Toxic Lawsuit Showcases State Solidarity in ISDS

A U.S. junk bond company’s attempt to collect $800 million from Peruvian taxpayers over an environmental clean-up dispute was dealt a blow earlier this week. In an award released to the public on Tuesday, a trio of arbitrators ruled that the company had failed to correctly file their litigation materials. As a result, the tribunal had no jurisdiction over the case.

Like the Philip Morris cases I discussed earlier this week, the Renco Group v. Republic of Peru case had become a poster child for critics of so-called investor-state dispute settlement, or ISDS. The company was owned by Ira Rennert, a controversial billionaire accused of bleeding distressed companies into bankruptcy and building one of the largest homes in the United States. And he was suing Peru for – among other things – not granting him a third extension of his clean-up obligations for a pollution-emitting smelter he owned there. The facility was faulted for turning the village of La Oroya into one of the 10 most polluted places on the planet, leading to cancer and other ailments in the local population.

The case has taken many twists and turns since being filed in late 2010. For instance, Rennert argued that his claim – brought under the U.S.-Peru trade agreement – shielded him from a tort claim brought by La Oroyans in Missouri state courts. For a timeline of the messy treaty and domestic proceedings, see here.*

Although two of the arbitrators sided with Peru in the decision this week, the matter is far from settled. Renco immediately announced their intention to re-file the case with the corrected paperwork. Thus, a case where the preliminary phases had already dragged on for years could drag on for years more.

Here are a few takeaways from the case.

Getting the rules right matters

The momentary win for Peru highlights a key role that policymakers can play in carefully limiting investors’ access to the jurisdiction of ISDS tribunals.

Continue reading “Toxic Lawsuit Showcases State Solidarity in ISDS”

GOP Platform: No TPP in Lame Duck

Okay, it doesn’t utter those words, just as the Democratic Platform will not. But it pretty much calls for the same thing. Here’s the full trade section of the agreed platform:

A Winning Trade Policy

International trade is crucial for all sectors of America’s economy. Massive trade deficits are not. We envision a worldwide multilateral agreement among nations committed to the principles of open markets, what has been called a “Reagan Economic Zone,” in which free trade will truly be fair trade for all concerned.

We need better negotiated trade agreements that put America first. When trade agreements have been carefully negotiated with friendly democracies, they have resulted in millions of new jobs here at home supported by our exports. When those agreements do not adequately protect U.S. interests, U.S. sovereignty, or when they are violated with impunity, they must be rejected.

We cannot allow foreign governments to limit American access to their markets while stealing our designs, patents, brands, know-how, and technology. We cannot allow China to continue its currency manipulation, exclusion of U.S. products from government purchases, and subsidization of Chinese companies to thwart American imports. The current Administration’s way of dealing with these violations of world trade standards has been a virtual surrender.

Republicans understand that you can succeed in a negotiation only if you are willing to walk away from it. A Republican president will insist on parity in trade and stand ready to implement countervailing duties if other countries refuse to cooperate.

At the same time, we look to broaden our trade agreements with countries which share our values and commitment to fairness, along with transparency in our commercial and business practices. In pursuing that objective, the American people demand transparency, full disclosure, protection of our national sovereignty, and tough negotiation on the part of those who are supposed to advance the interests of U.S. workers. Significant trade agreements should not be rushed or undertaken in a Lame Duck Congress (emphasis added).

Would be hard to argue that the TPP is not “significant,” and it’s the only deal anyone is thinking of “undertaking” in the Lame Duck. Obama was at one point betting he would have willing allies in Mitch McConnell and Paul Ryan. But that seems to have evaporated in recent days. So unclear who would help Obama bring in more votes, since Hillary Clinton and the Democrats are mostly opposed to a lame duck vote.

