australianvoice (australianvoice) wrote,


On March 25, 2015, a leaked copy of the investment chapter for the Trans-Pacific Partnership (TPP) was posted by WikiLeaks.(1) That same day Lori Wallach and Ben Beachy of Public Citizen’s Global Trade Watch released a document entitled "Analysis of Leaked Trans-Pacific Partnership Investment Text." It provides a careful account of what the chapter reveals about the TPP. Before we look at the main points which come from this analysis, however, we need to look at the broader implications of the TPP for Australia and other countries.

Lori Wallach and Ben Beachy begin their excellent account of the chapter with the claim that the TPP "elevates tens of thousands of foreign-owned firms to the same status as sovereign governments."(2) While these two writers are by far the most informed commentators on the TPP, this claim is incorrect. The TPP does not elevate foreign-owned firms to the same status as sovereign governments; it elevates them above sovereign governments. If they were on the same level as each other, they would be able to sue each other. In the TPP, however, it is corporations that sue governments, not governments suing corporations.

The TPP creates a supra-national state which we can call the Pacific Corporate State (PCS). The TTIP treaty being negotiated between the US and the EU creates another supra-national corporate state we can call the Atlantic Corporate State (ACS). These might be rather unusual states but they would perfect economic rationalist states. They would levy no taxes, they will have no military forces, and they will have no expensive parliaments and politicians. They will only have a small army of corporate lawyers who serve as prosecutors and judges for the actions of countries which used to be sovereign nations. The purpose of these states will be familiar to the thinking of Anglo-Saxon political theorists like John Locke.

Put simply, John Locke believed that without the state, in the "state of nature", people were selfish and would be in a constant state of war with each other. So, to avoid the state of war and to protect their private property people agree to set up a state. This is known as his Social Contract justification for the existence of a state. In the same way, the purpose of the PCS and the ACS is to protect the private property and profits of multinational corporations that are incorporated in the United States from any action by any government which might limit their profits.

The PCS and the ACS would be quiet and almost invisible states. They would not have ambassadors or embassies to get what they want. The thousands of multinational corporations which can use the laws of these states need only corporate lawyers, presumably paid for by each corporation, to prosecute countries and be judges. It is assumed that no further coordination or direction would be necessary. It is also assumed that there is no clear method of enforcement of the judgment of their courts. There will be no sheriff to arrest countries, and no police/military force to collect fines from uncooperative countries. The system is assumed to be very "polite" and "civilized", because these are the countries over which the US has a great deal of influence.

However, there is a different set of rules for those countries that are not directly controlled by the US. It has been described by Thierry Meyssan as the policy of constructive chaos. Thierry Meyssan explains it as follows:

"The simplest way to plunder the natural resources of a country over a long period is not to occupy it, but to destroy the state. No state, no army. No enemy, no risk of defeat. Thus, the strategic goal of the US military and the alliance it leads, NATO, is only destroying States."(3)

It has been used in Iraq, Syria, Libya, the Horn of Africa, Nigeria and Mali and in the Ukraine. If you are not under the control of the US, your country will either be torn apart by creative chaos or there will be US funded "opposition" movements like the ones in Russia, China, and Venezuela. This is why there are no military forces connected with these two corporate states. The "muscle" is provided by US and NATO or the CIA.

The authors, Lori Wallach and Ben Beachy, first review the basic outline of the chapter:

The leaked text would empower foreign firms to directly "sue" signatory governments in extrajudicial investor-state dispute settlement (ISDS) tribunals over domestic policies that apply equally to domestic and foreign firms that foreign firms claim violate their new substantive investor rights. There they could demand taxpayer compensation for domestic financial, health, environmental; land use and other policies and government actions they claim undermine TPP foreign investor privileges, such as the “right” to a regulatory framework that conforms to their "expectations."(4)

The TPP would newly empower about 9,000 foreign-owned firms in the United States to launch ISDS cases against the U.S. government, while empowering more than 18,000 additional U.S.-owned firms to launch ISDS cases against other signatory governments. These are firms not already covered by an ISDS-enforced pact between the United States and other TPP negotiating governments.

The tribunals would be empowered to order payment of unlimited government funds to foreign investors over TPP claims. Such compensation orders would be based on the “expected future profits” a tribunal surmises that an investor would have earned in the absence of the public policy it is attacking as violating the substantive investor rights granted by the TPP.

