Business Whines That Even EU's Mild, Unsatisfactory Reform Of Corporate Sovereignty Goes Too Far

from the preserving-privileges dept

Last month Techdirt wrote about the attempt by the European Commission to deflect the growing EU resistance to the inclusion of a corporate sovereignty chapter in TAFTA/TTIP by turning it into a more formal Investment Court System (ICS). We pointed out some major problems with the proposal, and noted that the US Chamber of Commerce had already rejected the idea out of hand. We now have a response from BusinessEurope, one of the main lobbying organizations in the EU with 40 members in 34 countries. As Politico.eu reports, BusinessEurope is not impressed, and the reasons it gives are highly revealing.

[Luisa Santos, director for international relations at BusinessEurope] said that the provision [in the proposed ICS] that requires investors bringing an arbitration case to pay for all the expenses related to the case if they lose will scare off small businesses. Moreover, the mechanism for appeals will likely be used extensively, leading to long and costly trials.
On the matter of costs, a document put together by the European Commission on arbitration costs (pdf) includes the fact that:
Research by the OECD indicates that the average legal and arbitration costs for a claimant are around $8 million.
That average figure means that very few small businesses could contemplate bringing an investor-state dispute settlement (ISDS) case under the current system, so the move to ICS is unlikely to make any difference here. As for the criticism that the appeals process will be "used extensively", governments are only going to take on even more costs if they think that the rulings of the ICS are unfair or the awards disproportionate, and that is precisely why the appeal system is there -- to allow unfair and exaggerated awards to be challenged.
Santos also contended that the provision on countries appointing the judges would discriminate against the business community.
Leaving aside whether that is actually the case or not -- and why should it be? -- the comment overlooks a far more profound unfairness at the heart of both ISDS and ICS. This is the fact that only companies can bring cases, never the nations, which means that a country can never win a case: the best it can hope for is not to lose. That is a very real discrimination against the public, which always foots the bill when companies are successful in their claims against states, but never gets to enjoy corresponding awards against companies, because none is ever made. Finally, Politico.eu reports the following concern:
[Santos] slammed Malmström's plan to tighten the rules for cases of "indirect expropriation," in which a business claims compensation for an indirect lowering of investment values, such as through new environment or health regulations. Although the commissioner wants to avoid the abuse of such claims, the new EU rules are so strict that "in reality it won't be possible for any investor to be compensated," Santos said.
To its credit, the European Commission has published its proposed text for TAFTA/TTIP's investment chapter (pdf) in full. Here's the key passage limiting claims for indirect expropriation:
For greater certainty, except in the rare circumstance when the impact of a measure or series of measures is so severe in light of its purpose that it appears manifestly excessive, non-discriminatory measures of a Party that are designed and applied to protect legitimate public welfare objectives, such as the protection of public health, safety, environment or public morals, social or consumer protection or promotion and protection of cultural diversity do not constitute indirect expropriations.
As that makes clear, the intent is to prevent claims against measures that promote public welfare objectives -- and even then, exceptions can be made. So BusinessEurope's comments seem to mean that it thinks investors should still have the right to bring claims against all measures that are designed to promote public health, or to protect the environment -- in other words, precisely those kinds of legal actions that make corporate sovereignty provisions such a threat to society.

BusinessEurope's rejection of the ICS idea, which involves some very mild tweaks to the investor-state dispute process, demonstrates neatly that what it really wants is the old ISDS system, with all its egregious flaws, and its tilted playing-field that gives deep-pocketed corporations a powerful tool for intimidating sovereign governments, and interfering with democracy itself.

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  • identicon
    Anonymous Coward, 15 Oct 2015 @ 5:44am

    Santos: "But, but...now we are actually at risk of losing some money! No fair!"

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 15 Oct 2015 @ 6:00am

    Corporate Sovereignty, just another bullshit term used to codify the deregulation of corporate interests worldwide.

    I still do not follow their rational with respect to the holding of citizen taxpayers responsible for the actions of their governing body. It is a well established fact that your representatives in government do not cast their vote on legislation in accordance with the desires of their constituents. Therefore, why are the citizens held responsible, financially or otherwise, for the actions of another. Doing so is wrong no matter how you look at it.

    Privatized profit and socialized losses seems to have become the norm rather than the exception. How does this fit into the whole "Market is Self Regulating" and the "Let the Business Fail" talking points?

