Why Tribunals Imposing Corporate Sovereignty Are Even More Dangerous Than We Thought

from the above-the-law dept

Wed, Dec 18th 2013 3:33am — Glyn Moody

Back in October, we introduced the term "corporate sovereignty" as an alternative to the standard but misleading phrase "investor-state dispute settlement" (ISDS) that is generally used. We noted that perhaps the worst manifestation of corporate sovereignty so far can be seen in Ecuador, where one of the secret tribunals used in these cases had ordered the Ecuadorean government to place Chevron above the country's constitution.

A detailed and important post from Public Citizen's Eyes on Trade blog not only sketches the background to that extraordinary demand, but also explains how things have since become even worse:

Now Chevron is asking the same extrajudicial tribunal to order Ecuador's taxpayers to hand over to the corporation any of the billions in damages it might be required to pay to clean up the still-devastated Amazon, plus all the legal fees incurred by the corporation in its efforts to evade justice.

Yes, you read that correctly: the oil giant's latest outrageous plan is to force the Ecuadorean government -- and hence the people of Ecuador -- to pay for the massive clean-up of the damage Chevron's predecessor company, Texaco, caused to the country, its environment and local communities. As the Eyes on Trade post points out, this means: [the ISDS tribunal] is acting as if the sovereign court ruling and two decades of trial never happened. In its recent decision, the tribunal barely made mention of the domestic ruling in Ecuador, or of the preceding 18 years of litigation spanning two nations. Many of the arguments that Chevron is bringing before the tribunal are the very same ones the corporation used before Ecuadorian courts -- arguments that were rejected. Rather than even examine the domestic courts' logic, the tribunal has invited Chevron to make the same arguments again as if for the first time.
The case of Ecuador shows how a company can use the corporate sovereignty chapter in international agreements to ignore years of adverse decisions by a country's highest courts, and to appeal to three arbitration lawyers who take no account of local legislation, practice or traditions, and are literally a law unto themselves.

But maybe Ecuador is just an exception: perhaps ISDS tribunals in other cases have been more respectful of national laws and existing decisions. New research from Gus Van Harten, associate professor at Osgoode Hall Law School of York University in Toronto, suggests otherwise. Studying 162 corporate sovereignty cases, Van Harten reports that 37% of them involved reviewing a government action, while 44% were about disputed legislation or judicial decisions. In other words, in these cases, ISDS tribunals were clearly placing themselves above a country's politicians and judges. Worryingly, Van Harten found:

there was little evidence that arbitrators demonstrated restraint in ways commonly adopted by domestic and international courts.

Moreover: the field has apparently offered arbitrators a fertile environment for creative lawyering alongside expansive approaches to their authority.
Unlike traditional judges, whose scope for action is tightly circumscribed by national laws, tribunals that ruled on cases brought under corporate sovereignty clauses had far more leeway for interpretation or -- even worse -- "creative lawyering." Van Harten concludes: In policy terms, the observations indicate a need for closer scrutiny by a range of actors -- such as national associations of legislators or judges -- of how arbitrators exercise their power and about whether their performance accords with considerations of public accountability, judicial restraint and basic even-handedness.
He also has some advice: states facing a reasonable prospect of investor claims, or seeking protection for non-Western investors, should systematically assess their anticipated exposure or protection and consider their options to avoid downside risks.
Of course, one obvious way to avoid those risks is for nations to refuse to agree to corporate sovereignty chapters in the first place.

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

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Filed Under: corporate sovereignty, ecuador, investor state dispute settlement, isds, tribunals
Companies: chevron

35 Comments

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Ninja (profile), 18 Dec 2013 @ 1:48am

Again, can't Ecuador simply give Chevron the middle finger and confiscate their assets in Ecuador and tell them to go fuck themselves?

