Why Tribunals Imposing Corporate Sovereignty Are Even More Dangerous Than We Thought

from the above-the-law dept

Back in October, we introduced the term "corporate sovereignty" as an alternative to the standard but misleading phrase "investor-state dispute settlement" (ISDS) that is generally used. We noted that perhaps the worst manifestation of corporate sovereignty so far can be seen in Ecuador, where one of the secret tribunals used in these cases had ordered the Ecuadorean government to place Chevron above the country's constitution.

A detailed and important post from Public Citizen's Eyes on Trade blog not only sketches the background to that extraordinary demand, but also explains how things have since become even worse: Now Chevron is asking the same extrajudicial tribunal to order Ecuador's taxpayers to hand over to the corporation any of the billions in damages it might be required to pay to clean up the still-devastated Amazon, plus all the legal fees incurred by the corporation in its efforts to evade justice. Yes, you read that correctly: the oil giant's latest outrageous plan is to force the Ecuadorean government -- and hence the people of Ecuador -- to pay for the massive clean-up of the damage Chevron's predecessor company, Texaco, caused to the country, its environment and local communities. As the Eyes on Trade post points out, this means: [the ISDS tribunal] is acting as if the sovereign court ruling and two decades of trial never happened. In its recent decision, the tribunal barely made mention of the domestic ruling in Ecuador, or of the preceding 18 years of litigation spanning two nations. Many of the arguments that Chevron is bringing before the tribunal are the very same ones the corporation used before Ecuadorian courts -- arguments that were rejected. Rather than even examine the domestic courts' logic, the tribunal has invited Chevron to make the same arguments again as if for the first time. The case of Ecuador shows how a company can use the corporate sovereignty chapter in international agreements to ignore years of adverse decisions by a country's highest courts, and to appeal to three arbitration lawyers who take no account of local legislation, practice or traditions, and are literally a law unto themselves.

But maybe Ecuador is just an exception: perhaps ISDS tribunals in other cases have been more respectful of national laws and existing decisions. New research from Gus Van Harten, associate professor at Osgoode Hall Law School of York University in Toronto, suggests otherwise. Studying 162 corporate sovereignty cases, Van Harten reports that 37% of them involved reviewing a government action, while 44% were about disputed legislation or judicial decisions. In other words, in these cases, ISDS tribunals were clearly placing themselves above a country's politicians and judges. Worryingly, Van Harten found: there was little evidence that arbitrators demonstrated restraint in ways commonly adopted by domestic and international courts. Moreover: the field has apparently offered arbitrators a fertile environment for creative lawyering alongside expansive approaches to their authority. Unlike traditional judges, whose scope for action is tightly circumscribed by national laws, tribunals that ruled on cases brought under corporate sovereignty clauses had far more leeway for interpretation or -- even worse -- "creative lawyering." Van Harten concludes: In policy terms, the observations indicate a need for closer scrutiny by a range of actors -- such as national associations of legislators or judges -- of how arbitrators exercise their power and about whether their performance accords with considerations of public accountability, judicial restraint and basic even-handedness. He also has some advice: states facing a reasonable prospect of investor claims, or seeking protection for non-Western investors, should systematically assess their anticipated exposure or protection and consider their options to avoid downside risks. Of course, one obvious way to avoid those risks is for nations to refuse to agree to corporate sovereignty chapters in the first place.

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Filed Under: corporate sovereignty, ecuador, investor state dispute settlement, isds, tribunals

Companies: chevron