from the be-very-afraid dept
We wrote recently about how multilateral trade agreements have become a convenient way to circumvent democratic decision making. One of the important features of such treaties is the inclusion of an investor-state dispute resolution mechanism, which Techdirt discussed last year. The Huffington Post has a great article about how this measure is almost certain to be part of the imminent TAFTA negotiations, as it already is for TPP, and why that is deeply problematic:
Investor-state resolution has been a common component of U.S.-negotiated pacts with individual nations since the North American Free Trade Agreement in 1994. But such resolution is not currently permitted in disputes with the U.S. and EU, which are governed by the WTO. All trade deals feature some kind of international resolution for disputes, but the direct empowerment of corporations to unilaterally bring trade cases against sovereign countries is not part of WTO treaties. Under WTO rules, a company must persuade a sovereign nation that it has been wronged, leaving the decision to bring a trade case before the WTO in the hands of elected governments.
Traditionally, this proposed political empowerment for corporations has been defended as a way to protect companies from arbitrary governments or weakened court systems in developing countries. But the expansion of the practice to first-world relations exposes that rationale as disingenuous. Rule of law in the U.S. and EU is considered strong; the court systems are among the most sophisticated and expert in the world. Most cases brought against the United States under NAFTA have been dismissed or abandoned before an international court issued a ruling.
As this rightly points out, investor-state dispute resolution mechanisms were brought in for agreements with countries where the rule of law could not be depended upon. That makes no sense in the case of the US and EU, both of whose legal systems are highly developed (some might say overly so.) The Huffington Post article quotes Lori Wallach, director of Public Citizen’s Global Trade Watch, who explains what she thinks is really going on here:
“The dirty little secret about [the negotiation] is that it is not mainly about trade, but rather would target for elimination the strongest consumer, health, safety, privacy, environmental and other public interest policies on either side of the Atlantic,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “The starkest evidence … is the plan for it to include the infamous investor-state system that empowers individual corporations and investors to skirt domestic courts and laws and drag signatory governments to foreign tribunals.”
One recent example of the kind of thing that might become increasingly common if investor-state dispute resolution is included in TAFTA and TPP is provided by Eli Lilly and Company. As Techdirt reported earlier this year, the pharma giant is demanding $100 million as compensation for what it calls “expropriation” by Canada, simply because the latter’s courts refused to grant Eli Lilly a drug patent on the grounds that it didn’t satisfy the conditions set down in law for doing so.
A new report (pdf) from the UN Conference for Trade and Development (UNCTAD), pointed out to us by IP Watch, reveals just how widespread the use of investor-state dispute resolution mechanisms has already become:
The Issues Note reveals that 62 new cases were initiated in 2012, which constitutes the highest number of known ISDS [investor-state dispute settlement] claims ever filed in one year and confirms that foreign investors are increasingly resorting to investor-State arbitration.
By the end of 2012, the total number of known cases reached 518, and the total number of countries that have responded to one or more ISDS claims increased to 95. The overall number of concluded cases reached 244. Out of these, approximately 42 per cent were decided in favour of the State and 31 per cent in favour of the investor. Approximately 27 per cent of the cases were settled.
Although that suggests that states are winning more often than investors, the cost of doing so is a drain on public finances, and ignores cases that never come to arbitration because governments simply give in. And when states lose, the fines can be enormous: the report notes that 2012 saw the highest monetary award in the history of investor-state dispute resolution: $1.77 billion to Occidental, in a dispute with Ecuador.
As an accompanying press release from UNCTAD points out, this growing recourse to international arbitration
amplif[ies] the need for public debate about the efficacy of the investor-State dispute settlement (ISDS) mechanism and ways to reform it
Unfortunately, against a background of almost total lack of awareness by the public that supra-national structures are being put in place that allow their governments to be overruled, and their laws to be ignored, it is highly unlikely we will get that debate.