I wonder, the company comes out as the villain, clearly. But what can be done to avoid it? How do you avoid their petrol? Pretty hard considering how the oil & gas market is set up.
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- Anonymous Coward, 18 Dec 2013 @ 3:47am
  
  Re:
  You blow all their assets in your country up. Then you work with neighbouring governments to blow their assets in that country up, through legal fiat and extra-legal means, if necessary.
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  - That One Guy (profile), 18 Dec 2013 @ 4:19am
    
    Re: Re:
    It's not explody, but that does bring to mind an idea.
    
    1) Seize any assets the company has in the country, given they have apparently refused to pay the fine the country levied against them for the original mess, and have therefor defaulted on the ruling.
    
    2) Sell seized assets to highest bidder.
    
    3) Use profits from sale to clean up mess caused by company.
    
    Or in other words, make them pay for the mess they caused, like it or not.
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    - ECA (profile), 18 Dec 2013 @ 5:29am
      
      Re: Re: Re:
      fine,
      An international corp gets kicked...
      DO the banks CARE?? NOPE they will take there money and BAN use of oil from that country. AND then CHARGE USA people more money to pay for the loss.
      
      CORP PAY NOTHING..
      those running it are not LIABLE for anything.
      
      Get a little history on SUPER FUND SITES in the USA..the CROPS WALKED AWAY..and NOW we are paying for the clean up.
      [ link to this | view in chronology ]
    - Ramon Creager (profile), 18 Dec 2013 @ 5:38am
      
      Re: Re: Re:
      Trouble is, Ecuador likely has assets in the western financial system, which is in cahoots with these villains.
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    - Pragmatic, 19 Dec 2013 @ 4:03am
      
      Re: Re: Re:
      http://en.wikipedia.org/wiki/Anglo-Persian_Oil_Company#Nationalisation
      
      See above for details of how that would work out, That One Guy. Bad, bad, bad idea.
      
      Big companies have a history of crying to Uncle Sam along the lines of, "The peons won't accept our oppressive ways. Bomb them!" and, of course, we end up in another war/military entanglement.
      [ link to this | view in chronology ]
  - Anonymous Howard (profile), 19 Dec 2013 @ 4:27am
    
    Re: Re:
    Then you make yourself independent from petrol and gas by giving the energy companies the middle finger, and giving the money you'd spend on oil companies to thorium research and green energy initiatives.
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- BJC, 18 Dec 2013 @ 9:37am
  
  Re: Confiscation
  Chevron very cleverly made sure that it has basically nothing worth having in Ecuador. There's nothing in Ecuador for the government to take.
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- Anonymous Coward, 18 Dec 2013 @ 10:46am
  
  Re:
  "Again, can't Ecuador simply give Chevron the middle finger and confiscate their assets in Ecuador and tell them to go fuck themselves?"
  
  I suppose they *could*, but then Chevron would run to their cronies in the US gov't to get something done. The US has a wide range of things it could use to punish Ecuador, ranging from economic sanctions to releasing private information the NSA may have on some of Ecuador's gov't officials to declaring some of those officials "terrorists" (effectively putting bounties on their heads). I doubt many Ecuadorian officials would want that.
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  - Paua Fritter (profile), 19 Dec 2013 @ 1:17am
    
    Re: Re:
    Yes, Ecuador's government has to be very careful. Since they don't have a sovereign currency (they use the US dollar), they are especially vulnerable as they are unable to run their own monetary policy. President Correa says it would be too costly and would provoke chaos to try to establish a new national currency, but they are strong proponents in the Union of South American Nations of establishing a regional (South American) currency "in the medium term", which would need to include Brazil at least.
    
    There is the new Bank of the South, backed by Venezuelan oil, and there is the "Bolivian Alliance" (ALBA) trade bloc, not for "free trade" but for "mutually beneficial" trade.
    
    So we can expect Ecuador's economy to become more and more closely linked with its neighbours', and less so with the US and Spain and the West generally. That should help to improve Ecuador's sovereignty vs Western corporations and their governments.
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That One Guy (profile), 18 Dec 2013 @ 2:46am

If one good thing comes from this mess...
I would hope it's that a good many other nations look at this, and other corporate sovereignty cases, see just where it puts the ultimate power, and flat out refuse to sign any future 'agreements' that include ISDS clauses.

