Last week 12 Latin American governments gathered in Guayaquil, Ecuador to craft a common response to an increasingly common menace: costly "investor-state" suits in which foreign corporations are dragging sovereign governments to extrajudicial courts to demand taxpayer compensation for health, environmental, and other public interest policies.
Ecuador, the host of this "Ministerial Conference of Latin American States Affected by Transnational Interests," has taken a particularly hard battering from the investor-state system enshrined in NAFTA-style Free Trade Agreements (FTAs) and Bilateral Investment Treaties (BITs). The country currently faces a ruling from one tribunal to hand $2.4 billion to Occidental Petroleum after Oxy broke Ecuador's hydrocarbons law, while confronting a ruling from another tribunal that the government should breach its own Constitution and block the enforcement of an $18 billion court ruling against Chevron for massive pollution of the Amazon. Many of the other countries present have also faced a taxing litany of investor-state cases in recent years: Mexico (e.g. losing $170 million in a NAFTA-created tribunal to the same U.S. agribusinesses that, under the same NAFTA, displaced over two million farmers), Argentina (e.g. losing a slew of cases to foreign financial firms for using financial regulations to mitigate the country's 2001 financial crisis), Guatemala (e.g. losing $13 million to a railroad company that failed to build a railroad because the tribunal thought that the government had failed to fulfill the company's expectations), etc.
These countries have indeed been "affected by transnational interests." And they are tired of it.
So they put together a conference, officiated by Ecuador's foreign minister Ricardo Patiño, to address the investor-state system that has empowered a multitude of foreign corporations to mount a skyrocketing number of challenges against the public policies of sovereign goernments. Several civil society organizations from around the world attended to deliver presentations on the dangers of the investor-state system. I was there on behalf of Public Citizen and summarized the exceptionally broad privileges that unaccountable tribunals have granted to foreign investors in this Wild West frontier of international law, and the equally broad array of public interest policies that have been directly attacked as a result. Cecilia Olivet of the Transnational Institute detailed the deep conflicts of interest among the private attorneys who alternate between acting as judges in investor-state tribunals and as prosecuting lawyers who bring the cases on behalf of corporations. Martin Khor of the South Centre explained that while attacks on public interest policies have grown under this investor-state system, foreign investment (the ostensible objective for such an extreme system) has not--study after study has shown no correlation between binding a country's policies to this anomalous regime and attracting foreign direct investment.
At the end of the day, seven of the governments present signed a declaration to coordinate efforts in seeking to replace the investor-state regime with an alternative investment framework that respects sovereignty, democracy, and public wellbeing. They announced the launch of an International Observatory, a intergovernmental commission based in Latin America to audit investor-state tribunals, draft alternative investment agreements, and collaborate in strategies for reform. The group will be headed by an executive committee that will help Latin American countries exchange information about emergent investor-state cases and collaborate in mounting defenses against such claims. Representatives from the remaining five governments participated as observers and are now taking the declaration back to their capitals to discuss joining the emerging Latin American coalition.
By launching this effort, these dozen Latin American countries are joining a mounting effort by governments to halt, renegotiate, or leave the now-notorious investor-state system. Australia has publicly refused to sign on to the proposed expansion of the extreme regime in the Trans-Pacific Partnership FTA, despite significant U.S. pressure to do so. India has moved to abolish investor-state dispute clauses in FTAs. South Africa is re-examining its policy on investor-state disputes and has refused to renew BITs with the EU. And now Ecuador's National Assembly is considering a bill to terminate its investor-state-embodying BIT with the United States. Last week's conference adds another dash of momentum to this growing global push to ditch this rather radical regime.