TransCanada Goes Legal On US Government Over The Rejection Of Keystone; Will It Wake Obama To The Problems Of Corporate Sovereignty?

from the wake-up dept

Over the last few years, there's been a big controversy over the Keystone XL pipeline project, a massive planned project to build an oil pipeline from Canada to the US that many folks had been protesting, and which (after years and years of debate), President Obama finally rejected a few months back. That's not a topic that we've really covered here, other than a single mention when we questioned why the FBI had spied on activists protesting the potential pipeline.

However, things got... interesting yesterday, as TransCanada initiated a corporate sovereignty claim against the US government over the rejection of the project. As we've been explaining, corporate sovereignty provisions in trade agreements (usually officially called "investor state dispute settlement" or "ISDS" -- in part because it's so boring many people ignore what it's really about) provide a way for foreign companies to effectively "sue" foreign governments over regulations they dislike -- including regulations that negatively impact "expected profits."

Even worse, it's not a real "court" that deals with these things, but a tribunal of folks, some of whom may have other dealings with the companies.

One of the most egregious examples of this is the ongoing corporate sovereignty claim made by drug maker Eli Lilly against the government of Canada, demanding $500 million, because Canadian patent laws rejected two Eli Lilly patents for not really doing anything new. Eli Lilly claimed that this "expropriated" its expected profit, and thus initiated a claim.

President Obama has been waving off concerns about corporate sovereignty/ISDS for a while now, noting that it's rarely been used against the US government, and that the US government had so far won all such claims. That's true. But, this is a big one -- and it might not end the same way. TransCanada is demanding $15 billion, claiming this is the "lost value" due to the rejection of the plan. And including these provisions in giant new agreements like the TPP (with Pacific rim countries) and TTIP (with Europe) will mean opening the floodgates.

Think about how crazy this is: Any time a company "invests" in plans to do something, that are later made impossible (or difficult) due to a regulatory decision, the (foreign) companies can basically demand payment. That puts a massive burden on any attempt to regulate anything in regards to how corporations act, even if new information has come to light, or people have recognized how existing regulations are problematic. These provisions will make it nearly impossible to even contemplate fixing copyright or patent laws, because companies will just make claims arguing that such changes destroy "expected" profits.

And now, big time champion of corporate sovereignty/ISDS, President Obama, is facing an ISDS claim that could cost American taxpayers $15 billion. Just for deciding that a giant oil pipeline isn't a good idea. Why would any country ever willingly submit itself to such conditions?

Filed Under: corporate sovereignty, isds, keystone, keystone xl, nafta, tpp, ttip
Companies: transcanada

Just Because Australia Won Its Plain Packaging Case Against Philip Morris Doesn't Mean Corporate Sovereignty Isn't A Threat

from the extrapolating-from-a-single-data-point dept

The challenge by Philip Morris to Australia's plain packaging law for tobacco products is perhaps the best-known example of how companies try to use corporate sovereignty provisions in trade agreements to force nations to change their policies -- in this case, one designed to save lives. That case was also notable for the way that it had been brought: since Philip Morris was very unlikely to win by invoking the trade agreement between Australia and the US, it used one between Australia and Hong Kong -- a classic case of treaty shopping. Last week, we heard that the case had been dismissed. An article by Kyla Tienhaara in The Sydney Morning Herald explains:

it appears that Australia was able to convince the tribunal that Philip Morris should not be permitted to plead the merits of its case because it engaged in "treaty shopping". In other words, it was an American investor when plain packaging was introduced and only adopted a "flag of convenience" in order to access arbitration.

It's great news that Australia won't be forced to pay huge punitive fines for proceeding with its health policy. But, predictably, people are already pointing to this result as "proof" that corporate sovereignty isn't really a problem, as in this column published by The Conversation:

A tobacco company sued a government for enacting laws designed to improve public health. They used a little understood mechanism -- ISDS -- to sue, despite having lost in Australian courts. International trade law disputes rarely have such a clear-cut villain. It is natural to distrust the mechanisms they relied on. However, this victory -- in the first ISDS claim brought against Australia -- should allay those concerns.

The author concludes:

Australia's victory over Philip Morris should take much heat out of this debate.

The bogeyman has been slain.

Leaving aside the rather important fact that it is not possible to extrapolate from a single data point -- and that there are dozens of other ISDS cases where governments have lost and been hit with massive fines -- there are couple of aspects to note here. First, as Tienhaara writes in her article:

the dismissal of the case on procedural grounds means that we will never get a ruling on the substance of Philip Morris' claims. As such, the award contributes nothing to the bigger debate about the conflict between investment protection and public policy.

