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Chevron calls for strong investor rights chapter in US-EU trade deal; will be able to use CETA to challenge EU policy in meantime

U.S. energy giant Chevron (profits $26.2 billion USD) is encouraging the United States to pursue a strong NAFTA-like investment chapter and investor-state dispute settlement process in the proposed Transatlantic Trade and Investment Partnership (TTIP) with the European Union. The company, which attracted global outrage for using these kinds of rules to try to avoid paying an Ecuadorian court-ordered $18-billion penalty for horrific contamination of the Amazonian rainforest, is now calling for “the strongest possible protection” from government measures in Europe that might interfere with its investments.

Chevron makes the comments in a submission to a United States Trade Representative consultation on the proposed TTIP which, if negotiations begin as expected in June, will look much like the Canada-EU Comprehensive Economic and Trade Agreement (CETA), now in its fourth year of negotiations. The Canada-EU deal will also include an investor-state dispute process that will threaten environmental and public health policies related to big resource projects on both sides of the Atlantic.

This month, the Council of Canadians, Corporate Europe Observatory and Transnational Institute released a report–The Right to say No–on how the investor “rights” chapter in CETA threatens bans or strong regulations on shale gas extraction (fracking) in Europe. The Chevron submission to the USTR justifies our concerns and will likely strengthen European resolve against including these investor protections in either the US or Canadian agreements.

“A strong investment protection regime within the TTIP would allow us and other U.S. businesses to better mitigate the risks associated with large-scale, capital intensive, and long-term projects overseas,” writes Chevron VP Edward Scott in a letter to USTR dated May 7, 2013. “Robust investment protections enable Chevron, and companies like us, to put our capital at risk in order to provide the energy required to fuel economic growth and energy security.”

What he means, of course, is that Chevron doesn’t want to take any risk when it invests in fracking or controversial offshore energy projects in Europe. Providing for the world’s fossil fuel needs (or perpetuating our reliance on dirty oil and gas, depending on your perspective) is a public service, according to the VP. If a community, including countries that are banning fracking for environmental or public health reasons, wants to get in the way of Chevron’s projects, it should have to pay the company for lost business opportunities.

Chevron calls on USTR to make sure the TTIP’s investment provisions:

– “Oblige” the Parties (U.S. and EU, including member states) to “accord fair and equitable treatment to covered investments,” including an obligation “to refrain from undermining legitimate investment-backed expectations.” Translation: if the company’s hopes are dashed–e.g. a future government wants to stop fracking–it should be able to claim it has been treated unfairly under the treaty.

– “Oblige the Parties to accord full protection and security to covered investments,” which European and U.S. legal systems already do (you generally can’t invade a mine or refinery and expect to get away with it). But tribunals have expanded the definition of full security beyond situations where physical property or people are harmed or threatened. For example, in the Biwater vs. Tanzania case related to a water concession, the tribunal said the term “full” protection “implies a State’s guarantee of stability in a secure environment, both physical, commercial and legal,” and that, “It would … be unduly artificial to confine the notion of ‘full security’ only to one aspect of security, particularly in light of the use of this term in a [bilateral investment treaty], directed at the protection of commercial and financial investments.” (Quoted in an International Institute for Sustainable Development report.) Like the fair and equitable treatment rules, this clause includes the “right” to a stable business environment, or for policies to never change over the course of the investment.

– Provide rules on expropriation and the requirement to promptly pay the company when it happens, presumably not just for actual seizure of property or investments but when environmental or other laws or policies have the effect of lowering profit expectations (indirect expropriation), even if the policies are legitimate protection measures that do not discriminate against Chevron.

– Define a covered investment in the treaty “as including both existing and future investments,” which Chevron says “is critical to sectors, such as energy, with a long investment timeline and enormous existing investments.” In other words, the company’s plans down the road should be treated as if they must happen unless the company decides to change them itself. Depending on how the TTIP, or Canada-EU deal for that matter, are worded, this could apply to investments Chevron simply wants to make in Europe but which may be blocked by an EU or member state decision related to what kind of investment it is (e.g. fracking in an environmentally sensitive area).

Chevron concludes its submission on the importance of a strong investor-state dispute process, which it admits “is being challenged by some governments today as an unwarranted infringement on their sovereignty.” Those governments include Australia and a group of Latin American countries who are cooperating to mitigate, reform and possibly replace the current investor-biased model with something that recognizes a community’s right to set policies without fear of multi-billion dollar corporate lawsuits.

With its substantial investments in Canada, Chevron will be able to use any investor-state dispute process in CETA to challenge European fracking bans and other policies that it feels violate the rights mentioned above. It’s one of the reasons more than 70 European, Canadian and Quebec organizations signed a declaration against including these excessive investor “rights” in CETA. The statement concludes:

We will vigorously oppose any transatlantic agreement that compromises our democracies, human and Indigenous rights, and our right to protect our health and the planet. We urge the EU and Canadian governments to follow the lead of the Australian government by stopping the practice of including ISDS in their trade and investment agreements, and to open the door to a broad re-writing of trade and investment policy to balance out corporate interests against the greater public interest.

If CETA does give Chevron and companies like it everything they’re looking for, the U.S. will be under pressure to adopt the CETA investment model in their own TTIP. Though the United States has never lost an investor-state dispute, probably for fear that it would create a backlash against the process, investment arbitrators might be less hesitant when it’s a European firm making the challenge.

To read more about the increasing use of investor-state dispute resolution, and why reform is overdue, see Corporate Europe Observatory and TNI’s recent report, Profiting from Injustice: How law firms, arbitrators and financiers are fuelling an investment arbitration boom.