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Corporations prepare to sue over action to save lives as pandemic reveals trade flaw – Patricia Ranald

Democracy Not Corporatocracy (cool revolution, 23 Sep 2013, Flickr cc)

Global companies are positioning them- selves to use little-known rules in trade agreements such as the Comprehens- ive Progressive Trans-Pacific Partner- ship (CPTPP) to claim compensation amounting to millions of dollars for restrictions that were imposed during the pandemic.

They and some other companies have successfully lobbied for rules in the CPTPP and other bilateral and regional agreements that give them rights to bypass courts including Australia’s High Court and sue governments in extra- territorial tribunals for income they claim restrictions have cost them, using so- called Investor-State Dispute Settlement (ISDS) procedures.

Such provisions do not exist in the rules of the World Trade Organisation itself, which is the body formally charged with regulating global trade.

The Philip Morris tobacco company has used such rules within a Hong Kong- Australia agreement to claim billions of dollars in compensation from Australia for plain packaging legislation.

Defeating this claim has taken Australia seven years along with A$12 million in legal costs.

There have been increasing numbers of such cases against governments regulating to reduce carbon emissions and combat climate change.

An international arbitration law firm Aceris Law LLC has told its clients “while the future remains uncertain, the response to the COVID-19 pandemic is likely to violate various protections provided in bilateral investment treaties and may bring rise to future claims by foreign investors “.

An Australian law firm Alston & Bird is advertising an event called “The coming wave of COVID-19 arbitration – looking ahead”.

Legal scholars critical of the ISDS say that governments could face an aval- anche of ISDS cases after the viral pandemic is over.

ISDS clauses establish rights to sue Foreign investors could allege that governments are breaching the “direct expropriation” clauses of ISDS rules by appropriating private health and other assets for public use.

Lock down rules that affect profits could be interpreted as “indirect expropriation”.

The pandemic is also raising questions about other aspects of Australia’s trade agreements.

Despite warnings from the Productivity Commission, each trade agreement is negotiated in secret without an independent evaluation of costs and benefits.

Often the agreements open up essential services including health, to private foreign investment, with only limited carve outs to allow regulation which can be wound back, but not widened, over time.

They have also allowed pharmaceutical companies to increase their 20-year monopoly on new medicines, delaying the availability of cheaper medicines.

In the past month the realities of the pandemic have forced the Australian government to (at least temporarily) back away from this approach.

It has directed private hospitals to treat pandemic patients.

It has assisted local firms to re-establish the capacity to manufacture equipment such as facemasks.

And it has ramped up the screening of foreign investment by the Foreign Investment Review Board, in a way trade agreements would normally prevent.

Post-pandemic trade policies should reject both the extremes of the recent agreements and the Trump and Hanson policies of building walls and a return to high tariffs.

Post-pandemic, we should wind such clauses back

Australia should also reject the trap of taking sides in the US-China trade war.

Trade agreements should be negotiated openly in a system that takes account of the specific needs of developing countries.

They should reinforce internationally- agreed and fully-enforceable labour rights and environmental standards, allow countries such as Australia to maintain the manufacturing capacity that will be needed in the event of crises and enable governments to regulate for purposes of public health and the environment.

They most certainly should not strengthen medicine or other monopolies, or give additional legal rights such as ISDS to global corporations that already have enormous market power.

Source: The Conversation, 23 April 2020

Dr Patricia Ranald is an honorary research fellow at the University of Sydney

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