This diary continues the study of Investor-State Dispute Settlements (ISDS) that began with an earlier diary posted on Sunday, “‘CRUDE’ – How TPP & TTIP free-trade agreements could threaten sovereignty.”
ISDS is a feature of the TPP and TTIP free-trade agreements. According to the textbook definition, it provides a means for settling international trade disputes when a business enterprise is denied due process in a foreign country where it operates. In practice, it has been used by large and powerful business corporations to exploit the people and resources in countries that aren’t prepared to defend themselves against predatory capitalism. That was the case with Chevron and Ecuador covered in the first part of “Crude.” ISDS is also being used by enterprises to create more favorable business conditions for themselves by nullifying local laws.
As the number of ISDS cases rise, what are the risks for Americans? The TPP and TTIP free-trade negotiations are conducted in private. US Trade Representative Michael Froman says secrecy is necessary so that negotiators can complete their work without disruption.
"If transparency would lead to widespread public opposition to a trade agreement, then that trade agreement should not be the policy of the United States."
---Senator Elizabeth Warren
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It seems that secrecy isn’t considered enough to stifle dissent from the public about TPP and TTIP. Congress may also use Fast-Track legislation to eliminate its Constitutional obligation to scrutinize trade agreements. Fast-Track would allow Congress to quickly pass the trade agreements with a straight up or down vote without any chance to amend them.
On Thursday, the Senate Finance Committee will hold a hearing to consider Fast-Track authority for TPP and TTIP.
US Senate Committee on Finance
January 16, 2014, 10:00 AM (Eastern)
Bill #: S. 1900 - Trade Priorities Act [aka Fast-Track]
Committee Phone: 202-224-4515
Committee Fax: 202-228-0554
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So far, four witnesses are scheduled to appear. In the list below, the first three favor free-trade and their testimony will provide cover for six Democratic Senators to vote for Fast-Track.
Witness |
Organization |
Location |
Interest |
Senators in play |
David Cote |
CEO, Honeywell International |
Morristown NJ |
military procurements |
Menendez/Booker |
Jim Allen |
President, New York Apple Association |
Victor NY |
apples |
Schumer/Gillibrand |
Elena Stegemann |
Director of International Business NuStep Inc (2012 E Star Award – Small business exporter) |
Ann Arbor MI |
exercise equipment |
Levin/Stabenow |
Larry Cohen |
President Communications Workers of America |
Washington DC |
labor union |
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Meanwhile, up in Canada, there’s another product waiting for export.
Crude.
Known as “tar sands” and produced in Alberta, this isn’t anything like the light sweet crude pumped out of the ground in West Texas. Tar sands crude is low quality and dirty, with high sulfur content. It was once considered useless because it’s difficult to recover from the ground and it requires a high degree of processing. Refineries must be specially outfitted to handle it. The cost of production used to be prohibitive but with new technology and the rising cost of gasoline, tar sands became profitable.
Big Oil companies want to pipe Canada’s tar sands to the Texas Gulf Coast refineries which would produce a finished product for export to Europe where it would be suitable for a particular need. Demand for diesel has increased since Europe’s automobile industry began converting production to diesel engines some years ago. Refining tar sands crude into diesel is cheaper to do than gasoline because it requires less processing. With a population over 400 million and GDP larger than the US, the EU is a huge market where a lot of diesel can be sold. It is also possible that some would be exported to China, too.
The map below shows the proximity of the Athabasca oil field to the Pacific Coast and the relative shipping distance from the Gulf Coast to Europe vs. China.
Present law requires State Department approval for the Keystone XL pipeline to cross the border. Environmental protection regulations must be satisfied, too. Since President Obama announced a hold on the Keystone XL Pipeline two years ago, Big Oil and the US government have remained in a standoff. There’s no upside for the US in allowing the pipeline but there’s a huge downside.
If you read the story of the catastrophic contamination caused by Chevron at Lago Agrio in Ecuador and thought it couldn’t happen here, think again. The ISDS provisions of the TPP could allow Big Oil operating in Canada to request offshore tribunal arbitration for a ruling that orders the US to make every effort to expedite the delivery of Canadian tar sands to market.
The situation deserves careful consideration. What it says about the US political process and where power resides in the world today deserves a diary of its own. Canada wasn’t part of the TPP when negotiations began. It joined the other participants in October 2012. It doesn’t appear that the existing NAFTA agreement has the necessary provisions that would support an ISDS ruling mandating a pipeline. With the Senate pretending to be dazzled by the thought of exporting more apples and recumbent bicycles, who would notice provisions that transfer the pipeline authorization to an offshore tribunal?
