The Guardian • Issue #2095

Agreements that strangle democracy

Glencore’s Cerrejón mine in La Guajira.

Glencore’s Cerrejón mine in La Guajira. Photo: Tanenhaus – (CC BY 2.0)

“Where there is water, there is life. Without it, where are we going to live?” asks Leobardo Sierra, a 48-year-old Wayuu Indigenous leader from Colombia referring to the damage caused by Glencore’s Cerrejón mine in La Guajira, Colombia. It is one of the largest open cut mines in the world.

“For the company, the land is just for extraction, for damaging, for money. For us, it’s territory, it nourishes us, it’s our mother. We must take care of it.”

People who speak out against the company receive death threats, and fear for their personal safety and that of their families. Militias are also present.

When Glencore diverted the Bruno stream for its own purposes in 2017, the Indigenous people took the company to Colombia’s Constitutional Court. It found in favour of their rights to water and ordered the company to restore the waterway to its original course.

Glencore responded by starting proceedings against the government in an Investor-State-Dispute-Settlement (ISDS) case, pressuring the state to pay Glencore millions of dollars it might lose in future profits as a consequence of the Court’s decision.

Glencore currently has five such claims against the Colombian state.

ISDS

ISDS clauses found in many free trade and investment agreements. They give foreign (but not local) investors the right to sue governments for millions and even billions of dollars of compensation. This applies if they can convince a tribunal that a change in domestic law or policy has reduced the value of their investment, or that they were not consulted fairly about the change, or that it did not meet their expectations of the regulatory environment at the time of their investment.

In other words, they are used against governments when decisions are made that might limit the company’s business activities or future profits.

The claims are heard by international tribunals behind closed doors. Costs are in the tens of millions, even when a government wins. For poorer nations, these costs are high, and they are a warning to them against trying to protect their citizens or the environment.

There are 1303 known ISDS cases, many against health, environment, regulation of carbon emissions, and other public interest laws. (UNCTAD)

ISDSs violate sovereignty, and override government laws and domestic courts. The process lacks transparency. This is very evident examining UNCTAD’s long list of cases and how few reveal details of outcomes.

EXAMPLES

When the minimum wage was increased in Egypt, the giant global French corporation Veolia sued the government using ISDS provisions in the Bilateral Investment Agreement between France and Egypt.

At the time Veolia had an agreement to provide waste management services for 15 years. It argued that the government had changed the labour law causing damage to its investment. Fortunately, Veolia lost but the Egyptian government still had to spend six years defending the case and paid millions of dollars in arbitration and legal costs.

In another case, an ISDS tribunal ordered the Peruvian government to pay the Canadian Bear Creek mining company AU$37m when it cancelled a mining licence. The company had failed to obtain informed consent from Indigenous land owners about the mine, leading to mass protests. In other words, the company was rewarded for ignoring Indigenous land rights.

Mexico is facing an AU$3.7b ISDS case from US company Odyssey Marine Exploration after rejecting a seabed mining permit due to environmental concerns. The permit would have allowed the corporation to dredge nearly 270,000 hectares of shallow Mexican coastline for phosphate.

However, widespread community concerns about marine life and the local fishing industry saw Mexico reject the permit in 2018. One of the dangers of cases like this is that governments will fear rejecting environmentally dangerous mining projects and make decisions that are not in line with climate action or in the interests of the health and wellbeing of communities.

CLIVE PALMER

Closer to home, Clive Palmer is using the ISDS provisions in the ASEAN-Australia-New Zealand Free Trade Agreement and the amended 2017 Singapore-Australia Free Trade Agreement to claim a total of nearly $410 billion from the Australian government.

As his company is Australian, and ineligible to use ISDS provisions against the Australian government, Palmer is using what is known as ‘forum shopping.’ This involves setting up companies in other countries that contain agreements with ISDS provisions with the country being sued.

Palmer’s Australian-based Minerology company had sued the WA government for $30 million in relation to legislation terminating his legal dispute over his proposed Balmoral South iron ore project in the Pilbara region.

Minerology is now owned by Zeph Investments, a Singapore-registered company. Palmer has launched a new claim, this time against the Commonwealth government, using the Investor-State Disputes Settlement (ISDS) clauses in the Singapore-Australia Free Trade Agreement.

LABOR GOVT

The groundswell against ISDSs has reached the point where governments are reluctant to include them in new agreements. Some are trying to remove or weaken their provisions. This can only be done by mutual agreement.

Labor made a pre-election promise to scrap ISDS provisions in agreements. Submissions to a Parliamentary inquiry into the government’s approach to trade policy closed in September 2023. A three-yearly mandated review of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is also under way. The CPTPP includes 11 countries in the Asia Pacific region, but not China or the US.

It is in the interests of all Australians that Labor keeps its promise.

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