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Global trade activists vow to fight unfair investment rights; sleeper issue emerges in CETA negotiations

WoA10I’m just back from a conference in Brussels on the global corporate rights regime locked into bilateral and regional investment treaties and trade agreements such as NAFTA. The four-day event, attended by over 130 activists, lawyers and community organizations from five continents, was organized by the Transnational Institute (TNI), SOMO, PowerShift, Corporate Europe Observatory (CEO), 11.11.11, Traidcraft UK, Oxfam Solidarity, the Austrian Chamber of Labour, Institute for Policy Studies (IPS), Democracy Center, Focus on the Global South and Equit.

The goals of the conference were education, deepened collaboration, and the development of alternatives to the global investment protection regime that is enforced by private and secretive tribunals under the terms of bilateral investment treaties (BITs) and free trade agreements (ex. NAFTA’s Chapter 11). Attendees endorsed a strong statement deploring how the agreements “give transnational corporations (TNCs) extraordinary rights without binding obligations and allow corporations to bypass local and national laws and courts and sue sovereign states for millions of dollars before private international arbitral tribunals,” and how, “There is no similar international tribunal where governments or citizens can bring TNCs to justice when their activities violate social, labour, human and environmental rights or when they act in breach of public policy requirements.”

While the theme of the conference was clearly international–there are over 3,000 BITs in the world with dozens signed each year–the Canada-EU Comprehensive Economic and Trade Agreement featured prominently in the minds of European groups facing a troubling new mandate for the European Commission to give more protection to foreign investors than even NAFTA affords.

I was there to represent the Council of Canadians and Trade Justice Network on a panel discussion of the EU’s existing negotiations with India, Canada and internally through a “trialogue” between the EU Commission, parliament, and the Council on a new unified investment policy. In a joint presentation with Pierre-Yves Serinet of the Quebec RQIC network, we tried to impress upon the conference that Canada is very likely to try to expedite its investment protection negotiations with the EU through CETA despite reports EU officials would prefer to move ahead with Singapore and India first.

Simply put, the Conservatives are desperate for a deal and would not shy away from giving corporations even more power than they currently have to challenge government regulations and legislation that interferes with profits. They also might not have the option of developing a more transparent or accountable investor-state dispute process since the final mandate granted to the Commission by Europe’s 27 member states calls for maximum protection without qualifications.

INVESTMENT – THE SLEEPER ISSUE IN CETA?

In presentations and conversations at the investment conference, a picture emerged of how investment could become a problematic sleeper issue in the CETA negotiations. It would be problematic in the EU mostly, which could frustrate one of Canada’s only real requests in CETA: that it contain an investor-state dispute settlement process similar to but perhaps better defined than the one in NAFTA.

EU member states have signed many, many BITs with themselves and third countries which are subtly different in messy ways. For example, they differ in how they define (or not) “fair and equitable treatment,” how easy it is for companies to claim regulatory expropriation in lawsuits against government measures, and how broadly the Most Favoured Nation and National Treatment provisions are understood to apply. The ambiguity in these and international investment treaties in general has allowed arbitration panels to declare that exports of flowers and oil should be treated similarly, that a Dutch firm challenging a measure in Uruguay should be able to do so under any other treaty Uruguay may have signed with any other country, and that Argentina had no right to freeze water prices after its financial crisis in the 1990s in order to mitigate a social emergency.

[For a truly disturbing example of how broadly trade law firms feel they can stretch the concept of fair treatment in investment agreements, see the report “Legal Profiteering” by Corporate Europe Observatory. It explains how the firm Freshfields Bruckhaus Deringer advised multinational corporations how to defend their investments in Libya in the middle of a humanitarian crisis. A communique claimed Libya could be held financially responsible under BITs for failing to comply with “promises to investors regarding physical security and safety of installation, personnel etc.”]

