Now updated with Paraguayan Super Snacks
An exchange at LGM started off like this, and my riposte to Erik Loomis's rejoinders got too long to post there, so here it is.
The operative terms there are "is suing", as opposed to "has won a judgment". There is no legal system anywhere that prevents bad lawsuits from being filed, but we don't propose to fix this by saying we shouldn't have a legal system any more.
Some background on the Vattenfall case: in 2009 the company (a company wholly owned by the Swedish government) sued Germany for $1.9 billion in an ISDS suit over plans for a coal-fired power plant in Hamburg, on which the city's CDU/Green coalition government wanted to impose some environmental conditions after agreeing (following prolonged local litigation) to give them a permit. The federal government (Merkel's CDU government) decided to settle (any damages payment is secret) in 2010 and allowed the plant to be built. The second Vattenfall suit, filed in 2012, has to be understood in this light; if Merkel had not caved on the first one the second one might never have happened.
The second case involves two nuclear power plants operated and partly owned by Vattenfall, the Krümmel and Brunsbüttel, which the German government shut down after the Fukushima disaster. The fecklessness of the Merkel government is also an issue here; while an elaborate plan to stop using nuclear power was developed under SDP and SDP-Green governments between 1998 and 2001 and successfully shutting down three plants between 2003 and 2005, the Christian Democrats came into office in 2009 determined to bring nuclear power back, then abruptly changed their minds two years later, and the switch wasn't planned properly.
Vattenfall claims to have lost $1.5 billion in expected revenues in 2011 alone, and demands compensation (at the moment of $5.8 billion). They're not trying to force Germany to go back to using nuclear power (or rather to stop phasing it out; the project won't have finished until 2022). The German-owned public utilities that own the other 15 nuclear plants being shut down are suing for compensation as well, inside the German court system. Vattenfall has evidently gotten the idea from Merkel that they're better off using the ISDS system, but it will be a long time before we find out if they're right about that.
The French waste-management company Veolia is not a water conglomerate but a spin-off from the water conglomerate Vivendi, which began not as a colonial enterprise but as a supplier of water to the city of Lyon in 1853 (not imperialist or Africa-connected in its origins, but rather Imperial in the sense that it was chartered by Napoleon III; its international business dates from the 1980s). It has a contract for sanitation and recycling in the city of Alexandria, but did not complain against Egypt raising the minimum wage it has to pay its workers; it complained that the governorate of Alexandria violated a contract clause in not adjusting its payments to compensate for increased expenses, including not just the minimum wage but also Alexandria's population growth and fluctuations in the exchange rate between the euro and the Egyptian pound. And failing to protect the company's garbage cans. (Story from Jeune Afrique, but you can read some of it in Wapo.) The picture of it heartlessly insisting on paying the Egyptian workers starvation wages is false.
The story of the attack on Uruguay's anti-smoking program by Swiss Philip Morris (not Hong Kong Philip Morris as I said above, that was the Australian case) could be pretty awful if it succeeds, but it's been going on for five years, I'd just like to say the Uruguayan government is tougher and better than the current German one, and they've fully and fearlessly implemented the program in spite of the suit. Philip Morris knows it can't reverse such developments; it does this in the hope of frightening other countries, like poor Togo. So it spins out the tribunal as long as it can, which is a bad thing.
But it will lose, just as in the not atypical case brought against the US in 1999 by Methanex, a Canadian methanol producer, which sued over the California ban on the gasoline additive MBTE, which can leak from underground tanks and pipelines and contaminate the water supply. The company complained that the ban was equivalent to an expropriation, taking away its California market share.
When you refer to the laws of Malaysia and Vietnam I don't suppose you're talking about the Vietnamese prohibition on labor organization, which I learned about from you, Erik, and which the TPP should be able to counter with enforceable trade sanctions (and certainly would if Congress would pass an adequate TAA, though it's not likely it can with a Republican majority; but I'm pretty sure the Obama administration really wants to include this in the agreement anyway, so it's still imaginable that it might end up there), or the lack of a legal apparatus in Malaysia to prevent human trafficking. I personally hope one day there is an international organization with teeth to deal with these things, where a labor union can bring an action as easily as a sanitation company, and I don't see any other way of getting there other than through deals like this (the European Union grew out of a trade agreement too).
Argentina and Czech Republic are not "poor nations", they're corrupt and badly run. A poor nation with a relatively well-run government is Costa Rica, which has been the respondent in six ISDS complaints. Of these, three were straightforward cases in which the government had expropriated property for use in the tourist industry and failed to pay for it, one to the US Compañia de Desarrollo Santa Elena, and two to a married couple, Marion and Reinhard Unglaube of Germany, and the government ended up paying; two were Canadian complaints, one alleging inadequate supervision of the financial sector and the other about agricultural property that hadn't been protected from squatters, and they were dismissed; and one was from a Spanish company that does vehicle inspections in Costa Rica and hasn't been allowed to raise its prices, and is still pending. None of these are gigantic American interests steamrolling a plucky little country or forcing it to abandon its environmental programs; the system is working pretty well.
