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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.

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

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Comments on “Is The UK Government Trying To Sneak Through Its Own Corporate Sovereignty Rules?”

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Anonymous Coward says:

it shows that the UK is being played by big business, who could easily be behind the present government, indeed could easily have funded the Tory party before the last UK G.E! with this and just about all ‘Trade Deals’ circulating atm, it shows that once again, big business is trying to turn the planet into a corporation! that must not happen! no one will have any rights at ll and the planet will effectively be killed, all in the name of profit for certain individuals!

Anonymous Coward says:

BIG business is trying to reduce all regulation ,health, business, finance etc ,and it wants to put all costs on to the tax payer,
Lack of regulation caused the housing ,financial crisis ,
in the us.
Banks gamble ,if they lose money they go to the government, we need billions to keep in business ,
we are to big to fail
The still get to keep the big bonus,s even if their gamble investments fail.

Maybe the uk government hope that noone will notice this clause buried among changes to minor regulations .

Ninja (profile) says:

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.

Big corporations already rule many countries out there (including, sadly, mine). The UK are just trying to make it official it seems.

Anonymous Coward says:

Re: Re:

Well… its already official, they are just working on making it more difficult to resist them.

You know… kinda like how it is already official that the FBI can (illegally) snoop on your computer without oversight in search of terrorism and kiddie porn, but still continue to seek laws and secret interpretations to continue solidifying that illegal access.

Easier to get forgiveness than it is to get permission!

Anonymous Coward says:

IF the environment in the uk,is harmed ,
there is pollution of groundwater ,
from fracking etc this will have a negative effect on
economic development in the long run.
AS people and companys will not want to locate or live in those area,s .

We will have a race to the bottom,in different area,s
eg companys want health and safety regulations
reduced ,and costs reduced ,
and if this harms consumers or local residents ,
well f u,
look at my corporate profits .
Banks made profits selling housing loans to people who could not
afford them,
if it destroys the housing market in 4 years ,
well too bad,
the bankers get their big bonuses,
eg companys think about short term profit .
Not what happens in 5 years .

This bill is saying reduce any rules that reduce my
potential profits ,in the short term,
even if regulation helps to promote a stable
economy in the long run.

Anonymous Coward says:

UK govt "Dysregulation" bill is evil twin of renowned "Precautionary Principle" on chemical regulation

“When an activity raises threats of harm to human health or the environment, precautionary measures should be taken even if some cause and effect relationships are not fully established scientifically. In this context the proponent of an activity, rather than the public, should bear the burden of proof. The process of applying the precautionary principle must be open, informed and democratic and must include potentially affected parties. It must also involve an examination of the full range of alternatives, including no action.” – Wingspread Statement on the Precautionary Principle, Jan. 1998

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