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Corporate Sovereignty Used To Bully Ukraine, Colombia And Italy For Protecting Public Health And The Environment

from the profits-before-people dept

Corporate sovereignty provisions in investment treaties have become much better known than they were when Techdirt first wrote about them in 2012. Despite that growing awareness, and widespread outrage at the idea that corporations can request secret supra-national tribunals to make awards of hundreds of millions or even billions of dollars paid from public funds, companies continue to use the system to bully governments into changing their policies. For example, here is the US pharmaceutical company Gilead successfully deploying corporate sovereignty against the Ukrainian government, as originally reported by Investment Arbitration Reporter:

The dispute with Gilead, which Ukraine's Ministry of Justice had characterized as an $800 million dispute, relates to the drug sofosbuvir (sold by Gilead as Sovaldi). Sovaldi, a highly effective treatment for chronic hepatitis C, has been available in Ukraine -- a country reportedly home to over 2 million people infected with hepatitis C -- since 2015, but the company has lately been locked in a struggle over the ability of generic companies to market cheaper versions of the drug in Ukraine.

According to details of the settlement released by Ukraine's Ministries of Justice and Health, the settlement sees Gilead refrain from pursuing its damages claims against the country, and will see the company offer Sovaldi (and a combination therapy called Harvoni) at a reduced price.

Also, following the settlement, a generic competitor of Gilead has seen its own competing drug de-registered by authorities.

By de-registering the generic competitor to Gilead, the Ukrainian government is allowing the US company's to maintain its monopoly on the drug. In Colombia, the Swiss drug company Novartis also used the threat of a corporate sovereignty lawsuit, in this case to put pressure on the government there to stop it from issuing a compulsory license for a key anti-cancer drug, which would allow low-cost generics to be produced:

Leaked letters (PDF) to the Ministry of Trade and Industry show how Novartis threatened to resort to international investment arbitration for an alleged violation of the Swiss-Colombian bilateral investment treaty (BIT), which was signed by both countries in 2006. This undemocratic procedural mechanism, better known as Investor-State dispute settlement (ISDS), forms part of many trade agreements and allows an investor from one country to bring a case directly against the country in which they have invested before a private international arbitration tribunal, without going through local courts first. This threat has undoubtedly influenced the decision of the Colombian health authorities to stop short of pursuing a compulsory license, focusing only on a price reduction.

It's not just drug companies that try to use ISDS litigation to force governments to reverse their policies. Here's an oil and gas exploration company that is unhappy with a decision by the Italian parliament to ban new exploration and production activity within 12 nautical miles of the coast because of concerns for the environment and the high risk of earthquakes:

Rockhopper Exploration is fighting for compensation from Italy after it banned offshore drilling, leaving the company unable to develop one of its oil and gas fields.

The Aim-listed explorer said that it had begun international arbitration against the country for "very significant monetary damages" over the loss of future profits from its Ombrina Mare field.

Since Rockhopper is an oil exploration company, it must have carried out detailed studies on the geology of the field before deciding to drill for oil and gas. Either its geologists were negligent in not spotting that there was a risk of earthquakes which made the area unsuitable for exploitation, or the company knew about the dangers, and decided to continue with its plans anyway. In any case, it's ridiculous that Rockhopper thinks the Italian government owes it money for "lost future profits" that clearly never existed anywhere other than in the company's fantasies.

This is a general problem with corporate sovereignty claims: they often invoke some mythical "future profits" as if those were indisputable and guaranteed. But business is based on rewarding calculated risk-taking, and that includes the risk that hoped-for profits never materialize. ISDS is an attempt to remove the risk of investment from companies, and place it squarely on the public's shoulders, without any quid pro quo.

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  1. identicon
    Anonymous Coward, 20 Apr 2017 @ 6:43pm

    How Rollerball-esque...Corporates as Nation State Equivalents

    "[Rockhopper Exploration]...said that it had begun international arbitration against the country for 'very significant monetary damages' over the loss of future profits from its Ombrina Mare field."

    Amusing Fictional Solution: One phone call from Rome to Palermo (or New York), and Rockhopper gets a message like, "Heeey, that's a nice, little oil exploration company you got there - be a shame, if something was to happen to it."

    Practical Reality: Rockhopper has ships - Italy has a navy.

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

  2. identicon
    Robert Beckman, 20 Apr 2017 @ 6:56pm

    I don't think that means what you think it means

    Your last example doesn't stand for what you say it does. According to your linked article, Rockhopper received environmental approval for drilling in 2015, so they really did have expected value, "other than in the company's fantasies." In this case this looks more like a blanket ban and revocation After Italy had already determined it was environmentally ok to drill, without regard for the actual dangers (at least as your sources report it).