That's the key issue -- whether companies can use corporate sovereignty provisions to trump laws enacted democratically. The defeat on a procedural issue leaves open the possibility that other ISDS cases will succeed where Philip Morris failed, and cause governments to repeal laws rather than pay massive fines. In particular, both TPP and TAFTA/TTIP are likely to give far stronger rights to tens of thousands of companies to sue governments directly, without needing to invoke obscure treaties with third parties. Tienhaara points out a further reason why the defeat of Philip Morris does not signal that corporate sovereignty is no longer a threat:

poor countries are in the worst position because they can't afford even a preliminary defence in an ISDS case. It has been reported that Australia has spent [AU]$50 million [about US$35 million] defending plain packaging in arbitration. Uruguay has been mired in its own dispute with Philip Morris for even longer than Australia and has to rely on funding from a foundation set up by former New York mayor Michael Bloomberg because it can't afford to pay its legal fees.

The high cost of ISDS makes the threat of arbitration a potent tool for the tobacco companies.

In other words, it is not necessary for companies to win all or even most corporate sovereignty cases: the mere threat of them winning is likely to be enough to dissuade many governments from proceeding with policies that could result in them paying huge awards. The ISDS bogeyman may have taken a hit with Australia's win, but it is most certainly not slain.

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Filed Under: australia, corporate sovereignty, isds, plain packs, trade agreeements
Companies: philip morris

CETA's Festering Wound: Corporate Sovereignty

from the just-chop-it-out dept

Remember CETA, the Comprehensive Economic and Trade Agreement between Canada and the EU? Even though the text was "celebrated" back in October 2014, it is still not ready to be presented for possible ratification. As Techdirt has been covering, it's pretty clear that the problem area is the corporate sovereignty chapter, because of concerns about the huge power it grants to Canadian (and US) corporations. First there were hints that Angela Merkel wanted the so-called "investor-state dispute settlement" (ISDS) mechanism changed. Then France said the same -- twice. Most recently, the EU commissioner responsible for trade and trade agreements, Cecilia Malmström, indicated that it wouldn't be possible re-open the corporate sovereignty chapter, or to move away from "classic" ISDS to the re-branded version known as the Investment Court System (ICS), which the European Commission is pushing in an attempt to head off growing opposition to the whole idea.

However, the arrival of a new government in Canada seems to have changed the situation once more, as Politico.eu reports:

With the new liberal government in power, there is hope for more flexibility to amend the [CETA] agreement via legal scrubbing, while not officially reopening it.

"We’re prepared to work with the EU to work in the direction of an international court for investment disputes," Canadian negotiator Verheul said. "But if the EU is going to press us to adopt an appellate mechanism that would certainly involve quite a bit of further discussion … We recognize that's a longer-term exercise."

There are obviously some mixed signals there: yes, Canada is willing to tweak the details of the ISDS chapter, but no, it isn't prepared to go all the way to the Investment Court System -- probably in part because it doesn't exist yet, and its details remain sketchy. It's by no means clear how this will all work out in practise, but it does confirm that corporate sovereignty remains a festering wound in the CETA text, as it does in TAFTA/TTIP, where formal discussions about ISDS and/or ICS haven't even started (pdf).

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Filed Under: canada, ceta, corporate sovereignty, eu, isds, trade

Six Key Flaws In The EU's Proposed 'New' Corporate Sovereignty Court

from the only-six? dept

A few months back, Techdirt wrote about the European Commission's proposal to replace the traditional corporate sovereignty system -- generally known as "investor-state dispute settlement " (ISDS) -- with what it called the "Investment Court System" (ICS). That seemed to us little more than a re-branding exercise; now an international investment law scholar has weighed in on the issue with his own, rather more expert opinion. Gus Van Harten is Associate Professor at York University in Canada. According to his biography, he's written a book proposing:

the establishment of an international investment court to ensure independence and accountability in the international adjudication of regulatory disputes between states and investors.

Despite that -- or maybe because of that -- Van Harten is none too impressed with the European Commission's plans, as the title of his new paper makes clear: "Key flaws in the European Commission’s proposals for foreign investor protection in TTIP". He singles out six in particular.

1. ISDS is alive in the EC's proposals

As Techdirt noted back in September, ICS isn't really very different from ISDS. Van Harten points out one aspect of corporate sovereignty tribunals that really has no place in any "new and improved" approach:

ICS "judges" would continue to have a financial interest in future claims because they are still paid a (lucrative) daily fee in a context where only one side -- foreign investors -- can bring claims, they would continue to operate under the usual ISDS arbitration rules, they would not have to meet the requirements for judicial appointment in any country, and they would not even be barred from working on the side as ISDS arbitrators. I am prompted to say that, if ISDS is "dead", as some officials have claimed, then the EC’s ICS proposal reminds me of a zombie movie.

The second flaw:

2. The case still has not been made for foreign investor protection in the TTIP

Van Harten writes:

Any proposal to give special privileges or public subsidies to any economic actor -- here, the largest and wealthiest in the world -- calls for a strong justification based on clear evidence of the public benefit. The absence of such a justification and evidence has been a serious omission in the EC's proposals for foreign investor protection from the very start.

