Lawyers Gearing Up To Hit UK With Corporate Sovereignty Claims Totalling Billions Of Dollars Over Brexit

from the nobody-painted-that-on-the-side-of-a-bus dept

We're not hearing much about corporate sovereignty -- also known as "investment state dispute settlement" (ISDS) -- these days. It's definitely still a problem, especially for smaller countries. But the big fights over the inclusion of corporate sovereignty chapters in the two global trade deals -- the Transatlantic Trade and Investment Partnership (TTIP), and the Trans-Pacific Partnership (TPP) agreement -- have been put on hold for the moment. That's for the simple reason that both TPP and TTIP are in a kind of limbo following the election of Donald Trump as US President with his anti-free trade platform.

TTIP seems completely moribund, whereas TPP -- re-branded as TPP11 to reflect the fact that there are only 11 countries now that the US has pulled out -- is showing the odd twitch of life. A recent article in the Canadian newspaper National Post points out that the departure of the US might even allow some of the worst bits of TPP to be jettisoned:

the Americans insisted on longer intellectual property patent terms and stronger copyright regulations than many countries wanted. Canada will now argue for shorter patent terms, in support of its generic drug sector and in an attempt to keep drug costs down.

Canada is also keen to water down the investor-state dispute settlement negotiated by the U.S. in the original deal, and bolster the state's right to regulate in the public interest.

The move by Canada to rein in some of the worst excesses of corporate sovereignty follows the EU's lead in this area. As Techdirt reported, during the TTIP negotiations between the EU and US, the former suggested replacing the old ISDS with a "new" Investment Court System (ICS). Although the US was not interested, Canada later agreed to this slightly watered-down version for the CETA trade deal with the EU.

The ICS still doesn't exist, and is still something of a mystery in terms of how it will work. It was proposed in an attempt to head off massive public concern about corporations being able to sue governments -- and thus taxpayers -- for huge sums, completely outside the normal legal system, and subject to few constraints. But even ICS was not enough to stop the Belgian region of Wallonia nearly de-railing the CETA deal at the last moment.

Anxious to avoid that happening again, the President of the European Commission, Jean-Claude Juncker, had a rather radical suggestion in his recent State of the Union address. In order to make future trade deals easier to push through the legislative process in the EU, Juncker proposed removing investment protection chapters from them completely, and negotiating a separate deal covering this aspect. An article on Politico.eu explains the thinking behind that move:

Slicing out investment protection will give [Juncker] an immediate legal advantage. Under EU law, a trade deal without investment clauses could be ratified exclusively by the European Parliament and by the member countries as represented at the Council in Brussels. That effectively removes the direct veto powers of the Walloons.

Simon Lester, Trade Policy Analyst at the Cato Institute, thinks the US should follow suit -- an idea that someone from the same group suggested a few years ago:

The Europeans have faced a greater struggle with investment protection and ISDS than has been the case in the United States, but these provisions have been a problem here as well. If we want to make it easier to get trade negotiations completed and trade agreements passed by Congress, we should consider following the EU's lead.

Although removing corporate sovereignty from trade deals does not solve the larger problem of giving companies special protection, it is a step in the right direction. For example, after concluding trade deals that do not have ISDS chapters, governments may decide to bring them in as quickly as possible in order to enjoy their claimed benefits. When commercial relations work perfectly well without them -- as is already the case for both the US-Australia trade deal, and the one between the EU and South Korea, neither of which include corporate sovereignty -- governments may decide to leave it at that, and forget about further negotiations covering investment.

Unfortunately, none of these recent moves is likely to help the UK, currently struggling with the implications of last year's "Brexit" referendum to leave the EU. Ever-inventive lawyers have realized that an unexpected withdrawal of the country from the EU could represent an excellent opportunity for companies that have invested in the UK to claim that they will suffer as a result, and to use corporate sovereignty clauses to claim compensation potentially amounting to billions of dollars. Corporate Europe Observatory has a new post exploring what could happen here:

the UK's impending exit from the European Union may bring new investment arbitration opportunities. The country has 92 investment agreements in force, which investors from other countries could use to file ISDS claims against the UK. In conferences and alerts for their multinational clients, some of the top investment arbitration law firms are already assessing the prospect of such Brexit claims. Depending on how the Brexit negotiations turn out, these lawsuits could be about anything from foreign carmakers or financial companies losing free access to the EU market, to the government scrapping subsidies for certain sectors. One lawyer from UK-based law firm Volterra Fietta has even suggested that "there may be a number of investors that would have come to the UK expecting to have a certain low wage group of employees", which might sue for loss of expected profit if they lose access to underpaid, foreign workers.

