South Centre, an intergovernmental think tank based in Geneva, Switzerland, details how a biased arbitration system used to decide cases between corporations and countries who are members of bilateral investment treaties (BITs) and “free trade” agreements is driving some nations to the financial brink:
Under these treaties, foreign companies can sue governments if they introduce policies that these companies deem affect their future incomes. The treaties define “expropriation” to include depriving investors of future profits due to new regulations.
So a tobacco firm has sued Australia and Uruguay for requiring cigarette boxes to have plain packaging. When Ecuador cancelled a contract with an American oil company for violating the terms of the contract, the company won took a case and was awarded US$2.4 billion.
Among some of the findings are:
• Only 15 arbitrators, nearly all from Europe, the US or Canada, have decided 55 percent of all known investment-treaty disputes. This small group sits on the same panels, acts as both arbitrators and counsels and call on each other as witnesses.
• Many arbitrators show a clear bias towards investors. Several prominent arbitrators have been members of the board of major multinational companies, including those who filed cases against developing countries.
• A few law firms have been encouraging investors to sue governments, as a weapon to weaken or prevent laws on public health or the environment. These investment lawyers are the new “ambulance chasers” and have fuelled an increase in cases from 38 in 1996 to 450 known cases in 2011.
• Countries have to pay exorbitant legal and arbitration costs averaging over $8 million per dispute, and exceeding US$30 million in some cases. The Philippines spent $58 billion defending two cases against a German firm.The U.S could be a huge target for such litigation if it enters into the TPP deal. Our country has more stringent labor, workplace safety, health and environmental rules than many of the 11 other nations we are currently negotiating with as part of the Trans-Pacific Partnership (TPP) trade pact. If we agree to the TPP, the only solution to avoid these lawsuits would be to lower our standards. That’s no solution at all.
It's time we negotiate trade agreements that protect American workers, not the big corporations. We should be setting the standards on how to treat workers, produce the best and safest products, and protect the environment. If the TPP is going to sink the workplace standards to the level of sweatshops in Vietnam, we should pass.