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Divernan's Journal
Divernan's Journal
January 24, 2014

Corporation Carte Blanche: Will US-EU Trade Become Too Free?

In his 2013 State of the Union Address, President Obama announced the U.S. would soon begin talks on a Trans-Atlantic Trade and Investment Partnership (TTIP). In other words, the U.S. is negotiating a “free trade agreement” (FTA) with the European Union (EU).

The dual track legal system created by the proposed Trans Atlantic Free Trade Agreement is causing increasing opposition and attention in the EU as well as the US. The link is to the lead article in yesterday's Der Spiegel Online International. The article details that previous criticism focused on the fact that the deal seems directed exclusively at economic interests. Now fears are growing that corporations will be given too much power.

The Dispute Settlement provision creates a private trade arbitration, 3 "judge" court which has the power to make rulings on HUGE damage payments if an investor believed its profits were reduced through a local or national law. The rulings are final and unappealable to a country's own court system. Your community's zoning laws prevent Big Fracking from drilling across the street from a grade school, church or hospital? Not under this trade agreement, baby!


Depriving Countries of Power

It would essentially deprive national justice systems of their power. And it could have dangerous side effects as well. Fears of large fines could considerably limit political maneuvering room for governments.

It is a lesson that Argentina learned in 2003. Following the country's currency reform, a US company filed a complaint for damages. The existence of bilateral investment treaties between the US and Argentina meant the company could sue in an arbitration court, which ultimately ordered the country to pay damages of $133 million.

Such dual-track legal systems are nothing new. EU member states have codified certain degrees of investor protection in 1,400 bilateral treaties implemented as early as the end of the 1980s. Germany alone has 136 treaties which were originally intended to secure investments in countries that didn't have reliable legal systems.

But such provisions have since become standard fare in almost all bilateral treaties -- even those between industrialized nations. They're effective, too. The increase in the number of arbitration proceedings has risen precipitously, and developed economies are targeted with increasing frequency.

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