Obama's Last Gasp At Trade Deals: Lame Duck Push On TPP; And 'Lite' Version Of TTIP

from the this-is-not-legacy-building dept

Lots of people have expected President Obama to push for a Congressional vote on the Trans Pacific Partnership (TPP) ratification in the "lame duck" session after the election, but before the new administration takes over. Last week, the President made it pretty clear that he was planning to do exactly that, and magically a bunch of "business groups" that make up the "President's Export Council" are suddenly pushing for a lame duck TPP vote, and lots of old school business lobbying groups are out talking to the press about how totally amazing the TPP is. Meanwhile, on the flip side, TPP opponents are (not surprisingly) gearing up to oppose a lame duck vote.

It's still not clear if there are enough votes in Congress, but of course, no one wants to talk about it before the election, because there's so much populist anti-TPP feelings from the public on both parties that speaking up in support of TPP now may harm election chances. Of course, after the election, when elected officials can go back to ignoring the will of the people, things may miraculously shift back to the way they were before.

Meanwhile, the other big "trade" plan that was supposed to be a part of Obama's legacy is the deal with the EU, known as the TTIP (Transatlantic Trade & Investment Partnership). That's run into lots of trouble as well, and there are serious concerns on both sides of the Atlantic about how it will work. With time running out on the clock, apparently the USTR is now pushing for a "light" version of the agreement so that something is accomplished:

The U.S. and EU countries supporting free trade are increasingly worried that the landmark Transatlantic Trade and Investment Partnership will collapse if they do not secure a preliminary accord before U.S. President Barack Obama leaves office in January.

They now accept that a full agreement will not be possible by the end of 2016 because of an impasse over agriculture and public procurement, but they don’t want to surrender what they regard as concrete progress made in other fields over the past three years of negotiations.

So to "lock in" something, they are looking at taking the pieces they have agreed on, and coming up with a simplified deal. What's interesting here is that the agreed upon parts are the ones that are normally used as the example of why we need TTIP in the first place. In the past, we've joked about how frequently those defending TTIP point to the single example of different automobile standards, such that automakers need to build different cars for each market. And it looks like that issue might make it in TTIP-lite:

U.S. and Italian officials are now weighing the option of a “Step 1” deal to lock in elements that can be finalized by December, possibly including joint testing regimes and mutually agreed upon standards for cars, pharmaceuticals and medical devices.

So, uh, that sounds good. Why do we need the rest of the crap that they're debating, around corporate sovereignty ISDS provisions -- especially since the entire basis for those kinds of agreements was supposed to be to encourage investment in developing countries. The EU and the US have perfectly decent court systems, so any dispute shouldn't need a special tribunal.

But, of course, those who have relied on shoving all sorts of pork and special interest protectionism through trade deals do not like the idea of a "lite" agreement that covers the officially discussed reasons for a trade deal. Why, that would be horrible! How could they continue to hide all the sneaky stuff they want to get in?

The idea has sparked immediate skepticism in the European Commission and in some EU member countries, which argue that any form of a downgraded deal will be very hard to sell politically, particularly after French Trade Minister Matthias Fekl and German Economy Minister Sigmar Gabriel turned hostile on the negotiations.

And, of course, anything that's "rushed" through may have problems on its own, so there are legitimate reasons to be wary of a "lite" deal anyway. But it is kind of amusing that they might dump all the "good" reasons for TTIP into a deal, and then have to continue to try to justify the rest of the stuff.

Filed Under: corporate sovereignty, isds, lame duck, president obama, tariffs, tpp, ttip, ttip lite, ustr, white house

Over 200 Economics & Law Professors Urge Congress To Reject Corporate Sovereignty Provisions In Trade Deals

from the more-of-this-please dept

We've written quite a lot for years about the massive problems with "corporate sovereignty" provisions in trade agreements -- so-called "investor state dispute settlement" (ISDS) provisions -- that allow companies to "sue" countries for regulations they feel are unfair. These aren't heard by courts, but rather by "tribunals" chosen by the companies and the countries. Some supporters of these provisions claim that there's really nothing wrong with them because they help encourage both investment in different countries and more stable and fair regulations.

If that's the case, though, why are over 200 economics and law professors signing a letter to Congress telling them to reject any trade agreements with these provisions?

Through ISDS, the federal government gives foreign investors – and foreign investors alone – the ability to bypass that robust, nuanced, and democratically responsive legal framework. Foreign investors are able to frame questions of domestic constitutional and administrative law as treaty claims, and take those claims to a panel of private international arbitrators, circumventing local, state or federal domestic administrative bodies and courts. Freed from fundamental rules of domestic procedural and substantive law that would have otherwise governed their lawsuits against the government, foreign corporations can succeed in lawsuits before ISDS tribunals even when domestic law would have clearly led to the rejection of those companies’ claims. Corporations are even able to re-litigate cases they have already lost in domestic courts. It is ISDS arbitrators, not domestic courts, who are ultimately able to determine the bounds of proper administrative, legislative, and judicial conduct.

This system undermines the important roles of our domestic and democratic institutions, threatens domestic sovereignty, and weakens the rule of law.

