Photo credit: Robert Bejil/Creative Commons
Drop the MIC: Why we oppose the EU’s latest corporate courts plan
Yesterday the TUC responded to the European Commission’s consultation on its plans to develop a global version of the notorious Investor-State Dispute Settlement (ISDS) system. ISDS is the court system found in thousands of trade and investment agreements that foreign investors have used to sue governments when they feel their profits have been threatened.
Like the Investor-State Dispute Settlement the EU’s proposal has another uninspiring name – the Multilateral Investment Court – so it’s surely destined to be shortened to the MIC.
While the Commission says the MIC is an attempt to develop a ‘coherent, unified and effective’ global system for investment, it makes no change to the rules in ISDS (and other systems like ICS in CETA) that undermine domestic legal systems, threaten workers’ rights and public services.
By seeking to make such a system global, the MIC would increase these threats which is why the TUC is calling for the Commission to drop these proposals.
While it’s important for investors’ property rights to be respected, foreign investors don’t deserve a special court like the MIC to protect those rights that isn’t available to domestic investors or any other group.
The TUC believes domestic court systems should be used to resolve issues around property rights for both domestic and foreign investors. Last week I attended an OECD conference that made clear there is no evidence that international investment agreements help to protect foreign investors where rule of law isn’t guaranteed. If there is no functioning rule of law, the domestic system will not be improved by establishing a parallel, democratically unaccountable multilateral court system.
Instead, the EU should work with potential trading partner countries to support the development of well-functioning, independent legal systems before undertaking trade negotiations. Indeed the EU has undertaken to support such work by pledging to support the UN Sustainable Development Goals which include a goal to create Peace, Justice and Strong Institutions (Goal 16).
And if foreign investors choose to invest in countries where the rule of law is not yet established, the TUC believes they must bear the risk of this individually through private insurance.
Threat to workers’ rights and public services
As the MIC doesn’t plan to reform the rules of existing investment protection agreements, corporate lawyers will still be able to use it to claim legitimate policies passed to protect workers and society are a form of ‘indirect expropriation’.
ISDS has been used in this way many times in the past. For example, in 2000, following mass protests by Bolivians over the company Bechtel hiking the price of water by 50%, the Bolivian government cancelled Bechtel’s contract. Bechtel responded by suing Bolivia for $50 million through the ISDS mechanism written into the Netherlands-Bolivia Bilateral Investment Treaty. Part of Bechtel’s claim was that they were a victim of ‘indirect expropriation’ because their ability to make profits in the future had been undermined by the government cancelling their contract. Although resistance from the Bolivian government combined with sustained pressure from trade unions, civil society and others lead to Bechtel eventually dropping the case against Bolivia, the government had still paid $1 million in legal fees to fight the case.
The existence of the MIC threatens to have a ‘chilling effect’ on democracy as governments are unlikely to pass laws – like renationalising public services or increasing the minimum wage – that might result in them having to fight multi-million legal cases against foreign investors. We know New Zealand decided not to introduce plain packaging laws for cigarettes after Philip Morris launched an ISDS case against Australia for introducing similar laws.
While the MIC would provide foreign investors with sweeping powers to claim compensation if they feel their rights have been threatened in other countries, no system currently exists for workers to enforce their rights internationally.
At present, trade agreements do not contain measures to ensure labour standards are effectively enforced. South Korea committed to respect core ILO standards in the EU-Korea free trade agreement, for example, but the EU has so far taken no action when these standards have been repeatedly violated in South Korea. In recent months unions around the world have raised concern that in South Korea union leaders have been imprisoned, excessive working hours have been imposed and a number of unions have been busted. The ETUC and TUC have also raised concerns that the labour chapter in the recently finalised EU-Canada (CETA) agreement currently adopts the same approach as the EU-Korea agreement.
Other initiatives to get companies to respect labour rights, such as the OECD Guidelines on Multinational Enterprises, continue to contain no material consequences if companies do not follow them.
Rather than pursuing its proposals for the MIC which provides another means for already powerful investors to advance their interests and exposes workers to further harm, justice dictates that the Commission develop stronger global systems to protect workers’ rights.
This should involve sanctions against companies and countries which do not respect workers rights. Gaining access to new investment and trade opportunities must be conditional on respect for human rights.