Monday, January 13, 2014

How TPP & TTIP free-trade agreements could threaten sovereignty.

By  Mark Lippman 

This diary is detailed and technical. It's intended to provide an illustration of Investor-State Dispute Settlement (ISDS), a feature of the TPP and TTIP free-trade agreements.
This information is for the people who have concerns about ISDS, and I've noticed a few of you here, because more knowledge and information is always better. Please read carefully. I would be glad to answer questions if there are any.

With Congress getting ready to decide fast-track authority for three new free-trade agreements, TPP, TTIP, & TISA, a reminder comes about the need for protection from the destructive greed of  powerful business corporations.  

Three years have passed since Ecuador’s Supreme Court awarded an $18 billion settlement to the villagers of Lago Agrio.  The court found Chevron liable for dumping toxic waste near a rainforest community with devastating consequences for the villagers who lived there.  However, there has been no remediation because Chevron refuses to pay. 

The European delegation was invited to inspect the area, which still hasn’t been cleaned up, as Chevron sued to overturn the judgment of Ecuador’s court by obtaining a judgment in its favor in US District Court for the Southern District of New York. The company admitted long ago that it dumped toxic waste into the waterways of the Amazon rainforest and abandoned huge open pits of the stuff as well, but it refuses to accept responsibility for its own actions.

After the Ecuadorean court’s decision, Chevron sold all of its assets in the country, and it left without paying a dime.  Legal convolutions followed, with Chevron claiming that the Ecuadorean villagers fabricated their story and won in court with bribery and fraud. The case being heard by Judge Lewis Kaplan in the New York District Court is a countersuit to invalidate the decision of Ecuador’s court.

Whether a US District Court has jurisdiction to overturn the decision of a court in another country isn’t clear. Judge Kaplan’s opinionated remarks disparaging Ecuador and its judicial system indicate that its decisions don’t hold as much weight as those of a London court would, in his estimation. 

Lurking in the background is the issue of Investor-State Dispute Settlements (ISDS) which are now a regular element in free-trade agreements like TPP and TTIP. 

When a country’s judicial system is unresponsive in a suit arising from a trade-related issue, an ISDS is supposed to offer another means for settling disputes through arbitration.  Following that process, an international tribunal cleared Chevron of any wrong-doing last October.  For anyone wondering why there are suspicions about the inclusion of ISDS in free-trade agreements, there’s your answer.

Meanwhile, Chevron’s countersuit creeps slowly to its conclusion in New York’s District Court where Judge Lewis Kaplan doesn’t appear to be very sympathetic to the Ecuadorean villagers either.  Recent reporting said that Judge Kaplan has insulted and disparaged the Ecuadorians by referring to them as the “so-called plaintiffs.”

Particularly perplexing is the story of a witness who travelled from Ecuador to testify:

“Another Ecuadorian, Donald Moncayo, who organizes tours of the contaminated areas in the rainforest, traveled for two days from the rainforest to New York's concrete jungle to testify. While on the stand, he mentioned his laptop. Judge Kaplan asked Moncayo if the laptop had with him in New York. When he answered, yes, Kaplan turned to Chevron's lawyer, Randy Mastro, and said, "Take it from here, Mr. Mastro." Mastro then motioned to seize the laptop, and Kaplan ordered it turned over to Chevron within two hours. Since Moncayo was not one of the named defendants in Chevron's RICO case, he had no legal representation. Kaplan denied motions to allow him time to find an attorney.

Afterwards, standing on a noisy New York City street, Moncayo had no idea why three men in expensive black suits in a Lincoln town car were driving away with his laptop, which they kept for 14 hours. On the laptop were photos of his children and wife. This high-drama tactic produced nothing for Chevron, except a story that Moncayo will never forget and will repeat over and over again. His parting words at the airport were, "I will never step foot in this country again."

If there’s no justice for the Ecuadorean villagers in New York, they may have found it in Toronto, Canada, instead.  The plaintiffs traveled there to target Chevron's $15 billion worth of assets in Canada.

Dec 17 2013 (Reuters) - An Ontario appeals court ruled on Tuesday that a group of Ecuadoreans can seek enforcement in Canada of a $9.5 billion judgment against U.S. oil company Chevron Corp, overturning a lower court decision from earlier in the year.

In the latest turn of a two-decade conflict between Chevron and residents of Ecuador's Lago Agrio region in the Amazon jungle, a three-judge panel said the case should proceed, which means the Ecuadoreans can seek damages in Canada that were originally awarded to them in a South American court two years ago.

"After all these years, the plaintiffs deserve to have the recognition and enforcement of the (Ecuadorean) judgment heard on the merits in an appropriate jurisdiction. At this juncture, Ontario is that jurisdiction," the panel wrote in a 29-page decision.

Free-trade agreements with ISDS provisions are supposed to provide resolution in disputes like the one between Chevron and Ecuador.  The tribunal ruled in favor of Chevron based on the trade agreement in effect at the time between the US and Ecuador.  

But the most important lesson to be learned from the case is this:

The tribunal didn’t issue the initial ruling on the matter.  It's decision came after the decision of Ecuador’s Supreme Court.  The tribunal knew that a decision had already been made by the sovereign court of Ecuador and it inserted itself into the decision and overruled it.  By doing so, it pushed the boundaries of the ISDS process beyond the established definition.

The EU provides a list of FAQs for its citizens with questions about TTIP. The same information would apply in the US, too, in a reciprocal agreement.

  • Q: Will the TTIP automatically trump EU laws?
    A: "The TTIP will not automatically overrule, repeal or amend EU laws and regulations."
  • Q: Why is the EU including Investor to State Dispute Settlement in the TTIP?
    A: " . . . Including measures to protect investors does not prevent governments from passing laws, nor does it lead to laws being repealed."

Yet, the tribunal did overrule Ecuador's court. The EU language and the organization that authorizes the tribunals refers to them as a resource available to investors. It seems that they're available to commercial business enterprises but not ordinary individuals.  Yet, the tribunal's decision for the dispute between Chevron and Ecuador had a very definite effect on ordinary Ecuadoreans.

For more information about the ISDS tribunals, authorized by the International Centre for Settlement of Investment Disputes (ICSID), an arbitration court of the World Bank, follow the link.

When there are important questions without answers, and there’s talk in the US Congress of putting these free-trade agreements on fast-track, it seems like pressure to pass a measure without the proper scrutiny.

For more information about the story of the Ecuadorean villagers, this is a good resource.

For more information about the Chevron vs. Ecuador ISDS decision, this is a knowledgable analysis.

Originally posted to Mark Lippman on Sun Jan 12, 2014