USTR Starts To Panic Over Calls To Take Corporate Sovereignty Out Of TAFTA/TTIP

from the is-that-the-best-you've-got? dept

Mon, Mar 31st 2014 3:33am — Glyn Moody

The pressure is really building on the US and EU over the corporate sovereignty provisions in TAFTA/TTIP. As we reported back in January, the European Commission has put on hold the negotiations for the investor-state dispute settlement (ISDS) chapter while it conducts a public consultation on the subject. The USTR seemed to be trying to tough it out, but it has finally cracked and released what it calls "The Facts on Investor-State Dispute Settlement: Safeguarding the Public Interest and Protecting Investors" in an attempt to bolster support for the idea. Its mere existence shows that the USTR is worried about losing the ISDS argument in the court of public opinion, and the answers, many of which are misleading or downright wrong, confirm this. Here's the rationale for releasing the document:

There are a lot of myths out there suggesting that ISDS somehow limits our ability -- or our partners' ability -- to regulate in the interest of financial stability, environmental protection, or public health. Some have even suggested that a company could sue a government just on the grounds that the company isn't earning as much profit as it wants.

These assertions are false.

The USTR gives some context for corporate sovereignty provisions: Over the last 50 years, nearly 3,200 trade and investment agreements among 180 countries have included investment provisions, and the vast majority of these agreements have included some form of ISDS. The United States entered its first bilateral investment treaty (BIT) in 1982, and is party to 50 agreements currently in force with ISDS provisions.
Although that seeks to give the impression that corporate sovereignty is absolutely standard and nothing to worry about, what it omits to mention is that the vast majority of those 3,200 trade agreements have been one-sided: they have been about rich, Western nations investing in poor developing ones. As such, ISDS has been a means for the former's corporations to bully the latter, who are powerless to object, since they are desperate for foreign investment, and must accept the terms imposed on them.

Contrast this with TAFTA/TTIP. For the first time, a trade agreement between two massive economic powerhouses will involve corporate sovereignty. That means that US corporations will be able to sue the EU and its member states, but also that EU corporations will be able to sue the US. The scale of the threat is unprecedented: there are 75,000 cross-registered companies with subsidiaries in both the EU and the US that could launch ISDS attacks under TTIP. This is totally unlike any of those 3,200 trade agreements the USTR mentions.

There then follow the eight "facts you should know about ISDS provisions under U.S. trade agreements". According to the USTR these: 1. Provide basic legal protections for American companies abroad that are based on the same assurances the United States provides at home.

Investment protections are intended to prevent discrimination, repudiation of contracts, and expropriation of property without due process of law and appropriate compensation. These are the same kinds of protections that are included in U.S. law. But not all governments protect basic rights at the same level as the United States. Investment protections are intended to address that fact.
So by its insistence on ISDS in TAFTA/TTIP, is the US saying that the EU does not offer "the same kinds of protections that are included in U.S. law"? Seriously? 2. Protect the right of governments to regulate in the public interest.

The United States wouldn't negotiate away its right to regulate in the best interest of its citizens, and we don’t ask other countries to do so either. Our investment rules preserve the right to regulate to protect public health and safety, the financial sector, the environment, and any other area where governments seek to regulate. U.S. trade agreements do not require countries to lower their levels of regulation.
Well, some people might beg to differ on the first claim there, but leaving that aside, the second claim is easily refuted. As Techdirt reported in October last year, the provincial government of Quebec in Canada is being sued over a moratorium on fracking it brought in to allow time for scientific studies of the potential impact. That was under the North American Free Trade Agreement (NAFTA), which includes ISDS, and is a clear case of environmental protection being threatened by corporate sovereignty. 3. Do not impinge on the ability of federal, state, and local governments to maintain (or adopt) any measure that they deem necessary.

Under our investment provisions, no government can be compelled to change its laws or regulations, even in cases where a private party has a legitimate claim that its basic rights are being violated and it is entitled to compensation.
Although that's true, it misses the point, which is that the mere threat of being sued under ISDS causes governments to drop legislation before it is even introduced. Here, for example, is what happened in Canada under NAFTA in this regard: Carla Hills, the US Trade Representative who oversaw the NAFTA negotiations for Bush I and now heads her own trade-consulting firm, was among the very first to play this game of bump-and-run intimidation. Her corporate clients include big tobacco--R.J. Reynolds and Philip Morris. Sixteen months after leaving office, Hills dispatched Julius Katz, her former chief deputy at USTR, to warn Ottawa to back off its proposed law to require plain packaging for cigarettes. If it didn't, Katz said, Canada would have to compensate his clients under NAFTA and the new legal doctrine he and Hills had helped create [ISDS]. "No US multinational tobacco manufacturer or its lobbyists are going to dictate health policy in this country," the Canadian health minister vowed. Canada backed off, nevertheless.

