How Corporate Sovereignty Threatens Democracy

from the at-most dept

As people have begun to learn about corporate sovereignty through plans to include it in TAFTA/TTIP, the European Commission has been trying to scotch the idea that it might allow corporations to dictate policies to nations. Here, for example, is a comment in the Commission's main TTIP FAQ, which tries to answer the question "Why is the EU including Investor to State Dispute Settlement in the TTIP?": Including measures to protect investors does not prevent governments from passing laws, nor does it lead to laws being repealed. At most, it can lead to compensation being paid. Those are all true statements in theory, but that's probably not much comfort to Romania, which has been discovering the harsh reality in the long-running discussions over whether to allow a Canadian company to create a huge open-cast gold and silver mine in the country. Here's what happened last year: Gabriel Resources Ltd. (GBU), backed by billionaire hedge-fund manager John Paulson, threatened to seek as much as $4 billion of damages should Romanian lawmakers vote to oppose its gold mine project in the country.



"We have a very, very robust case, and we believe we have claims up to $4 billion that we can send to the Romanian state," Gabriel Resources Chief Executive Officer Jonathan Henry said today in a telephone interview. "We will go ahead and do that if the vote is against." As the European Commission notes, the existence of a bilateral investment treaty with Canada that includes a dispute settlement mechanism did not, in itself, stop the Romanian politicians from blocking the gold mine project in the parliamentary vote, which took place in December 2013. So everything's fine, right? Democracy prevailed, and the people were heard. After all, "at most", as the FAQ helpfully reminds us, Romania will have to pay $4 billion damages at some point.

Except that, for a country with a GDP of less than $200 billion in 2013, this represents 2% of the country's entire economic production. That seems an incredibly high price to pay for the exercise of basic democracy. The danger is that faced with the threat of such enormous fines, other parliaments will lack the courage shown by Romanian's politicians, and choose to ignore the will of their people by meekly acquiescing to corporate demands.

Does GBU deserve some compensation if a project is cancelled by the local government because of widespread public concerns about its safety? Perhaps -- although business always involves some risk, and foreign investment is no different. If a company is really worried about that aspect, it can take out insurance -- from the World Bank, for example. Does GBU deserve to be awarded 2% of a country's GDP, paid for by the citizens of a land struggling to raise its living standards? That hardly seems fair. And yet it's precisely what ISDS could allow, because the arbitration panel that decides such corporate sovereignty cases is unconstrained in what it can award, and not at all concerned with what the knock-on effects might be.

But the politicians making up the European Commission should be, since they are supposed to represent the 500 million European citizens that pay their salaries. The fact that they are pushing as hard as they can for ISDS in TAFTA/TTIP shows which side they are really on, and that they are quite happy to put corporations before nations, and profits before people.

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Filed Under: canada, corporate sovereignty, democracy, romania, tafta, tpp, trade agreements, ttip

Companies: gabriel resources ltd., gbu