    There are plenty of instances of ISDS used to scam countries. This isn't one.

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

  3. identicon
    OGquaker, 21 Apr 2017 @ 1:11am

    Three judge panel....

    In 1998 the US B.L.M. (Bureau of Land Management) issues a 20 year gravel mining permit (fifteen times larger than any issued previously) to TMC (Transit Mixed Corporation) at a location in Sand Canyon, 27 miles north of LA City Hall, half way between Saugas and Acton. The Canyon is a large "ventura" or air restriction, speeding up winds funneled between Antelope Valley and the ocean one direction in the morning, and the other direction at night as the Mojave heats and chills.
    Los Angeles County Supervisor Antonovich comes to the "effected" ; Canyon Country, Valencia, Santa Clarita, Saugas, Newhall, Agua Dulce, Acton in his district and says the CUP (Conditional Use Permit) for one 88,000 Lb.truck with twin trailers every 2 minutes, 24/7, for the first 10 years.... and than one a minute for the second 10 years... won't happen "if we don't want it".
    "Fines" or micro dust will be controlled, or not, by spraying a million gallons of well water a day, OUR water.
    An 18 inches thick report of EPA charts and pages is distributed.
    Jobs are waiting to be filled.
    Nothing is offered for traffic or roadway compensation.
    We claim we will never see the stars again. Our children will never play outdoors again, except during the rain.
    The people of Los Angeles City never see stars. Their children can't play outside their door, rain or not.
    A second 18 inch thick report of EPA charts and pages is distributed.
    Santa Clarita puts up $1.3million to stop the new operation.
    TMC is bought by CEMEX in late 2000. Antonivich becomes "Topper", the invisible debutante http://homepage.ntlworld.com/forgottenfutures/smith/topper2/top2-07.htm .
    Even- (we're monotheistic in the 5TH district, no other layer of politician exist in "unincorporated" areas of Los Angeles County) -god's; ie. Antonivich's; -trusty Tonto retires, replaced by a likable Italian Ms.
    CEMEX sues LA County Board Of Supervisors for $2or3 billion in "lost profits".
    This new BIG pit, by price- undercutting the hundred LOCAL gravel pits (within a market area that includes Arizona) will revolutionize gravel marketing, moving gravel out of the mom and pop "era" into economy of scale per the 21centry. No more one-for you, one-for me haggling for peagravel.
    A three judge panel of persons knowledgeable in the industry under NAFTRA will now decide.
    Health, quality-of-life, "stikle fish" specie loss, diesel fumes are moot and specious arguments.
    I spend six months putting a concert together on both sides of the Tijuana (the border, dragging people from Global Phobia in TJ, Global Exchange in SF, AFSC (Quakers) in Tucson and San Diego to complement the Quebec City FTA events in April 2001. 2,000 kids show up. I drag myself out of post-protest debate in a borrowed hottub on Monday too a 8:30am meeting of the Los Angeles Board Of Supervisors meeting on Tues. morning back in LA.
    650 hard nose Republicans and Libertarians are in a room that might see twenty in the audience on an average Tuesday.
    Three or four of us knew that we were staring FreeTrade in the face.
    No one blinked.

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

  4. identicon
    OGquaker, 21 Apr 2017 @ 1:31am

    Neo-Cons got stamina

    " The Bureau of Land Management announced Friday (August 5, 2016) it would release its response Tuesday regarding the Cemex appeal of a BLM move to cancel two contracts Cemex had the rights to, which would have let Cemex mine approximately 56 million tons of sand and gravel from Soledad Canyon over the next 20 years...."

    http://www.hometownstation.com/santa-clarita-news/business/santa-clarita-waiting-to-hear-n ext-step-on-cemex-appeal-174983

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

  5. identicon
    Anonymous Coward, 21 Apr 2017 @ 1:44am

    Observations

    The weird thing is that, when we give for profit interests a steak in outcomes, we except them to be somewhat reasonable.

    Capitalism does not ensure reasonable participation. It only ensures that those with profit to make will do so vigorously. That isn't always a bad thing, but it is almost always a bad thing when profit versus the common weal are at odds.

    After all, what's a dollar more profit versus the public good, when it's no skin off your nose for the extra dollar, and to hell with the common good? This is how we get to the state of the US marketplace as is current.

    That's the real hook on unrestricted capitalism. The public good is often a casualty to profit. The hell of it is that I can't think of anything better, absent some sort of self restraint.