A former government official in Ottawa told me: "I've seen the letters from the New York and DC law firms coming up to the Canadian government on virtually every new environmental regulation and proposition in the last five years. They involved dry-cleaning chemicals, pharmaceuticals, pesticides, patent law. Virtually all of the new initiatives were targeted and most of them never saw the light of day."
The "facts" continue: 4. Do not expose state or local governments to new liabilities.

Under our Constitution and laws, investors frequently exercise their rights in U.S. courts. For example, in recent years, the U.S. government has defended hundreds of cases in U.S. courts under the Constitution's "takings clause," which requires compensation for expropriations. State and local governments have likewise defended many such claims. By contrast, the United States has only been sued 17 times under any U.S. investment agreement and has never once lost a case.
As well as confirming that ISDS tribunals are quite unnecessary, since US courts can be used instead, this overlooks the fact that the US has never had ISDS clauses in agreements with nations where large numbers of well-resourced corporations were able to take advantage of them. The EU has thousands of companies who can -- and will -- sue once they get the opportunity. 5. Provide no legal basis to challenge laws just because they hurt a company' profits.

Our investment rules do not in any way guarantee a firm’s rights to any profits or to its projected financial outcomes.
A year ago, we wrote about Eli Lilly suing Canada under NAFTA for "indirect expropriation" of future profits. That case hasn't been adjudicated yet, but obviously some company lawyers think NAFTA does indeed allow challenges just because projected financial outcomes suffer. 6. Include strong safeguards to deter frivolous challenges to legitimate public interest measures.

The United States has proposed additional safeguards that include stricter definitions than are in most investment agreements of what is required for successful claims, as well as mechanisms for expedited review and dismissal of frivolous claims, payment of attorneys' fees, consolidation of duplicative cases, and transparency.
If the US thinks its ideas are so good, it should publish them. After all, there's nothing confidential there -- what possible reason is there to discuss them behind closed doors? 7. Ensure fair, unbiased, and transparent legal processes.

The United States is committed to ensuring the highest levels of transparency in all investor-state proceedings.

...

8. Ensure independent and impartial arbitration.

Investor-state arbitration is designed to provide a fair, neutral platform to resolve disputes.
These are more aspirations than "facts" The reality is very different, as is evident from the official United Nations Conference on Trade And Development (UNCTAD) report on the reforming corporate sovereignty chapters, published in June last year (pdf), which contradicts the USTR's assertions that everything is just fine by noting: Concerns with the current ISDS system relate, among others things, to a perceived deficit of legitimacy and transparency; contradictions between arbitral awards; difficulties in correcting erroneous arbitral decisions; questions about the independence and impartiality of arbitrators, and concerns relating to the costs and time of arbitral procedures.
As the above indicates, the USTR's defense of corporate sovereignty is weak in the extreme. If these "facts" are the best it has got, it's easy to see why ISDS is in such trouble and likely to be dropped from TAFTA/TTIP.

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Filed Under: corporate sovereignty, isds, tafta, tpp, ttip, ustr

37 Comments

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Anonymous Coward, 31 Mar 2014 @ 3:52am

ISDS - I Sue Democratic Systems
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Anonymous Coward, 31 Mar 2014 @ 4:11am

There's a simple solution to all of this.
Include a "Told You So" clause, where if any of the things that were warned about were to happen, that part of the agreement is permanently and irreversibly stricken from the agreement.
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Anonymous Coward, 31 Mar 2014 @ 4:18am

Re:
ISDS - I See Dollar Signs.
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Anonymous Coward, 31 Mar 2014 @ 4:40am

One more
ISDS: Insane System of Destroying Sovereignty.
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Joe, 31 Mar 2014 @ 5:08am

And here I was, thinking Continuum was supposed to be fiction.
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Shaun Wilson (profile), 31 Mar 2014 @ 6:10am

The United States wouldn't negotiate away its right to regulate in the best interest of its citizens

The US (and really any other) government does this all the time when they want to pass laws that aren't "in the best interest of its citizens". This occurs when they want to help out political donors as with copyright law and when they want to attack minorities and maintain/increase police power over their "citizens" as with drug prohibition.
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Anonymous Coward, 31 Mar 2014 @ 6:10am

the simple fact Is that lawyers are not to be trusted when it comes to humanity ,they manipulate everything changing definitions on a whim .. there was a day when a simple handshake would suffice because honor in ones word defined them, In some cases this still holds true, but not in a corporate environment.
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Ninja (profile), 31 Mar 2014 @ 6:52am

I wonder, has the US been the target of such disputes. If they were, would they find it a good thing AND comply with whatever result comes out? Easy when you are the one wielding the weapon, no?
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KevinEHayden (profile), 31 Mar 2014 @ 7:02am