It's really getting to be like the Obamacare Tragedy Watch was. Just as you could never find a case where the Heritage allegations about the ACA were justified, so every time I look at one of the dreadful miscarriages of the ISDS process there's just nothing there. In the terrible Chevron vs. Ecuador case, often cited as an example of how dangerous ISDS is, the miscarriage of justice happened in a federal court in New York's Southern District and may soon be reversed in the 2nd District Court of Appeals; the ISDS case is so far just a sideshow. What the world needs, as I've said before, is a properly constituted International Investment Court, which of course the US would forever refuse to join, just the way it refuses to join anything that won't let it be exceptional, but in the meantime the ISDS process is not that bad.
I can still imagine that the TPP final agreement will suck in many ways and not be worth supporting, but the ISDS line just isn't one of them; that's propaganda, and the left shouldn't be using it.
Update:
Why Paraguay? Loomis is worried about Paraguay getting abused by the ISDS system, but I can only find one case, from 2000, a complaint by a businessman, Eudoro Armando Olguín, with dual Peruvian-US citizenship, on the basis of a 1994 bilateral investment treaty between Peru and Paraguay. In1993, Olguín deposited certain funds with a Paraguayan finance company, La Mercantil S.A. de Finanzas, toward the installation of a corn products plant to be entitled Super Snacks del Paraguay S.A., and after being granted tax incentives for the business by the Paraguayan government. Then La Mercantil folded in the financial crisis of 1995, and his money no longer existed, so he sued for the unpaid portion of his investment, Guaraní 2,407,057,500.00 (that's $467,840.08 at today's exchange rate), on the grounds that the Paraguayan government in granting him the tax incentives had taken on the role of a guarantor. So his claim was denied. That's all I know about it.
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| Invasion of foreign ketchup. Indonesian kecap manis, via Roda Dua. |
joe from Lowell says:
When I was taught math word problems as a child, we were always told to do a common-sense check afterwards. If you’re looking for the temperature in Johnny’s room, should it be a four digit number? That sort of thing.People have been reading and repeating the claim that ISDSs can overturn national laws. A lot. Call me crazy, but that really should be like coming out with 1236 as the temperature in Johnny’s room.- The French water conglomerate Veolia (formed as part of the nation’s African imperialist adventures) is suing Egypt over a minimum wage hike.This stuff is not theoretical.
The operative terms there are "is suing", as opposed to "has won a judgment". There is no legal system anywhere that prevents bad lawsuits from being filed, but we don't propose to fix this by saying we shouldn't have a legal system any more.
Some background on the Vattenfall case: in 2009 the company (a company wholly owned by the Swedish government) sued Germany for $1.9 billion in an ISDS suit over plans for a coal-fired power plant in Hamburg, on which the city's CDU/Green coalition government wanted to impose some environmental conditions after agreeing (following prolonged local litigation) to give them a permit. The federal government (Merkel's CDU government) decided to settle (any damages payment is secret) in 2010 and allowed the plant to be built. The second Vattenfall suit, filed in 2012, has to be understood in this light; if Merkel had not caved on the first one the second one might never have happened.
The second case involves two nuclear power plants operated and partly owned by Vattenfall, the Krümmel and Brunsbüttel, which the German government shut down after the Fukushima disaster. The fecklessness of the Merkel government is also an issue here; while an elaborate plan to stop using nuclear power was developed under SDP and SDP-Green governments between 1998 and 2001 and successfully shutting down three plants between 2003 and 2005, the Christian Democrats came into office in 2009 determined to bring nuclear power back, then abruptly changed their minds two years later, and the switch wasn't planned properly.
Vattenfall claims to have lost $1.5 billion in expected revenues in 2011 alone, and demands compensation (at the moment of $5.8 billion). They're not trying to force Germany to go back to using nuclear power (or rather to stop phasing it out; the project won't have finished until 2022). The German-owned public utilities that own the other 15 nuclear plants being shut down are suing for compensation as well, inside the German court system. Vattenfall has evidently gotten the idea from Merkel that they're better off using the ISDS system, but it will be a long time before we find out if they're right about that.
The French waste-management company Veolia is not a water conglomerate but a spin-off from the water conglomerate Vivendi, which began not as a colonial enterprise but as a supplier of water to the city of Lyon in 1853 (not imperialist or Africa-connected in its origins, but rather Imperial in the sense that it was chartered by Napoleon III; its international business dates from the 1980s). It has a contract for sanitation and recycling in the city of Alexandria, but did not complain against Egypt raising the minimum wage it has to pay its workers; it complained that the governorate of Alexandria violated a contract clause in not adjusting its payments to compensate for increased expenses, including not just the minimum wage but also Alexandria's population growth and fluctuations in the exchange rate between the euro and the Egyptian pound. And failing to protect the company's garbage cans. (Story from Jeune Afrique, but you can read some of it in Wapo.) The picture of it heartlessly insisting on paying the Egyptian workers starvation wages is false.
