Steps forward and back on democratizing trade

Two days ago, Corporate Europe Observatory, the Transnational Institute and the Council of Canadians warned that the proposed CETA trade pact between Canada and the EU would grant energy companies far-reaching rights to challenge franking bans and regulations. These investor-state disputes are used by multinationals to challenge and overturn democratically-enacted laws protecting labor, the environment, public health, or any other common good that gets in the way of the supposed "right" to make money. The three groups are urging the EU, member states and the Canadian government not to include an investor-state dispute settlement system in CETA.

Under the North American Free Trade Agreement (NAFTA) there already exists a precedent for legal challenges to fracking bans and regulations that could be the state of things to come in Europe. For instance, US energy firm Lone Pine Resources Inc., is challenging a moratorium on fracking in the Canadian province of Quebec, suing the Canadian government for compensation.

EU member states already have experience with investor-state disputes undermining green energy and environmental protection policies. Germany is currently being sued by energy company Vattenfall because of the country's exit from nuclear power. Vattenfall is seeking EUR3.7 billion in compensation for lost profits. EU - Canada CETA negotiations were launched at a bilateral summit in May 2009 and negotiators hope to conclude a deal before the summer.

More positively, 12 Latin American governments gathered in Guayaquil, Ecuador at the end of April to craft a common response to investor-state suits. 

As Public Citizen reported, "Ecuador, the host of [this gathering] has taken a particularly hard battering from the investor-state system enshrined in NAFTA-style Free Trade Agreements (FTAs) and Bilateral Investment Treaties (BITs)," including a ruling from one tribunal to hand $2.4 billion to Occidental Petroleum after Oxy broke Ecuador's hydrocarbons law, while confronting a ruling from another tribunal that the government should breach its own Constitution and block the enforcement of an $18 billion court ruling against Chevron for massive pollution of the Amazon.

"Seven of the governments present signed a declaration to coordinate efforts in seeking to replace the investor-state regime with an alternative investment framework that respects sovereignty, democracy, and public wellbeing, and announced the launch of an intergovernmental commission based in Latin America to audit investor-state tribunals, draft alternative investment agreements, and collaborate in strategies for reform…. Representatives from the remaining five governments participated as observers and are now taking the declaration back to their capitals to discuss joining the emerging Latin American coalition."

These efforts are matched around the world. Investor-state provisions in the Trans-Pacific Partnership are a sticking point for Australia, while India and South Africa are also eyeing changes in policy regarding investor-state disputes. Clearly, there is widespread grassroots pressure to end this egregious example of corporate rule.

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Multiple countries are rejecting investor state dispute settlement clauses in free trade agreements

by Janet Eaton

There appears to be a growing awareness that NAFTA-style foreign investor privileges and their private "investor-state dispute system [ISD]", which have been among the most controversial aspects of past US trade deals, should be rejected in trade and investment agreements. (ISDs allow corporations to sue to overturn local or national regulations or laws that are perceived as impinging in any way on the "right" of the corporation to profit. Past suits have targeted environmental and health regulations.)

In particular this provision has emerged as a point of major contention in the Trans-Pacific Partnership (TPP) negotiations, with Julia Gillard's Australian government announcing last April that they would reject investor-state arbitration in all trade agreements. It seems that her government was not only concerned about the loss of public policy sovereignty but was also taking seriously the advice of the  Australian Productivity Commission which concluded there were "few clear benefits, and several worrying risks, associated with such provisions."

Following on the heels of Australia, Korea appeared poised to go the same route with polls showing the opposition, which rejected ISD, favoured to win the upcoming election; however, in the election held last week, the governing Conservatives managed to hold on to a slender majority so the jury is still out as regards South Korea. However one clue might be found in a recent April 6th claim by India that it plans to abolish the investor-state dispute system and renegotiate FTAs with South Korea, Singapore, and other countries. According to the English language newspaper, Indian Express,  New Delhi´s decision to abandon the ISD system is based on its first-hand experience with the potential threat foreign companies pose to public policy on the grounds of investment agreement violations.

Other countries that have concerns with, are opposed to, or have rejected, ISD, include the South African government which is re-examining the ISD system after a policy of affirmative action for blacks, aimed at reducing economic disparities between white and black people, was targeted in 2007 by a multinational corporation; the Brazilian parliament which has refused to ratify a number of investment agreements on the grounds that they infringe on legislative sovereignty and Ecuador and Bolivia that have pulled out of the International Center for Settlement of Investment Disputes convention.

Meanwhile in the US and Canada, both President Obama and Prime Minister Harper are pushing Investor State Dispute settlement in their frenzy to initiate  free trade deals in every corner of the world. In the case of Obama this is in spite of his presidential campaign promises to review NAFTA Ch 11 [investor state] and other harmful aspects of free trade agreements in general and in spite of over 100 members of Congress and many progressive NGOs expressing support for the TRADE [Trade Reform, Accountability, Development and Employment] Act introduced by Representative Michael Michaud [D-Maine] and Sen. Sherrod Brown (D-Ohio).

In the case of Mr. Harper, he ignores calls from civil society, NGOs, institutes, activists and three opposition parties to renegotiate NAFTA Ch 11 while belittling anyone who tries to make the case. . [6]

Hopefully this momentum to reject the ISD system will eventually be powerful enough to influence the Harper government because in the words of a statement of concern initiatied by Canadian academics with expertise relating to investment law, arbitration, and regulation:

"We have a shared concern for the harm done to the public welfare by the international investment regime, as currently structured, especially its hampering of the ability of governments to act for their people in response to the concerns of human development and environmental sustainability."

Photo: Foreign Policy In Focus

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