The third serious flaw is similarly without any justification on the part of the European Commission:

3. The EC's proposals are fundamentally imbalanced

That's because it gives investors huge privileges without any corresponding responsibilities. Van Harten has a practical suggestion for remedying that:

The EC should establish actionable responsibilities for foreign investors by allowing a host country or affected third party, such as a trade union or a local community, to bring a claim (or, more modestly, a counter-claim) against a foreign investor in the very same process that is used to enforce foreign investor protections. That is a basic test for evaluating balance in the EC's proposals.

The fourth flaw concerns one of the main claimed improvements of ICS over ISDS:

4. The EC's proposals put poison pills into the "right to regulate"

The European Commission has made much of the fact that its new ICS will enshrine the "right to regulate." In his paper, Van Santen explores in detail exactly why that claim is mere window-dressing. He even goes so far as to say:

These textual details greatly undermine the EC's proposal on the right to regulate and the right to change the legal and regulatory framework. Indeed, they suggest that the EC is pretending to protect the right to regulate, while leaving catches in the text that return us to the usual concerns about ISDS.

The fifth flaw concerns a point that many have made about ISDS in the context of TTIP:

5. The EC's proposal remains disrespectful of domestic institutions, including domestic and European courts

Here's why:

The EC's proposal is still premised on an assumption that EU and US courts are so flawed that foreign investors should be able to bring an ISDS claim without having to demonstrate that it would be unreasonable for the foreign investor to seek relief first in the courts

As well as being an insult to these rather well-developed legal systems, and the people who work in them, it also has some serious negative consequences:

Foreign investors can choose to avoid the [domestic] courts, they can turn back from the courts at any point to pursue ISDS instead, and they can use ISDS to seek compensation for a court's decisions at any level.

In other words, ICS gives investors the best of all possible worlds, while the rest of us:

must deal with the usual risks of democracy and regulation in the usual ways: by taking part in the democratic process, by buying insurance, by bargaining for strong dispute settlement clauses in their contracts with government, or by relying -- like everyone else -- on the [domestic] courts.

Finally, Van Harten points out that if the European Commission wants to fix a system it admits is broken, it seems to be going about things in the wrong way:

6. If the EC is serious about an international investment court, why is it proposing to expand ISDS in the TTIP?

He means a real international investment court, not the ICS, which is far from being that.

while the EC has signalled that it will work toward an fullblown international court to replace ISDS, if this is the goal then the EC’s sequencing appears backwards. Logically, the EC should be pushing to transform existing treaties so that ISDS is replaced with an international court before the EC goes to the U.S. with its proposals. In past, the U.S. government has not welcomed the idea of new international courts. The fact that the EC has done the opposite -- by floating a version of ISDS with the U.S. before pursuing a proper court with other countries -- seems to undermine the EC's credibility on the issue of an international investment court.

Van Harten's paper is particularly valuable at a time when the European Commission is trying hard to propagate the idea that the problem of corporate sovereignty in TAFTA/TTIP is now "solved" by its ICS proposal. Van Harten's analysis shows that is very far from the case, and that corporate sovereignty remains one of the most problematic aspects of a deal that is itself highly problematic.

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Filed Under: corporate sovereignty, europe, european commission, gus van harten, ics, isds, tafta, tpp, ttip

Full Text Of TPP Released: And It's Really, Really Bad

from the no-wonder-they-were-hiding-it dept

Yesterday, a month after it was announced that the TPP was "finalized," the official text was finally released. Immediately after that, USTR (somewhat oddly) reposted the whole thing to Medium -- apparently in an effort to appear transparent for an agreement that was negotiated for years in secret. The overall document has been broken out into many different sections, but if you add it all up it's over 6,000 pages long. The Washington Post did what none of the governments actually did and made the document searchable. I spent much of yesterday trying to read through the various sections, and it appears to be super problematic. Along with the text, the USTR posted a bunch of nonsense propaganda about what they want people to think the TPP is really about.

But the problems with the TPP run deep: Despite earlier promises from both the USTR and Australia that intellectual property would not be subject to the "corporate sovereignty" provisions (which they call "investor state dispute settlement" or ISDS), they absolutely are. And this is a massive problem. It means that any country that's a member of the TPP can effectively never move its intellectual property rules in the direction of better benefiting the public -- because some foreign company will claim that this takes away their expected profits. Section 9.1 lists "intellectual property" as the type of asset that is a part of the ISDS process.

We already know what a mess this can create. Remember Eli Lilly is currently using NAFTA's corporate sovereignty provisions to demand half a billion dollars from Canada, after Canada rejected two of its patents because Canada realized the drugs that Eli Lilly had tried to patent did not deliver the benefits the company claimed when trying to get the patent. Canada said that was a good reason to reject the patent. Eli Lilly claimed that this was taking away its assets and demanded half a billion dollars.

