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Giving control away: why the new Pacific trade deal threatens our rights and laws

A threat to sovereignty

Just before the Easter break [2023], the government quietly announced the UK would be joining the CPTPP Pacific trade agreement.

CPTPP includes a type of corporate court system: the Investor-State Dispute Settlement (ISDS).

This notorious system allows foreign companies to sue the governments for any actions that they argue could affect their profits.

In the past, this court system has been used to challenge increases in the minimum wage and countries’ attempts to bring public services back into public ownership.

What is astonishing is that the government did not have to subject itself to such legal shackles.  When New Zealand joined CPTPP it opted out of the ISDS system with the countries that invested most in New Zealand.

But the UK government asked for no such exemption.

As a result, rather than ‘taking back control’, with CPTPP the government is handing multinational corporations huge powers to challenge and potentially overturn UK laws.

A threat to rights

CPTPP includes countries where workers’ rights are not respected, like Vietnam where independent unions are banned, and Malaysia where migrant workers are subject to forced labour.

CPTPP will mean a race to the bottom for workers and drive unfair competition by making it easier for goods that are made with exploited labour to be dumped on the UK market and make it easier for unethical companies and investors to do business with countries where it’s easier to exploit workers.

Meanwhile, the ISDS court system means protections to workers’ rights, such as those around safe working hours, in the UK could be challenged by multinational corporations who can argue that the protections threaten their profits.

A threat to jobs

Jobs in manufacturing in the UK are already being threatened by cheap imports of goods such as steel and aluminium from Vietnam.

Some of these goods are actually produced in China but routed through Vietnam to avoid the anti-dumping tariffs that the UK has on Chinese goods.

One of the reasons these goods are so cheap is that they are made by workers who are paid too little and pushed to work in exploitative conditions – independent trade unions are banned in both China and Vietnam, so workers have no collective voice and less power.

CPTPP is likely to increase the dumping of goods from Vietnam by providing it with more access to the UK market.

This puts good, unionised jobs in steel, aluminium and other UK manufacturing industries at risk.

ROSA CRAWFORD


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CPTPP Trade Deal Controversy

CPTPP Free Trade Deals: Investor-State Dispute Settlement (ISDS) Provisions Allow Foreign Corporations to Sue the UK Government

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) free trade deal, to which the UK has acceded, includes Investor-State Dispute Settlement (ISDS) provisions. These provisions allow foreign corporations to sue the UK government for billions of pounds if they believe their profits have been affected by changes to laws or regulations.

Key Concerns:

Secret Courts: ISDS disputes will be resolved through private arbitration, often behind closed doors, without public scrutiny or judicial oversight.

Corporate Interests: Foreign corporations can challenge UK policies, including those aimed at protecting the environment, public health, or workers’ rights, if they deem them harmful to their profits.

Potential Claims: Companies could seek compensation for alleged losses, potentially running into billions of pounds, even if the UK government’s actions are deemed legitimate and in the public interest.

Union Concerns:

1. The Trades Union Congress (TUC) has expressed concerns that ISDS provisions will allow multinational corporations to undermine UK labor laws and regulations.

2. The TUC’s general secretary, Paul Nowak, stated that the deal “allows multinational corporations to sue the UK government in secret courts for introducing policies which threaten their profits – this could include an increase in the minimum wage or bringing energy companies back into public ownership.”

Impact on UK Sovereignty:

1. The CPTPP ISDS provisions may limit the UK government’s ability to regulate in the public interest, potentially undermining its sovereignty.

2. The deal may create uncertainty for UK businesses and investors, as they may face claims from foreign corporations.

Conclusion:

The CPTPP free trade deal’s ISDS provisions have raised concerns about the potential for foreign corporations to sue the UK government for billions of pounds. While the deal may offer some economic benefits, its impact on UK sovereignty and the ability to regulate in the public interest is a significant concern.

Source: Brave AI

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RELATED

Investor-State Dispute Settlement (ISDS): corporate power vs the public interest

An unbalanced and unfair system  

AFTINET

ISDS gives special rights to foreign investors (that are not available to local investors) to bypass national courts and sue governments for millions of dollars if they can claim that a change in law or policy will harm their investment. ISDS has been included in some trade and investment agreements. All such agreements have government-to-government dispute systems, but not all have ISDS.

