Trade Agreements Are Designed To Give Companies Corporate Sovereignty

from the above-the-law dept

One of the difficulties of making people aware of the huge impact that investor-state dispute settlement (ISDS) clauses in TPP and TAFTA/TTIP are likely to have on their lives, is that the name is so boring, and so they tend to assume that what it describes is also boring and not worth worrying about. And yet what began as an entirely reasonable system for protecting investments in emerging economies with weak judiciaries, through the use of independent tribunals, has turned into a monster that now allows companies to place themselves above national laws, as Techdirt has reported before.

The acronym "ISDS" just doesn't capture any of that, so during a conversation on Twitter with Maira Sutton, Jamie Love and a couple of Techdirters (Mike and me), Joe Karaganis came up with a great alternative: "corporate sovereignty". That, in a couple of words, is what ISDS is really all about. It represents the rise of the corporation as an equal of the nation state, endowed with a financial sovereignty that allows it to claim compensation if its expectation of future profits is somehow diminished by a country's courts or legislative changes.

A link-rich page on Public Citizen's "Eyes on Trade" blog provides a timely introduction to the field. It's based on another interesting, but slightly more academic post by Todd N. Tucker, found on the Investment Policy Hub of United Nations Conference on Trade and Development (UNCTAD). That organization produces an extremely valuable annual review of the whole area of ISDS/corporate sovereignty, which is recommended if you want to get all the facts and figures.

Here's Public Citizen's summary of perhaps the most blatant attempt to assert corporate sovereignty so far: In one of the Chevron v. Ecuador cases, a three-person tribunal last year ordered Ecuador's government to interfere in the operations of its independent court system on behalf of Chevron by suspending enforcement of a historic $18 billion judgment against the oil corporation for mass contamination of the Amazonian rain forest. The ruling against Chevron, rendered by Ecuador's courts, was the result of 18 years of litigation in both the U.S. and Ecuadorian legal systems. Ecuador had explained to the panel that compliance with any order to suspend enforcement of the ruling would violate the separation of powers enshrined in the country’s Constitution -- as in the United States, Ecuador's executive branch is constitutionally prohibited from interfering with the independent judiciary. Undeterred, the tribunal proceeded to order Ecuador "to take all measures at its disposal to suspend or cause to be suspended the enforcement or recognition within and without Ecuador of any judgment [against Chevron]." As that notes, the tribunal was essentially telling the Ecuadorean government to place Chevron above the country's constitution -- an extraordinary state of affairs: imagine if the US government were ordered to do the same. Unfortunately, Ecuador's situation is one that is likely to become more common if the corporate sovereignty sections of TPP and TAFTA/TTIP make it into the final versions of those treaties.

Follow me @glynmoody on Twitter or identi.ca, and on Google+

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community. Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis. While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

Filed Under: corporate sovereignty, investor state dispute, investor state dispute resolution, investor state dispute settlement, isds, tafta, tpp, trade agreements, ttip