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TPP Would Empower Thousands of US Firms to Sue Governments, According to Document Published by WikiLeaks

Graphic developed by WikiLeaks for release of “Investment” chapter

The Trans-Pacific Partnership trade agreement being negotiated between the United States and eleven other nations in the Pacific Rim would empower tens of thousands of corporations or firms to sue governments through largely secret tribunal proceedings if regulations violated their expectation for profits.

WikiLeaks released another drafted chapter from the agreement, the “Investment” chapter [PDF], on March 25, adding to previous publications of the “Intellectual Property Rights” and “Environment” chapters that were released in November 2013 and January 2014 respectively.

“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,” according to Lori Wallach and Ben Beachy of Public Citizen’s Global Trade Watch [PDF].

“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.'”

Essentially, a parallel corporate legal system would be established permitting firms to circumvent domestic courts.

Wallach and Beachy estimate “9,000 foreign-owned firms in the United States” would be empowered to “launch ISDS cases against the US government.” Additionally, 18,000 US-owned firms would be empowered to launch cases against governments signed on to the agreement.

A tribunal, according to the chapter, would have “three arbitrators” or judges. Each disputing party would be able to appoint an arbitrator. A third arbitrator would be agreed upon by the disputing parties. These arbitrators are likely to be private sector attorneys.

Wallach and Beachy explain how this might work:

…The corporation initiating a case chooses the venue and selects one of the “judges” from a roster. The defending government chooses another, and those two select the third (Article II.21). Since only foreign investors can launch cases and also select one of the three tribunalists, ISDS tribunalists have a structural incentive to concoct fanciful interpretations of foreign investors’ rights and order that they be compensated for breaches of obligations to which signatory governments never agreed. Lawyers that do so while serving as a tribunalist in one ISDS case can increase the number of investors interested in launching new cases and enhance the likelihood that investors will select them for future tribunals…

Corporations would enjoy the benefit of being able to sue and decide what information they wanted to be protected and kept secret during proceedings.

An entire section of the chapter describes how tribunals may award damages or “restitution of property.” There are no limits outlined in this section. The tribunals could order a government to pay unlimited amounts of money if “violations” were found to have occurred. Members of the tribunal also get to determine how much a government has to pay them for arbitrating a dispute.

If the trade agreement was ratified with this language included, a host of domestic policies relating to the climate, energy, labor, mining, medicine, tobacco and toxic chemicals would be open to extrajudicial lawsuits.

As explained by Wallach and Beachy in their analysis:

Under US “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 US 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.

Very few regulations are passed by the US government these days, but imagine what would happen if there was a threat of extrajudicial lawsuits. Would it mean Congress proactively passes legislation to abolish certain regulations that create liabilities?

Philip Dorling for the Sydney Morning Herald noted in his report, “The Philip Morris tobacco company is currently using the ISDS provisions of Australia’s investment agreement with Hong Kong to sue the Australian government for billions of dollars over Australia’s plain packaging legislation.”

Australia appears to be one of the few countries insisting it be allowed exemptions. “Any measures comprising or related to the Pharmaceutical Benefits Scheme, Medicare Benefits Scheme, the Therapeutic Goods Administration and the Office of the Gene Technology Regulator,” according to the leaked chapter. The Office of the Gene Technology Regulator oversees regulation of genetically modified food.

However, US companies oppose these exemptions, and it does not appear the scope of the exemptions would protect Australia from a lot of the litigation that could be launched by corporations.

Green Party trade spokesman James Shaw in New Zealand wholly condemned the TPP:

…If New Zealanders vote for greater environmental protections or rules to assist local business, we should be able to do that…But under these rules foreign companies can trump the public’s vote. The leaked documents show that there are provisions for setting up a special court which multinational corporations can use to sue countries, such as New Zealand, for breaching the TPPA. Cases in these special courts overseas have seen governments have to pay companies millions of dollars. These courts can have a chilling effect on local democracy. New Zealand should not be dictated by a special court set up for companies that has no domestic accountability or oversight…

Senator Chuck Schumer had similar fears and told the New York Times “savvy deep-pocketed foreign conglomerates could challenge a broad range of laws we pass at every level of government, such as made-in-America laws or anti-tobacco laws.”

Of course, a larger fear signatory countries should have is that US firms will use their immense power as they are given the ability to file suits.

“US 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 projects for construction of infrastructure projects, as well as contracts relating to the operation of utilities,” according to Public Citizen.

Granting US-based corporations, as well as foreign firms, authority to gut public interest policies and enable corporations to award themselves millions of dollars if they are unsatisfied with the investor environment in a country amounts to a grand international conspiracy.

Obviously, that is why this is the first leaked chapter published by WikiLeaks to have the words, “This document must be protected from unauthorized disclosure.”

Countries apparently agreed to not release any of the contents of this chapter until four years after the TPP was in force or four years after negotiations. None want the citizens who will be most impacted by this trade agreement to be able to raise any alarms about the power countries are planning to award corporations.

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Kevin Gosztola

Kevin Gosztola

Kevin Gosztola is managing editor of Shadowproof. He also produces and co-hosts the weekly podcast, "Unauthorized Disclosure."