The story of the attack on Uruguay's anti-smoking program by Swiss Philip Morris (not Hong Kong Philip Morris as I said above, that was the Australian case) could be pretty awful if it succeeds, but it's been going on for five years, I'd just like to say the Uruguayan government is tougher and better than the current German one, and they've fully and fearlessly implemented the program in spite of the suit. Philip Morris knows it can't reverse such developments; it does this in the hope of frightening other countries, like poor Togo. So it spins out the tribunal as long as it can, which is a bad thing.
But it will lose, just as in the not atypical case brought against the US in 1999 by Methanex, a Canadian methanol producer, which sued over the California ban on the gasoline additive MBTE, which can leak from underground tanks and pipelines and contaminate the water supply. The company complained that the ban was equivalent to an expropriation, taking away its California market share.
That's certainly how it should have ended (though it should have ended a lot earlier than 2005, too). That's how the system is supposed to work, with guarantees of each polity's right to protect its environment and its workers through legislation, and that's how the TPP is supposed to be written, though of course we don't know if it is or not and some of the signs are not good.The tribunal in the ensuing arbitration found that the legislative process in California leading to the ban had been transparent, subject to due process and based on scientific report which was subjected to a peer review.Further, the tribunal concluded that the ban was a non-discriminatory regulation for public purpose. As such, it did not constitute an expropriation and therefore non-compensable.In conclusion, the claim by the investor was dismissed in its entirety.
I would say it’s a huge problem for those nations being sued such as Egypt and Paraguay. Yes, it’s true that ISDS will likely serve the interests of US corporations and that the laws of Malaysia and Vietnam are more likely to be overturned than that of the U.S. That is still not a good thing. Plus there’s no inherent reason why a more powerful ISDS system couldn’t eventually turn on the laws of U.S. cities and states primarily. That the current system serves powerful nations at the expense of poor nations is hardly revelatory, but it is still a reason to fight these courts.
When you refer to the laws of Malaysia and Vietnam I don't suppose you're talking about the Vietnamese prohibition on labor organization, which I learned about from you, Erik, and which the TPP should be able to counter with enforceable trade sanctions (and certainly would if Congress would pass an adequate TAA, though it's not likely it can with a Republican majority; but I'm pretty sure the Obama administration really wants to include this in the agreement anyway, so it's still imaginable that it might end up there), or the lack of a legal apparatus in Malaysia to prevent human trafficking. I personally hope one day there is an international organization with teeth to deal with these things, where a labor union can bring an action as easily as a sanitation company, and I don't see any other way of getting there other than through deals like this (the European Union grew out of a trade agreement too).
Argentina and Czech Republic are not "poor nations", they're corrupt and badly run. A poor nation with a relatively well-run government is Costa Rica, which has been the respondent in six ISDS complaints. Of these, three were straightforward cases in which the government had expropriated property for use in the tourist industry and failed to pay for it, one to the US Compañia de Desarrollo Santa Elena, and two to a married couple, Marion and Reinhard Unglaube of Germany, and the government ended up paying; two were Canadian complaints, one alleging inadequate supervision of the financial sector and the other about agricultural property that hadn't been protected from squatters, and they were dismissed; and one was from a Spanish company that does vehicle inspections in Costa Rica and hasn't been allowed to raise its prices, and is still pending. None of these are gigantic American interests steamrolling a plucky little country or forcing it to abandon its environmental programs; the system is working pretty well.
It's really getting to be like the Obamacare Tragedy Watch was. Just as you could never find a case where the Heritage allegations about the ACA were justified, so every time I look at one of the dreadful miscarriages of the ISDS process there's just nothing there. In the terrible Chevron vs. Ecuador case, often cited as an example of how dangerous ISDS is, the miscarriage of justice happened in a federal court in New York's Southern District and may soon be reversed in the 2nd District Court of Appeals; the ISDS case is so far just a sideshow. What the world needs, as I've said before, is a properly constituted International Investment Court, which of course the US would forever refuse to join, just the way it refuses to join anything that won't let it be exceptional, but in the meantime the ISDS process is not that bad.
I can still imagine that the TPP final agreement will suck in many ways and not be worth supporting, but the ISDS line just isn't one of them; that's propaganda, and the left shouldn't be using it.
Update:
Why Paraguay? Loomis is worried about Paraguay getting abused by the ISDS system, but I can only find one case, from 2000, a complaint by a businessman, Eudoro Armando Olguín, with dual Peruvian-US citizenship, on the basis of a 1994 bilateral investment treaty between Peru and Paraguay. In1993, Olguín deposited certain funds with a Paraguayan finance company, La Mercantil S.A. de Finanzas, toward the installation of a corn products plant to be entitled Super Snacks del Paraguay S.A., and after being granted tax incentives for the business by the Paraguayan government. Then La Mercantil folded in the financial crisis of 1995, and his money no longer existed, so he sued for the unpaid portion of his investment, Guaraní 2,407,057,500.00 (that's $467,840.08 at today's exchange rate), on the grounds that the Paraguayan government in granting him the tax incentives had taken on the role of a guarantor. So his claim was denied. That's all I know about it.
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| Via Clasificados Gratis de Paraguay, a 2011 ad for a field sales rep. |
Yastreblyansky says: