Stop ISDS | 11 February 2019
MEPs take note: EU-Singapore deal could hinder fight against fraud and corruption.
by Bettina Müller
On Wednesday, MEPs vote on the EU-Singapore Investment Protection Agreement (EUSIPA). There are a number of reasons to reject this agreement, but the most controversial thing about it is that it allows corporations to sue states using an obscure system called Investor-State-Dispute-Settlement (ISDS).
ISDS – in all its forms, including a proposed ‘Multilateral Investment Court’ – is highly controversial, because it allows multinationals to bully governments into doing their bidding.
The most worrying thing about the EU-Singapore deal is not the risk that Singapore firms themselves pose, but the fact that the agreement looks set to be used as a model for reinvigorating ISDS. Today it’s a deal with Singapore, tomorrow we could be looking at a whole new generation of investment deals that will expand the scope of ISDS to unprecedented levels. Our governments will then be seriously impeded from passing regulations like curbs on pollution or health and safety measures.
But let’s stay with Singapore for the moment. Indeed, corporations from Singapore have sued other countries for hundreds of millions of dollars on various occasions already, using ISDS. One example that should cause MEPs concern is PACC Offshore Services Holdings vs Mexico which demonstrates that ISDS can undermine the fight against fraud, corruption and money laundering.
PACC Offshore Services Holdings (POSH) provides offshore marine support services, which includes leasing vessels. The background to the case is that a POSH subsidiary in Mexico entered into a services and vessels leasing agreement with the Mexican oil company Oceanografía, which lent these vessels to the state-owned oil firm PEMEX. When Oceanografía went bust in 2014, the Mexican authorities got suspicious. They found massive irregularities in its payments and receipts, which is why the company is currently being investigated for money laundering, corruption and fraud. Oceanografía is now being administered by the Mexican state.
When they started the investigation into the company, Mexico decided to take possession of Oceanografía’s entire fleet for preventive reasons, including POSH´s leased vessels. The Singaporean company claimed that this act (that was part of a criminal investigation) damaged its investment and was effectively expropriation. Because Mexico had signed a bilateral investment agreement with Singapore similar to the one the EU is poised to agree, POSH could sue Mexico through ICSID, the private arbitration court of the World Bank, which it did in May 2018 demanding over $200 million in compensation. This happened despite the fact that POSH’s vessels had long been returned to their owner, and that the company itself admitted that it only lost $5 million in profit (a tiny fraction of their $200 million claim). Also, the fact that POSH’s transactions with Oceanografía were with a company involved in one of the biggest fraud scandals in Mexican history did not affect the company’s right to sue.
Another Singaporean company, Coastline is also claiming more than $450 million through ISDS via its Panamanian subsidiary Shanara Maritime International and Marfield, for the same reasons. Coastline was also involved with Oceanografía.
What does all of this mean for Europe? In the special case of EUSIPA, it would mean that Singapore companies will be able to sue all EU member states using ISDS. And since Singapore is one of the Asian countries whose companies invest most in Europe, this could actually be a bigger deal than it sounds.
If EUSIPA is ratified, European countries investigating companies for fraud could also see themselves challenged through ISDS. And it could have other serious implications for regulation in sectors that Singapore companies invest in (such as financial services). Of course, the threat posed by Singapore companies is dwarfed by what could happen, if ISDS supporters manage to use this deal to expand ISDS and establish a permanent Multilateral Court of Investment.
Therefore, it is of utmost importance that MEPs vote down EUSIPA on 13 February. But it is equally important that we all start taking action! Write to your MEPs and sign and share our petition!