Is The UK Government Trying To Sneak Through Its Own Corporate Sovereignty Rules?

from the downward-regulatory-ratchet dept

As their name suggests, corporate sovereignty chapters in trade deals are problematic in part because they place corporations on the same level as nations, allowing the former to sue the latter in special tribunals outside national courts. What's particularly troubling is that companies are now claiming that basic democratic functions, like passing laws promoting health, should be considered a form of "expropriation", because future corporate profits are reduced. That effectively turns investor-state dispute settlement (ISDS) into a downward regulatory ratchet that makes it very difficult -- or at least very expensive -- to bring in any new regulations that reduce profits for some business sector.

Despite this -- or possibly even because of this -- the UK government is currently trying to bring in its own, domestic version of this ratchet. It's found in a new Bill, simply but significantly called "Deregulation Bill". It's a rag-bag of legislative odds and ends, covering things like religious exemption from wearing safety helmets, selling yarn, erection of public statues, repealing the power to block Web sites (brought in by the Digital Economy Act), late night refreshments and -- tucked in near the end -- the following:

83 Exercise of regulatory functions: economic growth

(1) A person exercising a regulatory function to which this section applies must, in the exercise of the function, have regard to the desirability of promoting economic growth.

(2) In performing the duty under subsection (1), the person must, in particular, consider the importance for the promotion of economic growth of exercising the regulatory function in a way which ensures that--

(a) regulatory action is taken only when it is needed, and

(b) any action taken is proportionate.

The Bill goes on to clarify what a "regulatory function" might be:

(a) a function under or by virtue of an Act or subordinate legislation of imposing requirements, restrictions or conditions, or setting standards or giving guidance, in relation to an activity, or

(b) a function which relates to the securing of compliance with, or the enforcement of, requirements, restrictions, conditions, standards or guidance which, under or by virtue of an Act or subordinate legislation, relate to an activity.

As that makes clear, the proposed law would apply to pretty much any kind of regulation and its enforcement, and would require the effects on the UK's economic growth to be considered above everything else. Indeed, there's no obligation to consider anything else. Its effects would reach far beyond the obvious areas. For example, this post by the journalist David Hencke explains what the Bill's implications for human rights in the UK would be (pointed out to us by @AnitaBellows12):

The Deregulation Bill -- promoted as liberating business from silly bureaucratic rules -- includes what sounds like a rather arcane provision saying that all regulators for the first time must consider the impact on economic growth before they launch criminal or civil proceedings (see clauses 83/84) against a company.

In other words if the [UK's Equality and Human Rights Commission -- ECHR] doesn’t do this -- big companies with loads of cash can take them to judicial review and get cases where they break the law on discrimination annulled. It would also make the EHRC -- not the most radical of bodies -- even more careful before it takes up your case.

But it's not just limited to the field of human rights: it would also apply to the enforcement of environmental laws, or controls on financial services, say. It's true that the Bill doesn't make it impossible to carry out those functions, but it does open up an important new way for corporates to challenge any government enforcement actions against them: all they have to do is to complain that the implications for the UK's economic growth weren't properly considered. As with ISDS, it doesn't matter whether they win every such case: the mere threat of being able to bring these cases will inevitably have a chilling effect on people working in UK government departments, and result in them being much more cautious in their enforcement of UK laws against companies. If enacted, then, the new Bill would have a large-scale, deregulatory effect that will go far beyond the other, rather minor measures it contains.

As Hencke's post points out, this Bill is still in the early stages of its passage through the UK Parliament, so these particular clauses could be modified or even deleted -- although it is likely the UK government will just put them back if they are. Still, their appearance here, hidden away among mostly trivial matters, should act as a wake-up call that corporate sovereignty is not just a matter for international trade agreements, but may start cropping up in national legislation too.

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Filed Under: corporate sovereignty, deregulation bill, economic growth, isds, profits, tribunals, uk