Corporate Imperialism

The United States is about to enter into the largest trade deal in history. This deal will expand a system that allows wealthy corporations to exploit developing nations and will open up the United States to similar exploitation. This deal, which you may not be familiar with, is the Trans-Pacific Partnership (TPP). The current members are: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam. Together these countries compose 40 percent of world GDP and 26 percent of world trade.

Despite its importance, the deal is hardly covered by the mainstream media. While there have been some leaks in the negotiations, the deal has been kept secret from Congress and the American people. In fact, only the administrations of the negotiating countries and roughly six hundred “trade advisors” are in the know.

These so called “trade advisors” are really lobbyists for various wealthy and influential corporations and are pushing policies that will benefit their employers at great cost to the world. Some of the most well-known companies in the world, from IBM and Intel to Ford and Coca-Cola, pepper the list.

ECUADOR VS. CHEVRON

These companies have various interests at stake in the TPP negotiations, but they stand to gain the most from the expansion of the investor-state dispute system to the countries in the TPP. This system would empower “foreign firms …to skirt domestic courts and laws to directly sue TPP governments in foreign tribunals.” The foreign tribunals, known as international arbitration tribunals, pose serious risks to the ability of sovereign nations to protect the best interests of their citizens by expanding environmental, labor, and public health regulations. This is exemplified in an ongoing case between current TPP member Ecuador, and Chevron, which has also been represented in TPP negotiations.

Chevron, the second largest oil and gas company in the United States, is currently in an ongoing legal battle with Ecuador over Chevron’s destruction of the Amazon rainforest. In 2013, Ecuador’s highest court ruled that Chevron was responsible for $18 billion dollars in damages. Unfortunately, the Bilateral Investment Treaty (BIT) between Ecuador and the United States gave Chevron an alternative to paying up. Instead, throughout the process, Chevron has been conducting a separate legal campaign through an international arbitration tribunal. In 2013, the international arbitration tribunal absolved them of any responsibility for environmental damage done based on a paltry $50 million dollar cleanup.

While Ecuador is considering pulling out of the BIT, doing so could come at a substantial economic cost. Ecuador would lose out on all the benefits of such trade deals, and could also potentially lose any assets in the United States equal to the costs of Chevron’s lawyer fees if Ecuador refuses to pay them.

CORRUPTION WITHIN TRIBUNALS

The tribunal’s decision seems awfully convenient, and one might not be too surprised to learn that the three private attorneys who serve on the tribunals often rotate between suing governments on behalf of corporations and serving as judges on the tribunals. In fact, according to the Transnational Institute, a European think tank partially funded by the European Union, “Just 15 arbitrators, nearly all from Europe, the U.S. or Canada, have decided 55 percent of all known investment-treaty disputes. This small group of lawyers, referred to by some as an ‘inner mafia,’ sit on the same arbitration panels, act as both arbitrators and counsels and even call on each other as witnesses in arbitration cases.”

The corruption and problems with the international arbitration tribunals are not limited to the incestuous nature of the relationship between the judges and lawyers suing on behalf of the corporations. The Transnational Institute’s report continues, “Several prominent arbitrators have been members of the board of major multinational corporations, including those which have filed cases against developing nations.” The bias in such cases is self-evident. As a result of ties to the suing multinational corporations and their lawyers, the Institute finds that “arbitrators have failed to consider anything but corporations’ claims of lost profits in their rulings” and rejected the idea of giving “greater consideration to international environmental and human rights law in investment arbitration.” That’s wonderful news for multinational corporations interested in exploitative and destructive business practices, but extremely troubling to the average person.

Much of the evidence regarding international arbitration disputes shows that colonialism has not disappeared, it has simply changed its face. Multinational corporations based in the West with ties to the elite Western law firms that make up both the counsel and the judges typically sue and profit immensely from the system. Developing nations are forced to pay hefty settlements in addition to legal fees with taxpayer money that could be better spent on improving the country.

The most glaring example is a case in which, according to the Transnational Institute, “the Philippines government spent US $58 million to defend two cases against German airport operator Fraport—the equivalent of the salaries of 12,500 teachers for 1 year, [or] vaccination for 3.8 million children against diseases such as TB, diphtheria, tetanus, polio.” The average cost of a case amounts to roughly $8 million dollars. Not a small amount, and the costs go beyond the settlements and lawyers’ fees.

THE TPP: EXPANDING AN ABUSIVE SYSTEM

Of the 12 countries currently negotiating the terms of the Trans-Pacific Partnership, ten, including the United States, have agreed to be subject to lawsuits held in these infamous international arbitration tribunals. The TPP would authorize these tribunals “to order unlimited sums of taxpayer compensation for health, environmental, financial and other public interest policies seen as frustrating the corporations’ expectations.” The amount is based on the “expected future profits” the tribunal surmises that the corporation would have earned “in the absence of the public policy it is attacking.”

While the current system protects corporations from paying up when they are sued by nations, under the TPP, corporations will have the authority to prosecute signatories of the TPP for enacting regulatory policies if the policy cuts into the company’s expected future profits. Not only could Chevron (or any other company) avoid having to pay for environmental or health damages, they could sue the government for enacting policies in response to the malfeasance.

Lawyers in international arbitration disputes explicitly “encourage corporations to use lawsuit threats as a political weapon in order to weaken or prevent laws on public health or environmental protection.” As a result, developing nations are especially weakened by any strengthening of international arbitration tribunals. These nations are typically those most in need of new regulation in areas of labor, human rights, public health, and the environment. The TPP will discourage new regulations, keep operating costs cheap, and let catastrophes due to negligence (like the BP oil spill) occur without consequence for the corporations responsible.

The TPP will also amplify the tribunal’s ability to enforce their rulings, which exposes the US to risks previously only felt by economically weak nations. Under the TPP, refusal to comply could result in asset seizure in any of the twelve countries that signed the TPP. Furthermore, unlike smaller trade deals with developing nations, pulling out of the TPP to avoid enforcement would incur significant costs.

Lastly, until now, the United States has signed trade agreements including provisions for international arbitration tribunals with developing nations. Capital generally flowed from the United States to these developing nations, not the other way around, meaning US companies would sue the governments of developing nations. However, Japan and Australia, are capital rich nations with wealthy companies capable of launching successful lawsuits against the United States. This raises serious concerns that regulations meant to protect American citizens will be in jeopardy.

The Obama administration argues that international arbitration tribunals encourage interstate investment and will incentivize “U.S. companies [to] engage in and benefit from increased trade” by protecting foreign investors against government attempts to expropriate company assets. According to Mark Weaver of Emory Law School, expropriation “involves a host state directly or indirectly nationalizing an investment of a foreign investor.” The international arbitration tribunal is “an efficient and impartial way to resolve disputes” according to proponents of the system. Although it is true that some nations have nationalized industries or otherwise expropriated company assets in the past, the scope of international arbitration tribunals goes far beyond measures to prevent expropriation.

Even if proponents of the investor-state dispute system are correct that the investor-state dispute system would help attract foreign investors, the costs are too great. International arbitration tribunals overwhelmingly favor companies and give companies the power to discourage sovereign nations from passing important regulation that might hurt a company’s profits, but help people. The TPP will be the single largest trade agreement to date that pushes this corrupt system. It opens up more countries to lawsuits through these tribunals and puts the United States at a more serious risk of losing one. In the 21st century, anything from raising the minimum wage to putting a cap on carbon emissions is going to cut into corporate profits – that doesn’t make those policies undesirable.