But the clever lawyers don't stop there. They see opportunities for corporations to use Brexit as a way to sue other EU countries too:

Several law firms have published briefings suggesting that it would be an advantage for corporations if they structured their foreign investment into the remaining EU member states through the UK. This means that if you are a German company, for instance, and have an investment in Romania you could let this investment 'flow' through a subsidiary -- possibly only a mailbox company -- in the UK. You could then sue Romania via its bilateral investment treaty with the UK -- even if no such treaty was in place between Romania and Germany.

This kind of "creativity" is yet another reason why tweaks to corporate sovereignty of the kind contemplated by the EU and Canada are simply not enough: ISDS needs to be dropped completely from all trade deals -- past, present and future.

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  • identicon
    Agammamon, 27 Sep 2017 @ 8:22pm

    >Transatlantic Trade and Investment Partnership (TTIP), and the Trans-Pacific Partnership (TPP) agreement -- have been put on hold for the moment. That's for the simple reason that both TPP and TTIP are in a kind of limbo following the election of Donald Trump as US President with his anti-free trade platform.

    Trump notwithstanding, neither of those are 'free trade' deals. They might be modestly freer than what exists now, but they are a loooong way from free.

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

    • identicon
      Anonymous Coward, 28 Sep 2017 @ 7:14am

      Re:

      free trade .. no such thing

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

      • icon
        Roger Strong (profile), 28 Sep 2017 @ 8:10am

        Re: Re:

        Not while still having a country.

        Consider NAFTA: The US and Canada have different laws. Whether its food safety, labeling, hazardous goods transport, advertising, law enforcement, arms regulations or any of thousands of other things, the laws are different. The delegation of powers is different too; what might be a state law in the US might be a federal law in Canada.

        So you have two choices:

        a) You can harmonize all laws. The US adopts some Canadian laws and vice versa. Those would be decided by the treaty negotiators, not the normal legal/political means. And any time the US or individual US states wants to change a law or enact a new one, it must get Canadian approval first. Even if it's a campaign promise, your trade partners must sign off on it. Or...

        b) You can put some rules in place to manage what happens when goods and services from one country encounter the laws of another.

        We chose option b), for the best protection of sovereignty. The problem with the TPP and similar ISDS deals is that they lean heavily towards a).

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

  • icon
    Arthur Moore (profile), 27 Sep 2017 @ 11:02pm

    Will the UK pay out?

    Consider what's happened in the past when the US was found to be in breach. We basically said, "No," and that was the end. It's actually one reason I'm amazed countries constantly want ISDS agreements with the United States.

    The UK is moving along with an isolationist platform. All the politicians know that explicitly punishing them for this move will only encourage them. Theses lawsuits sure as heck look like punishment.

    I could easily see the UK either saying that those ISDS treaties are EU specific matters, and since they're no longer a member don't apply. For non EU treaties, I could easily see the UK following the US approach and just dare the companies to follow through.

    In the worst case, structuring a company to be based in the UK would be a horrid idea, since they could end up seizing it.

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

  • icon
    Robert Freetard (profile), 27 Sep 2017 @ 11:23pm

    Corporate Sovereignty

    Corporate Sovereignty,
    There's a construct that needs to be killed with prejudice.

    Nothing good can come from allowing a corporation to sue/challenge a sovereign government's policies and laws because it might cost them money.

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

  • icon
    Bergman (profile), 27 Sep 2017 @ 11:56pm

    There's something corporations are forgetting about all this

    They salivate and fantasize about being sovereign, about not having to answer to any government, just to their bottom line.

    But they are forgetting something about sovereignty.

    There has long been a remedy for disputes between sovereign entities, when they cannot (or don't want to) settle their differences through negotiation.

    So I have to ask -- how many soldiers, tanks, fighter-bombers and aircraft carriers do these corporations have to fight off a government with, once their abusing their sovereignty has the natural end result of doing so?

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

    • icon
      orbitalinsertion (profile), 28 Sep 2017 @ 2:03am

      Re: There's something corporations are forgetting about all this

      Some of them might quite like it, as inspired by dystopian science fiction as they seem to be.

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

    • icon
      Kal Zekdor (profile), 28 Sep 2017 @ 2:07am

      Re: There's something corporations are forgetting about all this

      ...where do you think the US Government gets all its military equipment from?

