How Corporate Sovereignty Undermines Democracy By Irrevocably Binding Future Governments

from the how-is-that-even-possible? dept

Techdirt has been at the forefront of pointing out the dangers of including investor-state dispute settlement (ISDS) in so-called trade agreements. Indeed, we even helped come up with a new term — corporate sovereignty — to make clear that ISDS is really about placing corporations on the same level as entire nations, and giving them a unique power to sue a country for alleged harms before special tribunals. But there’s an additional aspect to this, which is explored in an insightful article by Sam Fowles on The Conversation.

He points out that although we don’t know in detail what the US-EU TAFTA/TTIP agreement will contain, we do have the text for the one between Canada and the EU, the Comprehensive Economic and Trade Agreement (pdf), known as CETA. The European Commission has said many times that it aims to build on the corporate sovereignty chapter in CETA when it comes to negotiating TTIP. One feature of ISDS in CETA is the following:

In the event that the present Agreement is terminated, the provisions of [Chapter X Investment] shall continue to be effective for a further period of 20 years from that date in respect of investments made before the date of termination of the present Agreement.

That is, even if a party pulls out of CETA, it will still be bound by the corporate sovereignty provisions for another 20 years, whether it likes it or not. Since we know that the US model investment treaty (pdf) also requires parties to continue allowing ISDS claims for ten years, it seems likely that TAFTA/TTIP, if it includes corporate sovereignty, will also have such a clause, for at least ten years, maybe more. Fowles explains why that is a problem — he talks about the UK Parliament, but it applies equally to the US:

Parliament represents the will of the people. Therefore it can make or unmake any law it wants. But there?s a caveat: parliament can?t make a law that would bind future parliaments. To do so would be undemocratic. The laws of one generation are often inappropriate for the next. Parliament must embody the will of the people at the time. When two ordinary laws conflict, the courts will always apply the one passed most recently.

But the 10/20-year extension of ISDS interferes with that. It says that whatever the views of government in power, it must still respect the ISDS chapter signed by one of its predecessors. One implication is that for a decade or two, any major policy changes could be subject to billion-dollar cases before corporate sovereignty tribunals — a strong disincentive to bring them in, whatever the public might want. The implication is clear. As Fowles writes:

If democracy is to remain the fundamental tenet of our constitution then TTIP must not be ratified. At the very least we must derogate from the 20-year clause. Living under a government you don?t like is the risk you take in a democracy, but being forced to live by rules agreed 20 years ago is fundamentally undemocratic.

As Techdirt explained last year, Canada has already signed a trade agreement with China that will take precedence over Canada’s constitution for 31 years. Let’s hope the US and EU aren’t foolish enough to follow suit by allowing corporate sovereignty to reign over them even after TAFTA/TTIP is terminated.

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Comments on “How Corporate Sovereignty Undermines Democracy By Irrevocably Binding Future Governments”

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27 Comments
That One Guy (profile) says:

Nothing foolish about it

Let’s hope the US and EU aren’t foolish enough to follow suit by allowing corporate sovereignty to reign over them even after TAFTA/TTIP is terminated.

It has nothing to do with being ‘foolish’, and everything to do with huge paydays, both upfront and in the form of lucrative ‘retirement/job offers’. Make no mistake, those pushing for corporate sovereignty clauses know exactly what they’re doing, and who stands most to benefit from such clauses, and to believe otherwise is to grossly underestimate them.

Anonymous Coward says:

There’s a guy in the /r/Economics subreddit really pushing *hard* on ISDS not being new or different from any current rules and that anyone involved in the business or the legal decisions around them certainly wouldn’t make the mistake of thinking there’d be any benefit to them from ISDS.

I don’t have much else to say other than that…

That One Guy (profile) says:

Re: Re:

If they’re not any different than the current rules, then they’re redundant and useless, and there’s no reason to include them in any of the ‘trade’ agreements. Toss them out and move on.

The only reason to keep them in is if they do in fact cause a significant change to things, unless he’s arguing that those pushing for such clauses just feel like wasting space and threatening the negotiations by insisting on keeping something that is attracting a great amount of negative attention.

Richard (profile) says:

. But there’s a caveat: parliament can’t make a law that would bind future parliaments.

. But there’s a caveat: parliament can’t make a law that would bind future parliaments.

It follows that parliament cannot ratify this treaty. If it does then the ratification is null and void.

There is nothing to stop the UK simply ignoring the huffing and puffing of the tribunals.
These 10 year/20 year extensions are meaningless since once you have withdrawn from a treaty then you have abandoned its “benefits” and hence the tribunal has no leverage over you.

