Australian Case Shows Why Corporate Sovereignty Isn't Needed In TPP — Or In Any Trade Agreement
from the running-out-of-arguments dept
One of central claims made by supporters of corporate sovereignty chapters in trade deals is that companies “need” this ability to sue the government in special tribunals. The argument is that if the extra-judicial investor-state dispute settlement (ISDS) framework is not available to a company, it will be defenseless when confronted with a bullying government. A new case in Australia shows why that’s not true. A column in The Sydney Morning Herald provides the background, which concerns a US company called Nucoal:
In 2013, the NSW [New South Wales] Independent Commission against Corruption found that there had been corrupt conduct relating to the granting of mining licences to Nucoal and other mining companies and the NSW government cancelled the licences.
Naturally, Nucoal unleashed its lawyers:
[Nucoal] demanded compensation of more than $900 million in Australia’s High Court, claiming the decision to cancel its licence without compensation was unconstitutional and had reduced the value of the company. The High Court found in April 2015 that under Australian law Nucoal was not entitled to compensation.
Now Nucoal had a problem. Normally, a company in this situation would invoke the corporate sovereignty chapter in a relevant trade deal, and move the case to secret ISDS tribunals, which were likely to be more favorable to its cause than the independent national courts. But with unusual foresight, Australia refused to accept ISDS in the 2004 AUSFTA trade agreement between the US and Australia — which makes its decision to acquiesce to ISDS in TPP doubly foolish. Despite what fans of corporate sovereignty claim, Nucoal still has another option at this point:
Nucoal is pressuring the US government to put a case to the Australian government that the denial of compensation has violated the general investment terms of the [AUSFTA] agreement. This could result in a formal complaint from the US government demanding trade sanctions against the Australian government.
Last week The Australian reported that the CEO of the US Chamber of Commerce in Australia has announced that the US government will raise the issue in a closed-door review of the AUSFTA to be held in May.
That is, unable to avail itself of the investor-state dispute mechanism, Nucoal now wants to take advantage of the state-state dispute settlement process (pdf) whereby the US government formally complains to the other government concerned. Now, whether the US government should really be taking up a case involving corruption is another question. The key point is that it is not absolutely necessary to include corporate sovereignty provisions in a trade deal to protect companies, because there is always the state-to-state mechanism that can be invoked if necessary.