In previous posts we've covered many of the ways the copyright provisions in the Trans-Pacific Partnership (TPP), a massive trade deal between 12 Pacific countries, could undermine users' rights. But those are just the tip of the iceberg. What may really sink the Titanic is a rather obscure but very dangerous section covering foreign investment.

Like the rest of the TPP, we only know what has been leaked. Based on that, it seems the negotiators are poised to give private corporations new tools to undermine national sovereignty and democratic processes. Specifically, TPP would give multinational companies the power to sue countries over laws that that might diminish the value of their company or cut into their expected future profits.

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The provision that gives them this power is called “investor-state dispute settlement” (or ISDS for short). The policy was originally intended to ensure that investments in developing countries were not illegally expropriated by “rogue” governments, thereby encouraging foreign investment. But what began as a remedy to a specific problem has since been co-opted to serve very different purposes. Under investor-state, if a regulation gets in the way of a foreign investor’s ability to profit from its investment, the investor can sue a country for monetary damages based on both alleged lost profits and “expected future profits.” There are no monetary limits to the potential award.

Apparently a country’s own courts can’t be trusted to administer this kind of lawsuit, so investor-state also requires the creation of a new court. It would be comprised of three private-sector attorneys who take turns being judge and/or corporate advocate. 

Even if this kangaroo court ruled in favor of the defendant nation, court costs alone would scare countries from adopting (or enforcing) pro-user policies where they might potentially inhibit investor profits. The investor-state tribunal bills its time by the day and decides for itself how many days to work, so it can rack up as many days of work they want. Given this system, it's then no surprise that current investor-state court costs average about 8 million dollars per case. So even if it wins, the country has to pay those court fees, the lawyer fees, plus compound interest. That’s money that would doubtless be better spent elsewhere.

The process is absurd as well. Once a decision has been issued, there is no way to appeal it. That's right, if this court rules that the nation is at fault and has to pay huge fees that could even bankrupt a government, there's no other way for the country to overturn that decision.

The supposed “cause” of these lost “investments” can include environmental standards, labor standards, and yes, even intellectual property rules. So far, countries have been forced to shell out almost half a billion dollars thanks to similar provisions in other trade agreements. The cases have mostly dealt with environmental protection regulations (challenged by oil companies), or pharmaceutical companies (complaining about regulations invalidating their medicine patents). Ecuador was ordered to pay 2.3 billion dollars in damages and fees to Occidental Petroleum last year, in a dispute over oil exploration. Eli Lily and Company, a pharmaceutical giant based in the U.S., filed a $500 million lawsuit against Canada last month under a similar investor-state provision contained within the North American Free Trade Agreement (NAFTA).

But the disputes won’t stop there. Let's say a country adopts a new flexible copyright law. For instance, one that gives users a blanket right to remix songs or videos for noncommercial purpose and post them online, or one that ensures greater user protections for everyone including educational institutions, libraries, or people with visual or learning disabilities. Companies could bring an investor-state case, alleging that the policy undermines their copyright protections, and therefore, their profits. Or, more likely, it could use the threat of such a lawsuit to stop that law from getting passed in the first place. Indeed, given the perverse nature of investor-state powers, even if all the other harmful provisions are taken out of the TPP, corporations could still have the ability to attack and potentially unravel virtually any pro-user digital regulation.

And the problem won't stop with TPP — a similar provision is likely to be included in a pending EU-U.S. trade agreement, the Transatlantic Trade and Investment Partnership (TTIP), as well.

The investor–state provision is just one of many problems in the TPP. At the root of all of this, however, is that the secret trade negotiation process is a vehicle for multinational corporations to lobby for provisions that will impact how users interact, share, and develop technological tools and content — without any opportunity for those users to know about, much less comment on, those provisions.  

What is worse, even in the U.S. legislators are considering abdicating their authority to debate and modify the TPP once it is finally revealed to the public. The Obama administration is pushing hard for “Fast Track Authority” (aka Trade Promotion Authority) which effectively gives the U.S. Trade Representative the power to bind the United States to the TPP without the usual opportunity for congressional review and debate. Yesterday, a coalition of organizations sent a letter to Congress members calling on them to oppose it.

If you're in the U.S., tell your representative to stand up for your digital rights and preserve our constitutional checks and balances in government. Call on lawmakers to oppose Fast Track Trade Promotion Authority for the TPP:



For more information about the investor-state system:

Techdirt: People Begin To Wake Up To Massive Dangers Of Investor-State Dispute Resolution

Public Citizen: Investor-State Attacks on the Public Interest