An alliance to end corporate privileges?

By Roberto Bissio

What is the purpose of the Americas Partnership for Economic Prosperity (APEP) that will bring ten Latin American presidents and the Canadian prime minister to meet with President Joe Biden at the White House on 3 November?

 Nobel Prize-winning economist Joseph Stiglitz and influential Democratic Senator Elizabeth Warren have a suggestion: it is the great opportunity to do away once and for all with the private arbitration tribunals that condemn governments to pay huge amounts of compensation to large corporations for lost profits due to health and safety legislation, thereby inhibiting democratic decisions.

A year after its launch at the Summit of the Americas, APEP will meet for the first time and is expected to be attended at the highest level by Barbados, Canada, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, Mexico, Panama, Peru and Uruguay, in addition to the host. “We are 90 percent of the Western Hemisphere’s GDP and about two-thirds of its population. There is nothing we can’t do together,” announced Secretary of State Antony Blinken optimistically.

More realistically, the Republican think tankAmerican Action Forum argues that since the USA already has free trade agreements with 8 of the 11 participants and the Partnership does not intend to negotiate tariff reductions, “the talks will not result in increased regional trade flows”.

The goals of the Alliance, as stated by President Biden in several speeches, are not commercial, but aim to fight inequality, improve the situation of workers and public health, combat climate change and strengthen democracy. “None of these goals can be achieved if private systems of investor-state dispute settlement are maintained,” Stiglitz explained on October 26 during a virtual conference co-organized by the Columbia Center on Sustainable Investment (CCSI), Georgetown Law’s Center for the Advancement of the Rule of Law in the Americas (CAROLA), the Center on Inclusive Trade and Development (CITD) and Rethinking Trade..  Known by the acronym ISDS, these private tribunals are included as an investment protection mechanism in almost all free trade or investment agreements signed since 1994, when the North American Free Trade Agreement (NAFTA) enshrined them in its chapter 11.

In just one year after NAFTA, APEP countries signed 60 investment agreements, at a rate of five per month. Today, the countries of the Americas have accumulated 842 investment or free trade agreements with clauses enabling private arbitration, 47 of which are between the governments now meeting in Washington. Stiglitz was an advisor to President Clinton, vice president and chief economist of the World Bank in the last decade of the 20th century, developing countries came under what he considers “very aggressive” pressure for ISDS from the most advanced countries “which in turn answered to their big corporations”. During the conference, Lori Wallach, director of Rethinking Trade, presented a white paper by the organizers entitled Turning the Tide: How to Harness the Americas Partnership for Economic Prosperity to Deliver an ISDS-Free Americas. “The U.S. government pushed the ISDS regime on its neighbours before neoliberal policies became contested and with this initiative would be acting as a real partner in seeking to undo the damage,” she explained.

Traditionally used to settle disputes between private parties, arbitration tribunals are composed of specialized lawyers who rotate between defending corporations and arbitrating between them. ISDS authorize companies to sue states for any policy or legislation they feel aggrieved by. There is no limit to the compensation they can impose, nor do they allow for reciprocity: states cannot sue multinational companies if they are harmed by them, nor can they claim compensation for any windfall profits corporations may make, as happened during the pandemic.

In three decades, no evidence has been produced showing ISDS having stimulated more investment into countries that admit them than to those that do not, such as Brazil, Stiglitz explained. But there is ample evidence that their very existence acts as an inhibitor of democratic policymaking, since “any rule that affects the value of an asset is seen as an expropriation”. Courts even apply the concept of “profit expectations”, which is impossible to pin down economically, but for which arbitrator-lawyers award generous compensation.

Thus, since it banned offshore oil exploration, Italy has been sued by “aggrieved” companies that had not yet begun to invest. When President Obama halted construction of the XL pipeline across North America to bring fossil fuels from the Arctic to the USA, oil companies filed a US$15 billion lawsuit.

The claim was dropped when President Donald Trump reauthorized the pipeline and re-filed when Joe Biden stopped it again in the first month of his presidency. “When Congress passed these agreements, no one ever thought they could be used against the United States,” Senator Warren recalled. It has been estimated that, if countries were to comply with their commitments under the Paris Agreement to combat climate change, oil companies could sue them for US$340 billion.

Historically, tribunals find in favour of corporate claims twice as often as in favour of governments, not to mention that most cases are settled through negotiations (and payments) prior to the arbitrators’ final decision. The databases record a total of 231 cases that have already cost the 12 Alliance countries US$2,742,790,201. A further 73 cases are pending, for a total demand of US$47 billion.

A particularly affected country, Ecuador, has already initiated procedures to withdraw from (“denounce”) these investment treaties and many other countries are doing the same. But when an investment treaty is unilaterally ended, “survival clauses” cause its effects to persist for five or even ten years. However, when both parties decide to terminate or modify the treaty, the effects are instantaneous. Thus, the new agreements that replace the North American FTA eliminated ISDS entirely between the USA and Canada and make it harder to initiate claims between the USA and Mexico.

That is why the white paper proposes that, to advance its goals, APEP should become a collective forum to end ISDS among its members and thus spearhead a global movement.

In May 2020, well into his election campaign, Joe Biden said, “I don’t believe corporations should have special tribunals, unavailable to other businesses, and I oppose private interests being able to attack labour, health and environmental policies through ISDS.”

Last week, the US president joined the picket line of strikers who won a historic arm-wrestling match with the auto industry, and in Geneva his negotiators at the World Trade Organization announced that they no longer support the idea of an e-commerce agreement, which many denounced as favouring big tech corporations.

Three decades later, will it be possible to dismantle a powerful weapon of transnational capital with an alliance of trade unions, academics, anti-globalization activists and the US president?

So far, the agenda of the November 3 summit has not been announced and Democratic Senator Tim Kaine, Chairman of the Subcommittee on Western Hemisphere has only asked  the White House, “How will APEP help counter the influence of investments in critical infrastructure coming from Chinese State-Owned Companies into Latin America?”