By Jonathan Tasini
Here it is, for the world to see.
This is an advanced January 2015 version of the confidential draft treaty chapter from the Investment group of the Trans Pacific Partnership (TPP) talks between the United States, Mexico, Canada, Australia, Malaysia, Chile, Singapore, Peru, Vietnam, New Zealand and Brunei Darussalam. The treaty is being negotiated in secret by delegations from each of these 12 countries, who together account for 40% of global GDP. The chapter covers agreements on investments from one TPP nation to another, including empowering foreign firms to “sue” other states’ governments, as well as regulations around investor-state dispute settlements and tribunals. This document was prepared by TPP investment chapter negotiators in advance of the informal round of negotiations held in New York City 26th January to 1st February, 2015
Global Trade Watch has just provided an analysis of the leaked text via email (and now on its website more details):
The TPP would grant foreign investors and firms operating here expansive new substantive and procedural rights and privileges not available to U.S. firms under U.S. law, allowing foreign firms to demand compensation for the costs of complying with U.S. policies, court orders and government actions that apply equally to domestic and foreign firms. This includes:Foreign investors would be empowered to challenge new policies that apply equally to domestic and foreign firms on the basis that they undermine foreign investors’ “expectations” of how they should be treated. This includes a right to claim damages for government actions (such as new environmental, health or financial policies) that reduce the value of a foreign firm’s investment (what the leaked text calls “indirect expropriation”) or that change the level of regulation a foreign investor experienced under a previous government (a violation of what the text calls a “minimum standard of treatment” for foreign investors).
The leaked TPP text largely replicates the “minimum standard of treatment” language found in previous U.S. pacts that tribunals have used to issue some of the most alarming ISDS rulings. Tribunals often have broadly interpreted this vague “right” to fabricate new obligations for governments that do not actually exist in the texts of ISDS-enforced pacts, such as “not to alter the legal and business environment in which the investment has been made.” Due to such expansive interpretations, the “minimum standard of treatment” obligation has been the basis for three of every four ISDS cases “won” by the foreign investor under U.S. pacts.
Compensation for Claims
The text allows foreign investors to demand compensation for claims of “indirect expropriation” that apply to much wider categories of property than those to which similar rights apply in U.S. law. To the limited extent that “indirect expropriation” compensation is permitted in U.S. law, it is generally available only for government actions affecting real property (i.e. land). But the leaked text would allow foreign investors to claim “indirect expropriation” if government regulations implicate their personal property, intellectual property rights, financial instruments, government permits, money, minority shareholdings or other forms of non-real-estate property.
Foreign corporations could demand compensation for capital controls and other macro-prudential financial regulations that promote financial stability. This obligation restricts the use of capital controls or financial transaction taxes, even as the International Monetary Fund has shifted from opposing capital controls to officially endorsing them as legitimate policy tools for preventing or mitigating financial crises. Proposed provisions touted as “temporary safeguards” for capital controls would fail to protect many standard forms of capital controls, including those successfully used by TPP governments in the past to ward off financial crises.
The leaked text could newly allow pharmaceutical firms to use TPP ISDS tribunals to demand cash compensation for claimed violations of the World Trade Organization’s (WTO) rules regarding the creation, limitation or revocation of intellectual property rights. Currently, WTO rules are not privately enforceable by investors. But the leaked TPP investment text could empower individual foreign investors to directly challenge governments over policies to ensure access to affordable medicines, claiming that they constitute TPP-prohibited “expropriations” of intellectual property rights if ISDS tribunals deem them to violate WTO rules.
There are no new safeguards that limit ISDS tribunals’ discretion to create ever-expanding interpretations of governments’ obligations to foreign investors and order compensation on that basis. The leaked text reveals the same “safeguard” terms that have been included in U.S. pacts since the 2005 Central America Free Trade Agreement (CAFTA). CAFTA tribunals have simply ignored the “safeguard” provisions that the leaked text replicates for the TPP, and have continued to rule against governments based on concocted obligations to which governments never agreed. The leaked text also abandons a safeguard proposed in the 2012 leaked TPP investment text, which excluded public interest regulations from indirect expropriation claims, stating, “non-discriminatory regulatory actions ” that are designed and applied to achieve legitimate public welfare objectives, such as the protection of public health, safety and the environment do not constitute indirect expropriation.” Today’s leaked text eviscerates that clause by adding a fatal loophole that has been found in past U.S. pacts.
Most TPP countries, including the United States, have decided to expose decisions regarding the approval of foreign investments to ISDS challenge. Australia, Canada, Mexico and New Zealand have reserved the right to pre-approve foreign investors. But the United States took no exception for reviews by the Committee on Foreign Investment in the United States of planned foreign investments to determine whether they pose threats to national security.
The amount that an ISDS tribunal would order a government to pay to a foreign investor as compensation would be based on the “expected future profits” the tribunal surmises that the investor would have earned in the absence of the public policy it is attacking as violating the substantive investor rights granted by the TPP.
World Bank and United Nations Tribunals
The text would submit the U.S. government to the jurisdiction of World Bank and United Nations tribunals. All TPP nations have agreed to be so bound with the potential exception of Australia, which has indicated that it might do the same, “subject to certain conditions.”