Now imagine what would happen if anyone tried to... say... shorten copyright terms? Or require registration for copyright? Or fix the patent system so that you can't patent obvious and broad concepts any more? Does anyone doubt that any country that did so would be beset by these kinds of attacks, which wouldn't even be handled by courts, but by a tribunal of corporate lawyers, often the very same lawyers these companies would hire for other work? Including intellectual property in the investment chapter is a poison pill designed to ensure that intellectual property can only continue to ratchet up, rather than back.

Now, there is a very limited "exception" concerning the "revocation, limitation or creation of intellectual property rights" if it's "consistent" with the TRIPS Agreement -- an earlier trade agreement regarding intellectual property. As KEI notes, this limited exception isn't going to cut it:

The exceptions for intellectual property in the TPP investment chapter are important, and often designed to accommodate existing state practice in the United States or other countries, but one should not overstate the degree to which intellectual property rights are excluded. The meaning of the WTO TRIPS agreement and the TPP IP Chapter itself will be subject to review and arbitration led by private right holders, on topics such as "adequate" or "reasonable" compensation or remuneration for non-voluntary uses of intellectual property rights, the standards for granting patents, and other issues, to determine "to the extent" an action of policy is "consistent" with the TRIPS or the TPP IP Chapter. This not only leads to forum shopping (TRIPS and TPP IP obligations can be interpreted via TPP ISDS), but also empowers private right holder investors (and not consumers) to bring cases and benefit from sanctions against governments.

KEI also notes that these "exceptions" don't apply to any of the new expanded IP requirements that the TPP has introduced -- including things like much higher damages requirements and the possibilities of criminal charges for the vaguely defined "commercial scale" infringement.

What's kind of amazing here is that we've spent years warning about problems with the "intellectual property" chapter and the "investment" chapter individually, and the absolute worst part of this agreement is the way the negotiators tied them together in a ridiculous and dangerous way. This is much, much worse than many of the things we feared would be in the agreement, and it's made even worse by the fact that the USTR directly promised this would not be in the agreement.

There are a number of other problems as well: KEI warns that at least part of the e-commerce provision can be read to ban a requirement for open source software, which would seem to undermine certain open source licenses, like the GPL. Michael Geist notes that the document confirms that Canada basically has agreed to wipe out many useful copyright reforms from a few years ago, and to extend its copyrights yet again, robbing the public of the public domain. Of course, that raises the question of whether or not someone could make an ISDS claim that Canada is taking away their "investment" in Canada... Oh, who am I kidding. ISDS doesn't apply to the public... just to companies.

There are also, as expected, serious problems for affordable medicine and healthcare, privacy, surveillance and more. Despite claiming to demand "nondiscriminatory treatment of digital products" and "cross border transfer by electric means" of information -- an anti-censorship/blocking provision -- the agreement lets Malaysia off the hook on such requirements.

In addition to that, last month we wrote about how it appeared that the negotiators had carved tobacco out of the ISDS section, but upon reading the whole thing, people are pointing out that it's not actually true, as it makes that part voluntary for countries to decide themselves.

In short, the TPP appears to be a massive mess, and in some ways worse than we feared. According to some, concurrent with the release, President Obama told Congress of his intent to sign the TPP, which started the 90-day clock for Congress to "review" the agreement -- conveniently making sure that much of the debate is limited by the end-of-the-year holidays, long Congressional "recesses" that happen around this time, and other key end-of-the-year business. In short, this agreement that was negotiated in near total secrecy (unless you were a big corporate lobbyist) is a really bad deal, and the administration is going to play every trick it can come up with to get it approved. Now would be a good time to let your elected officials know that they need to vote against the TPP.

Filed Under: copyright, corporate sovereignty, intellectual property, isds, patents, tpp, ustr

Chevron's Star Witness In $9.5 Billion Corporate Sovereignty Case Admits He Lied

from the well,-that's-awkward dept

One of Techdirt's earliest posts on corporate sovereignty was back in October 2013, when we wrote about the incredible case of Chevron. It used the investor-state dispute settlement mechanism to suspend the enforcement of a historic $18 billion judgment against the oil corporation made by Ecuador's courts because of the company's responsibility for mass contamination of the Amazonian rain forest. Given the huge sums involved, it's no surprise that things didn't end there. As the site Common Dreams reports, in 2013:

Ecuador's National Court of Justice upheld the verdict but cut the initial mandated payment from $18 billion to $9.5 billion.

Chevron has repeatedly refused to pay the $9.5 billion ordered by Ecuadorian courts and even took the step of removing most of its assets from Ecuador in an apparent effort to avoid paying.

Chevron not only refused to pay, but asked a judge in New York to invalidate the claim. And that's precisely what happened in 2014, as Vice News explains:

California-based oil giant Chevron hailed a sweeping victory in a two-decade long legal battle in the Ecuadorian Amazon. A New York federal judge, Lewis Kaplan, ruled that a $9.5 billion Lago Agrio judgment leveled against the company by the small Andean country's highest court, was obtained by way of fraud and coercion.