For instance, the tribunals would be staffed by private sector lawyers unaccountable to any electorate, system of precedent or substantive appeal. Many of those involved rotate between acting as “judges” and as advocates for the investors launching cases against governments. Such dual roles would be deemed unethical in most legal systems. The leaked text does not include new conflict of interest rules, despite growing concern about the bias inherent in the ISDS system.

Some of the areas that have been attacked so far include tobacco, climate, financial, mining, medicine, energy, pollution, water, labour, toxins, development and other non-trade domestic policies. There are also cases against natural resource policies, environmental protections, health and safety measures. More than $38 billion remains in pending ISDS claims, nearly all of which relate to environmental, energy, financial regulation, public health, land use and transportation policies.

Here are some of the other major points:

Foreign investors alone would be granted access to extrajudicial tribunals staffed by private sector lawyers who rotate between acting as “judges” and representing corporations in cases against governments, posing major conflicts of interest.

Foreign tribunals would be empowered to order governments to pay unlimited cash compensation out of national treasuries.

An overreaching definition of “investment” has been agreed by all parties that would extend the coverage of the TPP’s expansive substantive investor rights far beyond “real property,” permitting ISDS attacks over government actions and policies related to financial instruments, intellectual property, regulatory permits and more.

U.S. negotiators in particular are pushing to expand the scope of coverage to also subject government contracts to ISDS enforcement. U.S. negotiators are pushing for foreign investors to have greater rights than domestic investors with respect to disputes relating to procurement contracts with the signatory governments, contracts for natural resource concessions on land controlled by the national government and contracts to operate utilities.

An overreaching definition of “investor” and lack of robust “denial of benefits” provisions would allow firms from non-TPP countries and firms with no real investments to exploit the extraordinary privileges the TPP would establish for foreign investors. The text includes an overreaching definition of “investor” as a person or legal entity that makes an investment as defined in the pact (Article II.1). This includes firms from non-TPP countries that have incorporated in a TPP signatory country.

Claims already decided in domestic courts can be re-litigated in ISDS tribunals for all but four TPP negotiating countries. These four do not include Australia.

The TPP would grant foreign investors procedural rights that are not available to domestic firms to “sue” governments outside of national court systems, unconstrained by the rights and obligations of countries’ constitutions, laws and domestic court procedures (Section B).

The leaked text shows that foreign investors would be able to demand compensation if new policies that apply to domestic and foreign firms alike undermine their “expectations” of how they should be treated.

Foreign investors would be allowed to use claims of “indirect expropriation” to demand government payments for regulatory costs all firms operating in a country must meet. Under domestic and international law, governments’ obligation to compensate for expropriation has typically applied to the physical taking of real property, such as when a government expropriates a house to make way for a highway. But the leaked TPP text would provide investors with a right to demand compensation for “indirect” expropriation (Article II.7 and Annex II-B), which can be and has been interpreted by ISDS tribunals to mean regulations and other government actions that merely reduce the value of a foreign investment.

Foreign corporations could be newly empowered to privately enforce public agreements concerning intellectual property in ISDS challenges to government policies that ensure access to affordable medicines.

Policies to create domestic jobs, support domestic businesses or foster economic development would be subject to foreign investors’ demands for compensation.

Most TPP countries have decided to expose decisions regarding the approval of foreign investments to ISDS challenge. An annex in the leaked text states that a government’s decision, done in accordance with domestic laws, on whether to approve a given foreign investment in its territory shall not be subject to ISDS enforcement (Annex II-H). But the annex only applies to four of the 12 TPP negotiating countries (Australia, Canada, Mexico and New Zealand).

Foreign corporations could demand compensation for capital controls and other macro-prudential financial regulations that promote financial stability.


3. The Blindness of the European Union in the Face of US Military Strategy,
4. The rest of this article is an edited summary of the analysis by Lori Wallach and Ben Beachy, presented with only minor changes. This is not my analysis, it is theirs.

Other Articles in Australian Voice about the TPP:





THE HIDDEN NASTY IN THE TPP: Investor-State Dispute Settlement (ISDS)
Tags: australia, tpp
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