How Corporate Sovereignty Provisions Could Undermine Anti-Trust Actions

from the are-you-sure-you-want-to-do-that? dept

Fri, Mar 20th 2015 12:56am — Glyn Moody

One of the (many) problems with corporate sovereignty provisions in treaties is that their practical effects are highly unpredictable. Unlike courts operating in the Anglo-Saxon tradition, investor-state dispute settlement (ISDS) tribunals are not obliged to take into account precedents set in previous hearings. Essentially, they can come to more or less any decision -- one, moreover, against which there is no real appeal. That means the inclusion of ISDS in TAFTA/TTIP and TPP is giving hostages to fortune: nobody can honestly say that they know how things will work out later on.

Writing on the International Economic Law and Policy Blog, Simon Lester has raised an intriguing -- and deeply troubling -- possibility in this context. He points to a pro-TPP piece that appeared in the Washington Post recently. It includes the following point:

[Qualcomm's] substantial share of the Chinese chip market attracted the attention of the Chinese government, which proceeded to extract $1 billion in fines for alleged anti-competitive practices. In the U.S., where Qualcomm also sells its chipsets, the company has faced no such anti-trust penalties.

Under current trade law, Qualcomm has little recourse to appeal its treatment by the Chinese government. Under a trade agreement with China like the TPP, however, Qualcomm and other U.S. companies would have access to an investor-state dispute settlement mechanism.

Lester points out that if Qualcomm were indeed able to use corporate sovereignty provisions to fend off anti-trust actions, it would be very big: The suggestion that ISDS could be used against antitrust/competition policy actions was something I hadn't thought of before. Would this mean that, in the future, Microsoft or Google could use ISDS in the TTIP -- if that happens -- to challenge the various European actions taken against them? And could a foreign investor bring an ISDS claim based on an action not taken against one of its competitors?
As he says, not only might large companies use ISDS to contest anti-trust actions against themselves, they might also use it to put pressure on governments to bring anti-trust actions against their competitors. This emphasizes not only how ISDS could take governments into completely uncharted waters for anti-trust actions, but also that there are even more ways in which corporate sovereignty could undermine a nation's ability to set and implement policy. That's another good reason to remove it from trade agreements before it causes this kind of serious damage to the fabric of democracy.

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Filed Under: antitrust, corporate sovereignty, isds, trade agreements

15 Comments

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Anonymous Coward, 20 Mar 2015 @ 1:28am

So lemme get that straight: If I do something illegal, and you go anti-trust on me, I'll drag you into ISDS-court - which will be so expensive it will nullify any gain from anti-trust fines/settlements? And I even stand a decent chance of winning too? Any gambler would take such a bet, I guess...
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Anonymous Coward, 20 Mar 2015 @ 1:49am

So...Are they trying to start WWIII?
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Anonymous Coward, 20 Mar 2015 @ 3:18am

Corporations are bigger than governments, and they know it.
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Anonymous Coward, 20 Mar 2015 @ 3:22am

Corporate-only Appeals
"Unlike courts operating in the Anglo-Saxon tradition, investor-state dispute settlement (ISDS) tribunals are not obliged to take into account precedents set in previous hearings. Essentially, they can come to more or less any decision -- one, moreover, against which there is no real appeal."

That's ideal for corporations. If a ruling goes in favor of a corporation, the government can't appeal it. If a ruling goes against a corporation, the corporation can re-organize itself into a "new" self and then file a "new" suit, over and over, essentially giving it unlimited appeals until it get what it wants.

What could possibly go wrong?
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Anonymous Coward, 20 Mar 2015 @ 3:52am

Re:
That's why it isn't really a gamble. IT's a cheap, explotative way to game the rules. But it only works for imaginary people.
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Anonymous Coward, 20 Mar 2015 @ 5:16am

SO big corporations are evading billions in taxes ,
but now they want to evade all forms of regulation,
using trade agreements,
it should be now clear that ISDS is an attack on democracy and a terrible idea,
good for corporations,lawyers,
bad for citizens .
The treaty is not signed yet tobacco companys are already threatening to sue ireland for new plain cigarette
packaging laws being passed .
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Steve holbert, 20 Mar 2015 @ 5:54am

corporations
If governments lose control their only course will be state sanctioned assassination
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Mason Wheeler (profile), 20 Mar 2015 @ 6:46am

Dear Washington Post:

That's a feature, not a bug.

Sincerely,

Rational Citizens Against ISDS
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Anonymous Coward, 20 Mar 2015 @ 9:19am

If I was a corp, first thing I'd do after TPP passed would be reincorporate in the country with the fewest legal restrictions available.
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Anonymous Coward, 20 Mar 2015 @ 2:50pm

As he says, not only might large companies use ISDS to contest anti-trust actions against themselves, they might also use it to put pressure on governments to bring anti-trust actions against their competitors.

Unlike courts operating in the Anglo-Saxon tradition, investor-state dispute settlement (ISDS) tribunals are not obliged to take into account precedents set in previous hearings.

Put these together and you have a recipe for disaster. Case 1: Country forced to initiate anti-trust actions against company from another nation.
Case 2: Said company sues the country, and manages to win because the tribunal refused to look at the reason behind the anti-trust actions.
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Vincent Clement (profile), 21 Mar 2015 @ 7:05am

The Beer Store - a beer retailer owned by the big three international brewers that has a government regulated near-monopoly on beer sales in the Province of Ontario - was considering filing a NAFTA complaint against the Province of Ontario if it opened up beer sales to other venues such as grocery stores.

So, three large international corporations were going to use a free trade agreement to argue that they should be compensated for potential loss of profits because their near -monopoly market share would be reduced.

Only in today's insane business and political environment could an agreement that is supposed to remove trade barriers be used to demand compensation for removing trade barriers.
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John Fenderson (profile), 21 Mar 2015 @ 9:17am

Recourse
Under current trade law, Qualcomm has little recourse to appeal its treatment by the Chinese government.

Qualcomm always has the recourse of choosing not to do business with China. This is what gets me about ISDS provisions: they are unnecessary. If a nation develops a reputation for abusing outside companies, outside companies will choose not to do business with them. If that nation wants outside companies badly enough, they'll stop being so abusive.
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Anonymous Coward, 21 Mar 2015 @ 7:07pm

Re: Recourse
The problem here is that the Chinese mobile phone makers get orders from their suppliers- Apple, Samsung, Motorola etc to use Qualcomm chipsets.

The Chinese Gov't wants them to use Chinese made chipsets, which just so happen to be cheaper, presently more prone to failure, are less advanced and have Chinese Gov't backdoors built in to monitor what is sent and said by the phone's users.

Companies like Qualcomm, Apple and Blackberry would like to avoid having their phones' security cracked.

Anyone with any brains can see where this is going.
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John Fenderson (profile), 22 Mar 2015 @ 9:00am

Re: Re: Recourse
I don't see how that changes anything I've said...
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p, 23 Mar 2015 @ 7:01am

Re: corporations
But governments are controlled by corporations because the politicians' election campaigns are funded by them.
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