The se­cret cor­po­rate takeover

Financial Mirror (Cyprus) - - FRONT PAGE -

The United States and the world are en­gaged in a great de­bate about new trade agree­ments. Such pacts used to be called “free-trade agree­ments”; in fact, they were

trade agree­ments, tai­lored to cor­po­rate in­ter­ests, largely in the US and the Euro­pean Union. To­day, such deals are more of­ten re­ferred to as “part­ner­ships,” as in the Trans-Pa­cific Part­ner­ship (TPP). But they are not part­ner­ships of equals: the US ef­fec­tively dic­tates the terms. For­tu­nately, Amer­ica’s “part­ners” are be­com­ing in­creas­ingly re­sis­tant.

It is not hard to see why. Th­ese agree­ments go well be­yond trade, gov­ern­ing in­vest­ment and in­tel­lec­tual prop­erty as well, im­pos­ing fun­da­men­tal changes to coun­tries’ legal, ju­di­cial, and reg­u­la­tory frame­works, with­out in­put or ac­count­abil­ity through demo­cratic in­sti­tu­tions.

Per­haps the most in­vid­i­ous – and most dis­hon­est – part of such agree­ments con­cerns in­vestor pro­tec­tion. Of course, in­vestors have to be pro­tected against rogue gov­ern­ments seiz­ing their prop­erty. But that is not what th­ese pro­vi­sions are about. There have been very few ex­pro­pri­a­tions in re­cent decades, and in­vestors who want to pro­tect them­selves can buy in­sur­ance from the Mul­ti­lat­eral In­vest­ment Guar­an­tee Agency, a World Bank af­fil­i­ate, and the US and other gov­ern­ments pro­vide sim­i­lar in­sur­ance. Nonethe­less, the US is de­mand­ing such pro­vi­sions in the TPP, even though many of its “part­ners” have prop­erty pro­tec­tions and ju­di­cial sys­tems that are as good as its own.

The real in­tent of th­ese pro­vi­sions is to im­pede health, en­vi­ron­men­tal, safety, and, yes, even fi­nan­cial reg­u­la­tions meant to pro­tect Amer­ica’s own econ­omy and cit­i­zens. Com­pa­nies can sue gov­ern­ments for full com­pen­sa­tion for any re­duc­tion in their fu­ture prof­its re­sult­ing from reg­u­la­tory changes.

This is not just a the­o­ret­i­cal pos­si­bil­ity. Philip Mor­ris is su­ing Uruguay and Australia for re­quir­ing warn­ing la­bels on cig­a­rettes. Ad­mit­tedly, both coun­tries went a lit­tle fur­ther than the US, man­dat­ing the in­clu­sion of graphic images show­ing the con­se­quences of cig­a­rette smok­ing.

The la­bel­ing is work­ing. It is dis­cour­ag­ing smok­ing. So now Philip Mor­ris is de­mand­ing to be com­pen­sated for lost prof­its.

In the fu­ture, if we dis­cover that some other prod­uct causes health prob­lems (think of as­bestos), rather than fac­ing law­suits for the costs im­posed on the man­u­fac­turer could sue gov­ern­ments for re­strain­ing them from killing more peo­ple. The same thing could hap­pen if our gov­ern­ments im­pose more strin­gent reg­u­la­tions to pro­tect us from the im­pact of green­house-gas emis­sions.

When I chaired Pres­i­dent Bill Clin­ton’s Coun­cil of Eco­nomic Ad­vis­ers, antien­vi­ron­men­tal­ists tried to en­act a sim­i­lar pro­vi­sion, called “reg­u­la­tory tak­ings.” They knew that once en­acted, reg­u­la­tions would be brought to a halt, sim­ply be­cause gov­ern­ment could not af­ford to pay the com­pen­sa­tion. For­tu­nately, we suc­ceeded in beat­ing back the ini­tia­tive, both in the courts and in the US Congress.

But now the same groups are at­tempt­ing an end run around demo­cratic pro­cesses by in­sert­ing such pro­vi­sions in trade bills, the con­tents of which are be­ing kept largely se­cret from the public (but not from the cor­po­ra­tions that are push­ing for them). It is only from leaks, and from talk­ing to gov­ern­ment of­fi­cials who seem more com­mit­ted to demo­cratic pro­cesses, that we know what is hap­pen­ing.

Fun­da­men­tal to Amer­ica’s sys­tem of gov­ern­ment is an im­par­tial ju­di­ciary, with legal stan­dards built up over the decades, based on prin­ci­ples of trans­parency, prece­dent, and the op­por­tu­nity to ap­peal un­fa­vor­able de­ci­sions. All of this is be­ing set aside, as the new agree­ments call for pri­vate, non-trans­par­ent, and very ex­pen­sive ar­bi­tra­tion. More­over, this ar­range­ment is of­ten rife with con­flicts of in­ter­est; for ex­am­ple, ar­bi­tra­tors may be a “judge” in one case and an ad­vo­cate in a re­lated case.

The pro­ceed­ings are so ex­pen­sive that Uruguay has had to turn to Michael Bloomberg and other wealthy Amer­i­cans com­mit­ted to health to de­fend it­self against Philip Mor­ris. And, though cor­po­ra­tions can bring suit, oth­ers can­not. If there is a vi­o­la­tion of other com­mit­ments – on labour and en­vi­ron­men­tal stan­dards, for ex­am­ple – cit­i­zens, unions, and civil-so­ci­ety groups have no re­course.

If there ever was a one-sided dis­put­eres­o­lu­tion mech­a­nism that vi­o­lates ba­sic prin­ci­ples, this is it. That is why I joined lead­ing US legal ex­perts, in­clud­ing from Har­vard, Yale, and Berke­ley, in writ­ing a let­ter to Pres­i­dent Barack Obama ex­plain­ing how dam­ag­ing to our sys­tem of jus­tice th­ese agree­ments are.

Amer­i­can sup­port­ers of such agree­ments point out that the US has been sued only a few times so far, and has not lost a case. Cor­po­ra­tions, how­ever, are just learn­ing how to use th­ese agree­ments to their ad­van­tage.

And high-priced cor­po­rate lawyers in the US, Europe, and Ja­pan will likely out­match the un­der­paid gov­ern­ment lawyers at­tempt­ing to de­fend the public in­ter­est. Worse still, cor­po­ra­tions in ad­vanced coun­tries can cre­ate sub­sidiaries in mem­ber coun­tries through which to in­vest back home, and then sue, giv­ing them a new chan­nel to bloc reg­u­la­tions.

there were a need for bet­ter prop­erty pro­tec­tion, and this pri­vate, ex­pen­sive dis­pute-res­o­lu­tion mech­a­nism were su­pe­rior to a public ju­di­ciary, we should be chang­ing the law not just for well-heeled for­eign com­pa­nies, but also for our own cit­i­zens and small busi­nesses. But there has been no sug­ges­tion that this is the case.

Rules and reg­u­la­tions de­ter­mine the kind of econ­omy and so­ci­ety in which peo­ple live. They af­fect rel­a­tive bar­gain­ing power, with im­por­tant i mpli­ca­tions for in­equal­ity, a grow­ing prob­lem around the world. The ques­tion is whether we should al­low rich cor­po­ra­tions to use pro­vi­sions hid­den in so­called trade agree­ments to dic­tate how we will live in the twenty-first cen­tury. I hope cit­i­zens in the US, Europe, and the Pa­cific an­swer with a re­sound­ing no.

Newspapers in English

Newspapers from Cyprus

© PressReader. All rights reserved.