In addition to these fundamental flaws that arise from a parallel and privileged set of legal rights and recourse for foreign economic actors, there are various flaws in the way ISDS proceedings are meant to be conducted in the TPP. In short, ISDS lacks many of the basic protections and procedures of the justice system normally available in a court of law. There are no mechanisms for domestic citizens or entities affected by ISDS cases to intervene in or meaningfully participate in the disputes; there is no appeals process and therefore no way of addressing errors of law or fact made in arbitral decisions; and there is no oversight or accountability of the private lawyers who serve as arbitrators, many of whom rotate between being arbitrators and bringing cases for corporations against governments. Codes of judicial conduct that bind the domestic judiciary do not apply to arbitrators in ISDS cases.

The letter appears to have been organized by famed law professor Laurence Tribe and famed economist Joseph Stiglitz -- as an update to a very similar letter they sent last year -- with many fewer signatories.

Many of the people who signed are really well-respected (including some I consider friends), but both Tribe and Stiglitz are fairly well-known for where they come from on the political spectrum -- and it would have been nice to have found equal weight from other parts of the political spectrum to balance this letter out a bit. It's still a good letter, and one whose message I agree with, but I fear that many in Congress will just dismiss it as "another Tribe/Stiglitz letter." That's too bad, because it really is a good letter.

Filed Under: corporate sovereignty, economists, isds, joseph stiglitz, laurence tribe, law professors, tpp, trade agreements

More Details On How Corporate Sovereignty Provisions, Like Those In TPP & TTIP, Are Dangerous

from the it's-bad-news dept

A few weeks ago, we wrote about a really great and detailed look by BuzzFeed's Chris Hamby into "investor state dispute settlement" (ISDS) provisions in international trade agreements -- something we refer to as corporate sovereignty, because it enables companies to effectively force countries away from certain regulations. Hamby's piece was about how rich corporate execs were using corporate sovereignty provisions to get out of criminal prosecutions. That was only part I of his investigation. Part II of the series may have been the most useful, because it detailed how the mere threat of an ISDS case could pressure countries into changing regulations. This is super important, because one of the key talking points from defenders of corporate sovereignty provisions is to point to stats on actual cases. But if the threats are really effective, the stats on cases really is only showing a portion of what ISDS is doing.

“I do a ton of work that involves threatened claims that never go to arbitration,” said Michael Nolan, a partner in the Washington, DC, office of Milbank, Tweed, Hadley & McCloy. “That’s much more common,” he said. “It’s much better to get things done quietly.”

“Every month I get a threat,” said Marie Talasova, a top lawyer for the Czech Republic’s Ministry of Finance. “We have to review the risks, how strong the claim is. We try to minimize the costs of the state.”

The article quotes ISDS defenders saying "where's the proof" of such problems -- which most people can't show, since it all happens behind closed doors and no one wants to talk about it. But then it goes on to show clear examples of it happening, and it's somewhat frightening, where mere threats basically wiped out important regulatory policies.

Part III of Hamby's report goes on to detail how some giant Wall St banks basically bled Sri Lanka dry, selling it complicated derivatives, and then going ballistic -- via ISDS corporate sovereignty provisions -- when the government stepped in to investigate the deals and whether they were legit or just a scam. Basically, the banks sold Sri Lanka derivatives that were a bet on the price of oil (just like a lot of the housing bubble was driven by bets on the prices of mortgages, where people were basically buying "insurance" on assets they didn't own), and the bet went way, way bad. But, the banks didn't want the government sniffing around to see if the sale of these derivatives had been legit:

Deutsche Bank’s response was swift. It had already made more than $6 million on the deal, but it demanded to be paid more — much more. More than $60 million, which was 24 times more than the bank ever could have lost on the deal.

Deutsche Bank didn’t bother pressing its case in Sri Lankan courts or even in the business-friendly English court where the bank and the state oil company had agreed in their contract to settle disputes. Instead, the bank pursued an audacious strategy. It turned to a powerful worldwide legal system and commandeered it for a novel purpose: helping financiers profit from some of their most controversial and speculative practices.

It was a gamble, but it worked; the tribunal accepted the case. This breakthrough came as a delightful surprise to some lawyers around the world who specialize in this legal system, known as investor-state dispute settlement, or ISDS. They saw in it not just a single judgment, but also a lucrative new horizon for the financial industry.

“I admire the boldness of counsel and the vision of the management of Deutsche Bank to opt for investment arbitration at a time when there were no precedents,” said Georges Affaki, a lawyer with a large ISDS practice. Calling the case “a huge step,” he said he is leading an International Chamber of Commerce task force to advise financial firms on how they can use ISDS.

As you can see from the quote above, the corporate sovereignty case over Sri Lankan derivatives lit up a bunch of lightbulbs in law firms. And it's why they're so adamant that ISDS is necessary today, even in things like TTIP. If you understood the reasons given for ISDS originally, this makes no sense. The point of these tribunals was to allow recourse in unstable countries where the fear was some tinpot dictator would show up and take all of the investment that, say, an Exxon put in to build up its presence in a country. Under that belief, an ISDS provision acts as a form of insurance for big investors, encouraging them to invest in less stable parts of the world. So that's semi-reasonable. But why the hell would you need that between the US and the EU? Or the US and Australia or Japan? You're not dealing with unstable governments (mostly!) in those countries.

The real reason is because it's really got nothing to do with that any more. Now it's just a way for companies and lawyers to profit through threats on just about any regulatory change. And even the story about it protecting investment in less developed nations is not really true any more either. Now it's used for shaking them down:

ISDS gives particular leverage to traders and speculators who chase outsize profits in the developing world. They can buy into local disputes that they have no connection to, then turn the disputes into costly international showdowns. Standard Chartered, for example, bought the debt of a Tanzanian company that was in dire financial straits and racked by scandal; now, the bank has filed an ISDS claim demanding that the nation’s taxpayers hand over the full amount that the private company owed — more than $100 million. Asked to comment, Standard Chartered said its claim is “valid.”

