How Corporate Sovereignty Undermines Democracy By Irrevocably Binding Future Governments

from the how-is-that-even-possible? dept

Techdirt has been at the forefront of pointing out the dangers of including investor-state dispute settlement (ISDS) in so-called trade agreements. Indeed, we even helped come up with a new term -- corporate sovereignty -- to make clear that ISDS is really about placing corporations on the same level as entire nations, and giving them a unique power to sue a country for alleged harms before special tribunals. But there's an additional aspect to this, which is explored in an insightful article by Sam Fowles on The Conversation.
He points out that although we don't know in detail what the US-EU TAFTA/TTIP agreement will contain, we do have the text for the one between Canada and the EU, the Comprehensive Economic and Trade Agreement (pdf), known as CETA. The European Commission has said many times that it aims to build on the corporate sovereignty chapter in CETA when it comes to negotiating TTIP. One feature of ISDS in CETA is the following:

In the event that the present Agreement is terminated, the provisions of [Chapter X Investment] shall continue to be effective for a further period of 20 years from that date in respect of investments made before the date of termination of the present Agreement.

That is, even if a party pulls out of CETA, it will still be bound by the corporate sovereignty provisions for another 20 years, whether it likes it or not. Since we know that the US model investment treaty (pdf) also requires parties to continue allowing ISDS claims for ten years, it seems likely that TAFTA/TTIP, if it includes corporate sovereignty, will also have such a clause, for at least ten years, maybe more. Fowles explains why that is a problem -- he talks about the UK Parliament, but it applies equally to the US:

Parliament represents the will of the people. Therefore it can make or unmake any law it wants. But there’s a caveat: parliament can’t make a law that would bind future parliaments. To do so would be undemocratic. The laws of one generation are often inappropriate for the next. Parliament must embody the will of the people at the time. When two ordinary laws conflict, the courts will always apply the one passed most recently.

But the 10/20-year extension of ISDS interferes with that. It says that whatever the views of government in power, it must still respect the ISDS chapter signed by one of its predecessors. One implication is that for a decade or two, any major policy changes could be subject to billion-dollar cases before corporate sovereignty tribunals -- a strong disincentive to bring them in, whatever the public might want. The implication is clear. As Fowles writes:

If democracy is to remain the fundamental tenet of our constitution then TTIP must not be ratified. At the very least we must derogate from the 20-year clause. Living under a government you don’t like is the risk you take in a democracy, but being forced to live by rules agreed 20 years ago is fundamentally undemocratic.

As Techdirt explained last year, Canada has already signed a trade agreement with China that will take precedence over Canada's constitution for 31 years. Let's hope the US and EU aren't foolish enough to follow suit by allowing corporate sovereignty to reign over them even after TAFTA/TTIP is terminated.