Читать книгу Shadow Courts - Haley Sweetland Edwards - Страница 9

Introduction

The environmental activist Jane Kleeb was driving down Highway 281 near Lincoln, Nebraska, on a gray day in January 2016, when she got a call from a reporter.

At the time, Kleeb was still riding high off of her success organizing local farmers, ranchers, and environmentalists in opposition to the Keystone XL pipeline, which would have carried petroleum products from Canada’s tar sands across the Nebraska plains to the Gulf of Mexico. Thanks to her and other activists’ efforts, President Barack Obama had announced in November 2015 that his administration would deny the Canadian company TransCanada permission to move forward with the project, ending an eight-year-long effort to get the pipeline built.

The reporter was calling to ask Kleeb about a new twist in the saga. Earlier that day, TransCanada had announced it was suing the U.S. government for $15 billion on the grounds that Obama’s decision to block the project violated the North American Free Trade Agreement. It was the first Kleeb had heard of the suit. “I’m an organizer, so my reaction was, ‘When are the hearings? Where is this happening? Who’s the judge?’” she said recently. If TransCanada was challenging the decision in court, she wanted to be there. Could she protest on the courthouse steps? Arrange for a rally in a nearby town?

But that, Kleeb learned, was not how this case would go down. TransCanada wasn’t suing the U.S. in a U.S. court, or in a Canadian court for that matter. Its argument would not be heard by a judge, and the merits of the case would not be considered under the auspices of either country’s legal system. There would be no protest on any courthouse steps. Instead, the case would be heard by a tribunal, manned by three private arbitrators, operating under a supranational legal system that Kleeb had never heard of. “It was totally strange,” she told me. “A foreign company can sue us in some secret tribunal? How is that even possible?”

Investor-state dispute settlement, or ISDS, first appeared in treaties in 1969. The idea behind the mechanism was straightforward: If a foreign investor believed that his host country—the nation where his company was operating—had violated an international treaty by seizing or destroying his factories, oil fields, or other assets, he could file an ISDS claim directly against that country. He could do that without involving his own government and without having to wait endlessly for a developing country’s corrupt or biased court system to dispense judgment.

By filing an ISDS claim, the investor would trigger the formation of a special arbitration tribunal, which would exist temporarily outside the jurisdiction of any nation’s judiciary or any international body. Its sole purpose would be to determine how much, if anything, the country owed the investor in compensation for property that had been seized or demolished. For example, in the late 1980s, the Sri Lankan government destroyed a British seafood company’s shrimp-processing plant during a military raid on rebels. The British investor filed an ISDS claim, a tribunal was formed, and the arbitrators determined that the Sri Lankan government must pay the company $460,000 in compensation for the destroyed plant. That was it. Case closed. The British company did not have to rely on Sri Lankan courts. The episode did not become a major diplomatic incident. The U.K. did not have to step in to defend its investors’ interests.

And that was the whole point: ISDS was supposed to be a cool, efficient, and apolitical dispute resolution system that kept powerful nations from interfering in the affairs of weaker countries, and that offered an extra layer of protection for foreign investors operating in countries with unreliable courts. But in the last 20 years, the mechanism has quietly changed, evolving into something much more powerful—and very political indeed.

One factor in this evolution is the explosion of new claims. Between the 1960s and 2000, ISDS was almost never used. Investors brought about 40 claims total in 40 years. Since 2000, there have been 647. In 2015 alone, there were 70 new cases. That uptick is partly because there are thousands more treaties today that include ISDS. For the last 25 years, countries have signed thousands of bilateral investment treaties, and beginning in the 1990s, nearly every new trade agreement, from NAFTA and Central American Free Trade Agreement to the Energy Charter, included a chapter on investment, complete with ISDS. In 1989, there were just a few hundred agreements that included ISDS. As of 2015, there were more than 3,000.

Another reason for the explosion of new claims is that the definition of what it means for a sovereign nation to seize or destroy a foreign company’s property, or otherwise violate an investor’s property rights under the terms of an investment treaty, has become much more expansive. Investors now regularly file claims if their host government passes a new law or regulation that results in even a partial loss of a company’s property or impinges in some way on its future profits. For example, in TransCanada’s ISDS claim against the U.S., it argues that President Obama’s decision to cancel the Keystone XL pipeline violated NAFTA by expropriating the company’s expected future profits.