Just a way for US corps to collect extra $$$
US corporations are beginning to realize that they've sabotaged themselves by outsourcing all of their manufacturing, etc. The only thing they have left is their IP. In order to protect that, they need a way to export their laws to the rest of the world. That's the only thing these trade agreements will accomplish. Other nations will have to toe the line with regard to US regulations and IP, or else face the inevitable lawsuit that follows. The net effect either way will be an export of US laws and regulations to the rest of the world and in import of everyone else's money to the US. Hopefully the rest of the world will wake up and see what's happening before it's too late!
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any moose cow word, 31 Mar 2014 @ 7:26am

Re:
Good sci-fi is a window into a future reality, usually one that's best avoided. Sadly, we're closer to 1984 than the Jetsons.
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any moose cow word, 31 Mar 2014 @ 7:30am

Re:
Trying to keep lawyers or politicians honest is like trying to nail jello to the wall.
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Pixelation, 31 Mar 2014 @ 8:11am

ISDS...I See Dead Safeguards
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Anonymous Coward, 31 Mar 2014 @ 8:14am

Re: Re:
No, it's easier to nail Jello to the wall. Or the politicians, really.
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Anonymous Coward, 31 Mar 2014 @ 8:48am

So basically, his "facts" say, that nothing will change.

Then answer me this, if nothing will change, why be so insistent on including them?

Don't answer, it is a rhetorical question, because of course these are the things that will change. This is not a list of what will be, but of what will have been.
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any moose cow word, 31 Mar 2014 @ 8:49am

Re: Re: Re:
Being spineless makes it hard to press them on anything. They always find a crack to squeeze through.
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Anonymous Coward, 31 Mar 2014 @ 8:59am

Looks like the standard political ploy, before the signing the treaty requires no new laws, after it is signed laws have to be enacted because of treaty obligations.
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Anonymous Coward, 31 Mar 2014 @ 9:24am

Re:
"The best interest of the companies is always the best interest of the people!"
And suddently things can not be abused!

"The best interest of the people is never the best interest of the companies!"
And suddently things can only be abused.

It is unfortunately for USTR to give its talking points in the black and white, while maintaining a position of obscurity over the specifics. It is far too easy to get away with murder if there is no body!
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Digger, 31 Mar 2014 @ 9:26am

Corporations aren't people, and not sovereign entities..
Period. End of this discussion.

While we're at it, let's strip protections from criminal prosecution for the officers and board members of these criminal organizations, otherwise known as Corporations.

Now, whenever someone dies from use of their product, their officers and board members go up on manslaughter charges.

Whenever someone's money is stolen, those same individuals do the time.

Whenever they violate local laws, yup, you guessed it, more time and punishment for those corporate asshats.

The only way to get Corporate greed and fascism under control is to take away their immunity from prosecution.
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art guerrilla (profile), 31 Mar 2014 @ 9:52am

Re: Re:
if you take it while it is still in the box, its actually fairly easy to nail it to the wall...
8^)
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Anonymous Coward, 31 Mar 2014 @ 10:03am

Re: Corporations aren't people, and not sovereign entities..
or actually treat the corporation and all of its top policy makers as a single entity/person, then we could effectively charge them all with any and all crimes committed by the organization, that would clean up 98% of corps in about a week.
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John Fenderson (profile), 31 Mar 2014 @ 10:42am

Re: Re: Corporations aren't people, and not sovereign entities..
Or simply do what used to be done: when a corporation acts illegally, the state dissolves the corporation.
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Zonker, 31 Mar 2014 @ 1:39pm

Under our investment provisions, no government can be compelled to change its laws or regulations, even in cases where a private party has a legitimate claim that its basic rights are being violated and it is entitled to compensation.
Right, it just makes any such laws inapplicable to the sovereign corporations and penalizes any country that tries to apply them. The law is only for the lesser people. And technically in this article's example Canada was actually compelled to *not* change its laws and regulations in a way which could have harmed US tobacco company profits.
The United States has proposed additional safeguards that include stricter definitions than are in most investment agreements of what is required for successful claims, as well as mechanisms for expedited review and dismissal of frivolous claims, payment of attorneys' fees, consolidation of duplicative cases, and transparency...
The United States is committed to ensuring the highest levels of transparency in all investor-state proceedings.
If everything is so "transparent" then why so secretive about just what is in the TAFTA/TTIP treaty? Why not release all drafts to the public so we can see with our own eyes how this will "benefit" us? Afraid we wouldn't like what we see? If you have nothing to hide, you have nothing to fear.
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Kronomex, 31 Mar 2014 @ 2:00pm

Change all the "public/s" to "corporate/corporation" and then the crap from the USTR gives us the true message. Points Seven and Eight made me feel almost physically ill.
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martyburns (profile), 31 Mar 2014 @ 2:22pm

