Is litigation Australia’s future under the TPP?

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By Leith van Onselen

Dr Kyla Tienhaara, from the Australian National University, has published a new report on behalf of GetUp warning that Australia could face huge litigation costs if the Trans-Pacific Partnership (TPP) agreement is ratified:

At the heart of the TPP are expanded powers for multinational corporations through the highly controversial Investor State Dispute Settlement (ISDS) provisions.

These clauses would allow multinational corporations to sue the Australian government in secret extrajudicial tribunals, adjudicated by corporate lawyers. They can award corporations unlimited sums, including for loss of future expected profits, all paid by Australian taxpayers. In this way, the TPP threatens public health safeguards, environmental protections and workers’ rights, on top of other provisions that undermine access to affordable medicines and internet freedom.

Despite enormous public concern over the deal in Australia and abroad, the Turnbull Government has flatly refused to undertake an independent cost analysis. This report is a response to this inaction – everyday people stepping up to the plate where our government would not.

Drawing on global data and the specific experience of Canada, subject to ISDS provisions brought in under the North American Free Trade Agreement (NAFTA), this report details the likely risks of enacting the deal here in Australia – from direct legal costs to dangerous ‘regulatory chill’ that deters governments from pursuing legislation in the public interest.

The research observes a worrying rise in aggressive, litigious predation by multinational corporations – especially those based in the USA – and notes several egregious examples of corporate overreach…

Canada is an excellent comparator to Australia due to significant political, social and economic parallels between the two countries – including an independent legal system, a comparably sized economy, and similar economic and trading activities.

Canada then is Australia’s ‘canary in the coal mine’, whose experience under NAFTA gives us a premonition of the ISDS environment that might emerge in Australia under the TPP…

There have been a total of 739 known ISDS disputes worldwide. The number is steadily on the rise, with 72 cases in 2015 – the highest number in any one year.

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The biggest users of ISDS are US multinational corporations. This means that entering into a trade deal with the US that includes ISDS provisions – such as the TPP – places a country at high risk of ISDS suits.

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Governments lose or settle ISDS cases far more often than they win them. Cases are either settled or the corporation wins in 52% of global ISDS cases, whilst the state wins in a mere 36% of suits. In the case of Canada, more than half of ISDS cases have involved claims against provincial or territorial government measures…

Under NAFTA, Canada has been hit with 39 ISDS claims – all from American corporations and investors. A massive 69% of those cases have been initiated since 2006. This is in line with global trends noting that ISDS disputes are becoming increasingly the norm. The rise is widely attributed to growing awareness of NAFTA’s ISDS provisions amongst US investors.

Canada has lost or settled 11 cases and won six since 1994. The corporations that have pursued ISDS cases against Canada have been mining and energy companies, and the service sector.

Canada has lost or settled a startling 62.7% of the cases brought against it. Based on available data – which does not include the costs of all the cases Canada settled – Canada has paid out at least $216.7 million Canadian dollars (CAD) in damages and settlements.1 Two further settlements are undisclosed and one case is still pending an award on damages…

Perhaps the most worrisome trend has been the mounting evidence of ”regulatory chill”. It is a phenomenon that sees governments reverse or fail to pursue important regulations due to fear of ISDS lawsuits.

For evidence, we need look no further than the corporate law firms themselves, who are actively advertising ISDS as a useful tool “to assist lobbying efforts to prevent wrongful regulatory change”.

Further, executives of energy giant Chevron praised ISDS as a mechanism for deterring governments from implementing environmental safeguards, explaining that “that the mere existence of ISDS is important as it acts as a deterrent”.

What makes this trend even more worrying is that the main issues pursued in ISDS cases are health and environmental matters, rather than trade issues…

Although it is called a “trade” agreement, the TPP is not about trade. Of its 30 chapters, only six deal with traditional trade issues.

Rather, the TPP trades away our democratic right to create laws in the public interest – at a significant cost to all of us.

Fortunately, there’s still time to stop this dirty deal. The enabling legislation to enact the TPP will need to pass the Australian Senate. We urge the Senate to carefully consider the numbers and examples laid out in this report.

Canada is Australia’s canary in the coal mine – and we would be fools to ignore the early warning signs.

The above report highlights, yet again, why the Productivity Commission (PC) should be engaged to assess the TPP before being ratified by the Australian parliament.

The TPP is an incredibly complex agreement whose text numbers some 6,000 pages and 30 chapters. It is far too complex for the joint standing committee on treaties to comprehensively review. Therefore, the PC’s expert assessment is vital.

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A Parliamentary committee last year also released a report slamming the lack of adequate “oversight and scrutiny” pertaining to the TPP, and lamented that “parliament is faced with an all-or-nothing choice” on whether or not to approve the agreement.

Under the terms of the TPP, member countries have two years from signing to assess the agreement before it must be ratified. Therefore, there is still around 12 months for the PC to undertake a thorough assessment – easily enough time.

Sadly, the chances of the Turnbull Government following due process are slim to none, and the TPP will be rammed-through without thorough assessment.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.