The Trans-Pacific Partnership: Empowering Corporations to Attack Nations
Incentivizing Corporations to Outsource Our Jobs and Attack Our Laws
[This page is about the ISDS threat posed by the now-defunct TPP. See more current analysis of ISDS here.]
The TPP was a massive, controversial, pro-corporate “free trade” agreement that was defeated by thousands of diverse organizations representing working people united across borders — fighting against corporate power and for the environment, health, human rights and democracy. The key provision in the TPP would have enabled an insidious corporate power grab. If it had passed through Congress and been enacted, the TPP would have granted new rights to thousands of multinational corporations to bypass domestic courts and directly “sue” the U.S. government before a panel of three corporate lawyers. Fair trade advocates must remain vigilant to stop the spread of this corporate power grab through attempts to revive this dangerous element of the TPP. Under this system, these lawyers can award the corporations unlimited sums to be paid by America’s taxpayers, including for the loss of expected future profits. The corporations need only convince the lawyers that a U.S. law or safety regulation that we rely on for a clean environment, essential services, and healthy communities violates their “trade agreement” rights. These decisions are not subject to outside appeal and the amount they can order taxpayers to give corporations has no limit.
How could multinational corporations attack domestic health, environmental and financial protections on which we all rely and that local companies have to follow? The TPP contained a provision known as Investor-State Dispute Settlement (ISDS). The ISDS provision in the TPP would have given multinational firms stunning new powers, including the ability to challenge new policies – from Wall Street regulations to climate change protections – because the corporations claim the policies violate the new TPP rights and frustrate the corporations’ “expectations” of they should be treated.
Under ISDS, if a tribunal rules against a challenged policy, there is no limit to the amount of taxpayer money it can order the government to pay the multinational corporation. The amount is based on the “expected future profits” the tribunal surmises that the corporation would have earned in the absence of the public policy it is attacking. Under existing U.S. pacts, tribunals have ordered billions in taxpayer compensation to multinational firms, and tens of billions more are pending.
These lawyers rotate between serving as “judges” and bringing cases for corporations against governments – a conflict of interest that would be deemed unethical under most legal systems. The “tribunalists,” as they are formally called, are not bound by precedent or the opinions of governments, and there is no outside appeal to their rulings.
While this shadow legal system for multinational corporations has been around since the 1950s, just 50 known cases were launched in the regime’s first three decades combined. In contrast, corporations have launched approximately 50 claims in each of the last six years.
The U.S. has dodged ISDS liability to date because past treaties have only covered a limited number of investors here. But instead of decreasing our exposure to this surge of corporate attacks, the TPP would have roughly doubled U.S. exposure to investor-state attacks against U.S. policies. The TPP would have newly empowered more than 1,000 additional corporations in TPP countries, which own more than 9,200 additional subsidiaries in the United States, to launch investor-state cases against the U.S. government. If that were not sufficiently outrageous, the TPP special protections for multinational corporations also incentivize more job outsourcing. The new corporate rights and powers would eliminate many of the usual costs and risks that make firms think twice about moving to low-wage countries, literally promoting corporations to launch a new wave of job offshoring.
The ISDS expansion planned in the TPP has been defeated thanks to the tireless work of thousands of international fair trade activists who stopped the TPP. But the unaccountable ISDS system still exists in other “free trade” agreements and could be expanded in future corporate-driven deals.
Visit www.isdscorporateattacks.org to learn more.
- Alternatives: The New Rules of the Road: A Progressive Approach to Globalization
- Map: See how TPP would have expanded corporate power through ISDS in your state
- Press Release: TPP Fight Escalates as Sen. Warren and Hundreds of Academics Oppose Tribunal System at Heart of Pact
- Analysis: TPP Investment Chapter Is Worse Than We Thought
- Map: See which multinational corporations near you could challenge U.S. policies under the TPP
- Case Studies: Investor-State Attacks on Public Interest Policies
- Ben Beachy and the Cato Institute’s Simon Lester in The Hill: Special Courts for Multinational Investors (April 15, 2015)
- Lori Wallach in the Kluwer Arbitration Blog: Brewing Storm over Investor-State Dispute Resolution Clouds Trans-Pacific Partnership (TPP) Talks Part 1 | Part 2 – Japanese translation available here
- Wallach in The American Prospect: A Stealth Attack on Democratic Governance (March 13, 2012)