More than that I would hope that those nations that are currently signed to agreements and treaties that include ISDS clauses start thinking really hard about 're-negotiating' those clauses out of the treaties/agreements, before they too find themselves on the defense against a company that feels entitled to the ability to dictate law to the country, all in the name of profits.
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- ECA (profile), 18 Dec 2013 @ 5:32am
  
  Re: If one good thing comes from this mess...
  Can I suggest something ELSE..
  
  TRY to find a register of ALL the major oil spills...
  ITS NOT EASY..and the USA hasnt had the worst ones.
  
  TRY, to find any clean up on those spills.
  
  THEN try to find a list of LEAKY SHIPS...there isnt one..some ships loose about 10% of their load just going from 1 place to another..
  [ link to this | view in chronology ]
Anonymous Coward, 18 Dec 2013 @ 4:47am

"Studying 162 corporate sovereignty cases ..."

So corporate sovereignty is already real and not a twisted corporate wet dream? How did this happen?
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- Anonymous Coward, 18 Dec 2013 @ 5:34am
  
  Re:
  They are mostly used by EU and USA and they are designed to limit corruption in banana republics. Still, the newer deals extend that protection further and further as more cases in these tribunals are settled and as banana republics have become far better at dealing with corruption and in corruption.
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beech, 18 Dec 2013 @ 5:10am

How can chevron claim they expected profits? They looked at Ecuador, examined it's laws and chose to set up shop there. They got caught breaking laws, and that surprised them?
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ethorad (profile), 18 Dec 2013 @ 5:10am

how about in the US?
Most of the ISDS cases I hear about are US companies taking action against non-US countries (eg Canada, Ecuador, etc)

Has the US government been hit with any yet? As that's the only thing that could really change their mind.
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- ECA (profile), 18 Dec 2013 @ 5:34am
  
  Re: how about in the US?
  Look up what the USA EXPORTS..
  NOT very much.
  the the biggest thing...GMO FOODS..most of the EU is banning it, but the current trade agreement CUTS the red tape..Hmm?
  [ link to this | view in chronology ]
  - ethorad (profile), 18 Dec 2013 @ 12:56pm
    
    Re: Re: how about in the US?
    Doesn't need to be about exports though? a decision to block drilling in Alaska - or oil wells in the Mexican gulf - would sound like something a company could sue over
    
    Oh and the US exports a lot of digital goods, far more than GM foods I think. Movies, games, music, etc.
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- Anonymous Coward, 18 Dec 2013 @ 2:42pm
  
  Re: how about in the US?
  US have these multinationals based in the US. So the US facilitates these companies ripping of forign taxpayers while letting these companies pay no US or forign tax, and domestic taxpayers foot the bills. The US wipes out its international political Goodwill/Capital for No Gain for the Nation.
  [ link to this | view in chronology ]
Anonymous Coward, 18 Dec 2013 @ 5:16am

Corporate Sovereignity vs Citizenship
I guess Corporate Sovereignity could become acceptable only if the Citizenship actually existed.

And the first should be denied until we get to see the second exists.

Anything less puts state citizen in the realm of corporate dictatorship.
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- Anonymous Coward, 18 Dec 2013 @ 5:33am
  
  Re: Corporate Sovereignity vs Citizenship
  Anything less puts state citizen in the realm of corporate dictatorship.
  
  That is what the corporations want, either by funding politicians and/or creating laws and treaties that favour them. The first has given them virtual control of the US government, and now they are using US muscle to gain control over other countries.
  [ link to this | view in chronology ]
- Anonymous Coward, 18 Dec 2013 @ 7:20am
  
  Re: Corporate Sovereignity vs Citizenship
  Remember, folks, Shadowrun wasn't meant to be a Platonic Ideal!
  [ link to this | view in chronology ]
  - ECA (profile), 18 Dec 2013 @ 2:29pm
    
    Re: Re: Corporate Sovereignity vs Citizenship
    Anon,
    forget Shadowrun..
    Look up something more entertaining.
    Look up Presidents Quotes on Corporations..
    They have been giving warnings for MANY YEARS..
    [ link to this | view in chronology ]
  - John Shade, 18 Dec 2013 @ 4:52pm
    
    Re: Re: Corporate Sovereignity vs Citizenship
    ROTFLMAO! I know 3 shamans & a really kick butt datamancer, just need some muscle & transport. Seattletime, boyz & gurlz, load up, lock up and mount up.
    [ link to this | view in chronology ]
    - That One Guy (profile), 18 Dec 2013 @ 9:32pm
      
      Re: Re: Re: Corporate Sovereignity vs Citizenship
      'Datamancer'? I didn't know Erfworld casters were mixing it up with Shadowrun ones.
      [ link to this | view in chronology ]
Ramon Creager (profile), 18 Dec 2013 @ 5:41am

This is a feature, not a bug.
At least to the US and its multi-national corporate and financial masters. To the rest of us, the very name Investor State Dispute Settlement is an insult. It places a sovereign state, representing the people of its nation, on the same level as unnamed, unaccountable "investors." Nice.
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Anonymous Coward, 18 Dec 2013 @ 6:09am

Gotta remember these are the 'trade agreements' that Obama LETS know the existence of (kind of)...Christ only knows what dark sinister deals get made out of the site of the public....
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Anonymous Coward, 18 Dec 2013 @ 6:10am

AT this point most of the US government are effectively paid lackeys of large corporations, taking massive behind the scenes payouts and job offers.

Hell even the NSA sells its data to the larger corporations (and not just the metadata but the content of calls/emails etc for 'research and marketing purposes')
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Anonymous Coward, 18 Dec 2013 @ 7:35am

I'd say go after each individual if you can't attack the corp(chevron) then make it a personal attack (employees/shareholders)
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Anonymous Coward, 18 Dec 2013 @ 10:57am

MY corporate sovereignty?
Could I setup my own little corporation and become sovereign? Then, if a traffic cop pulls me over can I basically tell him "Look, bud, you don't know who you're messing with here. I'm a sovereign corporation and way above your petty traffic laws. At this point, you're negatively impacting my profits. So, get back in your car and leave. Now."

Or this only for big, rich corporations?
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- John Fenderson (profile), 18 Dec 2013 @ 11:46am
  
  Re: MY corporate sovereignty?
  It's only for big, rich corporations. If you want to have a good belly laugh, check out what the IRS defines as a "small business". It's substantially larger than normal people would imagine.
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Dyspeptic Curmudgeon (profile), 18 Dec 2013 @ 11:32am

Corporate Sovereignty
The 'received-wisdom' backup to this is that 'Texaco was a bad corp'. Of course, there is the little question about how the plaintiff's lawyers bribed the judge, and paid an 'expert' to write the judge's decision. Of COURSE, they got a massive judgment. But it was a fraud, and should not have been granted.
Chevron is now suing the plaintiff's lawyers in the USA for damages for fraudulent conspiracy. For the same amount as the judgment.
So 'corporate sovereinty is not actually involved here. Just extortion and fraud.
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- Anonymous Coward, 18 Dec 2013 @ 4:54pm
  
  Re: Corporate Sovereignty
  wtf is "fraudulent conspiracy"?
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Anonymous Coward, 18 Dec 2013 @ 11:49am

Corporate law trumps all other jurisdictional laws and constitutions. All hail King Chevron! On your knees, maggots.
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Kronomex, 19 Dec 2013 @ 1:55pm

Re: ISDS.
Problem solved in one easy stroke; every government that signs this repulsive travesty just hands over all the holdings of their treasuries to the corporations and walk away. Saves all that annoying litigation and haggling in the courts.
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