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 15 Oct 2015 @ 6:10am

      Re:

      Corporate Sovereignty and deregulation are two very different things.

      Deregulation is not a problem either. You may not realize this but the drivers behind regulation are often the businesses themselves, example Turbo-Tax and how it likes to keep taxes more complicated to support their business. They want just enough regulation to make it difficult for new businesses to challenge theirs or make people come to them, but not enough to prevent them from doing what they want.

      Far too many people just make blanket statements that deregulation is bad. I hope you are not ignorant enough to think there are no loopholes being built into the very regulations you likely know nothing about, think are needed, and by all likely hood have no idea what they actually mean.

      Regulation & Deregulation are neither inherently good or bad, it's all there in the rules surrounding them.

      I live in a world where regulation is different depending on the mood of the auditor, which is a certain sign of the stupidity of bad regulations that either need to be removed or redone. Of course that will not happen with blanket statements like your running around town.

      reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 15 Oct 2015 @ 7:50am

        Re: Re:

        Regulation was originally put in place to allow the civic society, represented by their elected leaders, to ensure a fair distribution of social wealth.
        This has long been viewed by the business community as 'unfair', since those not involved in creating the wealth still got to benefit.
        From the 70's, deregulation has been the creed for industry organizations and with Reagan and Thatcher it really took off.
        Since then, the corporate drive has succeeded beyond measure, and the starving of civic society in concert with the roll-back of social programs has driven up inequality and created one social, economic, and environmental disaster after another.
        The neo-liberal agenda of deregulation has only helped the very few top percent of society while leaving millions to their sad fate.
        To claim that "Deregulation is not a problem either" is factually wrong. It is very much a problem. At least for the +90% not seated at the table.

        reply to this | link to this | view in chronology ]

        • identicon
          Anonymous Coward, 15 Oct 2015 @ 8:19am

          Re: Re: Re:

          "This has long been viewed by the business community as 'unfair', since those not involved in creating the wealth still got to benefit."

          No matter how incorrect their non fact based opinion may be.

          reply to this | link to this | view in chronology ]

        • identicon
          Anonymous Coward, 15 Oct 2015 @ 9:46am

          Re: Re: Re:

          This has long been viewed by the business community as 'unfair', since those not involved in creating the wealth still got to benefit.

          The business community create wealth just like emperors created empires, the tell other people to do the work while collecting most of the profit and kudos.

          reply to this | link to this | view in chronology ]

      • icon
        John Fenderson (profile), 15 Oct 2015 @ 7:54am

        Re: Re:

        You are correct, but I do find it interesting that the massive amount of deregulation that has happened in the US has made things worse, as abusive or outright fraudulent behavior on the part of companies has increased.

        reply to this | link to this | view in chronology ]

        • identicon
          Anonymous Coward, 15 Oct 2015 @ 9:41am

          Re: Re: Re:

          Sure, some deregulation is bad, just like some regulation is bad too.

          I am just getting tired of the word itself being default BAD when it is just a word.

          As I can read from some of the other commenters they seem to be unable to grasp the concept and refuse to see deregulation as anything but a bad word.

          I want smart responsible and non-crony/non-corrupt/non-loop-hole regulation. This seems practically impossible to discuss because everyone assumes that regulation is good while deregulation is bad, when history proves beyond any shadow of a doubt that either of the two can eat away at the fabric of any society!

          When people refuse to be honest with the definition of words and seek to subvert their meanings then it will not be possible to have dialog and we know what comes after that.

          reply to this | link to this | view in chronology ]

          • icon
            John Fenderson (profile), 15 Oct 2015 @ 10:10am

            Re: Re: Re: Re:

            Yes, the topic gets ridiculously polarizing. I blame the corporatists, though, since they are the ones who started to (and continue to) demonize all regulation as being evil. It's very hard to engage with that sort of mindset without sounding like you're saying that all regulation is good.

            reply to this | link to this | view in chronology ]

            • identicon
              Anonymous Coward, 15 Oct 2015 @ 10:47am

              Re: Re: Re: Re: Re:

              I agree that corporatists are at the root of the problem though, but they are not the only ones to blame.

              We, all too often, let stereo types develop where they don't belong.

              The price of liberty is eternal vigilance and I have found that people have little endurance for vigilance. We tend to freely admit ourselves to the servitude of others be it corporate, government, or personal.