This tactic is especially damaging to nations battling an economic crisis or struggling to lift their people from endemic poverty. Companies in crisis can declare bankruptcy, forcing the debt collectors to back off, but countries can’t do this, which can lead to a feeding frenzy

The final piece of Hamby's reporting is also really important. A key point that the White House has used in defending ISDS is that the US has never lost an ISDS case. As we've pointed out, that's kind of meaningless for a variety of reasons, in part because TPP and TTIP would massively expand the opportunities for companies to use corporate sovereignty claims in the US. On top of that, since using these to shake down countries is growing increasingly common, it's crazy to think more lawyers won't start targeting the US. In fact, Hamby's final piece in the series points out that the folks who drafted NAFTA were taken completely by surprise in a big ISDS case that was filed under it in response to a weird dispute between Mississippi funeral homes.

To keep a long and complicated story short, there was a dispute that went to court, and in court, the lawyer for one funeral home played up the fact that the owner of the other was Canadian and won a huge monetary settlement. The owner of the losing side (the Canadian) then invoked ISDS, claiming that NAFTA guarantees no discrimination against foreign businesses -- and this trial showed there was discrimination. Apparently, the US gov't (which had supported ISDS strongly) freaked completely the fuck out:

Soon, top officials in the Justice Department, State Department, and Office of the US Trade Representative were on red alert.

In meetings, government officials scribbled notes that reveal how rude an awakening the Loewen claim was:

“No one thought about this when NAFTA implementing law passed.”

“Floodgates, giving up sovereignty.”

“How much $, who pays, how big a blow up.”

And, what's amazing is that even though US officials started waking up, they're now still pushing ISDS:

“Allowing foreign investors to attack the decisions of our domestic courts through international arbitration could severely undermine our system of justice and, as a result, threaten continued public and political support for the NAFTA and, perhaps, other international agreements as well,” a top Justice Department official wrote in one memo. “This could result in a flood of arbitrations against the United States, the cost of which could be extraordinary.”

Also, in case you're wondering: the case was dropped because the Canadian company went bankrupt and was bought up by American investors. But, Hamby discovered, the US would have lost and would have lost big, according to one of the members on the tribunal overseeing the case. So the claim that the US hasn't yet lost an ISDS case may be true, but it's based on a massive technicality.

After reading all of these, it's difficult to see how anyone can still support corporate sovereignty in any shape or form. It's unnecessary, it's damaging and it's given way to a massive industry of companies and lawyers that abuse the system for profit.

Filed Under: corporate sovereignty, isds, tpp, trade agreements, ttip

'Trade Deals' & Corporate Sovereignty: How Convicted Executives Escape Punishment

from the the-shadow-court-system dept

Okay, we've been trying to raise the alarm bells about "ISDS" -- "Investor State Dispute Settlement" -- systems for many, many years, even helping to push the term "corporate sovereignty" to help describe it, since people's brains seem to turn to mush when you spell out ISDS. We've pointed out over and over again the problems of such a system where it basically allows companies to sue countries for passing regulations they don't like. We've noted over and over and over again how problematic this is... and yet people still tell us it's no big deal and the system is fair and "necessary" to keep countries from doing things like simply nationalizing an industry that foreign companies build up. Of course, that doesn't happen that often. ISDS corporate sovereignty cases are happening quite frequently, over subjects like Eli Lilly being upset that Canada rejected some patents and Philip Morris suing lots of countries for passing anti-smoking health regulations.

Thankfully, Chris Hamby, an excellent investigative reporter with BuzzFeed*, has done a massive detailed investigative report into the ISDS corporate sovereignty system and what a complete disaster it is. Much of this was assumed before, but many of the ISDS cases are done in complete secrecy, so there are few details out there. Hamby's reporting, though, will hopefully change that.

You know how we've written about the whole "high court, low court" thing where those in power and with connections get treated differently in court than those without? Well, consider the ISDS corporate sovereignty system an international version of the high court. You can only access it if you're a company, but it's also used, repeatedly, to protect executives who have been convicted of crimes for actions by companies. In just the first report (apparently more is coming), Hamby reveals:

A Dubai real estate mogul and former business partner of Donald Trump was sentenced to prison for collaborating on a deal that would swindle the Egyptian people out of millions of dollars — but then he turned to ISDS and got his prison sentence wiped away.

In El Salvador, a court found that a factory had poisoned a village — including dozens of children — with lead, failing for years to take government-ordered steps to prevent the toxic metal from seeping out. But the factory owners’ lawyers used ISDS to help the company dodge a criminal conviction and the responsibility for cleaning up the area and providing needed medical care.

Two financiers convicted of embezzling more than $300 million from an Indonesian bank used an ISDS finding to fend off Interpol, shield their assets, and effectively nullify their punishment.

The report notes that lawyers have increasingly looked to ISDS not as a system of last resort, as it was originally intended, but as a creative way to pad their billing help companies get all sorts of advantages over governments.

