Tag Archives: investor-state dispute mechanism

Latest Developments, December 15

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In the latest news and analysis…

Park eviction
The Guardian reports on allegations that members of Kenya’s Samburu community have suffered violent abuse since being evicted from land sold to a pair of US-based charities.
“The London-based NGO Survival International said the Samburu were evicted following the purchase of the land by two American-based charities, the Nature Conservancy and the African Wildlife Foundation.
The groups subsequently gifted the land to Kenya for a national park, to be called Laikipia National Park.
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A community leader, who did not wish to be named, described police harassment as enormous. He said police beat people, burned manyattas or traditional homesteads and carried out arbitrary arrests during the period leading up to and including the eviction last year. He said they also confiscated many animals and the intimidation has continued.”

State sues investor
Reuters reports that Brazilian prosecutors are suing Chevron and Transocean for $10.6 billion and are seeking to suspend their Brazilian operations over a November offshore oil spill.
“The case will add to already-large legal headaches for both companies. Chevron has already faced years of litigation over alleged pollution by Texaco, a company it bought, in Ecuador’s Amazon region decades ago.
Chevron was ordered by Ecuadorean courts in February to pay damages of $18 billion. The suit is now under appeal in Ecuador, and the dispute is also being reviewed by an international arbitration tribunal. Transocean was the rig operator in the giant four-billion-barrel Deepwater Horizon spill in the Gulf of Mexico in 2010.”

Investor sues state
The Inter Press Service reports on a protest outside a World Bank tribunal that is hearing a lawsuit brought by a Canadian mining company against the government of El Salvador for refusing to grant permits for a project along the country’s main water source.
“Pacific Rim, which has insisted long insisted that it would use the most up-to-date environmental technology and methods to ensure the integrity and health of the river, brought its suit under an “investor-state” provision of the 2005 Dominican Republic-Central American Free Trade Agreement (DR-CAFTA).
That provision allows corporations to sue governments over actions that allegedly reduce the value of their investments.
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DR-CAFTA is an agreement strictly between the U.S. and Central American countries. Because Pacific Rim is based in Canada, which is not party to DR-CAFTA, it created a U.S. subsidiary in Nevada in 2009 to press its case before the tribunal, after it could not persuade the Salvadoran government to back the mining plan.”

Investment regulation
A new report released by the Bretton Woods Project warns of the dangers of international financial flow volatility and argues poor countries must take measures to guard against foreign investment surges and stops.
“Even more effective would be policies in rich countries to tackle the risks from capital flows at their source. This includes better overall financial regulation, but consideration should be given to specific capital flows policy in source country. More regional and international coordination on capital account regulation, particularly enforcement of rules, would help developing countries deal with financial flows more effectively. Ultimately, a more ambitious global framework agreement could reinforce mutually consistent management techniques across source and destination countries.”

Mining fraud
The Financial Times reports on resentment in Ghana resulting from the perception that foreign mining companies are getting rich off the country’s resources and giving little back in return.
“One lawyer employed by a gold miner in the 1990s told the FT that the company he worked for systematically falsified its accounts to underestimate profits, thereby depriving the state of millions of dollars in taxes.
There are growing suspicions in government circles that similar tax fraud, known as transfer pricing, has been exercised systematically by companies in the sector.”

Illicit financial flows
A new report released by Global Financial Integrity estimates “developing” countries lost $903 billion to illicit financial outflows in 2009 (which is actually lower than the 2008 figure), capping a decade in which they lost $8.44 trillion.
“It would be encouraging to find that the 2009 reduction in illicit outflows occurred because of stronger governance within countries and more transparent financial dealings between countries. There is little indication that this is yet the case. The need for combined global effort to curtail illicit financial flows is more urgent than ever. We are pleased to note that the G20, OECD, World Bank, and others are beginning to take this issue much more seriously.”

An important distinction
ECONorthwest’s Ann Hollingshead draws a distinction between the concepts of “ill-gotten money” and “illicit financial flows,” which have markedly different economic impacts on poor countries.
“The [World Bank] authors study what they term ‘ill-gotten money,’ which they define as ‘money derived (illegally acquired) from crime and tax evasion.’ This includes not only illicit cross-boarder transfers and assets held abroad, but also illicit transfers and assets held and transferred domestically. The difference between this concept and illicit financial flows is important. The economic effect of a criminal activity alone is quite different than the economic effect of a criminal activity with a corresponding transfer of cash internationally. Or the economic effect of an illicit cross-boarder transaction where the underlying activity itself was not illicit.”