Since the Treaty of Lisbon became law in 2009, the European Commission has sole competence over investment. A trialogue with the member states and parliament was therefore necessary to figure out what to do with all these BITs, and what an EU-wide investment protection regime would look like. Many of the groups who organized this week’s investment conference worked hard to convince the the EU Commission to radically reform how investment was protected, including by removing the right of a company to directly challenge government policy before unelected and secretive trade tribunals at the International Centre for Settlement of Investment Disputes (ICSID), the United Nations Commission on International Trade Law (UNCITRAL), the International Chamber of Commerce (ICC) and other locations. Some of their proposals, such as the need for greater transparency, some room for appealing decisions, the involvement of third party testimony, and a pre-set roster of arbitrators to try to weed out possible corruption, were even taken up by the Commission in an earlier proposal.

The EU parliament has also expressed reservations about investor-to-state arbitration in trade agreements and BITs. A Seattle To Brussels network press release explains that EU Parliament:

– urged the Commission and the Member States to be properly consulted on draft mandates for future investment negotiations and stressed that its views must be taken into account;
– demanded that investment agreements be based on investor obligations in terms of compliance with human rights and anti-corruption standards
– stated that speculative forms of investment shall not be protected
– expressed its deep concern regarding the level of discretion of international arbitrators and called on the Commission to produce clear definitions of investor protection standards
– stated with regard to expropriation that a clear and fair balance must be established between public and private interests
– proposed more precise wording with regard to non-discrimination and fair and equitable treatment.

In another resolution on the Canada-EU trade negotiations, parliamentarians declared their preference for a state-to-state dispute process and the requirement that multinational firms should exhaust local legal processes before they sue a government for damages. EU member states however ignored these recommendations, giving the Commission a mandate only to go as far as the most far-reaching BITs that Germany and Holland have signed in new free trade deals with Singapore, Canada and India.

INVESTOR ATTACKS ON EU POLICY

Participants at this week’s conference brought examples from their regions of how European and U.S. companies have used BITs and trade deals to perpetuate a colonial economic relationship between north and south. BITs help these firms punish governments who dare to regulate corporate activity or extract maximum social and financial benefits from foreign investment. They form part of an “architecture of impunity,” according to a statement signed by participants at the close of the conference on Tuesday.

But northern countries are not immune, as the Canadian case clearly shows. When Scott Sinclair of the Canadian Centre for Policy Alternatives described how AbitibiBowater was able to extort $130 million out of the federal government in a NAFTA settlement that ignored any obligation the firm should have to pay its former workers or clean up its environmental mess, someone pointed out we are “like a developing country of the north.”

Two high profile cases, both brought by the same firm against Germany, are also turning heads in Europe. The Swedish state-owned power company Vattenfall recently settled a claim with Germany related to environmental and health regulations. When the city of Hamburg required Vattenfall to build its coal-fired power plant according to water and environmental protection rules determined shortly after initial construction had begun, the firm used the European Energy Charter to bring an investment dispute against Germany to ICSID. Germany settled with the company for an undisclosed amount.

Now Vattenfall is challenging the German government’s about-face on nuclear power following the Japanese meltdown. They are asking for over €1 billion compensation for the decision to phase out nuclear power. The case will be a lightning rod for criticism of this strange corporate rights framework that seems to have no consideration of anything outside the profits of multinationals. The case will draw attention in particular to the proposed investor-state chapter in CETA given Canada’s investment in mining, energy, fracking, infrastructure and private water in the EU. Just like the Harper government, Canadian firms can and will use trade agreements where possible to undermine climate and public health measures.

THE PATH AHEAD

As part of the investment week of action in Brussels, we attended a dialogue in the European parliament between MEPs and civil society from around the world. Helmut Scholz and Gaby Zimmer spoke on behalf of the GUE (United Green Left), with the Greens represented by Martin Koehler, a trade and investment advisor to the party, and the Socialists sending regrets. Koehler suggested there is little room any more to reform EU investment policy since the mandate from member states is clear. But he suggested trade agreements could still be blocked by the EU Parliament if there is enough resistance.