Driving this expansion are the lawyers themselves. They have devised new and creative ways to deploy ISDS, and in the process bill millions to both the businesses and the governments they represent. At posh locales around the globe, members of The Club meet to swap strategies and drum up potential clients, some of which are household names, such as ExxonMobil or Eli Lilly, but many more of which are much lower profile. In specialty publications, the lawyers suggest novel ways to use ISDS as leverage against governments. It’s a sort of sophisticated, international version of the plaintiff’s attorney TV ad or billboard: Has your business been harmed by an increase in mining royalties in Mali? Our experienced team of lawyers may be able to help.

A few of their ideas: Sue Libya for failing to protect an oil facility during a civil war. Sue Spain for reducing solar energy incentives as a severe recession forced the government to make budget cuts. Sue India for allowing a generic drug company to make a cheaper version of a cancer drug.

There are even lawyers who basically just scour the world for any regulatory change, and then go hunting for companies who can bring ISDS corporate sovereignty cases over those regulatory changes. In other words, the cart is not just in front of the horse here, it's dragging it down the hill.

And don't buy the claim that the "newer" versions of ISDS found in agreements like the TPP and the TTIP are somehow better and have fixed the problems of the old ones. The BuzzFeed report notes that there are massive loopholes, and lawyers are already preparing their clients on how to exploit them, should the TPP get ratified. As for the claim that ISDS must be fine because the US has never lost a case -- according to the report, that's basically mostly been luck, and it's unlikely to hold up much longer.

But, really, it's the escaping criminal charges stuff that's eye-opening in this first report:

Reviewing publicly available information for about 300 claims filed during the past five years, BuzzFeed News found more than 35 cases in which the company or executive seeking protection in ISDS was accused of criminal activity, including money laundering, embezzlement, stock manipulation, bribery, war profiteering, and fraud.

Among them: a bank in Cyprus that the US government accused of financing terrorism and organized crime, an oil company executive accused of embezzling millions from the impoverished African nation of Burundi, and the Russian oligarch known as “the Kremlin’s banker.”

Some are at the center of notorious scandals, from the billionaire accused of orchestrating a massive Ponzi scheme in Mauritius to multiple telecommunications tycoons charged in the ever-widening “2G scam” in India, which made it into Time magazine’s top 10 abuses of power, alongside Watergate. The companies or executives involved in these cases either denied wrongdoing or did not respond to requests for comment.

Most of the 35-plus cases are still ongoing. But in at least eight of the cases, bringing an ISDS claim got results for the accused wrongdoers, including a multimillion-dollar award, a dropped criminal investigation, and dropped criminal charges. In another, the tribunal has directed the government to halt a criminal case while the arbitration is pending.

The report then goes on to detail some specific case studies of people accused of criminal activity using corporate sovereignty tribunals to effectively get away with it.

There's also evidence that all this game playing with corporate sovereignty involves lawyers effectively doing "treaty shopping" to figure out where to set up companies so they can sue specific countries for money. Really.

A key service offered by the ISDS legal industry goes by various euphemisms: “corporate structuring,” “re-domiciling,” “nationality planning.” Critics have a different term: “treaty shopping.” It amounts to helping businesses figure out which countries’ treaties afford the most leeway for bringing ISDS claims, then setting up a holding company there — sometimes little more than some space in an office building — from which to launch attacks.

So it is that a private equity firm based in Texas can fly the flags of Belgium and Luxembourg, enabling it to sue South Korea, which convicted one of its executives of stock manipulation. The private equity firm declined to comment.

That means that even though domestic people aren't supposed to be able to use ISDS against their own governments, it still can happen:

ISDS was designed to protect foreign investors, not people suing their own government. But members of the once-prominent Turkish Uzan family — accused of perpetrating a fraud worth billions and derided at one point by a US federal judge as “business imperialists of the worst kind” — found a way to sue their native land through a variety of companies primarily under their control in Cyprus, Poland, and the Netherlands. (Turkey won each case, but at a cost of tens of millions in legal fees.) The family’s telecommunications company, however, remained Turkish so it could bring a claim against Kazakhstan, with which Turkey has a treaty — and win a $125 million award.

And, yes, lawyers specializing in this kind of money making effort are also the ones (shocker!) using the infamous revolving door at the US Trade Representative's office to cash in:

Daniel M. Price negotiated the section of NAFTA containing ISDS when he was a lawyer at the Office of the US Trade Representative. He later served as a top international trade official in the George W. Bush White House.

In between these government stints, he worked as a private lawyer helping clients in ISDS cases. Twice he used the treaty he himself had helped negotiate to help US-based businesses pursue claims against Mexico.

He founded and chaired the unit handling ISDS claims at Sidley Austin, a leading global law firm. Today, he promotes his services as an arbitrator and, along with a powerhouse team that includes other former government lawyers, sells international expertise on ISDS and related matters.

Nice work, if you can get it.

Another key point in the report is that the talking point from ISDS defenders that governments win more ISDS cases than companies is basically bullshit:

To prove that ISDS is not biased in favor of businesses, they point to the outcomes of known cases: Governments have won about 35% of the time, while business interests have won only about 25%.

But that statistic is anything but straightforward. It pertains only to the outcomes of known cases; ISDS is so secretive no one even knows how many additional cases there have been. Also secret are most of the settlements. Roughly a quarter of the known cases were settled, but the terms are almost never disclosed.

Moreover, subtract the cases that arbitrators tossed out because they didn’t have jurisdiction to hear the claim, and that win–loss balance flips: Business interests have won 60% of the time. Even then, cases recorded as losses for the corporation can actually be wins. In one case, an executive failed to garner a monetary judgment but obtained a finding that helped him wipe away a criminal punishment.

