Australian Case Shows Why Corporate Sovereignty Isn't Needed In TPP -- Or In Any Trade Agreement

from the running-out-of-arguments dept

Tue, Apr 19th 2016 11:38pm — Glyn Moody

One of central claims made by supporters of corporate sovereignty chapters in trade deals is that companies "need" this ability to sue the government in special tribunals. The argument is that if the extra-judicial investor-state dispute settlement (ISDS) framework is not available to a company, it will be defenseless when confronted with a bullying government. A new case in Australia shows why that's not true. A column in The Sydney Morning Herald provides the background, which concerns a US company called Nucoal:

In 2013, the NSW [New South Wales] Independent Commission against Corruption found that there had been corrupt conduct relating to the granting of mining licences to Nucoal and other mining companies and the NSW government cancelled the licences.

Naturally, Nucoal unleashed its lawyers: [Nucoal] demanded compensation of more than $900 million in Australia's High Court, claiming the decision to cancel its licence without compensation was unconstitutional and had reduced the value of the company. The High Court found in April 2015 that under Australian law Nucoal was not entitled to compensation.
Now Nucoal had a problem. Normally, a company in this situation would invoke the corporate sovereignty chapter in a relevant trade deal, and move the case to secret ISDS tribunals, which were likely to be more favorable to its cause than the independent national courts. But with unusual foresight, Australia refused to accept ISDS in the 2004 AUSFTA trade agreement between the US and Australia -- which makes its decision to acquiesce to ISDS in TPP doubly foolish. Despite what fans of corporate sovereignty claim, Nucoal still has another option at this point: Nucoal is pressuring the US government to put a case to the Australian government that the denial of compensation has violated the general investment terms of the [AUSFTA] agreement. This could result in a formal complaint from the US government demanding trade sanctions against the Australian government.

Last week The Australian reported that the CEO of the US Chamber of Commerce in Australia has announced that the US government will raise the issue in a closed-door review of the AUSFTA to be held in May.
That is, unable to avail itself of the investor-state dispute mechanism, Nucoal now wants to take advantage of the state-state dispute settlement process (pdf) whereby the US government formally complains to the other government concerned. Now, whether the US government should really be taking up a case involving corruption is another question. The key point is that it is not absolutely necessary to include corporate sovereignty provisions in a trade deal to protect companies, because there is always the state-to-state mechanism that can be invoked if necessary.

Follow me @glynmoody on Twitter or identi.ca, and +glynmoody 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: australia, corporate sovereignty, courts, disputes, isds, tpp, trade
Companies: nucoal

23 Comments

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

Reader Comments

Subscribe: RSS

View by: Time | Thread

Pseudonym, 20 Apr 2016 @ 12:01am

I know this song...
Repeat after me: The TPP is not a trade agreement. The TPP is an investment agreement.

Do this daily, and before long you'll never make the mistake again.
[ link to this | view in chronology ]
- Pseudonym, 20 Apr 2016 @ 12:12am
  
  Misleading story
  By the way, the snippet from the SMH story is slightly misleading. NuCoal has not been accused of corruption. They bought a company (Doyles Creek Mining) which had been granted the mining licence, apparently without finding out that a government minister basically handed the licence to a group of his friends.
  [ link to this | view in chronology ]
  - Anonymous Coward, 20 Apr 2016 @ 5:48am
    
    Re: Misleading story
    Legally, that doesn't matter in most first world countries. The deal was tainted from the start and the only persons that NuCoal has a legitimate case against are the corporate officers of Doyles Creek Mining who failed to disclose that fact to them during the sale process.
    [ link to this | view in chronology ]
  - Immersive (profile), 20 Apr 2016 @ 8:14am
    
    Re: Misleading story
    That's simply a failing of due diligence from NuCoal.
    [ link to this | view in chronology ]
    - Anonymous Coward, 20 Apr 2016 @ 8:53am
      
      Re: Re: Misleading story
      It's not a failing of due diligence unless there was some way they could have found this out. I mean, the company HAD the proper license. How were they to know if it was improperly granted?
      [ link to this | view in chronology ]
      - Derek Kerton (profile), 20 Apr 2016 @ 9:16am
        
        Re: Re: Re: Misleading story
        So you propose that selling a tainted asset (or company) instantly 'cleanses' the asset? That would make it far too simple to launder dirty money.
        
        Nope. Caveat emptor. Do your due diligence. Buy insurance on the deal if you want. But you buy the asset, you buy its problems.
        
        But we even have a valid process that can cleanse assets when it's truly needed by the economic system. It's above board - when you buy assets out of receivership from some bankruptcy.
        [ link to this | view in chronology ]
Anonymous Coward, 20 Apr 2016 @ 1:08am

"Repeat after me: The TPP is not a trade agreement. The TPP is an investment agreement.