For CETA this leaves us in an interesting position. Effectively the European Commission won’t be able to stray from its mandate, which calls for unqualified Most Favoured Nation and National Treatment protections for EU firms in Canada and vice versa. Canada’s negotiators, on the other hand, had been trying to develop a new model investment protection pact with the EU that would try to “weed out the frivolous cases.”

It would be nice to think that with Canada’s overwhelmingly negative experience under investor-state disputes–we’ve spent over $150 million in lost cases or settlements, and who knows how many more millions of dollars in legal fees–the Conservatives would not accept the EU position. But that is probably just wishful thinking. Harper wants this deal and will pay a hefty price for it.

Still, the friction opens up a space for us to fight back against this corporate rights regime in the provinces, federally, in Europe and other places where Canada is seeking to give companies the power to undermine democracy, environmental protection, job creation strategies and our health. At the very least, the EU mandate creates a new delay in an already fraught Canada-EU trade experiment that EU officials are now moving back again to mid-2012 for a signing date.

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CALL FOR AN ALTERNATIVE INVESTMENT MODEL
A statement from the Week of Action on Investment Treaties and for an Alternative Investment Regime, November 5-8, 2011, Brussels

All over the world citizens are demonstrating and struggling against the domination of financial capital and reclaiming participatory democracy and justice. In this time of intense economic crisis, we continue affirming that:

International Investment Agreements (IIAs) – such as the Bilateral Investment Treaties (BITs) and investment chapters in the Free Trade Agreements (FTAs) are part of an architecture of impunity for transnational corporations (TNCs) and as such undermine the sovereignty and constitutions of both developed and developing countries, democratic governance and peoples’ interests.

These investment agreements give TNCs extraordinary rights without binding obligations and allow corporations to bypass local and national laws and courts and sue sovereign states for millions of dollars before private international arbitral tribunals associated with the International Centre for Settlement of Investment Disputes (ICSID), the United Nations Commission on International Trade Law (UNCITRAL), the International Chamber of Commerce (ICC) and others. There is no similar international tribunal where governments or citizens can bring TNCs to justice when their activities violate social, labour, human and environmental rights or when they act in breach of public policy requirements.

Investment agreements are instruments used by TNCs to discipline and pressurize governments. These agreements grant transnational corporations unprecedented power allowing them to hold governments to ransom in their capacity to pursue public policy objectives. Thus, they are undermining human rights, including labour rights and access to health, access to public services, livelihoods and management of natural resources and environmental protection.

Financial liberalisation and investment protection, promoted through trade and investment agreements, are root causes of the financial and economic crisis. However, the US, EU, and the G 20 are promoting on-going liberalisation policies as solutions to the economic crisis and thereby creating the conditions for deeper crisis. This approach will further strengthen corporate power (the 1%) and increase investor protection. And, it will further harm the majority (the 99%) of the population.

We demand:

-the halt of negotiations for new investment agreements, BITs and FTAs!
-the termination of existing Bilateral Investment Treaties!
-the withdrawal of states from ICSID and other arbitration processes like UNCITRAL and ICC.

We call on:

-developed countries to halt the pressure on developing countries to sign BITs and investment provisions in FTAs.
-developing countries to examine and review the impact of existing Bilateral Investment Treaties on people in their countries.
-the United Nations to examine the impact of such investment treaties on development and human rights.

We propose an alternative international investment framework that is based on democratic principles and prioritises public interests over private profits, which:

-incorporates binding obligations on corporations related to human, economic, environmental, labour and social rights
-excludes investor-state dispute settlement mechanisms
-does not grant greater rights for foreign investors
-guarantees full democratic policy space to governments to regulate in favour of public interests, the environment and sustainable development
-includes the right to restrict and control speculative and destabilising international capital flows
-place areas like health, food, public services, eco-systems and natural resources firmly under public control and investment

We call on citizens and people’s movements to join the struggle against the international investment regime and corporate power and to develop and defend alternatives!!