There's much, much, much more in this story, and it's just the first in a series. Hopefully things like this will start to wake people up to just how incredibly bad ISDS corporate sovereignty provisions really are. They're not just some obscure system that involves big companies fighting. They're becoming an alternative court system for the super powerful and connected -- and letting them literally get away with criminal behavior.

* Okay, okay, I know some people still insist that BuzzFeed is just a horrible site full of nothing but junk, but it's actually got a really great reporting team, that has done some amazing work over the years -- it's just that very few people know about it.

Filed Under: corporate sovereignty, crimes, isds, tpp, ttip

With Republicans Backing Away From TPP, Does It Still Have Any Chance?

from the what-a-weird-year dept

We've pointed out before how topsy turvy things have become with the Trans Pacific Partnership (TPP) agreement lately, and it seems to be getting even more weird, but not for any good reason. As we've pointed out dozens of times now, actual free trade is a good thing for the world -- but the TPP agreement has very, very little to do with free trade. There are certainly some good things in the TPP when it comes to trade, including some stuff on helping protect the free flow of information on the internet, but it is significantly outweighed by numerous problems with the agreement that seem to have little to do with actual free trade and plenty to do with certain industries putting in place protectionist/mercantilist programs that are, in many ways, the opposite of free trade. The two areas that we've discussed at great length are the intellectual property section, which will force countries to ratchet up their laws (which runs against free trade) and the problematic corporate sovereignty provisions, that allow foreign companies to effectively block regulations that may make perfect sense for certain countries.

Historically, the way political support for trade deals in the US works breaks down as follows: Republicans support the deals strongly, with a simplistic mantra of "free trade is good, any free trade agreement must be good." They don't care much about the details (other than if a big company in their region wants some protectionist nugget in the agreement). Meanwhile, the majority of Democrats oppose the agreements, but again, often for simplistic and protectionist reasons. But, there are always a few "moderate" Democrats (i.e., Democrats who recognize free trade is actually a good thing overall) who support free trade and that's enough to get the deals passed. That's mostly how the TPP situation played out for the past few years.

Then the insanity of the 2016 Presidential election hit and everything went sideways.

On the Republican side, you've got Donald Trump, who is opposed to the TPP, but mainly because he doesn't understand international trade at all, and ridiculously seems to believe that everything is a zero sum game, and any trade agreement that helps other countries means we're "losing." The TPP is bad, but not for the reasons Trump thinks. And then you have Hillary Clinton, who had always been in the Democratic clump that supported free trade agreements, and who has always supported the TPP, despite now pretending not to. That's because Bernie Sanders was very much against it (also for mostly the wrong reasons!) and feeling pressure from the success of his campaign, she felt the need to come out against the TPP to avoid losing to Bernie.

So, you have both candidates claiming to be against TPP, but for weird reasons, and no one believing the Dem candidate, while no one quite understanding the GOP candidate. Meanwhile, the sitting President continues to push for the TPP even as the only two people likely to have his job in a few months insist they won't support it.

Now, throw into this mix the fact that Trump's railing against the TPP (again, for dumb reasons) is suddenly getting Republican voters to hate the TPP, and down ticket Republicans who have long supported the TPP are suddenly changing their tune. Senator Pat Toomey, a long time supporter of the TPP has now announced it's a bad deal and he's opposed to it. Of course, he actually spends most of his opinion piece (correctly!) lauding the benefits of free trade, but then says he's opposing it for a few reasons. His reasons are silly, though. It's mainly because the pharma industry has convinced him that the IP provisions in the TPP are too lax. Pharma pushed heavily for more ability to basically lock up their data and discoveries for a very long time, and thanks to Australia pushing back, there was a compromise here. So Toomey insists that's why he's now opposing:

About 46,000 Pennsylvanians have jobs in the life science and pharmaceutical sector, making it one of our state’s largest industries. TPP will make it too easy for other countries to steal innovations that we create in Pennsylvania and take the jobs tied to those innovations.

That's not true at all. What the TPP will do is actually mean that pharma will have an exclusive monopoly on certain things for not quite as long as they'd like. It won't make "stealing innovations" any easier.

Of course, the real reason for Toomey's about-face may have more to do with his re-election campaign:

Toomey's remarks arrive as public polls show him falling behind Democratic challenger Katie McGinty in one of the country's most crucial Senate races. They also come after months of rage against international trade fueled support for Trump and Bernie Sanders, and forced Democratic nominee Hillary Clinton to reverse course on the pending deal. McGinty has opposed the TPP and blasted Toomey over his stand on it.

"Pat Toomey has spent his entire career pushing bad trade deals and policies that ship Americans jobs overseas, so nobody is buying this ridiculous flip flop," McGinty said in a statement.

So, this topsy turvy election year, it's becoming increasingly clear that the TPP might not actually have the support it needs to get ratified in the US. If Republicans are bailing on it (and the top of the ticket screaming about how horrible it is), it's difficult to see how it can gain enough support. There is the popular theory that no matter what happens, in the lame duck session after the election, everyone will revert to their earlier positions and push the damn thing through, but if trade continues to be an issue in the election, doing so will create a huge amount of public anger.

So, in the end, there are a lot of reasons why the TPP may die on the vine... even if all of the reasons for it doing so will be pretty bad.

