Could This Lawsuit Be the Straw That Breaks the TPP’s Back?

By Robin Broad, a Professor of International Development at the School of International Service, American University, Washington, D.C. Her most recent book, co-authored with John Cavanagh, is Development Redefined: How the Market Met Its Match. Originally published at Triple Crisis

In November 2015, just after President Obama finally stood up to the fossil fuel industry and rejected the TransCanada Corporation’s application for its tar sands pipeline through the United States, I issued a warning: In The Hill, I applauded the Obama decision and laid out the reasons why, under current trade and investment rules, TransCanada had grounds to sue the United States under the 1994 North American Free Trade Agreement (NAFTA).  I hardly need remind readers that NAFTA launched the modern era of corporate-biased investment rules, and serves as the model for the investment chapter in the TransPacific Partnership (TPP) that now awaits votes in the U.S. Congress and in the legislative bodies of the 11 other TPP countries.

Lo and behold, TransCanada came to the same conclusion that I did.  They hired a giant corporate “K Street” law firm, Sidley Austin, and in January 2016, the fossil-fuel giant put the U.S. government on notice of a potential lawsuit under the investment chapter of NAFTA.  To get the U.S. government’s attention, they claimed to have suffered $15 billion in losses because of the rejection.  In TransCanada’s “notice of intent,” they argue that the United States has never before rejected a cross-border pipeline and that repeated studies by the U.S. State Department showed that the pipeline would not have a deleterious environmental impact on climate.  They conclude that the U.S. rejection of their pipeline, some seven years after their application, is a political decision and is not permitted under the NAFTA rules.

It is vital that people pause and ponder:  TransCanada, in its legally justified yet totally outrageous reaction, is reminding us of the reality of the investment rules our governments, under heavy pressure from global corporations, have inserted into thousands of trade and investment agreements.   And, we need to contemplate the assault on democracy that these rules and the TransCanada complaint represent.

Mull this over:   In the United States, cross-border pipelines like the now-rejected TransPacific one, require a Presidential Permit.  And, it is the U.S. State Department that makes such determinations. In November 2015, the U.S. State Department did precisely this in rejecting the pipeline.  It cited “concerns about the [pipeline’s] impact on local communities, water supplies, and cultural heritage sites.”  It argued that allowing the pipeline “…would significantly undermine our ability to continue leading the world in combatting climate change.”  The State Department also pointed out that the tar sands oil that would go through the pipeline was “a particularly dirty source of fuel.”

Suffice it to say, all these reasons are just and worthy and legitimate reasons for a government in a democracy to reject a proposed corporate project.

And, as I have pointed out in previous Triple Crisis blogs, there are many other egregious corporate lawsuits under investor-state rules that have undermined the democratic will of people in other countries.  A broad set of groups in El Salvador, with allies in North America, are now in their seventh year of fighting a lawsuit by a Canadian-Australian mining firm, OceanaGold.  Like the TransCanada suit, OceanaGold’s case is attempting to undermine actions by the Salvadoran government to protect the environment, in this case from toxic gold mining that threatens the fragile water supplies of over half the Salvadoran public.  Millions of dollars of Salvadoran taxpayer money later, the suit drags on.

Now, what do these outrageous cases mean for the upcoming vote in the U.S. Congress on the TransPacific Partnership?  Republican leaders in Congress do not want to give a win to President Obama before the election, so they have signaled their plan to put off a vote on the pact until after the November 2016 Presidential elections and hold it instead in a so-called “lame duck” session of Congress, likely in December 2016.  That means that it will likely be the current Republican-dominated House and Senate that vote on the TPP.

And, this is where it gets interesting in terms of U.S. politics.  Most Republicans support the TPP and will vote for it, but certain “tea party” Republicans, who distrust both “big government” and “big business,” are opposed.  Most Democrats in both houses of Congress oppose the TPP, but a few have been convinced that it will help business in their states and are currently in favor.   Right now, a vote would be close.  Hence, any new or stronger arguments against the pact could tilt the outcome.