That modern interpretation has only cropped up in the last 20 years, but it has opened up a vast new gray area. Where ISDS claims were once about seized oil fields and bulldozed factories, now they are about tax increases and environmental regulations. Where is the line between a government’s right to regulate in the public interest and a foreign corporation’s claim to its own property?

Meanwhile, the directionality of ISDS claims has also changed. In the 1960s and ’70s, the idea was that investors would use ISDS as a means to get compensation from a developing country with corrupt or rickety rule of law, where there were no other avenues of receiving justice. But nowadays, investors regularly use it to challenge well-developed countries with robust court systems, including the U.S., Canada, Australia, and Germany, where there are very clearly other avenues of receiving justice. That reality has made this supposedly apolitical tool of dispute resolution a hot button issue. Why should some rich Canadian investor get to do an end-run around the U.S. court system? Why should powerful, multinational corporations get access to a special, supranational judicial system that no one else can use? Why is there no way to appeal an ISDS award?

U.S. trade negotiators are now working to include ISDS in as many new treaties as possible, including both of the massive new free trade deals coming down the pike. The Trans-Pacific Partnership, which President Obama signed in February 2016 and which Congress will likely ratify before he leaves office, already includes ISDS. Whether the mechanism will be inserted into the Transatlantic Trade and Investment Partnership, linking the U.S. and Europe, is a subject of controversy. The question has already catalyzed something of an intellectual civil war in Europe, with the European Parliament recently rejecting, across party lines, any treaty that includes ISDS. Protesters opposed to it have swamped the streets in Berlin, Paris, and Brussels and written hundreds of letters in opposition to what they see as the imposition of shadowy “corporate courts” that can be used to undermine laws and regulations and compromise national sovereignty.

U.S. trade negotiators say such rhetoric is overblown. They point out that the U.S. is already a signatory to 50 agreements that include ISDS, and that foreign corporations have only ever used it to challenge Washington 18 times. The U.S. hasn’t yet lost a case. But experts on both sides of the debate argue those stats undersell the importance of ISDS. Including the mechanism in the TPP and TTIP would forever alter the global legal landscape for investors. The U.S.’s 50 existing treaties are relatively tiny, representing just 10 percent of the U.S.’s foreign direct investment; including ISDS in the TPP would increase that ratio significantly. If ISDS is included in both those trade deals, it would mean that any corporation headquartered in any of the nations that are signatories to either treaty—that includes the vast majority of companies listed under the Global Fortune 500—could use the mechanism to challenge U.S. laws and regulations outside of U.S. courts, in the same way that TransCanada is today.

“I don’t think the question is whether U.S. laws will get challenged by foreign corporations under the TPP,” Simon Lester, a trade expert at the libertarian Cato Institute, told me recently. “It’s pretty clear the U.S. will be challenged and it will lose some of those challenges and the U.S. taxpayers will have to pay.”

ISDS has yet to become a big news item in the U.S. Aside from a few op-eds and a proliferation of mostly error-riddled “explainers” on the subject, it has remained largely the purview of trade wonks. One reason is that ISDS does not follow the normal contours of the free trade debate. You can be 100 percent in favor of free trade and still be against ISDS.

Take libertarians, for example. They are the staunchest intellectual defenders of free trade deals, and yet have been among the loudest critics of ISDS, which they see not as a liberalizing tool, but as the opposite: ISDS gives certain economic players an advantage over everyone else. Only foreign investors can use the mechanism; domestic investors can’t. In a globalized economy, how does that make sense? Why should Toyota, which is technically a foreign company, despite its vast manufacturing operation in the U.S., be afforded a special judicial privilege that allows it to challenge U.S. laws outside of U.S. courts, when GM and Ford do not have access to that same perk?

Libertarians also point out that ISDS allows foreign corporations to target laws and regulations that threaten their economic dominance. Just recently, for example, the U.S. pharmaceutical giant Eli Lilly filed an ISDS claim against Canada after the country passed a law limiting the lifespan of drug patents. The law was designed to create a freer market—to reduce pharmaceutical companies’ monopoly control and to allow more generic competition in the drug industry—but Eli Lilly says it violates NAFTA by expropriating its future profits.

