South Africa Plans To Terminate And Renegotiate Treaties That Include Corporate Sovereignty

from the fair's-fair dept

Despite the growing evidence that corporate sovereignty clauses in international treaties pose considerable risks to nations that sign them, such "investor-state dispute settlement" (ISDS) mechanisms are present in both TPP and TAFTA/TTIP -- at least as far as we know: it's hard to be sure given the obsessive secrecy surrounding them.

South Africa has experienced first hand the reality of those bland-sounding systems and the behind-closed-doors tribunals that implement them. Here's what happened when it set about transforming the country after apartheid, as this column on the South African Independent Online site explains:

One would assume that no nation state would have the audacity to file such a [ISDS] claim against a post-apartheid country that has been widely held up as a model for the world. That, however, didn't stop European firms from filing claims under their bilateral investment treaties. Worse, they went right at the core of South Africa's post-apartheid transformation plan.

The reason the country was taken to these private tribunals was an attempt to shoot down South Africa's policy to seek greater equality in its lucrative mining sector. South Africa had required that these companies be partly owned by "historically disadvantaged persons".

Allowing external investors to dictate its social policies was unacceptable, and South Africa decided to review its other investment agreements to see if there were dangers there too. The problem turned out to be systemic:

Bilateral investment treaties, the review found, "pose risks and limitations on the ability of the government to pursue its constitutional-based transformation agenda".

Since this review South Africa has further concluded that "bilateral investment treaties were now outdated and posed growing risks to policymaking in the public interest". On that basis, the government has recently moved to terminate many of its bilateral investment treaties.

The dogma is that without such bilateral treaties and their guarantees of corporate sovereignty, external investors would be reluctant to invest in a country. But that turns out not to be true:

South Africa actually receives far more capital inflows from nations with which it does not have bilateral investment treaties than from nations with which it has a treaty. Therefore, renegotiating them should not cause capital flight.

Freed from the necessity to accept whatever terms other countries might seek to impose on it, South Africa is now able to renegotiate bilateral agreements that are fair and that preserve its right to pass laws as it sees fit, unconstrained by legal threats from foreign investors. The Independent Online article points out:

South Africa's efforts should not be seen in isolation. India is also undergoing a national review of its bilateral investment treaties. A group of 12 Latin American nations has recently convened to rethink the benefits of bilateral investment treaties, and the subject is under discussion at the [African Union].

Brazil, a country that did its homework ahead of time and does not negotiate bilateral investment treaties, is putting forth an alternative model for negotiating treaties that may serve as a template for others.

Over the next several years, we will thus see an increasing number of nation states withdrawing from their investment treaties and offering more balanced alternatives.

If that proves to be the case, it could be that those countries signing up for one-sided and inequitable ISDS clauses in TPP and TAFTA/TTIP will come to regret not choosing to preserve their sovereignty as South Africa has done.

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

Filed Under: corporate sovereignty, investor state dispute settlement, isds, south africa, tafta, tpp, treaties, ttip

How Much Does Gold-Plated Corporate Sovereignty Cost? $1 Billion Or About 2% Of A Developing Country's GDP

from the taking-from-the-poor,-giving-to-the-rich dept

Last week we wrote about the rising threat of corporate sovereignty, known more obscurely as "investor-state dispute settlement", that allows companies to sue countries for alleged loss of future profits. Just how grave that threat is for developing nations can be gauged by the following, reported by Tico Times:

Canadian gold-mining company Infinito Gold Ltd. announced its intentions to go forward with a $1 billion lawsuit against Costa Rica over the retracted Las Crucitas open-pit gold mining concession in northern Costa Rica, in a statement released on Friday.

The contract was withdrawn for largely environmental reasons:

Costa Rica and the Canadian mining company have been ensnarled in a protracted legal battle over the canceled Las Crucitas project in Cutris de San Carlos, Alajuela, since environmentalists and locals decried the loss of virgin forest and health concerns over leeching chemicals contaminating drinking water.

Initially, the company fought the decision using local courts, but when it lost there, it made use of corporate sovereignty to take its complaint to a supra-national tribunal, the World Bank's International Centre for Settlement of Investment Disputes (ICSID):

Infinito has been rattling its saber over a potential ICSID arbitration after the company lost its appeal in Costa Rica's Constitutional Chamber of the Supreme Court, known as the Sala IV, in November 2010.

Now, $1 billion is a lot of money by anyone's reckoning. But for a country like Costa Rica, whose Gross Domestic Product (GDP) is estimated to be around $46 billion for 2012, an award of $1 billion against it would represent about 2% of the country's entire annual economic activity, in a land where 25% of the population live below the poverty line.

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

Filed Under: corporate sovereignty, costa rica, investor state dispute settlement, isds, trade agreements
Companies: infinito gold

Trade Agreements Are Designed To Give Companies Corporate Sovereignty

from the above-the-law dept

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+

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