Trade Agreements Are Designed To Give Companies Corporate Sovereignty

from the above-the-law dept

Fri, Oct 25th 2013 12:22am — Glyn Moody

One of the difficulties of making people aware of the huge impact that investor-state dispute settlement (ISDS) clauses in TPP and TAFTA/TTIP are likely to have on their lives, is that the name is so boring, and so they tend to assume that what it describes is also boring and not worth worrying about. And yet what began as an entirely reasonable system for protecting investments in emerging economies with weak judiciaries, through the use of independent tribunals, has turned into a monster that now allows companies to place themselves above national laws, as Techdirt has reported before.

The acronym "ISDS" just doesn't capture any of that, so during a conversation on Twitter with Maira Sutton, Jamie Love and a couple of Techdirters (Mike and me), Joe Karaganis came up with a great alternative: "corporate sovereignty". That, in a couple of words, is what ISDS is really all about. It represents the rise of the corporation as an equal of the nation state, endowed with a financial sovereignty that allows it to claim compensation if its expectation of future profits is somehow diminished by a country's courts or legislative changes.

A link-rich page on Public Citizen's "Eyes on Trade" blog provides a timely introduction to the field. It's based on another interesting, but slightly more academic post by Todd N. Tucker, found on the Investment Policy Hub of United Nations Conference on Trade and Development (UNCTAD). That organization produces an extremely valuable annual review of the whole area of ISDS/corporate sovereignty, which is recommended if you want to get all the facts and figures.

Here's Public Citizen's summary of perhaps the most blatant attempt to assert corporate sovereignty so far:

In one of the Chevron v. Ecuador cases, a three-person tribunal last year ordered Ecuador's government to interfere in the operations of its independent court system on behalf of Chevron by suspending enforcement of a historic $18 billion judgment against the oil corporation for mass contamination of the Amazonian rain forest. The ruling against Chevron, rendered by Ecuador's courts, was the result of 18 years of litigation in both the U.S. and Ecuadorian legal systems. Ecuador had explained to the panel that compliance with any order to suspend enforcement of the ruling would violate the separation of powers enshrined in the country’s Constitution -- as in the United States, Ecuador's executive branch is constitutionally prohibited from interfering with the independent judiciary. Undeterred, the tribunal proceeded to order Ecuador "to take all measures at its disposal to suspend or cause to be suspended the enforcement or recognition within and without Ecuador of any judgment [against Chevron]."

As that notes, the tribunal was essentially telling the Ecuadorean government to place Chevron above the country's constitution -- an extraordinary state of affairs: imagine if the US government were ordered to do the same. Unfortunately, Ecuador's situation is one that is likely to become more common if the corporate sovereignty sections of TPP and TAFTA/TTIP make it into the final versions of those treaties.

Follow me @glynmoody on Twitter or identi.ca, and on Google+

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

Filed Under: corporate sovereignty, investor state dispute, investor state dispute resolution, investor state dispute settlement, isds, tafta, tpp, trade agreements, ttip

27 Comments

If you liked this post, you may also be interested in...

Reader Comments

Subscribe: RSS

View by: Time | Thread

Anonymous Coward, 25 Oct 2013 @ 12:39am

I wonder how long it would take the US government to pull an about-face if companies started suing them under the same clauses. Of course, the large corporations know this, and know that the US is the biggest proponent of FTAs with ISDS, so the smart ones won't bite the hand that feeds them.
[ link to this | view in chronology ]
- Anonymous Coward, 25 Oct 2013 @ 6:12am
  
  Re:
  It would most likely become pro-corporate Republicans supporting such a decision (especially if the case is about gutting environmental regulations, or increasing oil drilling in the US) and pro-environmental protection Democrats strongly opposing it (because the above two things are both seen as harming the environment to them).
  [ link to this | view in chronology ]
Anonymous Coward, 25 Oct 2013 @ 1:02am

Have money. Don't like law. Buy trade agreement. Kill law through ISDS.
[ link to this | view in chronology ]
Anonymous Coward, 25 Oct 2013 @ 1:05am

The sad thing is that ISDS is meant for states with unreliable legal systems. So what the f*** is it doing in agreements like TTIP/TAFTA?
[ link to this | view in chronology ]
- Anonymous Coward, 25 Oct 2013 @ 1:34am
  
  Re:
  Because it is only enforceable in countries with reliable governments and legal systems.
  [ link to this | view in chronology ]
  - Anonymous Coward, 25 Oct 2013 @ 1:52am
    
    Re: Re:
    then it shouldn't exist. That's shitty law. IT basically means that corporations have more rights then fucking nations. Not bad for imaginary people.
    
