If passed, the Transatlantic Trade and Investment Partnership (TTIP) trade deal will give corporations a new weapon to undermine future fracking bans and regulation in Europe. The deals’ investment chapters will grant corporations access to a system of private international tribunals to enforce a range of new rights.
This system, known as the investor-state dispute settlement (ISDS) mechanism – a veritable corporate trump card – is already being used by one US corporation to undermine fracking bans elsewhere. In the Canadian province of Quebec, the government has introduced a moratorium on fracking pending further tests and research. One of the corporations involved, Lone Pine Resources, is using the investment chapter of the North American Free Trade Agreement (NAFTA) to bring an ISDS case for $250million.
The ISDS system allows corporations to sue not just for what they have invested in a country when a government changes a policy or regulation but for what they expected to earn into the future. Hearings take place in private tribunals overseen by arbitrators working on a for-profit basis who move seamlessly between their roles as supposedly ‘independent’ arbitrators to their other work as corporate lawyers. Cases can only be brought by foreign corporations and there is no corresponding right for domestic companies – or indeed for governments or citizens when corporations cause human rights abuses.
If there was any doubt as to the intention of corporations to use this system in conflicts in Europe, the contribution to the consultation on the TTIP in the US by the Chevron corporation, which has fracking interests in several EU countries, is illuminating. It dedicated its entire response to the area of ‘investment protection’ – what it called ‘one of our most important issues globally’.
Europeans don’t have to go far to see this system at work. In Germany the government changed its policy on nuclear energy following the Fukushima disaster, cancelling some planned nuclear plants. It is now being sued by energy corporation Vattenfall for over €1 billion.
Nor was this the first such case. When Hamburg‘s environmental authority imposed quality controls for the waste waters released into the river from a planned coal-fired power plant, Vattenfall used ISDS provisions to seek compensation of €1.4 billion. The case was eventually settled when the City of Hamburg agreed to lower the environmental requirements – a telling indication of the ‘chilling effect’ the threat of such actions can have on policy.
Use of the ISDS system in cases against governments has only really taken off in recent years. Indeed, 2012 and 2013 have set records for the numbers of new ISDS cases – 57 and 58 respectively.
The ISDS mechanism has gone from being a legal tool of last resort in cases of government expropriation of assets to a weapon of choice in struggles over a growing range of important social and environmental issues. The explosion of cases in recent years has led many governments, economists and legal experts around the world to openly criticise the system and attempt to withdraw from it once they’ve seen in practice the threat it represents to democracy and public interest policy making.
The inclusion of ISDS in TTIP would greatly expand this system and likely lead to a further proliferation of cases. Given the very high level of existing trans Atlantic trade and investment, the deal would result in 75,000 firms being newly empowered to use these private tribunals.
The extractive industries, under increasing scrutiny for their role in environmental degradation, are using the ISDS weapon more and more in order to prevent any challenges to their dirty operations. They must be stopped.
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