Many dyed-in-the-wool conservatives, a group that has also traditionally backed free trade, object to ISDS too, but for different reasons. Joined by a growing number of state and local legislators, they worry that the mechanism will be used to undermine state and local laws. The National Conference of State Legislatures has promised it will not support any trade deal that includes ISDS. Conservatives also see ISDS as an unbearable imposition on American sovereignty, and reject it on the same grounds that they have long refused to confirm the U.S. as a member of the International Criminal Court or other binding international treaties, like the Convention on the Elimination of All Forms of Discrimination Against Women.

Constitutional scholars on both sides of the ideological aisle, from top Reagan administration lawyer Bruce Fein to President Obama’s former judicial advisor, Lawrence Tribe, raise related concerns. Namely, that ISDS tribunals have the power to review U.S. laws, regulations, executive actions, and judicial decisions. If the three arbitrators on an ISDS tribunal were to determine, say, that a U.S. Supreme Court decision was in violation of NAFTA, those three private citizens would have the power to demand that U.S. taxpayers pay compensation for that decision. It’s a point that U.S. Supreme Court Chief Justice John Roberts raised in 2014, when he expressed surprise about how ISDS works. In our highly globalized world, we have become accustomed to foreign companies suing the U.S. through U.S. courts, Roberts wrote, “[b]ut even where a sovereign nation has subjected itself to suit in its own courts, it is quite another thing for it to subject itself to international arbitration.” By signing a treaty that includes ISDS, he went on, a sovereign nation “permits private adjudicators to review its public policies and effectively annul the authoritative acts of its legislature, executive, and judiciary.”

Liberal Democrats, meanwhile, who have been among the most vocal critics of ISDS, worry that foreign corporations will use the tool to challenge U.S. laws and regulations designed to serve the public interest—particularly financial regulations, environmental rules, and health laws. In 2013, for example, an American oil and gas company filed an ISDS claim challenging an environmental regulation in Quebec that put a moratorium on fracking in rock underneath the St. Lawrence River. The oil and gas company claimed the regulation violated NAFTA by expropriating the company’s future profits.

President Obama, who has broken with much of his liberal base to defend ISDS, dismisses criticism of the tool—including a few barbs from his usually staunch ally, Massachusetts Senator Elizabeth Warren—as hyperbolic “bunk” and “totally wrong.” In interviews, he has repeatedly insisted that foreign corporations cannot under any circumstances use ISDS to challenge laws and regulations in the U.S. and that those who say otherwise are just “making this stuff up.” (Obama made those statements nine months before TransCanada used the ISDS provisions in NAFTA to challenge his decision to cancel the Keystone.)

Part of the president’s positioning may be realpolitik. It’s unlikely that the powerful international business community, including the Chamber of Commerce, would support the TPP or the TTIP unless they included ISDS in some form. One former lobbyist told me that if a free trade deal did not include an investment chapter complete with ISDS, it would be considered “a total joke, it would get laughed off stage.”

But another reason Obama may support the controversial mechanism is that it is, at least in theory, a major step toward one of the most intoxicating liberal promises of the last century—that an enlightened society can come together to craft a set of global rules and standards that apply to everyone equally. That’s been the defining idea behind trade agreements for a generation—that together we can create a common set of global best practices, governing everything from labor and food safety to investment protections, that will make the world a safer, healthier, more prosperous place. ISDS is a part of that vision. It is designed to enforce an international standard for how all investors and corporations are treated, no matter what country they’re from, or what country they’re operating in.

The problem, like all law, comes down to a question of language. How investment chapters, bilateral investment treaties, and ISDS provisions are actually written—the words and phrases that make their way into those hallowed documents—matters enormously. And how those words and phrases are ultimately interpreted by private arbitrators matters too. To put that another way, it’s not enough to simply agree that foreign investors ought to enjoy certain property protections abroad. There is wide consensus on that much. We’ve actually got to hash out what we mean by “property.” And what we mean by “protections.” And what, exactly, it looks like when a government breaches its obligation to protect that private property. If a foreign oil company’s claim on a well runs up against a local farmer’s access to clean water, who wins? And who decides who wins?

In our hyperglobalized world, where the biggest multinational corporations are vastly wealthier and more powerful than many of the nations where they operate, the question of how we balance private investors’ property rights with the priorities of a public society matters most of all. ISDS—this obscure, almost entirely ignored treaty enforcement mechanism—is at the front and center of that debate.