Latin American Countries Band Together To Fight Growing Problem Of Investor-State Disputes
from the US/EU-take-note dept
As Techdirt has observed, investor-state dispute resolution (ISDR) is turning into a major weapon that corporations can deploy against nations in order to claim damages for some alleged loss of future profits as a result of government action -- for example, stricter health or environmental regulations. Last year alone, 62 new investment arbitration cases were initiated against nations, and a record award of $1.77 billion was made against Ecuador.
Given that fact, it is perhaps not so surprising to see that country leading a new alliance of nations affected by ISDR and aiming to fight back:
Leaders of several Latin American countries have set up a new coalition to coordinate actions to face the growing number of international legal suits being taken against governments by transnational companies.
As well as holding a conference on the subject, and creating an observatory to monitor cases, the countries agreed to set up a new regional arbitration center for settling investment disputes. This is designed to address one of the biggest problems with the current ISDR mechanism:
A ministerial meeting of 12 countries held in Guayaquil, Ecuador, decided on several joint actions to counter the threat posed by these law suits, which have claimed millions or even billions of dollars from governments.
"No more should small countries face law suits from big companies by themselves," said Ecuador's Foreign Minister Ricardo Patino, at a media conference after the meeting which he chaired. "We have now decided to deal with the challenges posed by these transnational companies in a coordinated way."
The proposed centre is to provide an alternative to existing international tribunals which are seen as biased in favour of investors' interests.
The above article goes on to explain that there have been around 500 ISDR cases so far, with a high number involving Latin American countries: Argentina, Ecuador, Venezuela and Mexico have each had 20 to 30 ISDR actions brought against them.
The tribunals, such as ICSID (based at the World Bank in Washington), have also been accused of being mired in conflict of interest situations. Only a few arbitrators hear a majority of cases, with many of them also appearing as lawyers for companies in other cases, and some being board members of transnational companies.
A background note explaining the reason for the meeting said that arbitration proceedings and claims by European and US multinational companies against a growing number of states of the South have dramatically increased.
In other words, what seemed like a fairly minor issue when signing up to the investment treaties many years ago has since grown into a serious threat to many countries' finances and even sovereignty. That's something that both the US and EU would do well to remember when negotiating the TAFTA/TTIP agreement, which seems certain to discuss the possible inclusion of ISDR measures suffering from exactly the same problem.
These costly litigations, the majority of which were decided in favour of the investors, not only affect the States’ fiscal situation but pose a serious challenge to their national jurisdiction and sovereignty, and compromise on-going development plans in Latin America and other regions.
This problem originated in the 1990s when bilateral investment treaties were signed by developing countries in the expectation of attracting foreign investments, but the negative consequences of such commitments have now become evident, said the note.