Allowing foreign firms to sue governments for lost profits is legal terrorism – it must end | Joseph Stiglitz
DOnald Trump threw a hand grenade in global economic architecture, destroying some things that work well. But amid the destruction, it seems that some things are alive and that should come down. Among the most prominent of which is a group of international agreements that private sector investors can prosecute governments, known as ISDS: Investor and three -year disputes settlement. These disputes are not lit in public courts with fair judges, but in private arbitration – behind closed doors, and raging with conflicts of interests.
Early, when they were demobilized in many commercial agreements, no one has attention. For example, these provisions in Nava, the so -called free trade agreement between the United States, Mexico and Canada, have never met a discussion within the cabinet during my service in the Economic Counselors during the era of President Clinton when NAFTA was adopted.
Quick evidence
What is Isds and how it works?
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What is this?
Investor Dispute settlement (ISDS) has been created to help companies protect investments abroad. Companies are allowed to prosecute countries for missing profits due to governmental procedures, including corruption, asset seizure, or the introduction of health and environmental policies.
The system was It was created in the 1960s By the World Bank. Companies were supposed to give confidence in investing in poor countries that have weak political systems as they may not get a fair hearing in local courts.
How do you work?
The foreign company must provide a case that shows that the state has affected its profits. Most international investment treaties and free trade deals include ISDS conditions. Cases are heard by the Special Arbitration Court, and it is usually decided by a committee of three arbitrators – one chosen by the company, one chosen by the state and the third chosen.
How much is the value of cases?
Prizes regularly reach hundreds of millions of dollars, some in billions. In 2024 it was the average amount granted $ 385 million (304 million pounds). The average amount granted Increasing These batches can form a large part of the annual budgets of poor countries.
Who participates?
Fuel and fossil mining industries are the most severe in the ISDS system, where they represent More than 30 % From well -known cases.
Most claims are submitted by companies in rich countries against the governments of developing countries. Companies registered in the files of developed countries 81 % of ISDS lawsuitsAccording to United Nations data, while developing countries have faced 62 % of cases.
How common?
Isds started as a mysterious legal mechanism, and its average One case per year For her first contract. Now, dozens are brought every year, as the trustee analysis finds more than 900 since 2013.
Judgments were sold as the protection of property rights from confiscation – but that was nonsense: the number of the few sources that are happening today, and the World Bank and governments all over the world provide insurance against confiscation. It has also been sold, as an encouragement of investment – but in contracts since it began to have a feature of international agreements, there is little evidence that it occurs a lot or any difference, which is why some of the countries that have occurred today have given a notification that they end it.
What the agreements do is to provide companies with an opportunity to sue compensation when there is a change in the organization that they claim may weaken their future profits. This compensation is not only dependent on what they lost – their investments are less, and this is no longer very profitable – but for what they might get in profits: a completely mysterious amount. In my opinion, it has become a form of legal terrorism, which is used by rich companies to inhibit countries from meeting the needs of their citizens and protecting the global environment.
Uruguay was prosecuted when he suggested that cigarette companies ask to reveal that cigarettes pose a risk to the health of the individual – a disclosure that most developed countries require. It is recognized that the status of signs discourages smoking – this was the point – and this in turn will harm the profits of these companies. Fossil fuel companies all over the world filed a lawsuit against governments that have taken measures to reduce emissions. As one of the lawyers specializing in these disputes said: “It will not matter if the liquid plutonium is intended for child breakfast pills. If the government prohibits a product and … the company loses profits, the company can claim compensation.”
Claiming damage – and winning them – they have. Because of the secrecy in which many of these measures were avoided, it was difficult to assess the size. The report by the Guardian gave us a glimpse of the size of these cases, which showed more than $ 120 billion (94 billion pounds) of public funds for private investors since 1975, 84 billion dollars for the fossil fuel industry alone.
The world faces a debt and development crisis, and many countries have high burdens of debt to the point that they go beyond health, education, climate and development itself. These payments significantly add this debt burden – and the risk of doing so more. Globally, it is an obstacle to climate work: the two countries are afraid if they pass carbon tax or carbon organization, they will be sued. Even if they finally win, they will be linked to the courts for years. The deep pockets of the prosecution companies have been enriched by a new industry: investors in these cases, who see these claims just another gamble that they may win. The financial weight of passes is often outperformed in a poor developing country. Trading and financing these claims through hedge funds may have mainly changed their nature: from a judicial way to compensate a person for a certain category of harm, to another tool.
These are not the only inequality: US courts have constantly destroyed that one should not pay compensation for a change in the list that negatively affects the company’s profits – good regulations are part of the government’s basic rights and obligations. But with these agreements, foreign companies can prosecute the US government: they are granted more Rights from American companies!
It is time to end this farce on justice. We need a comprehensive international agreement that ends ISDS. Meanwhile, individual countries must make a notification that they are leaving these agreements and leaving ICSID, the International Center for the Settlement of Investment Conflicts.
Ending this system is necessary: If we do not, we will face a completely new set of barriers that prevent climate change from preventing; Developing countries and emerging markets will face increasing debts-from increasing payments to companies that destroy citizens’ health and sustainability of the planet.
Find more Covering the era of extinction hereHe followed the correspondence of biological diversity Vepi Weston and Patrick Greenfield In the Guardian app for more nature coverage