Vice News notes that central to Chevron's case in New York was the testimony of Alberto Guerra, a former Ecuadorian judge:

In New York, Guerra testified that he had struck a deal between the plaintiffs [the Ecuadorian government] and the presiding judge [in Ecuador], Nicolas Zambrano: Guerra would ghostwrite the verdict, Zambrano would sign it, and the two would share an alleged $500,000 in kickbacks from the plaintiffs.

Pretty damning stuff, which seems to have played a major part in convincing the New York judge to dismiss the $9.5 billion award. But in a rather dramatic turn of events, the following just emerged:

Guerra has now admitted that there is no evidence to corroborate allegations of a bribe or a ghostwritten judgment, and that large parts of his sworn testimony, used by Kaplan in the RICO case to block enforcement of the ruling against Chevron, were exaggerated and, in other cases, simply not true.

In keeping with the rest of the case, Guerra's confession is not entirely straightforward, and it's not clear what really happened during the 2013 Ecuadorian court case -- it's worth reading the fascinating Vice News story to get the full details of the continuing confusion. It does appear that the advantage has passed back to the government of Ecuador in this high-stakes legal battle, but it's by no means over -- all thanks to corporate sovereignty's disturbing power to overrule otherwise "final" rulings from national courts.

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Filed Under: alberto guerra, corporate sovereignty, ecuador, isds, rain forest
Companies: chevron

Leaked TAFTA/TTIP Chapter Shows EU Breaking Its Promises On The Environment

from the toxic-trade-deal dept

As far as trade agreements are concerned, the recent focus here on Techdirt and elsewhere has been on TPP as it finally achieved some kind of agreement -- what kind, we still don't know, despite promises that the text would be released as soon as it was finished. But during this time, TPP's sibling, TAFTA/TTIP, has been grinding away slowly in the background. It's already well behind schedule -- there were rather ridiculous initial plans to get it finished by the end of last year -- and there's now evidence of growing panic among the negotiators that they won't even get it finished by the end of President Obama's second term, which would pose huge problems in terms of ratification.

One sign of that panic is that the original ambitions to include just about everything are being jettisoned, as it becomes clear that in some sectors -- cosmetics, for example -- the US and EU regulatory approaches are just too different to reconcile. Another indicator is an important leaked document obtained by the Guardian last week. It's the latest (29 September) draft proposal for the chapter on sustainable development. What emerges from every page of the document, embedded below, is that the European Commission is now so desperate for a deal -- any deal -- that it has gone back on just about every promise it made (pdf) to protect the environment and ensure that TTIP promoted sustainable development. Three environmental groups -- the Sierra Club, Friends of the Earth Europe and PowerShift -- have taken advantage of this leak to offer an analysis of the European Commission's real intent in the environmental field. They see four key problems:

The leaked text fails to provide any adequate defense for environment-related policies likely to be undermined by TTIP. For example, nothing in the text would prevent foreign corporations from launching challenges against climate or other environmental policies adopted on either side of the Atlantic in unaccountable trade tribunals.

The environmental provisions are vaguely worded, creating loopholes that would allow governments to continue environmentally harmful practices. The chapter lacks any obligation to ratify multilateral agreements that would bolster environmental protection and includes a set of vague goals with respect to biological diversity, illegal wildlife trade, and chemicals.

The leaked text includes several provisions that the European Commission may claim as "safeguards," such as a recognition of the "right of each Party determine its sustainable development policies and priorities" but none would effectively shield environmental policies from being challenged by rules in TTIP.

There is no enforcement mechanism for any of the provisions mentioned in the text. Even if one were included, it would still be weaker than the enforcement mechanism provided for foreign investors either through the investor-state dispute settlement mechanism or the renamed investment court system.

The environmental groups have produced a detailed five-page document (pdf) that goes through each of these points in turn, and it's well-worth reading. But it's striking that the central problem is Techdirt's old friend, corporate sovereignty, aka investor-state dispute settlement (ISDS):

Nothing in the text would prevent foreign corporations, on either side of the Atlantic, from challenging climate or other environmental policies via an "investor-state dispute settlement" (ISDS) mechanism or via the European Commission's proposed "Investment Court System." Both enable foreign investors to challenge environmental policies before a tribunal that would sit outside any domestic legal system and be able to order governments to compensate companies for the alleged costs of an environmental policy. While the Commission claims that its new investment "reforms" would protect the right to regulate, States could still be "sued" if foreign investors considered that a policy change violated the broad, special rights that the Commission’s "reformed" investment proposal would give them.

In other words, at the heart of the European Commission's philosophy is the implicit acceptance that investors' rights take precedence over the public's rights -- in this case, those concerning the environment. Everything in the leaked sustainable chapter is couched in terms of aspirations -- the US and EU are encouraged to do the right thing as far as sustainable development is concerned, but there are few, if any, obligations or enforcement mechanisms. When it comes to protecting investors, on the other hand, everything is compulsory, backed up by supranational tribunals that can impose arbitrarily large fines, payable by the public. Although it is true that governments are given the "right" to legislate as they wish when it comes to the environment, investors are given the "right" to sue those governments black and blue if they attempt to do so.