Understand what could happen and how the conditions for it came about. In 2011, an Investor-State Dispute Settlement tribunal ordered Ecuador to “to take all measures necessary to suspend the enforcement and recognition both within and without Ecuador of the Lago Agrio Judgment.” [which fined Chevron $9 billion for the death and destruction it caused by dumping toxic waste in the Amazon rainforest where it was drilling.]
Because Ecuador had previously disputed the tribunal’s jurisdiction over a settlement decided by its sovereign courts, the tribunal spelled out the extent of its authority:
"These orders were directed not only to the Respondent’s [Ecuador’s] executive branch but to all branches and organs that make up the Respondent [Ecuador] as a State, including its judiciary and legislature. Neither disagreement with the tribunal’s orders nor constraints under Ecuadorian law can excuse the failure of Ecuador, through any of its branches or organs, to fulfill its obligations [to suspend the judgment against Chevron] under international law imposed by the Treaty."
Further defining the Tribunal’s exclusive power over Ecuador, it said:
"Moreover, from its perspective under international law, this Tribunal is the only tribunal with the power to restrain the Respondent [Ecuador]. Such restraint has not been achieved and could not be achieved by any state court, including courts in the USA."
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This astonishing judgment came 17 years after the villagers of Lago Agrio first filed a class action suit in New York District Court on behalf of 30,000 Ecuadorians. After making little progress from 1993 to 2002, Judge Jed Rakoff dismissed the case on
forum non conveniens grounds. His decision said that the case needed to be tried in Ecuador. Judge Sonya Sotomayor was in the Second Circuit Court of Appeals at the time and she inherited the case. She confirmed the dismissal after making an affirmative determination that the courts of Ecuador would be able to provide proper due process to Chevron as the defendant. Chevron strongly agreed with the decision.
From 2002 to 2008, Ecuador’s judicial system attempted to try the case as it was led into a labyrinth of countersuits and cross accusations against Ecuador itself, which was never a party to the class action. Finally, in 2009, Chevron requested ISDS arbitration with a claim that it was denied due process.
Chevron’s lawyers, infamous for stating, "We can't let little countries screw around with big companies like this,” found an unwavering and valiant foe in Ecuador. It filed enforcement actions against Chevron and its affiliates in Canada, Argentina, and Brazil. As a result, 40% of Chevron’s revenue in Argentina is being held in escrow. Last month, the Supreme Court of Ontario in Canada ruled in Ecuador’s favor. That judgment is illustrative of the contradictory rulings obtained from ISDS tribunals and sovereign courts.
Philip Morris Asia Limited vs. The Commonwealth of Australia is a notable case that’s still pending. When Australia’s legislature passed The Tobacco Plain Packaging Bill to reduce the prevalence of smoking, Philip Morris requested an ISDS arbitration. It alleges that the law requiring cigarettes to be sold in standardized plain packages with an oversized health warning is a violation of the trade agreement between Hong Kong and Australia. Billions of dollars are at stake, along with the right of sovereign nations to pass laws without the interference of business corporations.
Smile and Dial
Contact the members of the International Trade, Customs and Global Competitiveness Subcommittee, Chaired by Ron Wyden.The Subcommittee is part of the Senate Finance Committee holding a hearing on Thursday. Here’s the contact info for its members.
Senator |
Party-State |
Phone number |
Fax numbe |
WYDEN, Ron (Chair) |
D-OR |
202-224-5244 |
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BENNET, Michael F. |
D-CO |
202-224-5852 |
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BROWN, Sherrod |
D-OH |
202-224-2315 |
202-228-6321 |
CANTWELL, Maria |
D-WA |
202-224-3441 |
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MENENDEZ, Robert |
D-NJ |
202.224.4744 |
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ROCKEFELLER IV, John D. |
D-WV |
202-224-6472 |
202-224-7665 |
SCHUMER, Charles E. |
D-NY |
202-224-6542 |
202-228-3027 |
STABENOW, Debbie |
D-MI |
202-224-4822 |
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For another scholarly analysis of the Chevron vs Ecuador ruling, click the link.
For those trying to follow the convolutions in the Chevron vs Ecuador legal battle, click the link for a fact check of the numerous falsehoods told by Chevron.
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