AFL-CIO | 10.10.2014
Smoke screen: One industry carve-out won’t solve the problem of corporate courts
According to recent reports (behind a paywall), U.S. trade negotiators for the Trans Pacific Partnership (TPP) trade deal are floating a proposal to prevent tobacco companies from using corporate courts to sue national governments over anti-smoking regulations.
The TPP would give multinational corporations access to a special legal procedure called investor-to-state dispute settlement (ISDS). ISDS allows foreign investors to directly sue national governments over measures they think harm current or even future profits. Instead of using the domestic procedures that citizens and local businesses use (national courts, administrative hearings, etc.) foreign investors instead would bring claims to private international arbitration panels that can potentially award vast sums of taxpayer money in compensation.
There are two ongoing cases in Uruguay and Australia in which ISDS is being used to challenge plain packaging regulations—regulations designed to protect public health—in other words, these countries’ taxpayers are being asked for money to compensate for the loss of future profits.
While some may say these cases are egregious, these are hardly the only cases of corporations taking advantage of extreme investor rights in trade agreements to target public interest regulations. A limited carve-out for a single product will do nothing to address the fundamental threat to workers, consumers, the environment and democracy itself that these corporate courts pose.
The proposed carve-out will not stop multinationals like Veolia from suing the government of Egypt for raising the minimum wage. It won’t stop the pharmaceutical giant Eli Lilly from suing Canada over patent requirements or stop extractive company Pacific Rim Mining (a Canadian company that has since been bought by the Australian multinational OceanaGold) from demanding compensation when El Salvador refuses to let it pollute the local water supply by operating a gold mine.
Any industry-specific carve-out will not address the serious structural problems inherent in the system itself. Issues of broad public interest should not be viewed through the narrow lens of trade and investment at all, let alone decided by unaccountable private panels. Systems of justice should be transparent and accessible on an equal basis. ISDS is anything but: Only foreign investors can use it and there are no requirements that affected communities be allowed to participate or even have their view considered. In many cases, there often are not even requirements that hearings or decisions be made available to the public at all! Even in the case of clear legal error, it is almost impossible to reverse a decision.
The private arbitrators hired to sit on these panels are not neutral—they operate for a profit and have an interest in both maintaining and expanding the system. Investor rights in trade agreements are so broad that an entire legal industry has developed around it. ISDS generates massive legal fees for law firms, and since conflict of interest rules are weak at best, many arbitrators rotate between deciding cases and representing companies bringing claims. The result is panels that are fundamentally skewed in favor of corporations and the wealthy and against workers and communities.
No multinational corporation should have the ability to set policy priorities or demand taxpayer money when governments regulate their behavior to protect the public. The threat these corporate courts pose to democratic decision-making goes far beyond any one industry or sector and cuts to the heart of the debate surrounding who actually benefits from trade deals. ISDS is fundamentally a tool to enhance corporate power. This harmful system cannot be curtailed in a piecemeal fashion. It should be dismantled entirely to make way for a trade model that protects people and the planet.