Nor is this mere theory. Research carried out last year by Friends of the Earth Europe shows that of the 127 known ISDS cases that have been brought against 20 EU member states since 1994, fully 60% concern environment-related legislation. In other words, if the European Commission's proposals or something like them became part of the final TTIP agreement, it would almost guarantee a torrent of litigation aimed at blocking or neutering environmental legislation on both sides of the Atlantic.

This is an important leak because it reveals, once more, that a central problem of TAFTA/TTIP is the corporate sovereignty that is inherent in ISDS -- the fact that companies are allowed to place the preservation of their future profits above any other consideration, such as the environment, health and safety or social goals. The EU's sustainability chapter -- an area that is widely recognized as increasingly important in a world where lack of sustainability poses all kinds of problems -- is framed entirely in outdated, 20th-century terms: boosting trade and maximizing profits are the only metrics that matter. The European Commission's willing embrace of that approach confirms both its contempt for the 500 million Europeans it supposedly serves, and the fact that, far from protecting the environment, TAFTA/TTIP is shaping up to be a very toxic trade deal.

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Filed Under: corporate sovereignty, environment, eu, isds, promises, tafta, ttip

Business Whines That Even EU's Mild, Unsatisfactory Reform Of Corporate Sovereignty Goes Too Far

from the preserving-privileges dept

Last month Techdirt wrote about the attempt by the European Commission to deflect the growing EU resistance to the inclusion of a corporate sovereignty chapter in TAFTA/TTIP by turning it into a more formal Investment Court System (ICS). We pointed out some major problems with the proposal, and noted that the US Chamber of Commerce had already rejected the idea out of hand. We now have a response from BusinessEurope, one of the main lobbying organizations in the EU with 40 members in 34 countries. As Politico.eu reports, BusinessEurope is not impressed, and the reasons it gives are highly revealing.

[Luisa Santos, director for international relations at BusinessEurope] said that the provision [in the proposed ICS] that requires investors bringing an arbitration case to pay for all the expenses related to the case if they lose will scare off small businesses. Moreover, the mechanism for appeals will likely be used extensively, leading to long and costly trials.

On the matter of costs, a document put together by the European Commission on arbitration costs (pdf) includes the fact that:

Research by the OECD indicates that the average legal and arbitration costs for a claimant are around $8 million.

That average figure means that very few small businesses could contemplate bringing an investor-state dispute settlement (ISDS) case under the current system, so the move to ICS is unlikely to make any difference here. As for the criticism that the appeals process will be "used extensively", governments are only going to take on even more costs if they think that the rulings of the ICS are unfair or the awards disproportionate, and that is precisely why the appeal system is there -- to allow unfair and exaggerated awards to be challenged.

Santos also contended that the provision on countries appointing the judges would discriminate against the business community.

Leaving aside whether that is actually the case or not -- and why should it be? -- the comment overlooks a far more profound unfairness at the heart of both ISDS and ICS. This is the fact that only companies can bring cases, never the nations, which means that a country can never win a case: the best it can hope for is not to lose. That is a very real discrimination against the public, which always foots the bill when companies are successful in their claims against states, but never gets to enjoy corresponding awards against companies, because none is ever made. Finally, Politico.eu reports the following concern:

[Santos] slammed Malmström's plan to tighten the rules for cases of "indirect expropriation," in which a business claims compensation for an indirect lowering of investment values, such as through new environment or health regulations. Although the commissioner wants to avoid the abuse of such claims, the new EU rules are so strict that "in reality it won't be possible for any investor to be compensated," Santos said.

To its credit, the European Commission has published its proposed text for TAFTA/TTIP's investment chapter (pdf) in full. Here's the key passage limiting claims for indirect expropriation:

For greater certainty, except in the rare circumstance when the impact of a measure or series of measures is so severe in light of its purpose that it appears manifestly excessive, non-discriminatory measures of a Party that are designed and applied to protect legitimate public welfare objectives, such as the protection of public health, safety, environment or public morals, social or consumer protection or promotion and protection of cultural diversity do not constitute indirect expropriations.

As that makes clear, the intent is to prevent claims against measures that promote public welfare objectives -- and even then, exceptions can be made. So BusinessEurope's comments seem to mean that it thinks investors should still have the right to bring claims against all measures that are designed to promote public health, or to protect the environment -- in other words, precisely those kinds of legal actions that make corporate sovereignty provisions such a threat to society.

BusinessEurope's rejection of the ICS idea, which involves some very mild tweaks to the investor-state dispute process, demonstrates neatly that what it really wants is the old ISDS system, with all its egregious flaws, and its tilted playing-field that gives deep-pocketed corporations a powerful tool for intimidating sovereign governments, and interfering with democracy itself.