What do you think Vladimir Putin would do in that situation??

Daydream says:

What IS "corporate sovereignty"?

I keep seeing the phrase here but I’m not entirely sure what it means.

*reads the first link in the post*

Ah. It refers to a situation where a company gains the option to sue a government for compensation, if that government makes legislative changes or otherwise takes action that would impede that company’s future profits.

And…as a rule, governments are imbued with the legislative power that permits them to create and enforce laws.
If a company (or individual) feels that their rights are violated by the measures in a law, they can sue the government for infringing on their rights, and claim remedies.

So…what would make this “corporate sovereignty” clause bad, is not that companies could sue governments (that’s normal), but rather, it would let a company sue the government, and lay claim to damages, without showing that their rights were/would be infringed.
Instead, they would only have to show that their expected profit would go down as a result of the government’s actions.

To use a metaphor (or a simile?) between two companies (rather than one company and a government), Bakemasters has been in business in Johnsville for 10 years, when YouBread sets up shop across the other side of town.
Bakemasters immediately sues YouBread, because Bakemasters predicts that some of its customers from across town will begin going to the more convenient YouBread instead.
This predicted loss of income forms the sole basis of Bakemasters’ lawsuit against YouBread; Bakemasters wins, the court ordering YouBread to shut down and pay Bakemasters $$$ in damages.

Is my understanding of corporate sovereignty correct?

That One Guy (profile) says:

Re: What IS "corporate sovereignty"?

Kinda, but you’re missing a few bits.

Probably first and foremost, is the how the government gets sued thanks to corporate sovereignty clauses. It does not go through the normal court system within a country, and instead takes place before a ‘tribunal’ composed of highly biased parties(one of the people acting as a judge today might be presenting a case before them tomorrow), which tends to skew things a bit towards the corporations.

If you’re familiar with the term ‘conflict of interest’, you can see why this particular setup is not a good one for anyone but the corporations.

Another big aspect of why it’s such a bad idea, is that it basically gives corporations more power over writing and enforcing laws than the governments of countries.

When a corporation can dangle a multi-billion dollar threat over a government’s head if they pass or modify a law that might cut into the company’s profits(like say expanding safety regulations), and both sides know that the ‘court’ that’s going to be handing out that ruling is incredibly biased in favor of corporations, that gives them an insane amount of power over the government, basically allowing them to dictate what laws can and cannot be passed, regardless of what’s best for the public and the country.

Richard (profile) says:

Re: Re: What IS "corporate sovereignty"?

When a corporation can dangle a multi-billion dollar threat over a government’s head if they pass or modify a law that might cut into the company’s profits(like say expanding safety regulations), and both sides know that the ‘court’ that’s going to be handing out that ruling is incredibly biased in favor of corporations, that gives them an insane amount of power over the government,

Unless the government simply ignores the judgement – as I am sure the US would do.
After all these tribunals don’t have a police force or an army to enforce their will.

NeghVar (profile) says:

Re: Re: What IS "corporate sovereignty"?

What would force a government to pay these corporations when one of these tribunals sides with the corporation?

If the government refuses, if the legitimate courts refuse and every agency, association, etc. that could get them the money they believe they are entitled to? What are they going to do, steal it?

cat says:

Re: Re: Re: What IS "corporate sovereignty"?

take a look at Argentina. They had some of their sovereign ships docked in the Arab Penninsula cant recall the country probably Qatar a few years ago that used the boats as bond holding so they would pay the mafia interest rates set about on that country in the late 80s by Wall St. Problem with this picture : is a sovereign nation being used as a pawn to bully another sovereign nation by a fat burping Wall St Bully Corporate: (Capitals intended) This insurance policy is for business as usual with privatising profits and socialising losses in any part of a nations GDP worth. That GDP represents bluntly huge gains for corps and shavings for workers and the middle class. This way it has ‘respectability’ through the international tribunal courts system. Its probably been ‘arranged’ and worked through quite sometime ago to get to this stage – perhaps 50-100 yrs in its vision. The feudal system has never really left us.

Richard (profile) says:

Re: Re: Re:2 What IS "corporate sovereignty"?

take a look at Argentina. They had some of their sovereign ships docked in the Arab Penninsula cant recall the country probably Qatar

In other words force majeur. It may have partially worked against Argentina but it wouldn’t have worked against the US or Russia or China or a major European country.
Look how far Antigua got against the US – even though all the WTO decisions went in their favour.

Richard (profile) says:

Re: What IS "corporate sovereignty"?

You miss out one critical point.

Normally companies can sue governments in the courts of the country concerned and under the laws of the country. The government has the option to simply change the law if it doesn’t like the result.