ISDS is a fundamentally unbalanced system that gives additional legal rights to global corporations that already have enormous market power. Strong community opposition has kept it out of World Trade Organisation agreements, and of recent agreements like the Regional comprehensive Economic Partnership (RCEP), the Australia-UK Free Trade Agreement and the Australia-EU Free Trade Agreement.

The tribunals which hear the claims are not courts but temporary tribunals of investment lawyers who can continue to be practicing lawyers, with obvious conflicts of interest. Australia’s High Court Chief Justice and other legal experts have said that ISDS is not a fair legal system because it has no independent judges, no precedents and no appeals. There are 1303 known cases, many against health, environment, regulation of carbon emissions and other public interest laws.

Increasing numbers of ISDS cases against public interest legislation

Recent ISDS cases against health, environment, minimum wage rises and other public interest legislation include:

  • Public health: The Swiss pharmaceutical company Novartis threatened to sue the Colombian government over plans to reduce the price of a patented medicine to treat leukaemia. Read about more cases here.
  • Environment: the US Bilcon company won millions of dollars of compensation from Canada of because its application for a quarry development was refused by a local government for environmental reasons. The US Westmoreland coal mining company sued the Canadian government because the state of Alberta decided to phase out coal-powered energy.  In Europe, German energy companies RWE and Uniper have ISDS took cases against the Netherlands (under the Energy Charter Treaty) over its moves to phase out coal-fired power stations by 2030.The Intergovernmental Panel on Climate Change’s May 2022 report Climate Change 2022: Impacts, Adaptation & Vulnerability warned that ISDS clauses in trade agreements threaten action to reduce emissions.
  • Workers wages: The French Veolia company sued the Egyptian government over a contract dispute, claiming compensation for a rise in the minimum wage.
  • Indigenous land rights: An ISDS tribunal ordered the Peruvian government to pay $24 million to the Canadian Bear Creek mining company because it cancelled a mining license after the company failed to obtain informed consent from Indigenous land owners about the mine, leading to mass protests. ISDS rewarded the company for ignoring Indigenous land rights.
  • Philip Morris tobacco company vs Australia: when even winning is losingEven if a government wins the case, defending it can take years and cost tens of millions of dollars. For example, tobacco companies lost their claim for compensation for Australia’s 2011 plain packaging legislation in Australia’s High Court. The US-based Philip Morris company did not accept this decision under Australian law. The company could not sue under the US-Australia FTA because that agreement had no ISDS clause. The company found a Hong Kong-Australia investment agreement containing ISDS, shifted some assets to Hong Kong, claimed to be a Hong Kong company and sued the Australian Government, claiming billions in compensation. It took over four years and millions in legal fees for the tribunal to decide the threshold issue in December 2015 that Philip Morris was not a Hong Kong company.Although the tribunal in July 2017 eventually awarded a proportion of the legal and arbitration costs to Australia, the proportion and amount of the costs were blacked out in the tribunal’s cost decision. This was a failure of public accountability both by the tribunal and the Australian government, as taxpayers have a right to know the costs of defending ISDS cases. Community organisations called for the Australian government to reveal the costs. The government initially appealed an FOI case decision that it should reveal the costs, but on July 2, 2018 released total figures for the High Court case and the Philip Morris case that showed a total of $39 million.The government refused to reveal the specific ISDS legal costs and what percentage of the total costs had been awarded to Australia. The most recent FOI case on the ISDS costs, launched in 2017 by a legal publication, took another two years to reveal in February 2019 that Australian taxpayers were awarded only half of the costs of almost $A24 million in both legal fees and arbitration costs, despite the finding that the case was an abuse of process.This confirms that, even if governments win ISDS cases, defending them takes years (in this case seven years before costs were awarded) and tens of millions of dollars.

    Australia could afford to defend the case, but $12 million is still a loss to taxpayers that could have been spent on health or other community services. Developing countries simply cannot afford these costs, let alone the billions awarded if they lose cases. For example, Pakistan had to pay US$5billion when it lost a dispute over a mining lisence, which was almst equal to an International Monerary Fund loan granted to address a severe budegtary crisis.

    See also AFTINET’s submission to DFAT’s review of Australia’s bilateral investment treaties which documents Australiian mining companies suing low-income countries here. (September 2020).

    ISDS has also enabled Australian billionaire Clive Palmer to register a mining company in Singaore, claim to be a Singaporean investor and use ISDS in the ASEAN-Australia-NZ Free Trade Agreement and in the Singapore-Australia Free Trade Agreement in three separate cases to claim a total of $410 billion from the Australian government.

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