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Filed Under: corporate sovereignty, eu, ics, isds, tafta, ttip
Companies: businesseurope, chamber of commerce

The TPP And The Tobacco Carve-out Bring Together Strange Bedfellows... While Highlighting The Problems Of The TPP

from the not-a-good-idea dept

It's been rumored for years, but reports out of Atlanta suggest that it's now confirmed that in order to finalize the Trans Pacific Partnership (TPP) agreement, everyone agreed to carve tobacco out of the corporate sovereignty system, better known as ISDS (investor state dispute settlement). These systems allow companies to sue countries for passing regulations that the companies feel harm their ability to profit -- and tobacco companies have already filed ISDS complaints in a few countries that have pushed to put health warnings on cigarette packages.

While some health activists have cheered on this carve out -- it appears that almost everyone else is pissed off. Not because they think that Big Tobacco should be shaking down countries that pass anti-smoking laws (though, there may be some of that), but because they recognize the problems that occur when governments can start to set up trade deals that "carve out" certain industries. It's opening up a huge can of worms. Even some supporters of corporate sovereignty/ISDS are worried about what it means when one particular industry can just be excluded entirely from the process. Two of the biggest supporters of ISDS and TPP in Congress, Senators Mitch McConnell and Orrin Hatch, have both warned that the US should not carve out tobacco. Here's McConnell a few months ago, standing up for those poor, poor tobacco farmers:

“It is essential as you work to finalize the TPP, you allow Kentucky tobacco to realize the same economic benefits and export potential other U.S. agricultural commodities will enjoy with a successful agreement.”

And here's Hatch actually making a fairly salient point about the carve out:

“Although I don’t support tobacco at all, I still think it was essential,” Hatch said. “It’ll cost us some votes. And every vote is essential. And there are other things I am very concerned about. I’ve committed to read the bill, and I will read it, but right now I’m leaning against it.”

That doesn't bode well for the agreement, given that Hatch was a huge supporter of the TPP. Another Senator, Thom Tillis, has pointed out that carving out one industry opens up the possibility of carving out others:

“I’ll not only vote against it, I’ll work hard to have it defeated if it goes in the final agreement.... Once you carve out someone from dispute settlement agreements, then who’s next?”

And the tobacco carve-out, believe it or not, seems to be one thing that both big business and big labor agree on, though for entirely different reasons. The US Chamber of Commerce and the National Association of Manufacturers are totally against it:

we ask all of the TPP governments to reject the exclusion of products from the coverage of the TPP and its enforcement mechanism.... Such exclusions are unnecessary and would be highly damaging to the international rules based trading system and the prospects for the TPP.

And here was the AFL-CIO opposing the entire ISDS mechanism, and noting that the tobacco carve-out just highlights the problems of ISDS. Whereas Senator Tillis worried about "who's next" to get carved out, the AFL-CIO is pointing out that maybe there should be a lot more.

Any industry-specific carve-out will not address the serious structural problems inherent in the system itself. Issues of broad public interest should not be viewed through the narrow lens of trade and investment at all, let alone decided by unaccountable private panels. Systems of justice should be transparent and accessible on an equal basis. ISDS is anything but: Only foreign investors can use it and there are no requirements that affected communities be allowed to participate or even have their view considered. In many cases, there often are not even requirements that hearings or decisions be made available to the public at all! Even in the case of clear legal error, it is almost impossible to reverse a decision.

Indeed, as Sean Flynn pointed out just last week, carving out tobacco really just enforces how dangerous corporate sovereignty really is:

The new exception validates, rather than assuages, the concerns of those who have been criticizing ISDS systems for many years. Without express carve outs, ISDS provisions do threaten common health and safety regulations.

The carve out does nothing to halt the disturbing recent trend of companies using ISDS provisions in trade agreements to enforce international intellectual property norms through ISDS tribunals. This is, indeed, the claim at the heart of the tobacco cases now being litigated in ISDS systems. The claim is that tobacco regulations requiring plain packaging violate the trademark rights of tobacco companies protected by the World Trade Organization agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). The pharmaceutical company Eli Lilly has also claimed that the denial of a new use patent on an old (off-patent) medicine violates rights granted by TRIPS and the North Atlantic Free Trade Agreement (NAFTA).

Meanwhile, US trade officials are, of course, trying to tap dance around the fact that basically everyone absolutely hates this. The USTR has tried to pretend this isn't a big deal because tobacco is "unique."

The U.S. Government seeks to include this language because tobacco is a unique product – it is highly addictive, always harmful to human health, and the single most preventable cause of death in the world. Recognizing these facts about tobacco through the TPP will represent an important step forward for public health in the international trade community.

It's true that tobacco can be a serious health concern, but shouldn't we be raising questions about why this procedure is no good for tobacco companies, but just dandy for every other industry -- including some that produce harmful products? Or those like pharmaceutical companies who are jacking up prices to keep necessary medicines out of the hands of the poor?

