How Corporate Sovereignty Provisions Could Undermine Anti-Trust Actions

One of the (many) problems with corporate sovereignty provisions in treaties is that their practical effects are highly unpredictable. Unlike courts operating in the Anglo-Saxon tradition, investor-state dispute settlement (ISDS) tribunals are not obliged to take into account precedents set in previous hearings. Essentially, they can come to more or less any decision — one, moreover, against which there is no real appeal. That means the inclusion of ISDS in TAFTA/TTIP and TPP is giving hostages to fortune: nobody can honestly say that they know how things will work out later on.

Writing on the International Economic Law and Policy Blog, Simon Lester has raised an intriguing — and deeply troubling — possibility in this context. He points to a pro-TPP piece that appeared in the Washington Post recently. It includes the following point:

[Qualcomm’s] substantial share of the Chinese chip market attracted the attention of the Chinese government, which proceeded to extract $1 billion in fines for alleged anti-competitive practices. In the U.S., where Qualcomm also sells its chipsets, the company has faced no such anti-trust penalties.

Under current trade law, Qualcomm has little recourse to appeal its treatment by the Chinese government. Under a trade agreement with China like the TPP, however, Qualcomm and other U.S. companies would have access to an investor-state dispute settlement mechanism.

Lester points out that if Qualcomm were indeed able to use corporate sovereignty provisions to fend off anti-trust actions, it would be very big:

The suggestion that ISDS could be used against antitrust/competition policy actions was something I hadn’t thought of before. Would this mean that, in the future, Microsoft or Google could use ISDS in the TTIP — if that happens — to challenge the various European actions taken against them? And could a foreign investor bring an ISDS claim based on an action not taken against one of its competitors?

As he says, not only might large companies use ISDS to contest anti-trust actions against themselves, they might also use it to put pressure on governments to bring anti-trust actions against their competitors. This emphasizes not only how ISDS could take governments into completely uncharted waters for anti-trust actions, but also that there are even more ways in which corporate sovereignty could undermine a nation’s ability to set and implement policy. That’s another good reason to remove it from trade agreements before it causes this kind of serious damage to the fabric of democracy.

Follow me @glynmoody on Twitter or, and +glynmoody on Google+

Permalink | Comments | Email This Story


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s