BuzzFeed Exposes Corporate “Super Courts” That Can Overrule Government

Dave Johnson

BuzzFeed is running a very important investigative series called “Secrets of a Global Super Court.” It describes what they call “a parallel legal universe, open only to corporations and largely invisible to everyone else.”

Existing “trade” agreements like NAFTA allow corporations to sue governments for passing laws and regulations that limit their profits. They set up special “corporate courts” in which corporate attorneys decide the cases. These corporate “super courts” sit above governments and their own court systems, and countries and their citizens cannot even appeal the rulings.

The 2014 post “Corporate Courts — A Big Red Flag On “Trade” Agreements” explained the origin and rationale for these corporate courts:

Picture a poor “banana republic” country ruled by a dictator and his cronies. A company might want to invest in a factory or railroad — things that would help the people of that country as well as deliver a return to the company. But the company worries that the dictator might decide to just seize the factory and give it to his brother-in-law. … Agreements to protect investors, and allowing a tribunal not based in such countries (courts where the judges are cronies of the dictator), make sense in such situations.

Here’s the thing: Corporate investors see themselves as legitimate “makers” and see citizens and voters and their governments — always demanding taxes and fair pay and public safety — to be illegitimate “takers.” Corporations are all about “one-dollar-one-vote” top-down systems of governance. They consider “one-person-one-vote” democracy to be an illegitimate, non-functional system that meddles with their more-important profit interests. They consider any governmental legal or regulatory system to be “burdensome.” They consider taxes as “theft” of the money they have “earned.”

To them, any government anywhere is just another “banana republic” from which they need special protection.

“Trade” Deals Bypass Borders

Investors and their corporations have set up a way to get around the borders of these meddling governments, called “trade” deals. The trade deals elevate global corporate interests above any national interest. When a country signs a “trade” deal, that country is agreeing not to do things that protect the country’s own national interest — like impose tariffs to protect key industries or national strategies, or pass laws and regulations — when those things interfere with the larger, more important global corporate “trade” interests.

Now, corporations are pushing two new “trade” agreements — one covering Pacific-are countries and one covering Atlantic-area countries — that expand these corporate rights and move governments out of their way. The Pacific agreement is called the Trans-Pacific Partnership (TPP) and the Atlantic one is called the Trans-Atlantic Trade and Investment Partnership (TTIP).

Secrets of a Global Super Court

BuzzFeed’s series on these corporate courts, “Secrets of a Global Super Court,” explains the investor-state dispute settlement (ISDS) provisions in the “trade” deals that have come to dominate the world economy. These provisions set up “corporate courts” that place corporate profits above the interests of governments and set up a court system that sits above the court systems of the countries in the “trade” deals.

Part One, “Inside The Global “Club” That Helps Executives Escape Their Crimes,” describes, “A parallel legal universe, open only to corporations and largely invisible to everyone else, helps executives convicted of crimes escape punishment.”

In a little-noticed 2014 dissent, US Chief Justice John Roberts warned that ISDS arbitration panels hold the alarming power to review a nation’s laws and “effectively annul the authoritative acts of its legislature, executive, and judiciary.” ISDS arbitrators, he continued, “can meet literally anywhere in the world” and “sit in judgment” on a nation’s “sovereign acts.”

[. . .]

Reviewing publicly available information for about 300 claims filed during the past five years, BuzzFeed News found more than 35 cases in which the company or executive seeking protection in ISDS was accused of criminal activity, including money laundering, embezzlement, stock manipulation, bribery, war profiteering, and fraud.

Among them: a bank in Cyprus that the US government accused of financing terrorism and organized crime, an oil company executive accused of embezzling millions from the impoverished African nation of Burundi, and the Russian oligarch known as “the Kremlin’s banker.”

… One lawyer who regularly represents governments said he’s seen evidence of corporate criminality that he “couldn’t believe.” Speaking on the condition that he not be named because he’s currently handling ISDS cases, he said, “You have a lot of scuzzy sort-of thieves for whom this is a way to hit the jackpot.”

Part Two, “The Billion-Dollar Ultimatum,” looks at how “International corporations that want to intimidate countries have access to a private legal system designed just for them. And to unlock its power, sometimes all it takes is a threat.”

Of all the ways in which ISDS is used, the most deeply hidden are the threats, uttered in private meetings or ominous letters, that invoke those courts. The threats are so powerful they often eliminate the need to actually bring a lawsuit. Just the knowledge that it could happen is enough.

[. . .] ISDS is so tilted and unpredictable, and the fines the arbitrators can impose are so catastrophically large, that bowing to a company’s demands, however extreme they may be, can look like the prudent choice. Especially for nations struggling to emerge from corrupt dictatorships or to lift their people from decades of poverty, the mere threat of an ISDS claim triggers alarm. A single decision by a panel of three unaccountable, private lawyers, meeting in a conference room on some other continent, could gut national budgets and shake economies to the core.

Part Three, “To Bankers, It’s Not Just A Court System, It’s A Gold Mine,” exposes how “Financial companies have figured out how to turn a controversial global legal system to their own very profitable advantage.”

Indeed, financiers and ISDS lawyers have created a whole new business: prowling for ways to sue nations in ISDS and make their taxpayers fork over huge sums, sometimes in retribution for enforcing basic laws or regulations.

… The financial industry is pushing novel ISDS claims that countries never could have anticipated — claims that, in some instances, would be barred in US courts and those of other developed nations, or that strike at emergency decisions nations make to cope with crises.

… ISDS gives particular leverage to traders and speculators who chase outsize profits in the developing world. They can buy into local disputes that they have no connection to, then turn the disputes into costly international showdowns. Standard Chartered, for example, bought the debt of a Tanzanian company that was in dire financial straits and racked by scandal; now, the bank has filed an ISDS claim demanding that the nation’s taxpayers hand over the full amount that the private company owed — more than $100 million. Asked to comment, Standard Chartered said its claim is “valid.”

David Dayen explains this last point, in “The Big Problem With The Trans-Pacific Partnership’s Super Court That We’re Not Talking About”: “Financiers will use it to bet on lawsuits, while taxpayers foot the bill.”

But instead of helping companies resolve legitimate disputes over seized assets, ISDS has increasingly become a way for rich investors to make money by speculating on lawsuits, winning huge awards and forcing taxpayers to foot the bill.

Here’s how it works: Wealthy financiers with idle cash have purchased companies that are well placed to bring an ISDS claim, seemingly for the sole purpose of using that claim to make a buck. Sometimes, they set up shell corporations to create the plaintiffs to bring ISDS cases. And some hedge funds and private equity firms bankroll ISDS cases as third parties — just like billionaire Peter Thiel bankrolled Hulk Hogan in his lawsuit against Gawker Media.

Part Four of the great BuzzFeed series, “Secrets of a Global Super Court,” is expected to be published later this week.

PCCC Statement

The Progressive Change Campaign Committee (PCCC) released this statement on the ISDS provisions in TPP:

“Under the Trans-Pacific Partnership, Wall Street would be allowed to sue the government in extrajudicial, corporate-run tribunals over any regulation and American taxpayers would be on the hook for damages. This is an outrage. We need more accountability and fairness in our economy – not less. And we need to preserve our ability to make our own rules.

“It’s time for Obama to take notice of the widespread, bipartisan opposition to the TPP and take this agreement off the table before he causes lasting political harm to Democrats with voters.”

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