A few further notes:

  • Note no hard and fast rejection of TPP after the lame duck.
  • Unclear which trade deal provisions would or would not compromise sovereignty, as the platform isn’t explicit. (See here for one possible take.)
  • There’s a tension between signing agreements only with democracies, insisting on a worldwide trade deal (which would include non-democracies), but then also saying we should walk away from integration on a country-by-country basis. These are not compatible visions.
  • Finally, I don’t think there’s a clear pattern of a favorable U.S. export balance with trade partners that are democracies – as the platform seems to suggest. Econometric tests might be able to tell us more, although I can’t think of a clear theoretical mechanism for expecting any particular result. (e.g. does more inter-branch deliberation make foreign citizens want more U.S. goods?)

What the Close Decision on Philip Morris Tells Us About ISDS

Sometimes corporations don’t get what they want. That was the case earlier this month when a World Bank arbitration tribunal ruled against tobacco giant Philip Morris in its suit against Uruguay. In a split decision, a majority of two arbitrators sided with the Latin American sovereign’s right to regulate, while a dissenting arbitrator sided partly with the corporation (which had appointed him to the panel).

Philip Morris launched the case in 2010, after Uruguay introduced a set of cigarette labeling policies to deter smoking. First, all cigarette packages were required to have graphic warning labels on 80 percent of their surface area. Second, each cigarette brand family could have only one design presentation. (Uruguay argued that tobacco companies used different color and design schemes to suggest certain variants were healthier than others.) These policies were driven by the administration of Tabaré Vázquez, a left-leaning oncologist first elected president in 2005. Although Philip Morris is headquartered in the U.S.—and although the U.S. and Uruguay have a bilateral investment treaty, or BIT—the tobacco company used its Swiss subsidiary and a Switzerland-Uruguay BIT to bring the case, as it is permitted to do.

In recent years, the case had become the poster child for critics of so-called investor-state dispute settlement, or ISDS. This legal procedure is contained in thousands of international trade and investment treaties, and permits foreign investors to sue governments over alleged harms suffered from regulation. Critics maintain that ISDS chills ambitious public interest regulation, while proponents argue that it helps reassure foreign capital that it will be treated fairly overseas. Once an obscure issue, the investment rules catapulted into the national spotlight in the past year, figuring prominently on late-night talk shows and the Democratic Party’s platform fight over the Trans-Pacific Partnership, or TPP.

Despite (or likely because of) critics’ attention to the case, the arbitration tribunal did pretty much what you would want an international court-like body to do. First, the arbitrators clearly understood both the business and regulatory issues that concerned both Philip Morris and Uruguay. Second, the tribunal refused to second-guess the public health experts. Third, the arbitrators refused to second-guess the Uruguayan courts that had already heard the case. Finally, even the dissenting arbitrator raised reasonable points and did not toe the party line of his appointer.

I’ll go into more detail on each of these points below. Continue reading “What the Close Decision on Philip Morris Tells Us About ISDS”

Trump’s VP Pick His Opposite on Trade

Donald Trump is set to announce Indiana Governor Mike Pence as his running mate in a news conference tomorrow.

The media is just beginning to parse the two men’s similarities and differences on policy. Trump has never held elected office, while Pence served in the U.S. House of Representatives from 2001 to 2013.

One of Trump’s leading policy issues is his rejection of current trade agreements. This has put him at sharp odds with Republican campaign donors, a distinction he appears to relish.

On this issue, Pence is Trump’s opposite. While in the House, he supported every trade deal he voted on. Combined with key procedural votes, that’s a 100% track record (13/13 votes) of supporting the legacy trade policy that Trump is running against. Even when some Tea Party Republicans voted against recent trade agreements supported by President Obama, Pence crossed the aisle.

