Article by Nick Dearden, Director of Global Justice Now
Another week, another victory for big business over a government in a secret pseudo-court. This time it’s the turn of private water giant Suez, who successfully sued Argentina for reversing the privatization of Buenos Aires’s water supply.
No matter that the country was in a state of economic crisis when the nationalization took place, and the government didn’t want water prices to rise by 60%. No matter that the company time and again failed to meet its performance targets. In the world of corporate courts, nothing matters except an investor’s ‘right’ to profit.
Yet it is exactly this system of so-called Investor State Dispute Settlement (ISDS) that we will be signing up to if the US-EU trade deal known as TTIP goes ahead. Again and again government ministers tell us there’s nothing to fear. Nothing in TTIP will prevent us running public services in the way we choose.
Try telling that to Argentina, which now ‘owes’ $405 million, according to one such corporate court, this one based in the World Bank, which just happened to also be a shareholder in the Suez-run private water scheme.
The story began when a free market government in Argentina privatized Buenos Aires’s water supply back in 1993, egged on by the World Bank. A 30-year concession was given to a group headed by Suez, which promised to make water access universal and improve the water quality to meet international standards, all while maintaining reasonable tariffs.
From the start, targets were repeatedly not met, while tariffs increased, and the performance indicators were renegotiated. By 2002, average residential tariffs had increased by 88%, while inflation had only increased by 7%. Investment was below what had been promised, debt ballooned, but the profits kept rolling in.
In 2001-2, Argentina went through a dramatic crisis, exacerbated by international lenders like the International Monetary Fund, which caused mass impoverishment. As the country was rebuilt, emergency laws were passed to save Argentina’s people from further deprivation. With the private water company threatening another massive price rise, the government of Nestor Kirchner passed an emergency law to bring the company into public ownership.
Argentina has been hounded by cases like this ever since its economic crisis. That’s because the Argentinian government at the time took serious action to place human rights before corporate interests, telling big business they couldn’t profit from misery. Some of these cases have seen Argentina paying out, others have been resisted, turning into odious debts which hedge funds (known as vultures) use to threaten the country to this day.
This particular case has been brought under a bilateral trade agreement between Argentina and France. But the central mechanism is the same as that which is being proposed under TTIP and a separate treaty which the EU is about to ratify with Canada (known as CETA). These agreements will allow tens of thousands of corporations access to these secret pseudo-courts to take exactly this type of action against European governments.
Argentina has at least 20 more cases like this pending, arising mostly from the government trying to regulate energy and water prices, which is exactly what the Labour Party is promising to do in the upcoming general election.
What’s more, the threat of these corporate courts is having a much wider impact on governments’ willingness to even try to represent their people. Senior barrister Toby Landau says “no state wants to be brought under a treaty to an international process. It has an impact upon diplomatic relations, it may have an impact upon a state’s credit standing… as a practitioner I can tell you that there are states who are now seeking advice from council in advance of promulgating particular policies in order to know whether or not there is a risk of an investor-state claim.” [emphasis added]
The European parliament has a vote on TTIP in June. This case should make absolutely clear to MEPs that the ISDS system must be a red line not to be crossed by any political party that cares about democracy.
On 18 April people across the world will be taking part in more than 550 actions to protest TTIP and other dangerous trade deals. You can find your local action here.