    Now, imagine when Glencore (already known to have directly contributed to overthrowing governments it didn't like) gets a hold of this...
    [ link to this | view in chronology ]
    - Anonymous Howard (profile), 25 Oct 2013 @ 2:45am
      
      Re: Re: Re:
      The next step: corporations (big enough) declared sovereign nations.
      Then:
      When a corporation can't buy the laws, they rely on deniable assets to do the dirty work. These assets are called Shadowrunners...
      [ link to this | view in chronology ]
      - Anonymous Coward, 25 Oct 2013 @ 4:07am
        
        Re: Re: Re: Re:
        It's amazing how much that RPG is shaping up to be like reality.
        
        Reality has an RPG bias, clearly.
        [ link to this | view in chronology ]
        
        Anonymous Howard (profile), 25 Oct 2013 @ 4:39am
        
        Re: Re: Re: Re: Re:
        I'm starting to think that the creators of the SR universe were prescient on some level..
        
        That, or we're pretty much fucked.
        [ link to this | view in chronology ]
Anonymous Coward, 25 Oct 2013 @ 1:20am

The travesti of it all, is that if the US or China where handed down the same rules they both along with a couple of other ignore it to the full extent their armies can.

Remember that tiny little island in the middle of nowhere that won a case against the US?
[ link to this | view in chronology ]
Anonymous Coward, 25 Oct 2013 @ 2:16am

and you can bet your ass they will make it into the final bills. the money that companies with 'foreign' interests must be throwing around must be substantial. and let's face it, those on the receiving end of that money aren't going to give a toss about any of the countries or the people in them!
[ link to this | view in chronology ]
Anonymous Coward, 25 Oct 2013 @ 2:41am

Shadowrun
In the Shadowrun tabletop RPG universe, the major corporations even have extraterritoriality.

It saddens me to see that we are going in that direction.
[ link to this | view in chronology ]
- Bergman (profile), 25 Oct 2013 @ 7:57am
  
  Re: Shadowrun
  On the positive side, if a corporation has both extraterritoriality and sovereignty, then a nation could declare war on one and conquer it.
  [ link to this | view in chronology ]
  - any moose cow word, 25 Oct 2013 @ 10:34am
    
    Re: Re: Shadowrun
    But then they would have to pay back all of the "lost" profits to the former shareholders.
    [ link to this | view in chronology ]
    - Anonymous Coward, 27 Oct 2013 @ 2:53am
      
      Re: Re: Re: Shadowrun
      Nah, Right of Conquest. As the defeated 'nation', they're pretty much shit out of luck if flat out annexed, and stck with what they're given otherwise. If not dead.
      
      Can you Imagine what having a middlingly sized country and it's allies declare war against it would do to a company's share value? Unless they looked likely to Win and actually annex territory, their shares would Tank.
      
      Heh. Gives a whole new meaning to the term 'hostile takeover'.
      [ link to this | view in chronology ]
Donglebert the Needlessly Obtuse, 25 Oct 2013 @ 2:52am

So why doesn't Google, Facebook, Microsoft, Apple, Verizon, AT&T
and pretty much every internet or telecommunication company under the sun sue the US government for diminished future returns? It could reasonably be argued that the entire future value of the internet has been reduced because of the actions that allowed the NSA to act as it has.

Even a tiny reduction in the massive potential value of the net would be billions.
[ link to this | view in chronology ]
- Anonymous Coward, 25 Oct 2013 @ 3:24pm
  
  Re: So why doesn't Google, Facebook, Microsoft, Apple, Verizon, AT&T
  you, sir have a fantastic name. bravo.
  [ link to this | view in chronology ]
PRMan, 25 Oct 2013 @ 3:20am

Time to put Chevron on a 1-year ban
That's just evil. They earned their way onto my 1-year ban list. I suggest everyone else on here do the same. We can only vote with our money.
[ link to this | view in chronology ]
Ninja (profile), 25 Oct 2013 @ 3:29am

Did Ecuador submit to the pressure? I mean the judiciary can just give them a fat middle finger and carry on, right?
[ link to this | view in chronology ]
Bengie, 25 Oct 2013 @ 6:19am

I want that right
I wish I could sue for lost potential profits because something didn't go in my favor.