For those looking to cast doubts on Trump’s sincerity on trade policy, Pence’s voting record may provide ammunition:

  1. Voted for Fast Track.
  2. Voted for Chile FTA.
  3. Voted for Singapore FTA.
  4. Voted for Australia FTA.
  5. Voted for Morocco FTA.
  6. Voted against withdrawing from the WTO.
  7. Voted for CAFTA. Abstained on the Bahrain FTA.
  8. Voted for Oman FTA.
  9. Voted for Peru FTA.
  10. Voted against cancelling Fast Track.
  11. Voted for Obama’s Colombia FTA.
  12. Voted for Obama’s Panama FTA.
  13. Voted for Obama’s Korea FTA.

UPDATE: Jay Chittooran and I share a brain, apparently. He wrote a very similar post a few hours earlier – catching some Pence statements. Check it out here.

Video: Dems Debate #TPP / #ISDS

The Democratic National Committee debated trade policy in its platform debates yesterday.

The divide was between explicit opponents and implicit opponents of the Trans-Pacific Partnership – with both wanting to go further than the softly critical language in the July 1 draft platform.

Ben Jealous (former head of the NAACP) was in the former camp. Both were A Bernie Sanders supporter, he wanted the Democrats to state unequivocally that they oppose the trade deal. Both He raised the specter of a Trump/ GOP Platform that went further than the Democrats on the issue. The Sanders camp highlighted the amendment as a priority for the campaign.

Lee Saunders, head of the AFSCME labor union and a Hillary supporter, was in the latter camp. As John Nichols reported:

Saunders offered an amendment to add strong language declaring that trade agreements “must not undermine democratic decision making through special privileges and private courts for corporations, and trade negotiations must be transparent and inclusive. Democrats’ priority is to significantly strengthen enforcement of existing trade rules and strengthen the tools we have, including by holding countries accountable on currency manipulation and significantly expanding enforcement resources.” Outlining labor, environment and currency manipulation standards, and calling for “streamlined and effective enforcement mechanisms” that “protect workers and the environment,” the amendment insisted that “These are standards all Democrats believe should be applied to all trade agreements, including the Trans-Pacific Partnership.”

This language takes the previously obscure issue of investor-state dispute settlement (where companies sue countries outside of national courts) and puts it front and center in a critical way. Notably, the Saunders amendment (it’s long I’ll post full text when it’s available) also applies this standard to all past agreements. Union advocates touted that as a more comprehensive and forward looking proposal than just saying what they were against.

The Saunders proposal passed by a wide margin, but the Jealous proposal failed.

See the long debate here:


The Clinton campaign rapidly applauded passage of the Saunders amendment, saying:

“Hillary Clinton’s position on the Trans-Pacific Partnership is well-established and well-known: she opposes TPP, before or after the election.  Hillary Clinton has made clear that she is not interested in tinkering around the margins with TPP and believes we need a new approach to trade that protects American jobs, raises incomes for American workers, and strengthens our national security.

“We are proud to stand with our friends in organized labor in passing a strong amendment to the Democratic Platform on all trade deals, including the TPP, introduced by AFSCME’s Lee Saunders, which was backed full-throatedly by unions and other delegates in the room. With the amendment, the platform lays out a clear, high test for judging trade agreements, including whether they raise wages, create good-paying jobs, and enhance our national security. She believes that the TPP fails the test that is now laid out in the platform as a result of this amendment.”

Right afterwards, Sanders supporter Jim Hightower tried a second time to get a Jealous-style amendment through. This too failed. See the full video here.

Brexit fallout

I have a blog on Brexit fallout over at the Roosevelt Institute site.

Here’s a teaser…

The Brexit vote demonstrated the limits of U.S. pressure.

While the U.S. has a long history of intervening in votes in developing countries, recent years have seen a more widespread abandonment of neutrality. In 2014, the U.S. weighed in against the Scottish independence vote. This year, President Obama traveled to England to push Remain, and the U.S. Trade Representative threatened an increase in trade barriers against the UK if Leave succeeded.

It didn’t work this time. The failure of the Remain campaign has now triggered political blowback on both sides of the Atlantic and both sides of the aisle.

Head over to the Roosevelt site to read the full thing.