Corporate Sovereignty Trumps National Laws; Here's How The US Thinks It Can Get Around That

from the ain't-gonna-work dept

For a while now, Techdirt has been writing about the extraordinary corporate sovereignty chapters in trade agreements that grant foreign companies far-reaching powers to sue a government simply for issuing regulations that impact their investments. Recently, there has been a textbook example of how the investor-state dispute settlement (ISDS) tribunals that adjudicate corporate sovereignty cases are literally a law unto themselves. A post on The Hill explains the background:

A company sought to develop a mining and marine terminal project in Canada, but it had to obtain approval from provincial and federal authorities. As part of that process, the company had to submit an environmental impact study (EIS) addressing the project?s potential impacts on the natural and human environment.

A panel of experts was appointed to review that study, and to issue a recommendation on whether the project should go ahead. The experts recommended against approval, partly on the basis that it would have been inconsistent with “core community values.” As a result, the federal and provincial officials rejected the project. The company involved, Bilcon, appealed against that decision, but did so invoking NAFTA’s corporate sovereignty provisions. The ISDS tribunal ruled that:

The advisory panel’s consideration of “core community values” went beyond the panel?s duty to consider impacts on the “human environment” taking into account the local “economy, life style, social traditions, or quality of life.” The arbitrators then proclaimed that the government’s decision to reject Bilcon’s proposed project based on the experts’ recommendation was a violation of the NAFTA.

As The Hill article points out, that shouldn’t have happened:

The parties to the NAFTA — the United States, Canada and Mexico — have all repeatedly clarified that ISDS is not meant to be a court of appeals sitting in judgment of domestic administrative or judicial decisions.

Nonetheless, the ISDS tribunal’s lawyers ignored the clear intent of NAFTA’s corporate sovereignty provisions, and issued their judgment dismissing local decisions following national laws. Because of the astonishing way that ISDS works, Canada can’t even appeal. However, as the article in The Hill points out, the situation would have been even worse had the ISDS tribunal argued correctly:

It shows that ISDS stymies crucial evolution in domestic law. Under the tribunal’s reasoning, a breach of international law arises when government officials interpret vague concepts such as the “human environment” or “socio-economic” impacts using principles or terms not expressly found in earlier decisions. Yet, particularly in common-law jurisdictions such as the US’s, law develops in large part through new interpretations, adapting to changing circumstances and times. If this evolving process were indeed a breach of international law, the US should expect to face significant liability to foreign companies, especially as ISDS is included in new treaties with capital-exporting countries.

In fact, there is a first hint that the US government is well aware of these huge problems with corporate sovereignty provisions, and that it is already preparing for the day when it loses a major ISDS case. That hasn’t happened so far in part because relatively few foreign companies covered by existing trade agreements with corporate sovereignty provisions have major investments in the US that would allow them to make claims. However, that will change dramatically if an ISDS chapter is included in the TTIP/TAFTA deal currently being negotiated. According to Public Citizen’s calculations (pdf):

More than 3,400 parent corporations in EU nations own more than 24,200 subsidiaries in the United States, any one of which could provide the basis for an investor-state claim if TAFTA were to be enacted with ISDS.

That might explain a very interesting aspect of the Fast Track Bill released recently, as Sean M. Flynn, Associate Director, Program on Information Justice, and Intellectual Property Professorial Lecturer in Residence, American University Washington College of Law, explains:

The Trade Promotion Authority (TPA) bill that was released last week contains a fascinating Section 8 on “Sovereignty.” The section appears intended to make all trade agreements with the U.S. not binding to the extent that they contradict any provision of U.S. law, current or future. If valid, the section would go a long way to calming fears in this country that new trade agreements, like the old ones, could be used by corporations or other countries to force the U.S. to alter domestic regulations.

However, Flynn then goes on to argue Section 8 actually has no effect in protecting US law, and that:

If Congress changes our law to be in violation of a treaty commitment, the only way to avoid liability for that change is to re-negotiate the applicable treaties to remove the confining language at issue.

That threat of being sued in international courts for non-compliance with treaties is precisely how corporations have used international agreements to force the signatories to strengthen protection for copyright and patents thanks to measures they themselves lobbied for, and to block any moves to change the law in favor of the public.

Follow me @glynmoody on Twitter or, and +glynmoody on Google+

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Comments on “Corporate Sovereignty Trumps National Laws; Here's How The US Thinks It Can Get Around That”

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That One Guy (profile) says:

Not equal to, but above

As the Bilcon case makes clear, corporate sovereignty clauses don’t put companies on equal footing with governments, but above them.

The ISDS tribunal basically just over-ruled the government in that case, and told them that they weren’t allowed to refuse the company’s proposal to set up shop in the area if it meant deviating outside the ‘authorized’ avenues in the agreement in doing so. What that means basically is that the law is locked in, and is not allowed to change, if doing so would ‘violate’ any terms in the ‘trade’ agreement, despite the usual claims that such agreements have no effect on a country’s ability to write and change laws.

Anonymous Coward says:

Re: Re: Not equal to, but above

That is not capitalism.

That is a stupid government giving up their Sovereignty.

Capitalism is neither good or evil, it can be used for either, but is not in an of itself evil. If you want to protect against the negatives that come with capitalism then you need to have strong anti-monopoly laws and a government not stupid enough to give up their sovereignty.