None of the structural biases or conflicts of interest inherent in the ISDS system would be remedied. TPP ISDS tribunals would be staffed by highly paid corporate lawyers unaccountable to any electorate or system of legal precedent. They still would be allowed to rotate between acting as “judges” and advocates for the investors launching cases against governments. Corporations launching cases would still directly select one of the “judges.” The text includes no requirements for tribunal members to be impartial, reveal conflicts of interest or recuse themselves in instances of direct conflict. There is no internal or external mechanism to appeal the tribunal members’ decisions on the merits, and claims of procedural errors would be decided by another tribunal of corporate lawyers. The leaked text provides tribunals with discretion to determine the amount of compensation governments must pay investors and the allocation of costs, such as the tribunal members’ fees. A proposal that appeared in the 2012 leak of the text to standardize hourly fees for tribunal members at the lower end of the range of fees currently paid (about $375 per hour, compared to the $700 per hour that some tribunal members receive) has been eliminated.
Overreaching Definitions of Investment and Investor
An overreaching definition of “investment” would extend the coverage of the TPP’s expansive substantive investor rights far beyond “real property,” permitting ISDS attacks over government actions and policies related to financial instruments, intellectual property, regulatory permits and more. Proposals in the 2012 leak of the text that would have narrowed the definition of “investment,” and thus the scope of policies subject to challenge, have been eliminated. Also omitted is a proposal from the earlier leaked version that would not have allowed ISDS cases related to government procurement, subsidies or government grants.
An overreaching definition of “investor” would allow firms from non-TPP countries and firms with no real investments to exploit the extraordinary privileges the TPP would establish for foreign investors. Thus, for instance, one of the many Chinese state-owned corporations in Vietnam could “sue” the U.S. government in a foreign tribunal to demand compensation under this text.
The leaked text reveals that U.S. negotiators are still pushing, over the objection of most other TPP nations, to empower foreign investors to bring to TPP ISDS tribunals their contract disputes with TPP signatory governments relating to natural resource concessions on federal lands, government procurement of construction for infrastructure projects, as well as contracts relating to the operation of utilities. (In the leaked chapter, text that is not yet agreed upon appears in square brackets; Public Citizen has seen a version of the text that lists which countries support various proposals.)
More from Global Trade Watch
The leaked text provides stark warnings about the dangers of “trade” negotiations occurring without press, public or policymaker oversight. It reveals that TPP negotiators already have agreed to many radical terms that would give foreign investors expansive new substantive and procedural rights and privileges not available to domestic firms under domestic law.The leaked text would empower foreign firms to directly “sue” signatory governments in extrajudicial investor-state dispute settlement (ISDS) tribunals over domestic policies that apply equally to domestic and foreign firms that foreign firms claim violate their new substantive investor rights. There they could demand taxpayer compensation for domestic financial, health, environmental, land use and other policies and government actions they claim undermine TPP foreign investor privileges, such as the “right” to a regulatory framework that conforms to their “expectations.”
The leaked text reveals the TPP would expand the parallel ISDS legal system by elevating tens of thousands of foreign- owned firms to the same status as sovereign governments, empowering them to privately enforce a public treaty by skirting domestic courts and laws to directly challenge TPP governments i n foreign tribunals.
And remember why this is important
Foreign corporations have used these claims to attack tobacco, climate, financial, mining, medicine, energy, pollution, water, labor, toxins, development and other non-trade domestic policies. Under U.S. “free trade” agreements (FTAs) alone, foreign firms have already pocketed more than $440 million in taxpayer money via investor-state cases. This includes cases against natural resource policies, environmental protections, health and safety measures and more. ISDS tribunals have ordered more than $3.6 billion in compensation to investors under all U.S. FTAs and Bilateral Investment Treaties (BITs). More than $38 billion remains in pending ISDS claims under these pacts, nearly all of which relate to environmental, energy, financial regulation, public health, land use and transportation policies. Even when governments win cases, they are often ordered to pay for a share of the tribunal’s costs. Given that the costs just for defending a challenged policy in an ISDS case total $8 million on average, the mere filing of a case can create a chilling effect on government policymaking, even if the government expects to win. [emphasis added]
By the way, the screams and groans you just heard are coming from the White House and TPP supporters because when the elite New York Times–which has always flogged so-called “free trade” and treated opponents of such deals as backward people–writes this, this deal is sinking fast:
An ambitious 12-nation trade accord pushed by President Obama would allow foreign corporations to sue the United States government for actions that undermine their investment “expectations” and hurts their business, according to a classified document.The Trans-Pacific Partnership — a cornerstone of Mr. Obama’s remaining economic agenda — would grant broad powers to multinational companies operating in North America, South America and Asia. Under the accord, still under negotiation but nearing completion, companies and investors would be empowered to challenge regulations, rules, government actions and court rulings — federal, state or local — before tribunals organized under the World Bank or the United Nations.
Backers of the emerging trade accord, which is supported by a wide variety of business groups and favored by most Republicans, say that it is in line with previous agreements that contain similar provisions. But critics, including many Democrats in Congress, argue that the planned deal widens the opening for multinationals to sue in the United States and elsewhere, giving greater priority to protecting corporate interests than promoting free trade and competition that benefits consumers.Φ
Jonathan Tasini has worked as an authors’ advocate in the U.S. and globally for more than two decades. He served as president of the US National Writers Union from 1990-2003 and has also been a board member of the International Federation of Journalists. He was the lead plaintiff in the landmark electronic rights case, Tasini v. The New York Times, which the U.S. Supreme Court decided on behalf of authors in June 2001. He been writing, lecturing and blogging on economic, political and labor affairs for almost three decades for a wide variety of publications and media organizations, including The Wall Street Journal, Business Week, The Washington Post, The New York Times, CNBC and Playboy.