Latin American Countries Band Together To Fight Growing Problem Of Investor-State Disputes

from the US/EU-take-note dept

Mon, Jul 1st 2013 11:12pm — Glyn Moody

As Techdirt has observed, investor-state dispute resolution (ISDR) is turning into a major weapon that corporations can deploy against nations in order to claim damages for some alleged loss of future profits as a result of government action -- for example, stricter health or environmental regulations. Last year alone, 62 new investment arbitration cases were initiated against nations, and a record award of $1.77 billion was made against Ecuador.

Given that fact, it is perhaps not so surprising to see that country leading a new alliance of nations affected by ISDR and aiming to fight back:

Leaders of several Latin American countries have set up a new coalition to coordinate actions to face the growing number of international legal suits being taken against governments by transnational companies.

A ministerial meeting of 12 countries held in Guayaquil, Ecuador, decided on several joint actions to counter the threat posed by these law suits, which have claimed millions or even billions of dollars from governments.

"No more should small countries face law suits from big companies by themselves," said Ecuador's Foreign Minister Ricardo Patino, at a media conference after the meeting which he chaired. "We have now decided to deal with the challenges posed by these transnational companies in a coordinated way."

As well as holding a conference on the subject, and creating an observatory to monitor cases, the countries agreed to set up a new regional arbitration center for settling investment disputes. This is designed to address one of the biggest problems with the current ISDR mechanism: The proposed centre is to provide an alternative to existing international tribunals which are seen as biased in favour of investors' interests.

The tribunals, such as ICSID (based at the World Bank in Washington), have also been accused of being mired in conflict of interest situations. Only a few arbitrators hear a majority of cases, with many of them also appearing as lawyers for companies in other cases, and some being board members of transnational companies.
The above article goes on to explain that there have been around 500 ISDR cases so far, with a high number involving Latin American countries: Argentina, Ecuador, Venezuela and Mexico have each had 20 to 30 ISDR actions brought against them. A background note explaining the reason for the meeting said that arbitration proceedings and claims by European and US multinational companies against a growing number of states of the South have dramatically increased.

These costly litigations, the majority of which were decided in favour of the investors, not only affect the States’ fiscal situation but pose a serious challenge to their national jurisdiction and sovereignty, and compromise on-going development plans in Latin America and other regions.

This problem originated in the 1990s when bilateral investment treaties were signed by developing countries in the expectation of attracting foreign investments, but the negative consequences of such commitments have now become evident, said the note.
In other words, what seemed like a fairly minor issue when signing up to the investment treaties many years ago has since grown into a serious threat to many countries' finances and even sovereignty. That's something that both the US and EU would do well to remember when negotiating the TAFTA/TTIP agreement, which seems certain to discuss the possible inclusion of ISDR measures suffering from exactly the same problem.

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Filed Under: ecuador, investor state dispute resolution, investor state disputes, isdr, latin america, tpp

8 Comments

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Anonymous Howard (profile), 2 Jul 2013 @ 12:45am

What else would you expect from a secret, not elected tribunal with little to no accountability, that is small enough to be bought by corporations.

I fully expect Hollywood movie villains suddenly change to latin american and new terror threats discovered in south america. Then invasion, ofc to "defend" your country.
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That One Guy (profile), 2 Jul 2013 @ 12:53am

And of course the cherry on top...
... would be if the countries that were in this agreement were then sued/taken to court due to 'threatening future profits' by signing on to such a coalition.
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Androgynous Cowherd, 2 Jul 2013 @ 1:15am

Entitlement to future profits
As is so often the case, much of the problem stems from including a notion of "entitlement to future profits". The original intent of such agreements was to give companies a recourse if they, say, built a factory in Unstablestan, commies held a revolution, and the factory was seized and nationalized.

Limit these agreements to the companies' physical property that already exists -- to tangible assets -- and explicitly disclaim any applicability to future anythings or to "intellectual property" or anything else than physical facilities and inventory the company owns and has in the country, and the problems should go away.
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Anonymous Coward, 2 Jul 2013 @ 3:12am

out of curiosity, the majority of these law suits are from companies based where? are they UK, Swiss, US, Chinese companies or what?
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Anonymous Coward, 2 Jul 2013 @ 5:16am

Who do these sovereign nations think they are anyways.

The nerve, passing legislation!
That's bad enough, but it's legislation that helps the little people ffs.

Clearly we must invade, for their own good, in order to stop this heinous behavior and restore the corporate gravy train.
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out_of_the_blue, 2 Jul 2013 @ 6:09am

(Sigh.) The very purpose of these treaties is to entangle gov't --
for the benefit of international banks and corporations, NOT the people. Therefore your advice: "That's something that both the US and EU would do well to remember when negotiating the TAFTA/TTIP agreement," only shows that you've totally missed the true actors, their motives, and goals.

Here's a tip, minion: just assume that international banks and other international corporations drive national policy of US and UK, then analyze from there.
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Anonymous Coward, 2 Jul 2013 @ 7:07am

ISDR is the bane of a functioning democracy. It was originally invented for states with underdeveloped or undeveloped legal systems. So why is it inserted in TTIP, TPP e.a.?
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Anonymous Howard (profile), 2 Jul 2013 @ 7:26am

Re: (Sigh.) The very purpose of these treaties is to entangle gov't --
This would be a reasonable comment if you left out the Ad hominem and name calling.
Alas, you earned your report.
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