The new situation here is the existence of a tribunal which sits above the laws of the country and passes judgement on the laws themselves – not just the actions of the government.

Of course they key to this is that the decisions of such a tribunal are only enforceable so long as the tribunal has some leverage over the government.

The leverage would generally consist in the threat of the withdrawal of other benefits of the treaty. Generally this would take the form of trade based retaliation by other parties to the treaty.

In the absence of suchg leverage, when a country has withdrawn from the treaty, then it is not clear whether these clauses are enforceable. In fact it is unclear whether thease clauses would ever be enforceable against a country like the US, after all the US routinely ignores judgements of the WTO. In practice these clauses will genrally be used by the US against smaller less powerful countries or as an excuse by politicians for not listening to public opinion.

This latter is probably the biggest problem for people in big powerful countries/blocs like the US, EU, China etc

Random Element says:

Re: Re: Corporate Congress

If we are talking Sci-Fi, someone should mention the show Continuum, from Canada, which included a future where corporations were the government, the state was run by the corporate congress. They had armies, police, courts, etc… The pilot episode started with people being executed by a corporation. I’m pretty sure one of the episodes referenced food riots.

And unrelated to the show, but still relevant to the over-all conversation the phrase: “1984 was not a goal”

Spaceman Spiff (profile) says:

A fool and their $$ are soon parted.

“Let’s hope the US and EU aren’t foolish enough to follow suit by allowing corporate sovereignty to reign over them even after TAFTA/TTIP is terminated.” I guess hope springs eternal, but I suspect that isn’t going to work well in this case. In the case of TPP and TTIP, the inmates truly do run the asylum!

Anonymous Coward says:

ISDS provisions do not, to my knowledge, tie the hands of “future legislatures”. They are still able to change national laws, but with the limitation that money damages may become an issue for some period of time following any such change.

Moreover, as many who have already commented, it is one thing to secure a favorable decision before an arbitral tribunal, and quite another thing to actually “collect” on that decision.

I will readily admit that there are arguments to be made against the adoption of such provisions. I will also readily admit that there are many pros. Might. I suggest that if the author here wants to be seen as one who speaks with knowledge and authority, he actually take the time to objectively discuss both. In many instances the pos overwhelm the cons, but one limiting their knowledge of this issue to just what is regularly presented here would never know that because pros are studiously avoided.

John Fenderson (profile) says:

Re: Re:

“They are still able to change national laws, but with the limitation that money damages may become an issue for some period of time following any such change.”

And I can break any law I wish, with the limitation that fines or incarceration may become an issue for some period of time afterwards.

I’m not seeing how this is a meaningful argument.

“I will also readily admit that there are many pros.”

Many of those “pro” arguments have been discussed here, but perhaps there was some persuasive one that was missed. Can you tell us what they are?

Anonymous Coward says:

the whole aim is to run the planet as a company, with the government as front men, much like they are now, in powerful positions but powerless without the say-so and backing of those who are behind the government, doing whatever the hell they like as long as it makes money for them! any consequences, as long as they are to the ordinary people, are negligible.

David E.H. Smith says:

CETA & Global Treaties/'Arrangements

CETA & Global Treaties/’Arrangements;

2 Republican Senators Admit that They Have read the TPP.
Should Congressmen & Parliamentarians Have to Sully Their’ Beliefs’ & Sales Pitches with
‘Sordid’ Facts that Come from Actually Reading & Understanding Global Treaties/’Arrangements’?

CETA & Global Treaties/’Arrangements’;
Global Corporate Economy’s Last Chance to Fleece the Little Guy (95% – 99% of U.S.) Before Tanking the Global (non BRICS) Economy?

2 Republican Senators Admit that They Have read the TPP.
Should Congressmen & Parliamentarians Have to Sully Their’ Beliefs’ & Sales Pitches with ‘Sordid’ Facts that Come from Actually Reading & Understanding Global Treaties/’Arrangements’? Congress; Deluded, or, Deluding; ‘IGNORAMUS et IGNORABIMUS’ (I do not know & I will Not Know)?

Can ‘your’ Federal Representatives Willingly Answer ‘your’ Questions below If They haven’t Read the TPP & other Global Treaties? Just Ask them ‘For Your Record’ & then, to Share Their Inability with Others.
Don’t Forget to Demand Your Money Back for ‘Supplementing’ Fed Rep’s Wages & Future Considerations at Incompetency Tribunals.
How many ‘Preferred’ Shares are You Selling Your Right to Sue The Global Corporate Economy for?