Filed Under: corporate sovereignty, donald trump, free trade, gop, hillary clinton, intellectual property, isds, pat toomey, politics, tpp, trade agreements

US Suddenly Discovers Why Supranational Tribunals Are A Problem, Just As It Starts Losing In Them

from the probably-just-a-coincidence dept

There's a bit of a battle going on in an obscure part of the World Trade Organization (WTO) called the Appellate Body, which has extremely wide-ranging powers within the WTO:

It is a standing body of seven persons that hears appeals from reports issued by panels in disputes brought by WTO Members. The Appellate Body can uphold, modify or reverse the legal findings and conclusions of a panel, and Appellate Body Reports, once adopted by the Dispute Settlement Body (DSB), must be accepted by the parties to the dispute.

Here's what's been happening, as reported by Bloomberg:

The U.S. won't support the reappointment of Seung Wha Chang of South Korea to the World Trade Organization (WTO) appellate body, a U.S. official said at a meeting in Geneva.

"We do not consider that his service reflects the role assigned to the appellate body by WTO members in the WTO agreements," Deputy U.S. Permanent Representative Chris Wilson told members of the WTO dispute settlement body (DSB) May 23. "Any failure to follow scrupulously the role we members have assigned through these agreements undermines the integrity of, and support for, the WTO dispute settlement system."

As the article explains, that's not going down too well with other WTO members, including Brazil, the European Union, Japan, and South Korea, who are traditionally allies of the US in trade matters. So what exactly has Chang done to incur the wrath of the US?

The U.S. said it was troubled by four recent panel decisions that Chang was involved in because they "raised systemic concerns about the disregard for the proper role of the appellate body and the WTO dispute settlement system."

Which seems to be a polite way of saying that Chang hasn't been toeing the US line. That's confirmed by the following section from a WTO news item about the DSB meeting where this argument took place:

Canada, the European Union, India and Viet Nam added that the United States' statement of opposition [to Chang] based on previous Appellate Body decisions could create a dangerous precedent for other reappointment proceedings and affect an Appellate Body member's decision-making during their first term.

Here's one of those panel decisions that the US doesn't like:

In the fourth ruling -- which upheld China's allegations about U.S. duties on non-market economies -- the appellate panel "took a very problematic and erroneous approach" that risks turning the DSB into "one that would substitute the judgment of WTO adjudicators for that of a member's domestic legal system as to what is lawful under that member's domestic law," Wilson said.

The interesting part is the bit at the end there, where the US complains that the WTO's dispute settlement system is effectively overruling national law. Techdirt readers will recognize that as a common complaint about the tribunals that adjudicate on disputes between investors and governments -- the so-called "investor-state dispute settlement" (ISDS) system, aka corporate sovereignty. Until now, the US has been a solid supporter of these tribunals, so it's rather significant to see it moaning about the problem of uppity adjudicators here. It raises the question why the US is unhappy with the DSB tribunal, but doesn't seem to have a problem with those used in ISDS.

It might have something to do with the fact that the US has never lost a corporate sovereignty case -- something it uses to justify the inclusion of ISDS in TPP and TAFTA/TTIP -- but is increasingly on the wrong end of decisions at the WTO. As to why the US never loses ISDS cases, Ante Wessels, writing on the FFII.org blog, has a provocative theory: he says the "Investor-to-state dispute settlement is a rigged system" that is tilted in favor of the US. Whether or not you agree with his analysis, it's certainly interesting to see how the US seems to be changing its mind on the value of supranational tribunals that can ride roughshod over domestic legal systems now that it finds itself on the losing side.

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

Filed Under: corporate sovereignty, isds, seung wha chang, trade agreements, tribunals, us, wto

TPP's Corporate Sovereignty Chapter A 'Threat To Democracy And Regulation'

from the wrong-direction dept

When the negotiations for the Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada were concluded in September 2014, the text was finally released after years of secrecy. At the time, the Canadian Centre for Policy Alternatives put together what remains the best overall analysis of the main text's 1598 pages, in a series of studies collectively called "Making Sense of CETA." The same organization has now published a set of analyses looking at key aspects of TPP, entitled "What’s the big deal? Understanding the Trans-Pacific Partnership".

They are all worth looking at, but Techdirt readers will probably be particularly interested in one called "Foreign investor protections in the Trans-Pacific Partnership." It's by Gus Van Harten, a professor at Osgoode Hall Law School of York University in Toronto, Canada, and a well-known commentator on trade law and policy. The first part of his analysis provides a good summary of the world of corporate sovereignty, or investor-state dispute settlement (ISDS) as it is more formally known. The later section looks at some new research that provides additional insight into just how bad corporate sovereignty is for those of us who are not insanely rich.

For example, Van Harten quotes some recent work showing that 90% of ISDS fines against countries went to corporations with over $1 billion in annual revenue or to individuals with over $100 million in net wealth. Similarly, the success rate among the largest multinationals -- those with turnovers of at least $10 billion -- was 71% in the 48 cases they initiated, compared with a success rate for everyone else of 42%. So any claim that ISDS is equally useful to all companies, including small and medium-sized businesses, is not borne out by the facts.

Van Harten also mentions some interesting figures for the financial winners and losers across all known corporate sovereignty cases. The largest corporations ended up with gains of around $6 billion; the thriving ISDS legal industry took home $2 billion; very wealthy individuals received around $1 billion; and large companies picked up another $500 million. As for the countries that were sued by these groups, their losses totaled some $10 billion. That's an important reminder that nations cannot win ISDS cases: the best they can ever hope for is not to lose. And they often do lose, as the high cumulative fines indicate.