Legal corruption
The New York Times reviews Harvard law professor Lawrence Lessig’s new book, Republic, Lost, in which he explores the idea of legal corruption.
“There is, in his view, one thing holding back America, a legal but corrupt system of campaign finance. ‘Practically every important issue in American politics today is tied to this ‘one issue,’ ’ he writes. Mr. Lessig’s agenda (invoking Thoreau) is to attack ‘the root, the thing that feeds the other ills, and the thing that we must kill first.’
Existing campaign finance reforms, particularly donor disclosure and contribution limits, have done as much harm as good, leading to ‘a corruption practiced by decent people’ and legitimizing what Mr. Lessig calls ‘a gift economy.’ Disclosure of the identities of contributors has made the venal routine. The system ‘normalizes dependence,’ Mr. Lessig writes. ‘There’s is no shame in the dance.’ ”

Latest Developments, November 7

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In the latest news and analysis…

Energy governance
Former NATO secretary general Javier Solana and the ESADE Center for Global Economy and Geopolitics’ Ángel Saz-Carranza make the case for a system of global energy governance, arguing that neither an unregulated market nor current multilateral institutions are up to the task.
“Owing mainly to its environmentally negative externalities, an unregulated energy market is not a useful governing mechanism, because it is unable to internalize the environmental costs. It has been calculated that the most contaminating energy sources would have to pay a 70% tax to reflect their negative externalities.
A substantial lack of information in this field is another reason why the free market doesn’t work. Often, as with the properties of a gas reserve, for example, information is technically difficult to obtain. In addition, governments consider natural resources to be strategic and don’t release information about them. Finally, time frames related to energy are usually long: centuries for environmental effects or decades for investments to pay off. Thus, energy must be governed through a system of cooperation and regulation.”

Covert war
The Bureau of Investigative Journalism’s Pratap Chatterjee argues the CIA must prove that two Pakistani boys, aged 12 and 16, who were killed last week in a drone strike posed an imminent threat to US security or else it is guilty of murder.
“Over 2,300 people in Pakistan have been killed by such missiles carried by drone aircraft such as the Predator and the Reaper, and launched by remote control from Langley, Virginia. Tariq and Waheed brought the known total of children killed in this way to 175, according to statistics maintained by the organisation I work for, the Bureau of Investigative Journalism.”

First, do no harm
The University of London’s Donna Dickenson writes about the recent discovery that American researchers intentionally infected hundreds of Guatemalans with syphilis in the 1940s, and she warns against ethical complacency today as more and more clinical drug trials are conducted in poor countries.
“In fact, one should view the Guatemalan study, with its incontrovertible horrors, as an extreme example of the biggest ethical problems in research today. Now, as then, richer developed countries are able to put pressure on weaker, poorer ones.
A report in 2010 revealed that foreign citizens made up more than three-quarters of all the subjects in clinical trials conducted by US firms and researchers. The US Food and Drug Administration inspected only 45 of these sites, about 0.7 per cent. There is no suggestion that Third World patients are deliberately being made ill when research is outsourced – unlike in the Guatemalan case – but that does not attenuate the inherent vulnerability of populations lacking basic medical care or experiencing epidemics.”

Investment agreements
The Guardian reports on bilateral investment treaties and how their investor-state dispute mechanism is a powerful and increasingly popular tool for transnational corporations to sue governments whose policies threaten their profits.
“There is growing concern among legal experts and the countries hit by these legal cases that the investment regime, made up of a patchwork of bilateral investment treaties and multilateral agreements, favours corporations over the public interest, puts sovereignty at stake, is chronically lacking in transparency and accountability and has been mis-sold to many developing countries that only realise exactly what they have signed up for when they get sued.
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In the last 15 years multinational corporations have increasingly recognised the potential of the ISDM, and this area of law – in which lawyers and arbitrators can command fees of $500 an hour and more – has seen a rapid expansion. A UN report in 2010 noted that 57% of all known cases have been brought in the last five years, with growing numbers of law firms opening large, dedicated sections.”

Affordable medicine
Intellectual Property Watch reports the Medicines Patent Pool, whose goal is to improve access to effective HIV/AIDS treatments in poor countries, has responded to criticism of a deal it signed with a major pharmaceutical company earlier this year.
“The Pool said in its response that the Gilead deal is not a template for the future, and that it includes more countries in its scope than any other HIV licence to date. The response also details how the licence does not undermine flexibilities contained within the World Trade Organization Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). It also seeks to address concerns related to production of generic products in India and elsewhere.”

Ethical oil
Nobel laureates Jody Williams and Desmond Tutu argue one of their own, US President Barack Obama, will take “one of the single most disastrous decisions of his presidency concerning climate change and the very future of our planet” if he approves construction of the Keystone XL pipeline that would transport oil from Canada’s controversial “tar sands” to the Gulf of Mexico.
“The claim that Alberta’s fossil fuels are “ethical” because Canada is a friend is a specious ploy aimed at perpetuating the world’s addiction to fossil fuels. There is no such thing as ethical fossil fuel, regardless of geographical origin. The ethical choice is to move as quickly as possible away from fossil fuels, period.”

Roadmap for sustainable development
The UNDiplomatic Times’s Bhaskar Menon calls for a specific course of action to be mapped out at next year’s Rio+20 summit in order to actually undertake the radical changes needed to achieve sustainable development.
“The [UN] secretary-general’s report submitted earlier this year to the committee preparing for the [Rio+20] conference noted that to succeed in ‘fundamentally shifting consumption and production patterns onto a more sustainable path’, public policy would have to extend ‘well beyond “getting prices right”’.
However, it did not say what specific policy measures would be necessary. Indeed, nowhere in the massive body of documentation the United Nations has produced since it convened the first Environment Conference in 1972 can we find a single analysis of that issue.”