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November 03, 2014

Corporations Aren’t People And They Aren’t Nation States, Either

Despite what some politicians say, corporations aren’t people. But, even worse, when it comes to the world’s biggest trade deals, corporations are actually treated like nation states. Thankfully, a major storm is brewing that could put a crack in this fundamental pillar of the existing free trade regime.

Today’s free trade deals commonly include a set of rules that empower corporations to challenge laws and policies passed by democratically-elected governments in secret trade courts. Increasingly, corporations use these so-called ‘investor-state’ provisions to challenge energy and climate policies, public health and anti-smoking laws, and minimum wage requirements – among many others. That authority effectively gives corporations the same legal standing as other nations when it comes to international trade.  While civil society has long opposed this anti-democratic and anti-public interest process, new leadership in the European Union may help bury this system of corporate rights once and for all.

This process of “investor-state” dispute settlement has been a major and controversial issue in the Transatlantic Trade and Investment Partnership (TTIP), a free trade deal being negotiated between the United States and the European Union. Back in December 2013, less than six months after negotiations for the trade pact began, more than 200 civil society organizations from both sides of the Atlantic urged investor-state provisions to be excluded from TTIP because:

  • Investor-state dispute settlement forces governments to use taxpayer funds to pay  corporations for public health, environmental, labor and other public interest policies and government actions;
  • Investor-state dispute settlement explicitly undermines democratic decision-making; and
  • European and U.S. legal systems are already very capable of handling disputes.

The United States Trade Representative (USTR), the part of the U.S. government that negotiates free trade pacts like TTIP, has been absolutely clear in its desire to keep investor-state provisions in the pact, despite strong opposition from U.S. civil society organizations, state legislators, and some Members of Congress.  The sentiment in Europe is more skeptical.

In January 2014, for example, growing public concern over these reckless provisions prompted the European Commission to halt negotiations on this part of the agreement and conduct a public consultation on the issue.  About 150,000 people responded to the consultation--one of the highest response rates ever for a Commission consultation.  The Commission is now compiling the results.

Member states of the European Union are also increasingly doubtful about giving corporations free rein to challenge public health and environmental safeguards in secret courts. Germany’s Federal Minister for Economic Affairs and Energy, for example, wrote in March 2014 that “From the perspective of the [German] federal government, the United States and Germany already have sufficient legal protection in the national courts,” and that Germany “has already made clear its position that specific dispute settlement provisions are not necessary in the EU-U.S. trade deal.”  It’s no wonder why Germany is concerned; Germany has been on the wrong end of two investor-state cases—one to challenge new regulations in Germany’s coal fired power plants and another to challenge its decision to ban nuclear energy.

To top this, European Commission President-elect Jean-Claude Junker—the supreme decision- maker on this topic in Europe—has also expressed his strong concerns over investor-state dispute settlement in TTIP.  In his speech before European Parliament, Junker said that: “In the agreement that my Commission will eventually submit to this House for approval there will be nothing that . . . will allow secret courts to have the final say in disputes between investors and States.”  Junker furthermore said that “There will be no investor-to-state dispute clause in TTIP” if his deputy, incoming commission Vice President Frans Timmermans, “does not agree with it too.”

Of course, the battle is not over yet and the public in both the EU and the U.S. need to be vigilant in our opposition to this system of corporate rights in trade pacts. And, while keeping investor-state provisions out of TTIP would be a major, major accomplishment, there would also be many other dangers of the TTIP. Right this second, however, you can raise your voice and help crack this system of corporate empowerment in trade agreements by taking action here.

--Ilana Solomon, Director, Sierra Club’s Responsible Trade Program

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