Discussions of the value of trade agreements have been quite prominent in the current election campaign. Supporters of the neoliberal economic model are strong advocates of so-called ‘free trade’, extolling the benefits they claim it provides, while critics have said that the only ones who really benefit are the oligarchs who get greater freedom to move capital and production around the globe is pursuance of greater profits, leaving behind abandoned workers.
But there is another lesser-known aspect of these agreements and that is that they create an alternative legal system that is heavily tilted in favor of the oligarchs. Chris Hamby, in the first of a three-part series, describes how this new system known as ISDS (investor-state dispute settlement) enables crooks to get away either scot-free or with just a slap on the wrist.
Imagine a private, global super court that empowers corporations to bend countries to their will.
Say a nation tries to prosecute a corrupt CEO or ban dangerous pollution. Imagine that a company could turn to this super court and sue the whole country for daring to interfere with its profits, demanding hundreds of millions or even billions of dollars as retribution.
Imagine that this court is so powerful that nations often must heed its rulings as if they came from their own supreme courts, with no meaningful way to appeal. That it operates unconstrained by precedent or any significant public oversight, often keeping its proceedings and sometimes even its decisions secret. That the people who decide its cases are largely elite Western corporate attorneys who have a vested interest in expanding the court’s authority because they profit from it directly, arguing cases one day and then sitting in judgment another. That some of them half-jokingly refer to themselves as “The Club” or “The Mafia.”
And imagine that the penalties this court has imposed have been so crushing — and its decisions so unpredictable — that some nations dare not risk a trial, responding to the mere threat of a lawsuit by offering vast concessions, such as rolling back their own laws or even wiping away the punishments of convicted criminals.
This system is already in place, operating behind closed doors in office buildings and conference rooms in cities around the world. Known as investor-state dispute settlement, or ISDS, it is written into a vast network of treaties that govern international trade and investment, including NAFTA and the Trans-Pacific Partnership, which Congress must soon decide whether to ratify.
Hamby gives three examples of how corporate criminals exploit this court.
- A Dubai real estate mogul and former business partner of Donald Trump was sentenced to prison for collaborating on a deal that would swindle the Egyptian people out of millions of dollars — but then he turned to ISDS and got his prison sentence wiped away.
- In El Salvador, a court found that a factory had poisoned a village — including dozens of children — with lead, failing for years to take government-ordered steps to prevent the toxic metal from seeping out. But the factory owners’ lawyers used ISDS to help the company dodge a criminal conviction and the responsibility for cleaning up the area and providing needed medical care.
- Two financiers convicted of embezzling more than $300 million from an Indonesian bank used an ISDS finding to fend off Interpol, shield their assets, and effectively nullify their punishment.
Just as the neoconservatives seek to impose US hegemony on the rest of the world by using US military force, the neoliberals seek to impose corporate-capitalist hegemony on the rest of the world using these trade agreements. Both groups are entrenched in the US political system and have the power to overcome objections.
When the US Congress votes on whether to give final approval to the sprawling Trans-Pacific Partnership, which President Barack Obama staunchly supports, it will be deciding on a massive expansion of ISDS. Donald Trump and Hillary Clinton oppose the overall treaty, but they have focused mainly on what they say would be the loss of American jobs. Clinton’s running mate, Tim Kaine, has voiced concern about ISDS in particular, and Sen. Elizabeth Warren has lambasted it. Last year, members of both houses of Congress tried to keep it out of the Pacific trade deal. They failed.
It will be interesting to see if the ISDS gets mentioned in the upcoming presidential debates and becomes an issue. The idea of a supra-national entity that can override national legal systems is the kind of thing that should be repulsive to the nativist campaign of Donald Trump and I am not sure why he has not taken u the issue.
The *idea* behind the ISDS is a necessary, and even a noble, one—the liberalisation of capital should be constrained by a multinational framework for that capital’s management. Supranational capital necessitates supranational regulations in order to be effective over the long term, and those supranational regulations require a supranational body to adjudicate them, and yet another supranational body to enforce them. But having the adjudicative body staffed entirely by the “I” in the “IS” is a bit like having the foxes guard the hen house.
It’s surprising as well, from a game-theoretic perspective, that so many legislators across the world would write themselves out of such power—either taking the short-term view of getting campaign contributions, or hewing so credulously to the religion of neoliberalism that they voluntarily surrender their authority to their paymasters. But, then again, the US Congress in particular has become so ossified and arthritic that it can’t even build a fucking road any more, so I guess it’s not *that* surprising. Or maybe the Alex Jones lobby is so strong they’re afraid of anything that smacks of the New World Order?
the liberalisation of capital should be constrained by a multinational framework for that capital’s management
Can you explain this a bit? I just don’t understand the terminology.
hewing so credulously to the religion of neoliberalism
That’s my bet.
Some people believe in an absolute free-market and other neo-liberal tenets with the same fervor that a fundamentalist Christian minister believes in a literal interpretation of the Bible or a ISIS imam believes in a literal interpretation of the Koran. Of course, he says cynically all three only believe in a literal interpretation if it suits their purposes.
I have had a neo-liberal economist tell me things that it took all of 5 seconds to debunk but he believed them totally.
And both have an ally in Hillary.
In NZ I have been railing against the TPP, but not because of it’s ISDS provisions (although they unnecessarily favour corporations by creating conflicts of interests in mediators) but because it isn’t in NZ’s interests because it offers only minor expansions of trade at the cost of subservience to U.S IP standards.
The TPP is in the U.S’s interests, but may not pass because it’s now a political football and the tide is flowing against freer trade right now. I’m happy it may fail, but not with foolish sentiment against trade.
There’s no need for ISDS to be such a problem, but it is because corporate interests are pushing their luck by having such treaties overly favour their interests. For nearly fifty years treaties have had perfectly acceptable ISDS provisions in them by incorporating the International Centre for the Settlement of Investment Disputes (“ICSID”) under the Convention
on the Settlement of Disputes between States and Nationals ofOther States, done at Washington on March 18, 1965
NZ has signed very successful treaties referring disputes to this mechanism and if incorporated into the TPP and it’s like the issue would fade. But the corporates who contributed to the treaty (where citizens could not due to it’s extremely secretive negotiations) just had to push for more in their favour.
fentex, #4:
That has been my impression of the TPP as well. Expansion of trade is rather minor, one sourse (Paul Krugman) says that it does allow better protection of environmental and labor laws than past trade deals. But other sources say that the major changes is in the intellectual property laws.
I’ve read somewhere that the Japanese government has already stated that it will not increase the length of time of copyright protections in its laws to be consistent with the TPP.
My last comment was unclear. I meant to say that I’ve read that current Japanese IP law isn’t strict enough according to the TPP, but the Japanese government has stated they won’t change their laws to be compliant.