Will CETA be Okay if Local Corporations can Prove that they Won’t Benefit from Agreements that Try to Disguise that they are Circumventing Other ‘Lesser’ Jurisdictions (Prov./State/Municipal)?
ie. Corporations Need Proof of Non Circumvention of ‘Lesser’ Jurisdictions, or else, ‘Non Good Corporate Citizens’, &/or, ‘Persona Non Grata’

What is Premieres’/Governors’ Rationale for not Defending Taxpayers; States Colluding with Feds?

TPP & Global Treaties part of corp. US’s attempt to Increase $17+ Trillion
Debt ‘Earning$’ & to Legitimize Hiding Earning$ in Untouchable Foreign Banks.
Time to REPATRIATE ‘Earnings’; NO FOREIGN Accountants, Banks, services, etc.
NO Trickle Down from Hiding ‘Earnings’ in Secret Foreign (Off-Shore) Accounts.

Shifting Costs to harmless Non Shareholders to Inflate ‘Profits & Dividends’.
Is It Time to Cool off the ‘Stockbrokers’ again; Buy Gold?

‘Schadenfreude’ & the Public; Too ‘Unenlightened’ to Figure out ‘The Greatest Global Sleight of Mind on Earth’ Illusion.
– David ‘Copper’ Smith

Are TPP & Global Corporate Treaties/’Arrangements more about Tort ‘Abolishment’ than Tort ‘Reform’?

Corporate America, Wall St., Congress; Deluded, or, Deluding; ‘IGNORAMUS et IGNORABIMUS’?

Global Treaties Not about How Much Trade, but, How to & Who to Trade with to ‘Undermine’ AIIB. About as Reversible as Wall St.’s ‘Derivatives’. How Can You Ensure that their are NO ‘Future Considerations’ Paid out by TPP, et al, ‘Foreign’ & Domestic Lobbyists?

Will Individual States & Provinces Jump at Opportunity to: Refuse, or, ‘Over Charge’ Business Licenses, Raise Targeting Prov./State Taxes, ‘Road’ Taxes, etc. to Recoup Global Treaties’ Suits (plus Earn Lucrative ‘Punitive Damages’) from Non Good Corporate Citizens (non-Compliant of Prov./State laws), Associated/Support Corps., Securities Exchanges, et al?

TPP, TTIP, CETA, et al, Shareholders ‘Persona non Grata’; Shareholders’ Meetings I.D. Toxic Neighbors, In-laws, et al.

The fact of the matter is, the flurry of global treaties have very little to do with trade. The treaties are about ‘preferred’ trading partners who are successfully attempting to legitimize for the signatories of the treaty/’Arrangements’, settlements of the TPP’s ‘contrived’ disputes, et al, by enabling the parties to alleged ‘disputes’ to use non adversarial settlements whereby,
the corporations & preferred shareholders ‘merely’ shift all of their costs from themselves to the harmless NON shareholder & the un-preferred shareholders, ie. the general public/individual taxpayers.

These costs include the costs of determining:
1) which harmless non shareholders will have to pay corporations & some SHAREHOLDERS (‘preferred’ SHAREHOLDERS) for the corporations’ ‘mistakes’, contrivances, unrealistic, &/or, any expectations, etc.,
2) how high (win-fall) the punitive penalties, awards, damages, etc. will be
without the harmless NON shareholder being represented throughout the determination
of, not, if the NON shareholders are guilty, but, ‘merely’ how ‘guilty’ the harmless NON shareholders are with no means/opportunity to appeal the decisions by way of the Treaties’ (‘Death-Star-Chamber’) new superseding, cyber jurisdiction Tribunals,
&
3) et al.
***
FULL Article, see; davidehsmith.wordpress.com
***
Please consider sharing the enclosed information & questions with 10 friends who will share it with 10 others…

David E.H. Smith says:

Corporate Sovereignty & Global Corporate Treaties/’Arrangements’.

At the risk of repeating the position, the crux of the flurry of Global Treaties is to shift the costs of corporations suing each other to suing the signatory governments; meaning, to suing the harmless Non Shareholders in order to inflate ‘profits & dividends’ of the corporations for their corporate leaders & Shareholders.