Do this daily, and before long you'll never make the mistake again."

Not only is it not this but it not a whole lot more.

"These are not the droids you're looking for."
[ link to this | view in chronology ]
This comment has been flagged by the community. Click here to show it

Anonymous Coward, 20 Apr 2016 @ 1:27am

Mike Masnick just hates it when copyright law is enforced.
[ link to this | view in chronology ]
- Anonymous Coward, 20 Apr 2016 @ 4:56am
  
  Re:
  You and Whatever seriously need to profess your undying love for each other. In an asylum.
  [ link to this | view in chronology ]
- Anonymous Coward, 20 Apr 2016 @ 4:58am
  
  Re:
  Interesting. Mining licenses are covered by copyright and someone infringed upon said right while being corrupt?
  [ link to this | view in chronology ]
- Anonymous Coward, 20 Apr 2016 @ 10:10am
  
  Re:
  We just love it when a troll is flagged.
  [ link to this | view in chronology ]
Anonymous Coward, 20 Apr 2016 @ 1:38am

The difference
In order to use the state-to-state dispute path, the company first has to convince the government of its motherland to pick up the case. Which may be difficult if they were accused of corruption, since not a lot of countries are willing to stick out their neck to defend that.

In a secret ISDS however, the company has the power to bully a 'sovereign' state all by itself.
[ link to this | view in chronology ]
- Anonymous Coward, 20 Apr 2016 @ 2:56am
  
  Re: The difference
  Well, this is the case in Australia thanks to other free-trade agreements.
  
  Thankfully, NuCoal hasn't gone the route of Philip Morris...yet
  [ link to this | view in chronology ]
Anonymous Coward, 20 Apr 2016 @ 3:35am

i suppose one of the first questions to ask is did Nucoal know about/have anything to do with the original corruption? will they be able to prove they didn't, if they deny all knowledge? otherwise, Nucoal may be making a rod for it's own back and making the USA look like a total prat!
[ link to this | view in chronology ]
- Rattran (profile), 20 Apr 2016 @ 3:58am
  
  Re:
  To be fair, the USA looked like a total prat long before NuCoal came into the picture.
  [ link to this | view in chronology ]
- Anonymous Coward, 20 Apr 2016 @ 5:08am
  
  Re:
  i suppose one of the first questions to ask is did Nucoal know about/have anything to do with the original corruption?
  
  Kind of like buying stolen property. If discovered, it still goes back to the rightful owner, even if the buyer didn't know it was stolen. Nucoal wants to keep it.
  [ link to this | view in chronology ]
Anonymous Coward, 20 Apr 2016 @ 4:10am

why not, bribe an openly corrupt government to take the stand on your behalf and split the profits.
[ link to this | view in chronology ]
Craig Welch (profile), 20 Apr 2016 @ 5:12am

"The key point is that it is not absolutely necessary to include corporate sovereignty provisions in a trade deal to protect companies, because there is always the state-to-state mechanism that can be invoked if necessary."

No it can't. Only if such a mechanism is specified in a relevant treaty.
[ link to this | view in chronology ]
Whoever, 20 Apr 2016 @ 8:16am

The skies are falling....
What will the world come to if companies are not allowed to enforce contracts that they obtained through bribery?
[ link to this | view in chronology ]
Immersive (profile), 20 Apr 2016 @ 8:17am

Give them their compensation
Then charge them for conspiring to and benefiting from corruption.

At the moment they're only forfeiting their poorly-researched investment with no formal charge on record (and therefore no damage to their reputation or future prospects).
[ link to this | view in chronology ]
Anonymous Coward, 20 Apr 2016 @ 8:55am

State-state
The problem with the suggested solution of state-state disputes is that your state has to like your company. I could totally see this administration refusing to go to bat for a company because it was 10% owned by the Koch brothers, or something.
[ link to this | view in chronology ]
- Anonymous Coward, 20 Apr 2016 @ 10:18am
  
  Re: State-state
  The problem with the suggested solution of state-state disputes is that your state has to like your company. I could totally see this administration refusing to go to bat for a company because it was 10% owned by the Koch brothers, or something.
  
  The same applies even more so for the so-called little people. To get a fair trial, the government has to like you. You can get totally railroaded if the government doesn't like you. So maybe *all* trials should be held in international courts. If state and federal courts aren't good enough for issues impacting corporate profits, how could they possibly be good enough to decide issues concerning people's lives?
  [ link to this | view in chronology ]
  - Anonymous Coward, 20 Apr 2016 @ 10:54am
    
    Re: Re: State-state
    "If state and federal courts aren't good enough for issues impacting corporate profits, how could they possibly be good enough to decide issues concerning people's lives?"
    
    Simple. Corporate profits are more important than people's lives.
    [ link to this | view in chronology ]