Study Shows Risks Of Including Corporate Sovereignty In The 'Other' Huge Asian Trade Deal, RCEP

from the watch-out-US dept

As we've noted, TPP is unlikely to come back from the dead, despite what some seem to think or hope. For example, the Japanese government has decided to go ahead and ratify TPP anyway. That seems foolish, since it has just thrown away most of its bargaining counters for other trade negotiations, in what amounts to an act of political seppuku. As Sean Flynn points out, Japan has form here, since it also ratified the infamous Anti-Counterfeiting Trade Agreement (ACTA), just as pointlessly.

One of the most important trade deals still under active discussion is the Regional Comprehensive Economic Partnership (RCEP). Techdirt first wrote about this 18 months ago, while recently we noted that many of its provisions are even worse than those in TPP. One aspect of RCEP that has received little attention so far is the corporate sovereignty chapter. The Transnational Institute (TNI) has put together a useful document looking at what it calls the "hidden costs" of including investor-state dispute settlement (ISDS) in RCEP. It provides an excellent summary of corporate sovereignty activity in Asia that complements a 2014 study from Friends of the Earth Europe, which looked at the same "hidden costs" of ISDS in Europe. Here are a few of the main findings for RCEP nations (pdf): 50 investment arbitration cases already filed against 11 RCEP (Regional Comprehensive Economic Partnership) countries since 1994, over 50% of which have been filed after 2010.



India alone has been the target of 40% of the cases filed against RCEP countries.



Foreign investors have claimed at least 31 billion USD from RCEP countries. Given the secrecy surrounding investor-state dispute settlement (ISDS) proceedings, this could be much more. This amount is 7 billion USD less than India's entire health budget for 2015.



Of the 31 billion USD claimed by investors, 81% has been claimed from just four countries, India, South Korea, Australia and Vietnam.



The largest known amount paid to a foreign Investor by an RCEP country is 337 million USD as part of the settlement in the Cemex versus Indonesia case.



36% of cases against RCEP countries concern environmentally relevant sectors.



RCEP countries have been sued for measures taken to protect public health, adjust corporate taxes, promote industrialisation, and review contracts acquired through allegations of corruption, among others. The study brings together much-needed data on corporate sovereignty cases in Asia. It also points outs why RCEP countries would be very unwise to sign up to an ISDS chapter in the deal: Including the harmful ISDS clause in the RCEP trade agreement under negotiation contributes to cementing investors' rights and expanding the scope of private arbitrators' power. RCEP will lock in place this system of privatised justice. Governments will find it much more difficult to withdraw their commitments to the rights accorded to foreign investors in RCEP than in Bilateral Investment Treaties, because they would need to put an end to the whole agreement and not just the sections on investors' rights. It's a general problem with ISDS provisions in trade deals: they are almost impossible to cancel, however much harm they end up causing. The bigger the deal, the greater the lock-in. This aspect underlines once more how corporate sovereignty comes at the expense of national sovereignty.

Finally, there's one other interesting nugget that Techdirt readers may find of note. According to the RCEP report, over two-thirds of all ISDS cases against RCEP nations have come from Europe. At the moment, there are only a few minor trade deals that allow European companies to sue the US in ISDS tribunals, in theory at least. But if some kind of post-Trump TTIP 2.0 were agreed -- always a possibility despite the anti-trade deal rhetoric -- and it included a corporate sovereignty chapter, the US might find itself on the receiving end of a similar barrage of costly lawsuits that will reduce its sovereignty at both a national and local level.

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Filed Under: asia, china, corporate sovereignty, isds, rcep, trade deals