Throw into this mix the current U.S. presidential race. So too could strong statements by U.S. presidential contenders have an influence.  Bernie Sanders, the independent Senator from Vermont, has been opposed to NAFTA from the start and is a harsh and outspoken critic of the TPP and its investment chapter.  Sanders has made this one of his campaign issues and Hillary Clinton, under heavy pressure from the more populist Sanders, said in the fall of 2015 that she would not support the TPP in its current form.  Not surprisingly, given her past support of trade agreements, she has largely avoided the issue on the campaign trail. But the Democratic party base deeply opposes the agreement, and a broad coalition of citizen groups under the Citizens Trade Campaign is rallying people against it.  On the Republican side, all the remaining candidates support the TPP save the frontrunner and likely Republican nominee, Donald Trump.  Trump has attacked the TPP, charging that it will accelerate the shift of good U.S. jobs to Asia.

In the context of this fluid debate, it is crucial for academics, activists, politicians, and citizens in the United States and around the globe to speak out against this outrageous assault on democracy enshrined in the TPP.  In the longer-run, we need a truly democratic set of rules to replace the current investor provisions in trade agreements, a new set of rules that do not give global corporations unfair advantage over people and the environment.  This is not pie in the sky; promising alternatives have been raised in the trans-Atlantic trade negotiations that are going on right now.

In the short term, however, the current TPP strengthens these undemocratic rules.  The TransCanada case offers new chilling evidence as to why these agreements are a danger to the environment, to workers, and to democracy, and why the TPP must be stopped.

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  1. Steve H.

    Let’s set the record straight on one thing. The Obama administration did not reject the pipeline due to the reasons outlined in this post. They did it to inhibit competition for rail transport of tar sands, which have strong investment from Obama/H. Clinton advisor Buffett, and his partner Bill Gates. That effects of that rail transport can be seen by searching “oil bomb train” and will make clear that environmental and safety considerations had nothing to do with the decision.

      1. Steve H.

        If you copy and paste the last sentence, it will get you there. Not posting the clickable link is a way to try to dodge skynet.

    1. Vatch

      Hah! One of the few times that Obama did the right thing, he may have done it for the wrong reason! Why am I not surprised?

      1. RP

        always 11th dimension chess with this guy.

        Almost makes you yearn for a democratic socialist to rally the people against the system.

    2. steelhead23

      Perhaps it would have been better to allow the pipeline – which in our current oil glut would have been uneconomical and likely shelved. Still, the basic argument is that NAFTA substantially reduced the participating nations’ sovereignty and Obama’s decision serves that up on a platter. Have at it Bernie.

    3. different clue

      The only way that Alberta Tar could explode is if it is mixed with so much benzene and/or other diluents that the benzene and/or those other diluents fueled an explosion. By itself the Alberta Tar is far too thick , heavy, gummy and non-volatile to explode.

      The bomb-trains are carrying light gassy oil full of toluene, xylene and other naturally explosive gases from the Bakken Field. A most different sort of oil.

      If Obama did a good thing for bad reasons, it is still a good thing and as someone downthread said, tees up the inherent evil of Investor Dispute Settlement regimes for
      Sanders to name and shame and for Hillary to praise with faint damns, like the Free Trade Treason Traitor enemy of the American nation she is.

      1. Steve H.

        To be clear, the article I linked to did not deal with explosions, and predates the ones I remember.

        However, tar sands are mixed with additives. The March 7 2015 derailment in Gogama, Ontario, was described in news sources as an explosion. An official release by the Transportation Board of Canada stated, “A number of the cars were breached, released product and ignited a large pool fire which destroyed the steel rail bridge.’ If the picture at the below does not show the results of an explosion, it illustrates why there might have been confusion over the technical definition:

        1. Steve H.

          edit: “If the picture at the link below”

          Pretty much agree with your last paragraph.

  2. John

    The argument against the TPP is this:

    The American people are being SUED under NAFTA by a foreign company for BILLIONS of dollars for FAKE FUTURE LOST PROFITS.

    Not hard at all for the American people to understand that we will be SUED and told to pay billions for nothing under the TPP

    1. Ulysses

      Yep. The only people who would benefit from TPP are transnational kleptocrats and their minions. Ordinary people, working in the real economies of the nations involved, will all suffer grievous harm– if this unconditional surrender of national sovereignty to the transnational kleptocracy is completed!