I think I should be the CEO of Microsoft, since I'm not, I should be able to sue for lost profits!
[ link to this | view in chronology ]
The Real Michael, 25 Oct 2013 @ 7:17am

Maybe if sovereign nations stopped taking bribes and the people told the corporate entities to take a hike, all this nefarious crap would cease happening.
[ link to this | view in chronology ]
Chris Brand, 25 Oct 2013 @ 8:48am

Seems easy enough to me
"Ecuador had explained to the panel that compliance with any order to suspend enforcement of the ruling would violate the separation of powers enshrined in the country�s Constitution -- as in the United States, Ecuador's executive branch is constitutionally prohibited from interfering with the independent judiciary. Undeterred, the tribunal proceeded to order Ecuador "to take all measures at its disposal to suspend or cause to be suspended the enforcement or recognition within and without Ecuador of any judgment [against Chevron].""

So they turn around and say "done - we have no measures at our disposal".
[ link to this | view in chronology ]
any moose cow word, 25 Oct 2013 @ 10:39am

Real entities with extraterritoriality and sovereignty can be corrected with sanctions and embargoes, but they don't get to sue for "future profits".
[ link to this | view in chronology ]
Anonymous Coward, 25 Oct 2013 @ 11:41am

Countries should refuse to give up their sovereignty
"Undeterred, the tribunal proceeded to order Ecuador "to take all measures at its disposal to suspend or cause to be suspended the enforcement or recognition within and without Ecuador of any judgment [against Chevron]."

Ecuador should do the opposite. Enforce the judgment by force, ridding Chevron of all its Ecuadorian properties and interests to the extent necessary to settle the debt, if necessary.
[ link to this | view in chronology ]
Chris, 25 Oct 2013 @ 4:49pm

alternate phrase
Perhaps /corporate immunity/ has a better ring to it, evoking /diplomatic immunity/.
[ link to this | view in chronology ]
Calm, 26 Oct 2013 @ 4:47am

Free Trade
I think you need to research as far back as 1980 (Free Trade) and when the U.S. Capitalists deliberately set out to abandon the North American Continent and walk away from every promise made to the working class since the end of World War II.

Free Trade was all about giving the rich folks an unfettered opportunity to move their wealth and assets offshore because the rich folks decided in 1980 to abandon the North American Continent, and to walk away from every promise made to the working class since the end of World War II.

The Rich Folks had no intention of sticking around while 15 thousand people lined up each day to collect on the retirement benefits which were promised to the working class.

The Rich Folks moved their accumulation of wealth offshore and out of reach to any worker who might want to sue and seize assets in lieu of broken promises.

This is exactly what the Capitalists did in 1870 as the British economy bankrupted itself and the Rich Folks in Britian moved their wealth into North America.

We did not see it happening because the U.S. Capitalists created an illusion of success with 15 trillion worth of Federal debt since 1980. (Not including 600 Trillion in Toxic Assets.) Prior to NAFTA being implemented, there was no U.S. Federal debt.

The largest U.S. export to China is scrap metal and scrap paper.
http://www.dotandcalm.com/calm-archive/EconomicNotes.html

Calm
[ link to this | view in chronology ]
Mama H., 21 May 2015 @ 5:46am

steven donziger and fraud
Seems like the lawyer and his team got really sloppy and fell into the hands of Chevron by committing fraud, bribery , etc. Was is because he wasn't averse to unethical practices to "win" his case ? Was he overly greedy himself ? As a result he seems to have waged another nail into the coffin of the Indigenous tribes, a common tactic among white privileged people. Did he just get caught up with his own self-importance and loose sight of the cunning of a cold corporation that only cares about its profits and shareholders, which is, unfortunately, their lawful only purpose for existence. sounds like Stephen was over his head. A real travesty.
(and what is all this reference to board game or video game terms?. Playing with our Earth, environment and beleaguered Indigenous peoples is not a game).
[ link to this | view in chronology ]