Oh, and then there are those who are in complete denial, who are insisting that there really isn't a carve-out for tobacco, even though there almost certainly is (we can't say for sure, of course, because the documents are secret):

“TPP will not discriminate against any agricultural commodity nor will it exclude tobacco. On the contrary, TPP will provide protections to ensure that governments can implement tobacco control measures, while guaranteeing that tobacco has the same legal status as any other product,” a U.S. official told CQ Roll Call last week.

In short, the whole tobacco carve-out situation is a microcosm of the problems with the TPP. You have a terrible idea (corporate sovereignty) mixed with a weak attempt to appease health activists (carve out tobacco), that basically fixes nothing and satisfies no one. And, now, the same Senators in Congress who demanded the fast track authority be granted, which ties their own arms behind their backs in terms of changing the agreement, are threatening to force this change, even though they've already given up the power to do so.

Filed Under: carve-out, corporate sovereignty, exemption, isds, mitch mcconnell, orrin hatch, tobacco, tpp, trade, winners and losers

After Pulling An All-Nighter, Negotiators Finish TPP; But Don't Expect To See The Text For A While

from the wait-and-wait-and-wait-and-wait dept

After negotiators failed to complete negotiations on the Trans Pacific Partnership (TPP) agreement a few months ago in Maui, there was some concern as to whether or not they'd ever be able to finish the agreement. They called a special negotiating session in Atlanta that began last week, and was supposed to last just a few days to "iron out the details." Except that got extended. And then extended again. And after promises of an announcement last night, they apparently brought in boxes of pizza and told reporters they were going to pull an all nighter to complete the agreement.

Because, of course, when trying to complete an agreement that could reshape global norms on investment, regulations, intellectual property and a little bit of trade... staying up all night sounds like a grand idea.

And just like you after staying up all night before your college finals, negotiators think that this all-nighter worked. This morning they announced a final deal.

But also that it won't be public for maybe a month or so. And then there will be some debate over it, but thanks to Congress caving in on fast track authority, Congress has almost no ability to point out flaws in the agreement. They can only give it a clean yes or no vote. In the announcement, negotiators (not surprisingly) played up all the tariffs that will be wiped out by this agreement. That's the one part that I'm fine with. Trade tariffs are a mostly bad idea, and getting rid of them is fine. But the TPP is not about trade. That's just a pretext.

The key parts are really about regulations and investment. Indeed, two of the big sticking points concerning patent-like exclusive rights on certain new pharmaceutical compounds ("biologics"), where the US was pushing for at least 12-year exclusivity periods to drive up the price of drugs around the globe, while Australia and other countries were pushing for five years. It sounds like there was a compromise that allows for a range from five to eight years, but, again, who the hell knows until we see the details. At the press conference, negotiators refused to give any details, other than suggesting they came up with text that pretends to satisfy everyone. That is, officially it's five years but there are "other regulations" that bring things closer to the US's demanded 12 years. Another point of contention was on the infamous corporate sovereignty provision, officially called "investor state dispute settlement" (ISDS), which is a boring sounding name for saying that foreign companies can take entire countries to special tribunals if they feel that new regulations in those countries negatively impact profits. These tribunals are a joke and put corporate interests over sovereign country interests.

The one real "compromise" here is that the agreement apparently excludes tobacco companies. As we've noted a few times in the past, tobacco companies have used these corporate sovereignty provisions in other trade agreements to sue countries that pass anti-smoking laws of any kind. Last year, the US floated this compromise idea, that if tobacco companies were excluded, the rest of ISDS would remain in place. And it sounds like that's what happened.

Either way, at some point the final text will be revealed and then there will be lots of shouting and screaming, but rest assured that the USTR and the Obama administration are going to fight like crazy to get this approved, because they (very stupidly) see this as part of Obama's "legacy." The compromises may make things a bit more difficult, because the compromises on pharmaceuticals and tobacco will piss off two of the biggest lobbyists in support of the agreement.

From the sound of things, the rest of the intellectual property chapter hasn't changed much since the May version leaked. It's unclear if the USTR ever did push for clearer fair use provisions as was rumored. Chances are they're not in there, but, again, we won't know for a bit, because... "secret trade deal."

And, really, the most sickening part in all of this, beyond the efforts to increase drug prices globally, beyond the efforts to extend copyright terms, beyond the efforts to limit fair use, beyond the efforts to give companies corporate sovereignty over nations... is the ridiculous willingness of the US government to look the other way on human trafficking/slave labor. As you may recall, part of the fast track authority was that this agreement could not include countries designated as human trafficking hot spots. Malaysia, one of the negotiating countries was included in that list. But, no problem, the State Department, for purely political purposes, upgraded Malaysia, even though the country has shown no improvement at all, and just two months earlier police had found 139 mass graves found along a path where migrant workers had been trafficked.

What a "legacy" for President Obama: "compromising" in a way that helps big companies sue countries that pass bad legislation, drive up the price of drugs, decrease access to culture... and look the other way on human trafficking. And now it's a "done" deal.

Filed Under: australia, corporate sovereignty, drug prices, human trafficking, isds, malaysia, tpp, transparency, us, ustr