    2. Vatch

      The U.S. has already been successfully sued under the auspices of the WTO over Country of Origin Labeling (COOL) for meat. As a result of the lawsuit, the Congress and the President changed the law, and eliminated the labeling requirement. This law was very limited, and instead of repealing the law, the Congress should have extended it to cover more types of food. But no. Now I guess we get to wonder whether our food is poisonous junk from China.

      1. different clue

        Makers of shinola meat grown and processed in America could still legally label their product as Made In America, couldn’t they? Or are they legally forbidden from doing so by their own free choice?

        1. Vatch

          I don’t know. Here’s an advocacy group’s comment on this:

          Part of the statement:

          “The long struggle to require basic information on food labels has made it clear that we can not allow the meatpacking, food processing and grocery retail industries to determine what to disclose to consumers. More Americans are demanding to know more about what is in their food and where it comes from, but Senator Stabenow’s proposal lets Big Ag decide whether or not they will tell us what we are feeding our families.

          “Voluntary COOL is indistinguishable from total repeal: meatpackers won’t use it, consumers won’t see it and U.S. farmers and ranchers won’t benefit from it. We had voluntary COOL prior to 2009, and the meatpackers refused to sell beef and pork with a ‘born and raised in America’ label.

          I don’t know how accurate any of this is, but it certainly seems plausible.

        2. Mink

          Certainly they could label Grown In the USA – but without stringent labeling requirements, there are gray areas with all sorts of consumer confusing shenanigans. How about Honduran cattle slaughtered in the US? American chickens processed in China? How about hamburger/sausage/chicken patties with 51% US content added later?

          Sure the courts could arbitrate under truth in advertising laws, but the repeal took a lot of power away from consumers.

  3. diptherio

    I was reading Bloomberg Business Week yesterday, and they were talking about the TPP as if it were already in place. I was very confused. Either BBW’s writers are misinformed, or they’ve decided to just treat it as a fiat accompli in hopes that everybody else will just play along.

  4. Chauncey Gardiner

    Hmmm… Justin Trudeau in DC this week. I expect this is a topic of conversation. I further expect some sort of backdoor deal to get this lawsuit off the table and out of the public limelight.

    1. Fiver

      It will be sold as ‘proof’ the deal he already signed is founded on a mechanism that ‘protects’ Canadian interests, which is of course hooey given what Canada gave up, and kept on giving up to corporate power since the first FTD back in the ’80’s.

  5. McWatt

    Anyone have Bernsuelo’s personal email? This is a great specific arguing debate point regards trade.

    I agree on the rail transportation point. I travel between Iowa and Illinois on Route 64, a route that parallels
    the Burlington line. It is chock a block with oil cars, all brand new, 95% without even graffiti! That is a major investment by someone and it can’t go sour.

  6. susan the other

    silver linings… it’s nice to read above that the Atlantic trade pact is working on democratic resolutions to trade disputes. That must be France. Why is our State Dept such a gutless, greedy wonder? I think we’d be better off without it at all.

  7. Synoia

    Can we, the people, file a court based constitutional challenge to the ISDS process entered into by 2 Branches of our Government, which excludes the third branch of our government from it’s purpose, disputes?

    I suggest a kickstarter funded challenge to the seeming unconstitutional mechanism. I’ve read there are several, or even many, law professors who believe the mechanism unconstitutional.

    I suspect, but do not know, that the limitation on a challenge is funding.

    As Bernie has shown, and Kickstarter has proven over and over again, getting individuals to fund a large undertaking is possible.

    If we challenge the ISDS process and win in the US, it probably falls apart world wide. Other people from other countries, especially in Europe would probably contribute to a fund to challenge ISDS.

    1. dk

      Yes, I’m curious about this, too. Although it doesn’t necessarily have to be a constitutional challenge… whatever works. RICO might fit as well.

    2. CraaazyChris

      The more I read about ISDS systems, I wonder if they have an achilles heel where they could be overwhelmed by complaints of this form: “your law resulted in our loss of jobs [or more expensive pills, or ruined our environment], therefore pay us, the people who were harmed by this.”

