Thursday, March 03, 2016

The Secret Courts

The “investor-state dispute settlement” process, or ISDS, is built into treaties like NAFTA, the upcoming Trans-Pacific Partnership (TPP), Transatlantic Trade and Investment Partnership (TTIP), Trade in Services Agreement (TISA) and the Comprehensive Economic and Trade Agreement (CETA), between Canada and Europe. It allows foreign investors to sue participating governments if they do anything that harms their investment in that nation. Corporations can sue governments through this process, but governments can’t sue corporations. Suits are not brought through a normal, public court process. Instead, they are heard before private panels of arbitrators, often made up of attorneys who represent corporations as part of their practice. These hearings are conducted under rules set up by independent arbitration bodies that include the International Chamber of Commerce. These trade deals are not about trade. It’s about the transfer of power to Big Business. These agreements give great power to the wealthy and powerful few.

A wide range of policies can be challenged under ISDS: Argentina has had its macroeconomic policies challenged, Australia its anti-smoking efforts, and Costa Rica its environmental preservation laws. This process is unfairly skewed toward powerful corporations and ultra-wealthy individuals. A study published by York University’s Osgoode Hall Law School in Toronto has concluded that “the beneficiaries of ISDS … have overwhelmingly been companies with more than $1 billion per year in annual revenue – especially extra-large companies with more than $10 billion – and individuals with more than $100 million in net wealth.”

Report authors Gus Van Harten and Pavel Malysheuski point out that the “legitimacy” of the ISDS concept “appears to depend in part on an expectation that it benefits smaller businesses, not just large multinationals and the super wealthy.” But that doesn’t appear to be the case. Virtually all of the financial benefits of the ISDS have gone to the rich and powerful. Nearly 95 percent of all award money went to giant corporations or extremely wealthy individuals. Those “extra-large” corporations of $10 billion or more in revenue won 70.8 percent of the time, while others were only successful 42.2 percent of the time. They won in the “merits” stage of their hearings 82.9 percent of the time, versus a 57.9 percent success rate for everyone else.

The United States has fared better than many other countries in ISDS hearings. It’s not hard to understand why. Most of the countries that signed deals like NAFTA don’t have as many billion-dollar corporations and highly wealthy individuals as the United States does. As this report shows, that means their oligarchs and companies are less likely to win big through ISDS. Foreign investors rarely pursue arbitration against the United States and have never been successful when they have done so.


The ISDS industry scored big, too. The authors found that ISDS “lawyers, arbitrators, experts and other actors” had earned an estimated $1.7 billion from these hearings by the spring of 2015.

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