Another fascinating insight comes from looking at the percentage of foreign-owned assets (that is, inward foreign direct investment) in the US economy that are covered by ISDS in trade and investment agreements. Currently, it is only around 10%, which is probably why corporate sovereignty is not a big deal for the US public today. If TPP is ratified, another 10% of foreign investments will be covered. But if the TAFTA/TTIP deal with the EU goes through, it would add another 60% to the total -- a huge jump. That would mean that TPP and TTIP together would make nearly all foreign investments in the US subject to corporate sovereignty.

Van Harten highlights another key aspect of TPP that has not received much attention. He points out that TPP goes beyond the older North American Free Trade Agreement (NAFTA), which is between the US, Canada and Mexico, but does not solve its serious problems, despite claims to the contrary:

anything that is apparently better in the TPP compared to NAFTA will very likely be lost in practice because a U.S. investor can bring a claim under NAFTA instead of the TPP. Also, anything worse in the TPP would not be displaced by NAFTA because a foreign investor could choose to bring a claim under the TPP. If a foreign investor was unsure which agreement offered the best chance to win compensation, it could bring a claim under the TPP and NAFTA, making a different argument under each and getting compensation if it won under either.

In other words, TPP has been written in such a way that the public always gets the worst of both worlds. Van Harten's chilling summary of the corporate sovereignty provisions in TPP is worth quoting in full:

The TPP would take us in the wrong direction and be very difficult to reverse. It would expand the transfer of power to ISDS arbitrators from legislatures, governments, and courts. The arbitrators would not be accountable like a legislature. They would not be capable of regulating like a government. They would not be independent or fair like a court.

At the core of the TPP's threat to democracy and regulation is the uncertain and potentially huge price tag that its ISDS process would put on any law or regulation that is opposed by a large multinational company or a billionaire investor. The problem is not that foreign investors would be too big to fail; it is that the TPP would make the biggest and richest ones too risky to regulate.

The TPP was an opportunity for countries to step back from and reform the flawed system of foreign investor rights and ISDS. Instead, the TPP would expand the system massively. That decision is reason enough to reject the TPP in order to protect the established institutions of democracy, sovereignty, and the rule of law in TPP countries.

Anyone who has any lingering illusions that it might be worth signing up to TPP should read this new analysis, which will dispel them rapidly.

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

Filed Under: ceta, corporate sovereignty, democracy, gus van harten, isds, predictions, tpp

Corporate Sovereignty Finally Enters The Political Mainstream

from the yet-another-ratchet-clause dept

Techdirt has been writing about investor-state-dispute settlement (ISDS), aka corporate sovereignty, for more than three years now. During that time, we've published well over a hundred articles on the topic. Increasing numbers of people have become aware of the threat that ISDS represents to democracy because of the privileged access it grants companies to a parallel legal system. Now, it seems, it's beginning to enter the political mainstream around the world.

A couple of weeks ago, the leader of the UK's Labour Party, Jeremy Corbyn, promised to reject TAFTA/TTIP if he were in power, and to vote against it if he were in opposition. One reason for that, he said, was his concerns over:

the facility for corporations to sue national governments if regulations impinged on their profits.

The Labor Party in Australia has also started to make pronouncements about corporate sovereignty:

The opposition's trade spokeswoman, Penny Wong, said Labor would try to remove so-called investor state dispute settlement (ISDS) clauses from every trade agreement, and every bilateral investment treaty, that Australia has signed.

It means Labor plans to review three major trade agreements concluded by the Abbott-Turnbull governments -- with China, Korea, and the Trans-Pacific Partnership -- that have ISDS provisions.

That comes at a time when the current Australian government is thinking about doing exactly the opposite:

The Turnbull government is considering adding a controversial provision to the Japan-Australia free-trade agreement that would allow foreign corporations to sue the Australian government.

Here's why it's taking that odd course of action:

The negotiations have been triggered by a relatively unknown clause in the Japan-Australia agreement, which was signed by the Abbott government in 2014.

The clause states that if Australia's government signs any future trade deal with another country that includes an ISDS provision then the Japan-Australia deal would be subject to an automatic review "with a view to establishing" an ISDS provision in it.

The trigger for such a review was the China-Australia free-trade agreement, which came into force on 20 December 2015, because it included an ISDS provision.

In other words, this is yet another "ratchet" clause that ensures changes only ever move in one direction -- to the benefit of companies, and against the interests of the public. It's yet another reason never to include corporate sovereignty chapters in these so-called trade deals.

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

Filed Under: corporate sovereignty, isds, tpp, trade agreements, tribunals, ttip

India Seeks To Renegotiate 47 Investment Treaties Because Of Their Corporate Sovereignty Clauses

from the leading-the-way dept

Corporate sovereignty has become a big issue as a result of its inclusion in TPP and TAFTA/TTIP, but it's present in hundreds of other trade and investment treaties.The heated discussion of investor-state dispute settlement (ISDS) chapters in those negotiations has led some countries to realize that corporate sovereignty could prove very costly to them one day. As we've written, both South Africa and Bolivia have decided to dismantle the ISDS provisions by renegotiating treaties, and according to a new report in The Economic Times, India has decided to do the same on a large scale:

India has written to 47 countries to nullify the existing bilateral investment agreements and ink fresh treaties that will make it mandatory for foreign investors to exhaust local judicial remedies before seeking arbitration.