Re: Re:
ISDS - I suspect dodgy senators.
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any moose cow word, 31 Mar 2014 @ 2:35pm

Re: Re: Re: Corporations aren't people, and not sovereign entities..
I like the idea of capital punishment for corporations. A corporation is not a sovereign right, it's a legal privilege granted by the government--one that can be revoked.
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That One Guy (profile), 31 Mar 2014 @ 2:50pm

Scurry little roaches, scurry about desperately trying to hide what everyone already knows, but know that the light has been turned on, and it's not going to be so easy to flick it off again.
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Anonymous Coward, 31 Mar 2014 @ 5:03pm

Re: Re: Re:
Same goes for lawyers and politicians :)
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Loki, 31 Mar 2014 @ 6:51pm

2. Protect the right of governments to regulate in the public interest.

I stopped reading at this point. Since I have seen next to none (if any at all) serious regulation in the last decade that was actually in the public interest, I didn't feel it worth the effort to proceed any further.
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Jonathan, 31 Mar 2014 @ 9:06pm

"Its citizens"
are basically the child-rapist landed gentry class. The rest are, frankly, as close to livestock as they feel they can get away with.
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Jonathan, 31 Mar 2014 @ 9:17pm

The important thing to remember
is that the fallacy of composition is pervasive in political speech where a bait-and-switch is desired. A phrase like "the public" might not even describe the same set of people twice in one document, and that's intentional. What elites call rhetoric, we can safely treat as hostile.

Is it fusion cultures in general that makes a cultural desert and calls it peace, or is that just the influence of Rome generally? That Greco-Roman heritage isn't working out for us so well and neither is the "Judeo-Christian" one.
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Anonymous Coward, 1 Apr 2014 @ 5:21am

'1. Provide basic legal protections for American companies abroad that are based on the same assurances the United States provides at home.'

i found this rather worrying. there is no mention of any other countries companies being protected, whether 'at home' or in the USA! surely this point alone shows how one-sided this type of provision is and how it is trying to give the USA not only special provisions here but giving the USA the ability to rule over everywhere! the whole ISDS thing needs throwing out and never allowed back in, regardless of how it is written! if we are not very careful, we are going to be living in a corporate controlled world with no way anyone from another county's government, industry or company, let alone an ordinary individual will be able to get any compensation on anything!
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Anonymous Coward, 1 Apr 2014 @ 5:45am

" 7. Ensure fair, unbiased, and transparent legal processes.

The United States is committed to ensuring the highest levels of transparency in all investor-state proceedings.

... "

--Best part of the article... I'm still laughing.
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A. Lauridsen, 1 Apr 2014 @ 7:49am

Ratification process
Although IANAL, it sounds to me as if ISDS will run afoul in the EU ratification process.

The way I see it, ISDS will remove sovereignty from the individual member countries. This cannot be done without the treatry being ratified by each individual EU member country.

An in quite a few countries, this will require a referendum. Given the austerity measures invoked to keep the EURO afloat, I have sincere doubts that any referendum in response to the EU will meet with favorable results for the EU.
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Sunhawk (profile), 1 Apr 2014 @ 10:06am

Re:
Heck, I'd like to see proposals for such clauses written in to many bills and treaties - if defenders say "oh, this legislation won't be used to go after non-terrorists", then surely they wouldn't mind some stiff penalties and the striking of the law if they're found to do so...?
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Pragmatic, 2 Apr 2014 @ 3:31am

Re: Corporations aren't people, and not sovereign entities..
The only way to get Corporate greed and fascism under control is to take away their immunity from prosecution.

Well, it's one of them. Then you have to actually win the case. Since they've loaded the system in their favor - a point lost on extreme Libertarians and Anarcho-capitalists - good luck with that.
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Pragmatic, 2 Apr 2014 @ 5:18am

Re: Re: Re: Corporations aren't people, and not sovereign entities..
Yeah... great idea, I'm all for it, but practically speaking we've been out-manoevered by the Far Right, who see corporations, etc. as BOTH property AND persons in their own right.

Why do you think they've been railing against regulation of business for so long? They frame it as an attempt to control the property (profits and other monies) of the owners and shareholders by force, "therefore it's theft."

"Framing" means "put on a pair of blinkers so you can't see the breadth and depth of what you're dealing with," and Heaven knows they love to frame the issues. When we let them get away with that instead of calling them on it, they own the narrative and are able to cast dissenters as "Liberal Socialists," etc.

Even the ones who call corporations "a creature of the state" never seem to be that eager to have them broken up with anti-trust laws or otherwise dissolved, citing the need to compete on the world stage, or some such crap. So much for being anti-statist.

/End rant.
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Pragmatic, 2 Apr 2014 @ 5:20am

Re:
Yeah... though they neglected to say who they're being transparent with. Bear in mind that they consider We the People to be the enemy.
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