Tobacco Carve-Out From ISDS Starts To Spread: Another Nail In The Coffin Of Corporate Sovereignty

from the crack-in-the-dam dept

One of the last pieces of horse-trading that went on in order to conclude the TPP deal involved corporate sovereignty, aka investor-state dispute settlement (ISDS), and tobacco. As we reported a year ago, a “carve-out” for tobacco was agreed, which was designed to assuage fears that tobacco companies would use TPP’s ISDS mechanism to challenge health measures like plain packs — something that Philip Morris attempted against both Australia and Uruguay. Now, it looks like the idea is spreading, as Simon Lester points out on the International Economic Law and Policy Blog:

Whether or not the TPP ever gets ratified, the idea for a tobacco carveout seems to have taken hold. Via Tania Voon on twitter, I see that Australia and Singapore have agreed to amend their FTA to include a tobacco carveout.

The wording itself, inserted into the section on corporate sovereignty, is pretty simple (pdf):

Section B: Investor-State Dispute Settlement


Tobacco Control Measures

No claim may be brought under this Section in respect of a tobacco control measure of a Party

It’s worth noting that this is not just another carve-out, but a retrospective one, which creates an interesting precedent that might be followed elsewhere. After all, once the principle that tobacco companies should not be allowed to use ISDS to interfere with health programs is established, there’s no reason not to apply it more widely, to both future and existing trade and investment deals.

More generally, the appearance of this carve-out for tobacco raises a question Mike asked a year ago: if corporate sovereignty is such a bad idea for this industry, why not for others that can cause harm — like the extractive industries, for example? And once people start asking these kinds of questions, it’s not long before they realize that putting companies above national laws, and letting them sue governments in supranational tribunals, makes no sense at all for any sector. Calls to drop the entire ISDS system have been growing for a while; the latest move by Australia and Singapore is likely to make them louder.

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

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Comments on “Tobacco Carve-Out From ISDS Starts To Spread: Another Nail In The Coffin Of Corporate Sovereignty”

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Uriel-238 (profile) says:

Let's pull out a Simpsons example

Let’s say the tobacco companies develop Tomacco or some other addiction-driven consumer product that is removed enough to be regarded as its own thing, and not qualify for the carve out?

Because they will.

And other enterprisers will develop other tobacco-like products that we cannot trust end-consumers to use responsibly, and they will have the advantages of corporate sovereignty to scuttle national health measures.

That One Guy (profile) says:

One less cup...

… from a barrel still filled to the brim with sewage.

The fact remains that corporate sovereignty, the idea that corporations should have equal if not more power than governments over deciding what laws and/or regulations are ‘fair’ and ‘acceptable’ should be seen and treated as utterly toxic, and grounds to reject out of hand any agreement that it’s in.

Adding in an ‘exception’ for tobacco is an improvement to be sure, especially considering past history of the industry, but it’s still a gilded turd, just slightly more polished now.

Anonymous Coward says:

Just remove the ISDS altogether and make something else in its stead.
The ISDS is already ONLY useful against protectionist measures like bidding rules in state contracts or patent laws.

ISDS SHOULD NOT allow a corporation to sue a state for mandating better health & safety protocols.
You know things like less fat, less sugar, smoke detectors or safer building codes.
Which is exactly what the ISDS is being used for in a majority of cases.

Craig Welch (profile) says:

Re: Re:

Which is exactly what the ISDS is being used for in a majority of cases.

No it’s not.

“State conduct most frequently challenged by investors in 2015 included legislative reforms in the renewable energy sector, alleged direct expropriations of investments, alleged discriminatory treatment, and revocation or denial of licences or permits.”

Source: ‘Investor-State Dispute Settlement: Review of Developments in 2015’ (United Nations Conference on Trade and Development (UNCTAD) 2016)

Craig Welch (profile) says:

Re: Re: Re: Re:

“alleged direct expropriations of investments” is a pretty big and vague category.

No it’s not. Expropriation is a well understood concept in International Law.

> E.g. the recent tax changes that have been occurring around the world to prevent companies avoiding taxes by offshoring profits could fall under this category.

No they couldn’t. Taxation is not expropriation, period.

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