      As things are now, this seems to not happen because only corporations and governments have standing in these tribunals. Maybe the solution is for everyone to have corporate entities to battle on their behalf. CraaazyFriends, is there a 10-bagger here? Maybe some sort of Kickstarter that spins out shell corporations geared towards (a) taking a social/progressive side in ISDS cases and/or (b) flooding ISDS systems with progressive cases to crowd out the other ones….

      1. dk

        If that’s possible, such cases are not cheap. Also, going that route legitimizes the ISDS courts, and by extension the premise of global corporations and their having any kind of standing at all. But I’ll ask around.

  8. Lord Koos

    “Most Democrats in both houses of Congress oppose the TPP”

    Is this true? Here in WA state, senators Cantwell & Murray both are gung ho for it.

    1. Vatch

      It’s true; the majority of Democrats in the Congress oppose the TPP. However, there is a non-trivial minority of Democrats who supported fast track, and who almost certainly also support the TPP. These are the ones who likely support the TPP:

      There’s also a minority of Republicans who oppose the TPP, but I’m afraid I don’t have a list of them.

      1. JTMcPhee

        I just called Senator Bill Nelson’s office on a whim. Staffer says he still supports the TPP and fast track and the related “trade deals.” I asked him to please pass along the anger of a Vietnam vet who enlisted to protect the nation and now sees the nation being sold out to “corporate interests,” noting the Keystone XL example. Deaf ears, will not hear.

  9. Alicia Snow

    Synoia, Interesting proposal. Can the citizenry in fact file such a challenge? I am an American expat living in France, and I can assure the readers that the TTIP is very unpopular among informed people in France, who do not trust “Brussels” to look out for their best interests.

  10. Russell Scott Day

    You are either a Corporatist or a Nationalist. Now, long gone they say, is Mercantilism, which was Nationalistic. Apparently to me it is not as gone as the Corporatists would like. Corporatists of the US, those with money to hide as individuals have increased their switch from US citizenship to UK citizenship from approximately 300 a year to 3,000 a year. Obama did complain about the Cook Islands and Cayman Islands at least once that I know of. Piketty had a colleague say that there would be no deficit if US citizens had not been able to hide money. They started starving to beast when Reagan said to. Taken as “Don’t pay taxes.” So it goes back to the Clintons who were the best Republicans ever. Now we live in Meyer Lansky’s world of financial engineering and under J.Edgar Hoover’s oppressive reign aimed at any dissenters, Blacks or hippies.

  11. RBHoughton

    Strange that Republicans in Congress should vote for their own irrelevance!

    Its not just the trade agreements since NAFTA that usurp authority from legislatures either.

    The concept of the independent central bank, a bank that controls the national money supply but is unaccountable to parliament, is another nail in the coffin of democracy. Bank staff operate without government oversight and have peculiar foreign considerations in their policies.

    And that’s not all.

    The west provides training for all the world’s armies and this lets us assess the generals of every country. That’s how we recognised General Sisi as the appropriate man to replace the democratic government of Egypt.

    Businessmen, central bankers and generals all represent routes around the governments of countries. They are replacing democracy. There may be something similar in the world of spookery as well but I don’t know much about that.

    It seems that some forum of decision-makers has agreed that democracy does not work or works too slowly and a more fascist approach is required.

  12. Ulysses

    “It seems that some forum of decision-makers has agreed that democracy does not work or works too slowly and a more fascist approach is required.”

    It is actually not all that difficult to identify the few dozen kleptocrats who now pull the strings, and their minions.

  13. Fiver

    If this deal was not very, very important for US corporate globalists it would not have made it this far in the face of significant bi-partisan opposition, and popular opposition around the world. The plot needs to take one mighty twist for this not to find a way to ‘gotted done’.

    For those looking for an Obama ‘chess’ move, perhaps delaying for 7 years, then nixing a project for reasons likely to lose in camera was the best way to trigger a multi-billion dollar suit right in the middle of a critical election – an historic, final shot for sanity from a man who had no idea what he was getting into, and has done what he could when he could since. A reprieve.

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