TPP's Corporate Sovereignty Chapter A 'Threat To Democracy And Regulation'

from the wrong-direction dept

When the negotiations for the Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada were concluded in September 2014, the text was finally released after years of secrecy. At the time, the Canadian Centre for Policy Alternatives put together what remains the best overall analysis of the main text's 1598 pages, in a series of studies collectively called "Making Sense of CETA." The same organization has now published a set of analyses looking at key aspects of TPP, entitled "What’s the big deal? Understanding the Trans-Pacific Partnership".

They are all worth looking at, but Techdirt readers will probably be particularly interested in one called "Foreign investor protections in the Trans-Pacific Partnership." It's by Gus Van Harten, a professor at Osgoode Hall Law School of York University in Toronto, Canada, and a well-known commentator on trade law and policy. The first part of his analysis provides a good summary of the world of corporate sovereignty, or investor-state dispute settlement (ISDS) as it is more formally known. The later section looks at some new research that provides additional insight into just how bad corporate sovereignty is for those of us who are not insanely rich.

For example, Van Harten quotes some recent work showing that 90% of ISDS fines against countries went to corporations with over $1 billion in annual revenue or to individuals with over $100 million in net wealth. Similarly, the success rate among the largest multinationals -- those with turnovers of at least $10 billion -- was 71% in the 48 cases they initiated, compared with a success rate for everyone else of 42%. So any claim that ISDS is equally useful to all companies, including small and medium-sized businesses, is not borne out by the facts.

Van Harten also mentions some interesting figures for the financial winners and losers across all known corporate sovereignty cases. The largest corporations ended up with gains of around $6 billion; the thriving ISDS legal industry took home $2 billion; very wealthy individuals received around $1 billion; and large companies picked up another $500 million. As for the countries that were sued by these groups, their losses totaled some $10 billion. That's an important reminder that nations cannot win ISDS cases: the best they can ever hope for is not to lose. And they often do lose, as the high cumulative fines indicate.

Another fascinating insight comes from looking at the percentage of foreign-owned assets (that is, inward foreign direct investment) in the US economy that are covered by ISDS in trade and investment agreements. Currently, it is only around 10%, which is probably why corporate sovereignty is not a big deal for the US public today. If TPP is ratified, another 10% of foreign investments will be covered. But if the TAFTA/TTIP deal with the EU goes through, it would add another 60% to the total -- a huge jump. That would mean that TPP and TTIP together would make nearly all foreign investments in the US subject to corporate sovereignty.

Van Harten highlights another key aspect of TPP that has not received much attention. He points out that TPP goes beyond the older North American Free Trade Agreement (NAFTA), which is between the US, Canada and Mexico, but does not solve its serious problems, despite claims to the contrary: anything that is apparently better in the TPP compared to NAFTA will very likely be lost in practice because a U.S. investor can bring a claim under NAFTA instead of the TPP. Also, anything worse in the TPP would not be displaced by NAFTA because a foreign investor could choose to bring a claim under the TPP. If a foreign investor was unsure which agreement offered the best chance to win compensation, it could bring a claim under the TPP and NAFTA, making a different argument under each and getting compensation if it won under either. In other words, TPP has been written in such a way that the public always gets the worst of both worlds. Van Harten's chilling summary of the corporate sovereignty provisions in TPP is worth quoting in full: The TPP would take us in the wrong direction and be very difficult to reverse. It would expand the transfer of power to ISDS arbitrators from legislatures, governments, and courts. The arbitrators would not be accountable like a legislature. They would not be capable of regulating like a government. They would not be independent or fair like a court.



At the core of the TPP's threat to democracy and regulation is the uncertain and potentially huge price tag that its ISDS process would put on any law or regulation that is opposed by a large multinational company or a billionaire investor. The problem is not that foreign investors would be too big to fail; it is that the TPP would make the biggest and richest ones too risky to regulate.



The TPP was an opportunity for countries to step back from and reform the flawed system of foreign investor rights and ISDS. Instead, the TPP would expand the system massively. That decision is reason enough to reject the TPP in order to protect the established institutions of democracy, sovereignty, and the rule of law in TPP countries. Anyone who has any lingering illusions that it might be worth signing up to TPP should read this new analysis, which will dispel them rapidly.

Follow me @glynmoody on Twitter or identi.ca, and +glynmoody 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: ceta, corporate sovereignty, democracy, gus van harten, isds, predictions, tpp