And, because the ‘disputes’ are to be resolved in secret (‘Death-Star’-Chamber) Tribunals there is no way to check & manage how much that the alleged ‘adversarial’ corporations are colluding to split any proceeds of the decisions; ie. any penalties, &/or, ‘damages’, particularly if the companies in the suits are owned jointly 49% – 51% (or, by any other split).
Other Tribunal abuses are;

1) Burden of proof; as the Tribunals are secret the litigants are not bound to government regulations & are not accountable to any governments, ie. the harmless, individual taxpayers who will pay the costs of:
a) developing, operating & maintaining the Tribunals
and
b) all of the decisions regardless of which corporations wins, or, loses the disputes, ie. The harmless, individual taxpayer is guilty in every decision at the outset of the resolution,

2) Appeals; there are no circumstances whereby the harmless taxpayers can take evidence that one, or, both of the corporations in a ‘dispute’ have acted ‘illegally’. For instance; the Tribunals do not have to accept proof that either, or, both of the litigants have inflated costs of the damages because neither ‘litigant’ is paying any of the costs. Consequently, the challenge of malfeasance will not be raised by the litigants. The proof of inflated costs will not be heard, or, have merit with The Tribunals. Will it be up to the harmless individual taxpayer to raise the legal funds in order to try to sue the corporations in the lesser courts including The Supreme Court of Canada, et al?
(see; Investment Litigation; Putin, Buffett, &/or, the ‘coveted’ Hong Kong investor)

3) Bribery/Lobbying; as the harmless taxpayers pays for all of the Global (non BRICS) Corporate Tribunals decisions, there will be no need for the corporate litigants to try & bribe the Tribunals as the ‘guilty’ party, the harmless taxpayers, have already been ascertained at the point that the Treaties/’Arrangements’ have been signed & ratified. It may not be a coincidence that as of May 20, 2015, 2 Republican Senators (US) have admitted that they Have read the TPP. How many Senators who have Not read it are Supporting the TPP? And, how many Canadian Senators, et al, Have read it, &/or, the other Global Corporate Treaties/’Agreements’ & as a consequence support the TPP, et al? (see; ; ‘IGNORAMUS et IGNORABIMUS’ (I do not know & I will Not Know)
&
4) et al.

Therefore, one of the many areas of ‘collateral damage’ caused by the Global Corporate Treaties/’Arrangements’ is tort law. As the corporations behind the treaties will no longer have to pay compensations because they are off-loading their liabilities to the signatory governments’ harmless taxpayers , the corporate ‘desire’ for tort ‘reform’ is moot. The Treaties are willfully causing the de facto ‘abolishment’ of significant areas of tort law.
By way of closing, what do you, the reader, think are some of the various other areas of ‘collateral damage’ that are probably the real target reasons for developing the treaties in the first place? Trade & employment are continuing to have nothing (or, very little) to do with why the corporations based in various countries have come together to protect &promote themselves at the costs of the harmless taxpayers via the flurry of Global Corporate Treaties/’Arrangements’. *** For More Information, see,
‘TPP & Global Treaties & Anti AIIB’. davidehsmith.wordpress.com
Also see;
‘The Submission’ to The SUPREME COURT of CANADA:
“The SHAREHOLDERS & Corporations of AMERICA, Australia, Canada, the EU, et al
vs
the harmless Canadian NON shareholders, both; Native & non Native, et al”
including
‘The MERKEL (Chancellor of Germany) Letter; To Sue, or, Be Sued?’
(see; davidehsmith.wordpress.com)

TeaPartyImmigrationCoalition (profile) says:

CORPORATOCRACY

CORPORATOCRACY:
This will be our future. Remember those awful “B” movies that portrayed the world run by corporations. Well, reality is trumping fiction today. In a mind bending manner, these international corporations are fast becoming a new thing: corporations that have similar or equal rights as nations!
Thus, these corporations will have the right to sue in international courts. this was a right previously reserved for nations. However, the new TPP and TTIP will allow corporations to haul you, your company and your local and state governments into international court. Not having the resources, most of us will fold our legitimate causes. We will fold because of the money. Giant corporations are like the US Government: nearly unlimited resources to sue.
We must stop this onslaught, this juggernaut against freedom. For that is what the greedy hate most: your ability to be free via the US Constitution. Daily, you hear arguments that say that the Constitution is outdated, made up by men in powdered wig and thus has no relevance to today. Daily, you hear about end runs around the it by politicians on both sides of the aisle. And we also have Justice Roberts who said, incorrectly, that the Treaties of the United States can supercede the Constitution!
If you fail to get very excited about this, you don’t compromise the future…you cede it. You give it away. You forfeit your children’s and grandchildren’s future. You destroy the world’s best hope for liberty.

Greg says:

TPPA will cause revolutions

Does anyone seriously think that this deal will promote trade, workers wealth, when in fact its a well hidden asset steal, & competition breaker.
This deals going to cause revolutions, if not wars. The only way to get out of it, is if other countries agree.
Does America want a generational war in the pacific.

And kiss you pension money goodbye.

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