Forcing foreign investors to use domestic courts is designed to stop them circumventing Indian's laws by going outside the system to arbitration tribunals. Among the 47 treaties that India wants to renegotiate are relatively new ones, as well as others that can be cancelled quite easily. The Economic Times provides some information on the growing magnitude of India's ISDS problem:

The government amended the text after being dragged into international arbitration by as many as 17 companies or individuals including Deutsche Telekom of Germany, Vodafone International Holdings BV, Sistema of Russia, Children's Investment Fund and TCI Cyprus Holdings. India even lost an international arbitration case involving White Industries of Australia.

This is a very sensible move by the Indian government, and a great signal to other countries exposed to the threat of costly corporate sovereignty claims in the future. It will be interesting to see who is next now that India has helped legitimize further the idea of renegotiating these deals.

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

Filed Under: corporate sovereignty, india, international trade, isds, renegotiate, trade agreements

New Leak Reveals Proposal To Extend Corporate Sovereignty Massively To Include Intra-EU Investments

from the most-toxic-acronym-in-Europe dept

As Techdirt has reported, the public backlash against corporate sovereignty in TAFTA/TTIP was so strong in the EU that the European Commission was forced to come up with Plan B. It now wants to replace what has been called "the most toxic acronym in Europe" -- ISDS, which stands for "investor-state dispute settlement" -- with ICS: the investment court system. That was little more than a re-branding exercise, since most of the key flaws remained, but at least it suggested that the European Commission recognized that corporate sovereignty had become a serious problem that needed to be addressed. However, it seems that others didn't get that memo -- or, more likely, just don't care what the EU public thinks. A new leak reveals that a group of EU governments want to extend the use of ISDS, and to embed corporate sovereignty even more deeply in the fabric of the European economy.

The plan by the five countries -- Austria, Finland, France, Germany and The Netherlands -- is to give corporate sovereignty rights for all cross-border investments made within the EU. That would allow EU companies to challenge EU governments over things like local health and safety laws, or environmental regulations, with the public paying for any losses in the ISDS tribunals. The original rationale for corporate sovereignty was to protect only foreign investors when they put money into a country; this has been turned on its head in a so-called "non-paper", now leaked, which calls for domestic investors to enjoy the same special extra-judicial rights (pdf). The background to this extraordinary idea is a move last year by the European Commission to terminate some old bilateral investment treaties (BITs) between European Union members:

Many of these intra-EU BITs were agreed in the 1990s, before the EU enlargements of 2004, 2007 and 2013. They were mainly struck between existing members of the EU and those who would become the "EU 13". They were aimed at reassuring investors who wanted to invest in the future "EU 13" at a time when private investors -- sometimes for historical political reasons -- might have felt wary about investing in those countries. The BITs were thus aimed at strengthening investor protection, for example by means of compensation for expropriation and arbitration procedures for the settlement of investment disputes.

Since enlargement, such 'extra' reassurances should not be necessary, as all Member States are subject to the same EU rules in the single market, including those on cross-border investments (in particular the freedom of establishment and the free movement of capital). All EU investors also benefit from the same protection thanks to EU rules (e.g. non-discrimination on grounds of nationality). By contrast, intra-EU BITs confer rights on a bilateral basis to investors from some Member States only: in accordance with consistent case law from the European Court of Justice, such discrimination based on nationality is incompatible with EU law.

As the European Commission rightly points out, one of the key points about the EU is that it offers the same protection to all EU investors, wherever they are based, and wherever they put their money in the European Union. And yet, rather than complying with that call from the Commission, the five countries involved in this new plan want to go in precisely the opposite direction. The leaked "non-paper" even has the gall to use the biased nature of ISDS as a reason to extend it yet further:

modern guarantees on investment protection are necessary to the level playing field for EU-investors vis-à-vis their foreign competitors, to ensure the continued availability of competitive financing terms for EU-investors and to promote intra-EU investments. The dismantling of intra-EU BITs will be perceived by investors, banks and creditors alike as an overall decrease in the legal protection for EU investors and create a competitive advantage for foreign investors who can rely on clearly defined and uniform protection standards under the forthcoming EU agreements or on Member States’ BITs. If EU investors are not afforded comparable protection as their foreign competitors, incentives for EU investors to locate their foreign investments outside the EU will be created and the functioning of the internal market will be compromised.

By an amazing coincidence, in February the Business Europe lobby group sent a letter to the European Commission calling for corporate sovereignty to be extended to intra-EU investments. It's not hard to guess why there is this sudden push from countries and companies. As Techdirt has reported, the corporate sovereignty provisions are without doubt the most contentious part of the proposed TAFTA/TTIP agreement, and many are demanding that they be dropped completely. The introduction of corporate sovereignty for all intra-EU investments would allow supporters of ISDS in the EU-US trade agreement to argue that the same protection must be offered to US companies investing in the EU -- the perfect circular argument.

The reverse is also true, as the leaked document itself recognizes:

If one postulates that such provisions are not required within the EU due to the very nature of the internal market or to the level of development of EU Member States, it would then be even more difficult to argue in favour of investment chapters within the TTIP or other FTAs with developed countries.

But the European Commission is indeed arguing that such provisions are not needed in the European Union. Awkward.

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

Filed Under: corporate sovereignty, eu, intra-eu, isds