Governments and Activists are Fighting the Corporate “Right” to Sue Governments

Robin Broad

This post is drawn from a new article regular TCB contributor Robin Broad wrote with John Cavanagh, “A Strategic Fight Against Corporate Rule,” The Nation, February 3, 2014.

Over the past several decades, multinational corporate Goliaths have helped to write and rewrite hundreds of rules skewing tax, trade, investment and other policies in their favor. The extraordinary damage these policies have caused has become increasingly apparent to the communities and governments most directly affected by them. This, in turn, has strengthened the potential of a movement that’s emerging to try to reverse the momentum. But just like David with his slingshot, the local, environmental and government leaders seeking to revise rules to favor communities and the planet must pick their battles carefully.

We have come to believe strongly that one of the most promising of these battles takes aim at an egregious set of agreements that allow corporations to sue national governments. Until three decades ago, governments could pass laws to protect consumers, workers, health, the environment and domestic firms with little threat of outside legal challenge from corporations. All that changed when corporations started acquiring the “right” to sue governments over actions—including public-interest regulations—that reduce the value of their investments. These rights first appeared in little-known bilateral investment treaties. Twenty years ago, corporate lawyers embedded them in the North American Free Trade Agreement (NAFTA). Today, more than 3,000 trade and investment agreements and even some national investment laws grant foreign investors these powers.

The Obama administration is attempting to insert similar anti-democratic investor protections in new trade and investment agreements with countries that border the Pacific and with the European Union. Hoping to expedite the so-called Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP), in early 2014, U.S. congressional leaders introduced fast-track trade promotion legislation that would severely limit Congress’s ability to amend such agreements. The widely anticipated move set off a storm of protest from unions, environmentalists, liberal members of Congress and others, and will likely remain a high-profile fight in the United States in the coming months.

The forces aligned against these proposed agreements in the United States are not alone. In The Nation, John Cavanagh and I have written about activists across the globe who are developing creative and increasingly effective strategies to push back against investor assaults on their communities, environment and national sovereignty. An important front has opened up in El Salvador, where the Canadian/Australian firm Pacific Rim/OceanaGold is using investor powers to sue the government over the “right” to mine gold.[1] This case represents an extreme assault on democracy: local communities, the majority of the Salvadoran public, and the Salvadoran government all oppose gold mining. But what’s happening in El Salvador is not an anomaly. There are crucial battles brewing in several other Latin American countries—including Argentina, Venezuela, Bolivia and Ecuador—as well as in other parts of the developing world.

As the strategies for asserting investor rights proliferate across the globe, new alternatives are sprouting up as communities, activists, and governments confront the challenge with increasing urgency.

In the 1990s, a conservative Bolivian government privatized the water system of its fourth-largest city by granting the concession to the U.S. corporation Bechtel. When Bechtel hiked the rates for consumers, tens of thousands rose up in what became known as the “water war.” After Bechtel abandoned the contract as a result of the opposition, it sued Bolivia under a bilateral investment agreement. Following a creative global campaign that included protests outside the company’s San Francisco headquarters and a shaming strategy, Bechtel finally caved, settling the case for a mere $1.

In the case of El Salvador, groups as diverse as the Council of Canadians, MiningWatch Canada, U.S. and Australian unions, Oxfam, and the Institute for Policy Studies have come together to do with Pacific Rim what those activists did with Bechtel. They’ve started a petition drive to pressure Pacific Rim and its parent company OceanaGold to “drop the suit,” and they’ve organized several hundred labor and other citizen groups to push the World Bank to sever its ties with the International Centre for the Settlement of Investment Disputes (ICSID) tribunal.

Several Latin American governments are also challenging corporations’ rights to sue them in international tribunals. Brazil has never accepted such rights in any international agreement. Bolivia, Venezuela, and Ecuador have withdrawn from the ICSID tribunal and are rethinking their bilateral and multilateral investment deals. In an important development, Ecuador hosted these governments and several others last April to discuss an alternative to such agreements. Twelve governments are now on record supporting the creation of a regional mechanism “to ensure fair and balanced rules when settling disputes between corporations and States,” while laying out a framework for continuing the negotiations and bringing in other governments.

South Africa is terminating its bilateral investment agreements and establishing a new investment law that allows foreign corporations to bring such claims only to domestic courts rather than international tribunals. India is conducting a review of its treaties in the face of several corporate lawsuits. Australia refused to include these corporate rights in the 2005 Australia-U.S. Free Trade Agreement, and so far it has not agreed to subject itself to them in the secretive negotiations surrounding the Trans-Pacific Partnership agreement. Recently leaked documents suggest that several of these governments are attempting to at least scale back investors’ rights in the TPP trade deal.

The diverse set of groups that fought NAFTA two decades ago have remained united through the Citizens Trade Campaign, which is trying to stop the fast-track legislation for the TPP and the TTIP. Opponents have gained significant traction by raising questions about the corporate interests behind the proposed agreements.

These fights are critical. If the momentum of corporate investment rules can be slowed or halted, the power of global corporations would be significantly curtailed.  Rules protecting investors’ rights are a key strategic front where progress against corporate rule is possible. A victory in the David versus Goliath battle between El Salvador and Pacific Rim/OceanaGold would be huge—both symbolically and substantively—in the fight to shift the momentum back toward the rights of people and the environment they inhabit.

[1] Our Nation article also details the environmental, social and economic havoc wrought by OceanaGold’s Didipio mine in the northern Philippines (based on our 2013 research there).

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2 Responses to “Governments and Activists are Fighting the Corporate “Right” to Sue Governments”

  1. […] By Robin Broad, a Professor of International Development at the School of International Service, American University. Originally published at Triple Crisis […]

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