive rights relative to U.S. law, it does provide an additional procedural right: the right for foreigners & Americans to choose impartial arbitration rather than domestic courts when alleging that the government itself has breached its international obligations, whether by discriminating against a foreign investor, expropriating the investor’s property, or violating the investor’s customary international law rights.

    4. Opponents criticize ISDS for “elevating” corporations and investors to equal standing with countries by allowing corporations to “drag” sovereign governments to dispute settlement. But the right of private parties to challenge the actions of government is one of the oldest and most established legal principles (dating back 800 years to the Magna Carta): that “the king, too, is bound by law.” Importantly, while it provides a venue for conflict resolution, ISDS protects the sovereign right of States to regulate. Under U.S. agreements, ISDS panels are explicitly limited to providing compensation for loss or damage to investments. They cannot overturn domestic laws or regulations.

  5. Ranger Rick

    PRESIDENT BARACK OBAMA: It cuts 18,000 taxes on products made in America, which will then support more good jobs here in America.

    Assembled in the good ol’ USA from parts made by foreign labor. Globalism at its finest.

    1. polecat

      Sh!tting on us and calling it like it is……..SH!T…..and your going to eat it and Like it………. this is why i hate all of my reps in gov., soooo comfortably ensconced in their sinecures, knowing they won’t be affected by whatever befalls the plebs!

  6. TedWa

    I really don’t understand how any of our reps could vote for this since voting for it and the ISDS will put them out of a job. We won’t need a Congress to protect the citizens cause they won’t be able to without checking first with the ISDS if it’s okay. COOL is one example and the first of the layers to be ripped off, imo. Will we even need a SCOTUS, eventually?

    1. polecat

      out of one job…..and into a better, more connected job, w/ far greater benies & vig then they ever had as a so-called public(cough) representative for said public….something about revolving doors..

    2. Skip Intro

      The role of congress in the advanced neoliberal market state is still important. Someone has to pick winners and losers among the cronies bidding on the various parts of national infrastructure that are converted into private rents. Indeed, the new weapon of the ISDS will give corporations a stick to wield, along with all the carrots they’ve been trowing around, and the role of the representative in this new poker game will become even more complex, at least as long as competing corporate interests still exist.

  7. norm de plume

    A useful summary, particularly on the stacking, but the neatest introductory critique for me remains Australian Greens Senator Scott Ludlum’s plea, in the upper chamber nearly a year ago, to his fellows to put the brakes on the TPP freight train coming down the Fast Track.

    You can see a snippet of this speech behind Ms St Louis at about 2:35 in the Real News segment. It didn’t go viral exactly, but it’s obviously Mr Ludlam’s 15 minutes of fame.

    At about that time I wrote to my local federal member about the TPP. After a month I was surprised to receive a comprehensive but strangely affectless reply, so I ventured a second email, expressing puzzlement that such a feisty and apparently independent operator such as himself would be content to promote a regime that promised to curtail his own power. Shortly afterward I received precisely the same reply as I had to the first. The member is now our Prime Minister, and a boon companion of your President if our papers are to be believed.

    Toward the end of that month, despairing late one night of the Labor Party’s muted me-tooism, I emailed a couple of Greens senators. Both responded promptly, with Ludlum himself back to me inside 20 minutes.

    Sometimes the best don’t ‘lack all conviction’, sometimes they even have passionate intensity, but against the raw power of interests they can’t prevail.

  8. Minnie Mouse

    It may be very interesting to see if the “budget hawks” in Congress are willing to pony up $$$$$B to pay off an international tribunal extortion protection racket. What is the worst that can happen if they just say NO? What WTO gangster enforcers are up to the task?

  9. Minkiepaw

    So if TPP had been in place at the time of the Emancipation Proclimation, British banks could have sued the U.S. for trillions of dollars in losses?* Citing perhaps, Brazilian law which still allowed slavery?

    *(British banks had made huge loans into the est. approx. 10 trillion dollar (2011 dollars) slavery industry.)

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