I bet if you were in charge of these companies you would be just as evil. I am betting you are one of those types that likes to blame tools for evil instead of the people using them. It is your kind and creates the concepts like Civil Forfeiture where your property instead of you is charged with a crime so they can steal it.

Justme says:

Re: Re: Re:2 Not equal to, but above

To look at capitalism as good or evil doesn’t work, Capitalism is a balance of beneficial and destructive effects. And unregulated capitalism will eventually end up having mostly a destructive effect.

The perfect example, which shockingly fox news hasn’t yet touted “As a shining example of a free market completely unfettered by burdensome government regulation” is the drug trade. What has been wrongly labeled as drug violence in Mexico is actually a fight over market share and profits. Their not fighting over supply, they are fighting for control of the market. Unregulated capitalism in the extreme!!

Capitalism is the most efficient economic system which when coupled with good regulation will have a largely beneficial effects. But left unregulated or poorly regulated, the destructive effects will eventually far out weigh the benefits.

tqk (profile) says:

Re: Not equal to, but above

… despite the usual claims that such agreements have no effect on a country’s ability to write and change laws.

Nobody who cares about this believes that !@#$ anymore. The problem is, those people are vastly outnumbered by those (“sheeple”) who don’t, and won’t, care.

Crazy !@#$, and they will get away with it, due to the preceding.

Bergman (profile) says:

Re: Not equal to, but above

The thing is there has always been one final remedy between sovereign entities when all other methods of resolution prove unsatisfactory: War.

If corporations are sovereign nations unto themselves, they can be the subject of military action.

How many tanks does the average corporation own? How many fighter-bombers? For that matter, how many corporations are nuclear powers?

tqk (profile) says:

Re: Re: Not equal to, but above

If corporations are sovereign nations unto themselves, they can be the subject of military action.

I’m not a violent man, but that’s strangely appealing. It really speaks to me (as a libertarian). These corps are not “laissez faire” free marketers. They’re looters, or “moochers”, feeding off of us who’re going by the golden rule and the rule of law. I’d be happy to ally myself with forces who want to fix this and eliminate their access. Thanks for this. Great food for thought. Hmm.

Jeff Green (profile) says:

Re: Re: Re:

This old saw may help explain it

You say you have troubles as great as my own
On the surface this seems to be true
But you see all my troubles all happen to me
But yours only happen to you

Or in grammatical terms, there are irregular verbs

I enact necessary environmental legislation
You enact regulations that unfairly favour local companies
They want to steal from me

David says:


It is a basic legal principle that in a court or arbitration panel, the adversaries are represented and the court is an independent party.

However, the ISDS panel is made from industry experts and “arbitrates” between a democratically legitimated government on the one hand and an internationally operating corporation on the other.

The “neutral” character is maintained by having a multinational panel.

Which makes about as much sense as making sure that there is a balanced number of fair- and dark-haired men on an all-male jury for sexual harrassment.

Anonymous Coward says:

Corporations have it both ways they are citizens,
but are able to sue countrys and avoid taxes and locate
in any country that has low taxes but they will still be able to sue another country that reduces their possible profits.
SO TPP is an attack on democracy , and also reduces all health and safety laws to the lowest common denominator .
Also its an attempt to extend all us laws on patents
and copyright to the eu.
WE have already seen with kim dotcom ,
the usa wants all countrys to be treated as if all people are under
the jurisdiction of us courts .
even email servers in ireland should be avaidable to the us justice system ,at least according to one us court judge .

tqk (profile) says:

Re: What's the problem?

Uh… what are we trying to accomplish here? I’m politically naive, so maybe there’s some subtlety I’m missing.

There’s not really any politics involved here, just cronyism and lawyering crap. Suffice to say, you lose, and multinational corporates get a get out of jail card no matter what your politicos put in place to protect you and your country. International century of the corporations and their elites. You didn’t really want your taxes going towards supporting your way of life, did you? Foolish backwards paranoiac thinking, that.

Cal (profile) says:

“The parties to the NAFTA — the United States, Canada and Mexico — have all repeatedly clarified that ISDS is not meant to be a court of appeals sitting in judgment of domestic administrative or judicial decisions.

Nonetheless, the ISDS tribunal’s lawyers ignored the clear intent of NAFTA’s corporate sovereignty provisions, and issued their judgment dismissing local decisions following national laws.”

Here in America, anyone who implemented that would be OPENLY declaring their TREASON against the American people and the US Constitution. (Yes, treason must ALWAYS be against the American people and the US Constitution and all that is in Pursuance thereof it – though it can go through those that serve within our governments it is STILL against the American people).

The US Constitution, Article 6 applies to those laws, Treaties, regulations that follow (are in Pursuance thereof) the US Constitution which are the ONLY lawful to be used here in the USA.

Article 6: “… This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.”

Alexander Hamilton: “… a treaty cannot be made which alters the Constitution or which infringes any express exceptions to the power of the Constitution of the United States.”

Alexander Hamilton, concerning the supremacy clause The Federalist Papers, 33: “It will not, I presume, have escaped observation that it expressly confines the supremacy to laws made pursuant to the Constitution.”

Alexander Hamilton: “The only constitutional exception to the power of making treaties is, that it shall not change the Constitution… On natural principles, a treaty, which should manifestly betray or sacrifice primary interests of the state, would be null.”

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