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September 26, 2014

New Cases Show Risks of Corporate Empowerment in Trade Deals


One result of neoliberalism, writes Mark Bittman in the New York Times, is that “some corporations are more powerful than governments.” This message was a theme of many of the signs and chants at the People’s Climate March, where more than 400,000 participants came together in New York City, many denouncing corporate greed at the expense of a sustainable planet. And nowhere is that power divergence more apparent than in free trade pacts, where a provision called “investor state dispute settlement” (ISDS) empowers corporations to sue governments over nearly any policy that a corporation alleges would reduce its expected future profits.

The Dominican Republic, for example, faces two new corporate challenges to its environmental policies. Instead of supporting the Dominican Republic’s right to implement environmental safeguards, the U.S. is pushing to expand these “investor” rights in new trade agreements currently under negotiation—the 12-nation Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership between the U.S. and the European Union.

Under the Dominican Republic-Central America Free Trade Agreement (DR-CAFTA), Corona, a Florida-based construction materials company (not to be confused with the beer), has announced a case against the Dominican Republic for $100 million because the Dominican Republic denied Corona an environmental license to mine for construction materials after citing concerns about the proposed project’s risks to waterways. Separately, three U.S. investors are threatening to bring a case against the Dominican Republic for not allowing them to “extend” a resort—which already includes luxury homes, a restaurant with a rotating floor and tennis courts— into a neighboring national park. The coveted “extension” would allow the developers to construct a second restaurant, spa, and “world-class boutique hotel.

It’s important to note that around 41 percent of Dominicans live below the poverty line, and the richest (overwhelmingly white) 10 percent of the population owns most of the land and enjoys around 40 percent of the national income. In their notice of intent to sue the Dominican Republic, the developers hoping to expand the luxury resort emphasize that they have “developed a deep love and affection for the country’s people and their culture.” But if these cases move forward and the investors win, it’s the Dominican taxpayers that would pay the millions of dollars in compensation. Even if the Dominican Republic were to win these cases, taxpayers could be forced to pay for a share of tribunal costs, which average $8 million per case.

Neither domestic nor international courts determine the outcomes of ISDS cases. They take place before three attorneys in private trade tribunals. Many of these attorneys rotate between acting as tribunal “judges” and as the lawyers launching cases against governments on behalf of the corporations. ISDS also exists in the North American Free Trade Agreement, which recently empowered a U.S. oil and gas company to sue the government of Canada for $250 million in response to a fracking moratorium around the St. Lawrence River in Quebec. To date, ISDS in free trade agreements and bilateral investment treaties has allowed corporations including Exxon Mobil, Dow Chemical, and Chevron to file nearly 600 cases against almost 100 governments.

The Dominican Republic cases may seem surprising, but cases like this are quickly becoming the norm. Last week, for example, people gathered in front of the World Bank to protest an investment case brought by Oceanagold Corporation, an Australian mining company, against El Salvador, simply because the country denied the company a gold mining permit. Communities in El Salvador are concerned about mining’s costs to water quality, since 90 percent of the country’s surface water is already heavily contaminated. Yet even while protests against ISDS gain international momentum, our own government continues to promote ISDS in massive new trade agreements which could further empower big corporations to challenge countries’ environmental policies.

Complete with a giant inflatable fat cat, protesters rally outside the World Bank in support of El Salvador’s right to ban toxic mining along its principal watershed. (Photo: Ron Carver / Institute for Policy Studies)

These cases give a taste of the consequences that the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) could have both abroad and in the U.S. We know that the TPP includes ISDS and that the TTIP will likely include it unless negotiators listen to the massive public opposition on both sides of the Atlantic. If approved with ISDS, these trade agreements would empower tens of thousands of new corporations from around the world to sue the U.S. and other governments over federal, state, and regional policies that protect communities and safeguard the environment.

You can take action now, and let our government officials know that you oppose investor-state dispute settlement in all current and future trade pacts.

--Courtenay Lewis, Campaign Representative, Sierra Club’s Responsible Trade Program



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