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

  • identicon
    PrivateFrazer, 27 Sep 2017 @ 11:58pm

    Ah Brexot, it just keeps giving. When will we just admit that it was a mistake, a minority win in a non binding referendum?

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

  • icon
    orbitalinsertion (profile), 28 Sep 2017 @ 2:00am

    Maybe the entire "City of London" can open a mailbox somewhere else and attempt sue the crap out of the UK if they can't keep all the perks they have managed to snag without even being part of the Euro bloc.

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

  • identicon
    Anonymous Coward, 28 Sep 2017 @ 2:07am

    Rather than politicians...

    Rather than politicians trying to block Brexit (with their "implementation period" and others) you now have the maligned global corporations doing it themselves.

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

    • identicon
      Anonymous Coward, 28 Sep 2017 @ 2:58am

      Re: Rather than politicians...

      Implementation period is not the same as blocking. It's rare that I'll stand up for my government but on this they're being quite sane. We aren't ready, at all, to cut ties with the EU so buying time is rational.

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

  • identicon
    Anonymous Coward, 28 Sep 2017 @ 6:55am

    Crooks

    This is more of a reason to get rid of lawyers.

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

  • identicon
    James, 28 Sep 2017 @ 8:31am

    You can only abstract things so far - then you meet realpolitik and angry voters.

    There's a huge problem with all of this!

    Lawyers are playing around with the technicalities of agreements. If they do end up suing some state, they would likely just cause the agreements to ignored or torn up. They could even whip up a lot of public and political anger towards the corporate sector.

    The reality is that when push comes to shove, governments are still very powerful if they chose to act.

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

  • identicon
    Anonymous Coward, 28 Sep 2017 @ 9:24am

    bloody good job! perhaps this will show the stupid UK government and others just how bad this is to have included in any 'deal' and how the law, provided it is upheld correctly, should always be the best and only needed choice!

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

  • icon
    ECA (profile), 28 Sep 2017 @ 1:02pm

    WHO GAVE WHO..

    Who gave Who rights to FORCE a trade agreement??

    https://ustr.gov/trade-agreements

    Lets ask something simple..
    WHAT does the USA export that is WORTH much of anything??
    There are 3 nations that have ENOUGH land to grow MOst types of food, as well as Food extenders, like Wheat and grains..

    For all the Agreements, under WHAT conditions would a nation GET FREE TRADE??
    Exchanging food for food, is 1 thing, but it would Do great things if the corps wanted restrictions, and GIVE the option NOT to TAX/TARIFF goods..

    WHY would USA corps Bring back jobs??
    NO pollution LAWS in other countries..(Japan Quit, they like fishing off the coast)(China is almost there also)
    Illegal Dumping?? NOPE, just throw it in the river..
    Wood and metal processing and PLASTICS are Cheap materials IN OTHER COUNTRIES.,..because they dont need to clean up ANYTHING..

    Notice I didnt say anything about JOBS??
    BECAUSE WORKERS HAVE FEW IF ANY RIGHTS.. 16 hour days?? not a problem. UNDER PAY?? not a problem... When you have a population EQUAL OR LARGER then the USA, IN A SMALL COUNTRY.. you can be PICKY about HIRE/FIRE all you want..

    What does that REALLY mean?
    Product and processing prices IN THE DIRT.
    WAGES in the DIRT..(look up COAL MINERS in the EARLY 1900's)

    So, out of all this, you can Cut Creating a product by over 2/3's.. Making the product as CHEAP as possible..

    Bring it to the USA.. Think about what it take to SHIP WOOD to CHINA, Process it, and then SHIP GOODS BACK.. HOW much are they saving?? That Processing and building in the USA is to expensive.. The Profits are HUGE..(look up the creation of the Wood PULP industry) LOVE wood and GLUE.

    WHAT is this "FAIR TRADE" thing..?
    Fair only to the middle man. NOT FOR YOU.

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

  • identicon
    Paul Keating, 28 Sep 2017 @ 5:38pm

    Removing Corporate Sovereignty in Trade Deals

    By removing the CS provisions from trade deals is the EU now opening themselves up to a Corporate Sovereignty claim based on the fact that the provision was removed?

    :-)

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

    • icon
      ECA (profile), 3 Oct 2017 @ 2:20pm

      Re: Removing Corporate Sovereignty in Trade Deals

      YES..
      And its funny..

      A Corporation tried to do it to the Aussies, but had to Change local to china to do it..And CHINA who had CS, kicked it out..

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


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