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

  6. identicon
    Darren Octave, 21 Apr 2017 @ 3:40am

    Re: I don't think that means what you think it means

    They received the environmental approval but not the permit to drill. Even if there's an approval, in view of new information for the protection of health or the environment, corporations should be allowed to challenge measure for better protection before private arbitral tribunal that only look at impact on the investment. If the company believes the State didn't behave fairly, there are administrative tribunals with real judges that can decide whether or not this is the case.

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

  7. identicon
    David, 21 Apr 2017 @ 4:13am

    Stupid headline.

    Corporate Sovereignty Used To Bully Ukraine, Colombia And Italy For Protecting Public Health And The Environment

    This is exactly what ISDS has been created for: combatting local laws interfering with business interests. It's not an unfortunate side effect, it is the desired and intended principal effect of the treaties that is at work here.

    "Look, the treaties work in the intended and advertised manner" is not news.

    They are an abomination and blight upon the free world, sure. But that's what they are intended to be.

    If you want to be newsworthy, you might try putting together tables of deaths attributed to cancelled health legislation next to the dollars of profit international companies have been able to make because of it.

    That's not a sensation, either. It's accounting. It's telling citizens the price that their government is willing to have them killed for.

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

  8. identicon
    Anonymous Coward, 21 Apr 2017 @ 6:08am

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

  9. identicon
    Anonymous Coward, 21 Apr 2017 @ 6:40am

    Re: I don't think that means what you think it means

    I've been promised many things that never panned out, but I do not have a taxpayer funded shadow judicial system to go fight for my right to bribe, extort and and otherwise threaten those who have not met my expectations.

    Pay to play? Very much so, where competition is publicly praised and privately condemned.

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

  10. identicon
    Anonymous Coward, 21 Apr 2017 @ 6:49am

    Re: Stupid headline.

    Your post is not comment worthy.


    "This is exactly what ISDS has been created for: combatting local laws interfering with business interests."

    Your claim it is not news because you are already aware of it, is rather silly unless you think this site exists only for your edification. The hell with everyone else, amirite?


    "They are an abomination and blight upon the free world"

    And you think everyone is aware of this also?


    "you might try putting together tables of deaths attributed to cancelled health legislation next to the dollars of profit international companies have been able to make because of it."

    That is a very good idea. Please get back to us once you have completed same, as I'm sure many here would be interested in reading it.

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

  11. identicon
    Anonymous Coward, 21 Apr 2017 @ 6:53am

    Re:

    It's funny how he thinks he is passing laws when he signs an Executive Order.

    Remember how the other team squealed like a stuck pig whenever Obama signed an Executive Order?
    Pepperidge Farm remembers.

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

  12. icon
    Anonymous Anonymous Coward (profile), 21 Apr 2017 @ 7:08am

    Corporate Sovereignty Limits

    I heard about GM's plant in Venezuela being appropriated by the government. It will be interesting to see how this works out via Corporate Sovereignty.

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

  13. identicon
    Anonymous Coward, 21 Apr 2017 @ 8:26am

    Re: Re: Stupid headline.

    Seconded!

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

  14. icon
    Wyrm (profile), 21 Apr 2017 @ 12:08pm

    Re: Re: Stupid headline.

    "Your post is not comment worthy."

    ... which is exactly why you're not commenting. Right?

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

  15. identicon
    Anonymous Coward, 22 Apr 2017 @ 10:17am

    Here's an oil and gas exploration company that is unhappy with a decision by the Italian parliament to ban new exploration and production activity within 12 nautical miles of the coast because of concerns for the environment and the high risk of earthquakes:

    Well, this is the country that convicted scientists of manslaughter for failing to predict earthquakes a few years ago. Do you think those scientists are currently going to say anything other than "yes, that might cause an earthquake", knowing that they will get blamed if there is an earthquake whether or not this actually caused it?

    Also, I'm no seismologist, but earthquakes are generally caused by the movement of tectonic plates, right? Even if something triggered an earthquake, wouldn't that help relieve the pressure and ensure the NEXT earthquake is less severe?

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

  16. identicon
    OGquaker, 22 Apr 2017 @ 1:01pm

    One more Climate Change; ask Oklahoma

    Virginia fracking wipes out Washington's Monument
    http://www.texassharon.com/category/earthquakes/

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

  17. identicon
    Anonymous Coward, 23 Apr 2017 @ 9:01am

    Re: Re: Re: Stupid headline.

    I see you missed the point completely.

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


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