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.

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Companies: nucoal

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Comments on “Australian Case Shows Why Corporate Sovereignty Isn't Needed In TPP — Or In Any Trade Agreement”

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23 Comments
Pseudonym (profile) says:

Re: Misleading story

By the way, the snippet from the SMH story is slightly misleading. NuCoal has not been accused of corruption. They bought a company (Doyles Creek Mining) which had been granted the mining licence, apparently without finding out that a government minister basically handed the licence to a group of his friends.

Derek Kerton (profile) says:

Re: Re: Re:2 Misleading story

So you propose that selling a tainted asset (or company) instantly ‘cleanses’ the asset? That would make it far too simple to launder dirty money.

Nope. Caveat emptor. Do your due diligence. Buy insurance on the deal if you want. But you buy the asset, you buy its problems.

But we even have a valid process that can cleanse assets when it’s truly needed by the economic system. It’s above board – when you buy assets out of receivership from some bankruptcy.

Anonymous Coward says:

The difference

In order to use the state-to-state dispute path, the company first has to convince the government of its motherland to pick up the case. Which may be difficult if they were accused of corruption, since not a lot of countries are willing to stick out their neck to defend that.

In a secret ISDS however, the company has the power to bully a ‘sovereign’ state all by itself.

Anonymous Coward says:

Re: State-state

The problem with the suggested solution of state-state disputes is that your state has to like your company. I could totally see this administration refusing to go to bat for a company because it was 10% owned by the Koch brothers, or something.

The same applies even more so for the so-called little people. To get a fair trial, the government has to like you. You can get totally railroaded if the government doesn’t like you. So maybe all trials should be held in international courts. If state and federal courts aren’t good enough for issues impacting corporate profits, how could they possibly be good enough to decide issues concerning people’s lives?

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