              The need for Regulation has been justified time and again by greedy/corrupt corporations, but the need for deregulation has also been justified time and again by greedy/corrupt politicians.

              I have found that "We The People" are often the least served in regards to either regulation or deregulation.

              reply to this | link to this | view in chronology ]

              • icon
                JoeCool (profile), 15 Oct 2015 @ 4:14pm

                Re: Re: Re: Re: Re: Re:

                The problem is that corporate money rules politics, so when we scream for less regulation, they toss the regs that keep them from screwing over the people and competitors, and when we scream for MORE regulation, they enact regs to build a wall against more competition as well as force people to buy their crap (often in the form of subsidies and bail-outs).

                The corporate masters make sure that either way, they win. What are you going to do? Move? They own the world.

                reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 15 Oct 2015 @ 7:21am

      Re:

      Most of what iSDS is meant to fight is the communistic ways of nationalising a company and claim its valuables "for the good of the people".

      Socialized losses is a selling point for many western countries unable or unwilling to compete on the race to the bottom on taxes and economic burdens from policies. By giving companies some safety blankets like ISDS to reduce the risk of unexpected economic burdens, western countries can ensure an advantageous position when it comes to attracting investors.

      People arguing for "market is self regulating" are generally against socialized losses too. That the more extreme see tax as theft and public interest as something consumer behaviour will fix (very unlikely given the root of advertising in imperfect knowledge) is another issue. Economic costs of "Let the Business Fail" can be pretty devastating too with the current stock market.

      While markets are imperfect and there are good reasons to avoid regulating or reduce regulatory burdens to encourage competition from smaller entities, certain regulations are needed to protect against bad practices. ISDS is in that context a huge problem and while ICS is imperfect, it is a small step in a more sustainable direction.

      reply to this | link to this | view in chronology ]

      • icon
        That One Guy (profile), 15 Oct 2015 @ 7:44am

        Re: Re:

        Most of what iSDS is meant to fight is the communistic ways of nationalising a company and claim its valuables "for the good of the people".

        That 'problem' is a self-solving one. If a country gets a reputation for doing that, companies aren't going to set up shop there anymore, and the government in question is going to lose a lot more than they gained from one 'nationalized' company. You don't need corporate sovereignty for that, basic actions/reaction is plenty.

        reply to this | link to this | view in chronology ]

  • icon
    Ninja (profile), 15 Oct 2015 @ 6:15am

    These corporate sovereignty clauses are pure bullshit. We've seen them being used here in South America by oil companies to try to run from environmental bills handed out for their mishandling of their effluents and products. I said at the time that the country (Ecuador or Colombia I can't recall now) should just give them a huge middle finger. We'd see they tone down quite quickly in order not to lose their money fountains. It's either you respect the laws of the country you intend to operate or get lost.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 15 Oct 2015 @ 6:50am

    yet again, business whines but doesn't give a toss about the people! these 'businesses, industries and corporations are trying to turn the planet into a giant cash machine where businesses profit even when they lose and the people lose all the time! so much for governments, elected by the people, working for the people! i sure hope there are a lot of heads roll when new elections come round!! those in the respective positions atm have done nothing except crap on joe public!

    reply to this | link to this | view in chronology ]

  • icon
    That One Guy (profile), 15 Oct 2015 @ 7:23am

    Oh what poor babies

    Santos also contended that the provision on countries appointing the judges would discriminate against the business community.

    As opposed to the current system, where the same people acting as judges in one case can be representing a company before their buddies in another case, and vice-versa?

    They're like junkies throwing a fit that their favorite drug of choice, a completely stacked 'court', might be taken away from them and replaced with something slightly less biased in their favor.

    reply to this | link to this | view in chronology ]

  • icon
    limbodog (profile), 15 Oct 2015 @ 7:37am

    Good enough for the goose...

    Oh my god! Arbitration! That's it!

    Every country should require that each business who chooses to sell products or services there sign a mandatory arbitration clause, wherein the moderator is chosen by said country and always sides with the country.

    Suck it, corporate sovereignty!

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 15 Oct 2015 @ 10:23am

    Brings a new meaning to the term "too big to fail"

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 15 Oct 2015 @ 11:15am

    As that makes clear, the intent is to prevent claims against measures that promote public welfare objectives
    That's not really clear. It only protects against non-discriminatory measures. A law that calls out tobacco or alcohol, for example, would be obviously discriminatory.

    reply to this | link to this | view in chronology ]


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