Rep. Alan Grayson (D-Fla.) sent nearly 10,000 constituent letters to the Obama administration in an effort to remove a provision from a proposed free-trade deal with the EU that he says could give unchecked power to corporations hoping to kill regulations.
“This is one of the tools you could use … to get bad governments to do what they've committed to do,” said William Reinsch, the president of the National Foreign Trade Council, a business trade group dedicated to trade and investment issues that boasts members such as Boeing and Caterpillar.
Opponents have long railed against the trade courts, arguing that giving multinational corporations the ability to directly challenge a foreign government in an international tribunal threatens public and environmental safeguards.
Laws and regulations “reflect the actions of democratic government,” Grayson told The Hill, calling the provision “an organized assault against middle-class Americans and against democracy.”
The cases in the tribunals created by these investor-state disagreements are decided by three attorneys, who public interest groups say shuffle from acting as judges and representing corporations.
Corporations should not “get the right to sue in front of a rigged system where the outcome is preordained,” Grayson said.
In April, the U.S. Trade Representative’s office (USTR) asked for feedback in advance of a meeting about the U.S-EU trade deal, known as the Trans-Atlantic Trade and Investment Partnership.
Just more than a day before the deadline, “Alan’s army,” as Grayson affectionately calls his supporters, sent him nearly 10,000 individual comments in opposition to the investor-state negotiation clause.
“Before we did this, there had been only 113 comments submitted in about six weeks, mostly from corporate lobbyists,” he said. The provision is “of the lobbyists, by the lobbyists and for the lobbyists,” he continued.
Reinsch said that without the negotiation clauses, businesses would have to rely on convincing their government to go to bat for them in battle with a foreign government.
The World Trade Organization generally governs disputes between the U.S. and EU, which means corporations have to persuade the government to fight dispute cases for them.
“Sometimes, governments are willing to fight,” Reinsch said, but not always. “This is right out of the American tradition, we can sue anyone for anything.”
Investors can already sue foreign regulators in domestic courts, as U.S. pharmaceutical manufacturer AbbVie did in the EU last month over its clinical data-sharing rules.
Historically, the state-investor negotiations stem from the premise that some countries’ “legal systems are too corrupt, incompetent or ill-equipped to hear foreign investors’ claims,” said Ben Beachy, the research director at Public Citizen's Global Trade Watch. “So the question for the EU and U.S. governments is: Does either side see the other’s domestic legal systems as untrustworthy?”
Grayson already has another 15,000 signatures from Americans in a letter he's poised to send to other House lawmakers, he said.
In the letter, Grayson says the investor-state negotiation provisions “undermine sovereignty without significantly increasing trade.”
“These kinds of provisions have been used to undermine country-of-origin meat labels, dolphin-safe tuna labeling requirements, regulation of hydraulic fracking,” he said. “These are not fundamentally questions of trade; why are they governed by so-called ‘trade agreements?’”
A new report from the United Nations Conference on Trade and Development found foreign investors are more commonly turning to the pact-enabled litigation to settle disagreements.
Although Reinsch ceded grounds that it “gives people that have no case the opportunity to sue,” he said the government is most likely going to win.
“What [Grayson] doesn’t mention is whether anyone ever wins,” Reinsch continued. “There's a big difference between suing and winning.”
Over the last two decades, governments have won about 42 percent of the 244 cases where a verdict had been reached, while investors are successful about a third of the time, according to the U.N.’s paper. The other 27 percent of lawsuits end in a settlement agreement between the two parties.
In 2012, 58 new investor-state dispute settlement cases were initiated worldwide, “the highest number of known treaty-based disputes ever filed in one year,” the U.N. study says. Out of the 31 decided cases made public last year, the tribunals sided with foreign investors 70 percent of the time.
When governments lose these cases -- which can award damages from millions -- the taxpayers pay the tab, Beachy said, and there is no appeals mechanism.
The threat of litigation, and potential expense, “can create a chilling effect” on creating controversial regulations, he said.
“The issues [Congress] addresses falls into two categories: High-profile issues and low-profile issues,” Grayson said. “Lobbyists are very effective at influencing lawmakers on low-profile issues, like isolating one provision out of a 600-page bill.”
He said he wants to “change the category” of the investor-state dispute resolution by sharing his views.
“If not for this kind of effort, members would be able to support a bill like this because the public wouldn't know about it. ... Lawmakers will know that people will be judging them on this issue.”