Inside The Global “Club” That Helps Executives Escape Their Crimes
Inside The Global “Club” That Helps Executives Escape Their Crimes A parallel legal universe, open only to corporations and largely invisible to everyone else, helps executives convicted of crimes escape punishment. Part one of a BuzzFeed News investigation.
In a little-noticed 2014 dissent, US Chief
Justice John Roberts warned that
ISDS arbitration panels hold the alarming power to review a nation’s laws and
“effectively annul the authoritative acts of its legislature, executive, and
judiciary.” ISDS arbitrators, he continued, “can meet literally anywhere in the
world” and “sit in judgment” on a nation’s “sovereign acts.”
Imagine a private,
global super court
that empowers corporations to bend countries to their will.
Say a nation tries to
prosecute a corrupt CEO or ban dangerous pollution. Imagine that a company
could turn to this super court and sue the whole country for daring to
interfere with its profits, demanding hundreds of millions or even billions of
dollars as retribution.
Imagine that this
court is so powerful that nations often must heed its rulings as if they came
from their own supreme courts, with no meaningful way to appeal. That it
operates unconstrained by precedent or any significant public oversight, often
keeping its proceedings and sometimes even its decisions secret. That the
people who decide its cases are largely elite Western corporate attorneys who
have a vested interest in expanding the court’s authority because they profit
from it directly, arguing cases one day and then sitting in judgment another.
That some of them half-jokingly refer to themselves as “The Club” or “The
Mafia.”
And imagine that the
penalties this court has imposed have been so crushing — and its decisions so
unpredictable — that some nations dare not risk a trial, responding to the mere
threat of a lawsuit by offering vast concessions, such as rolling back their
own laws or even wiping away the punishments of convicted criminals.
This system is already
in place, operating behind closed doors in office buildings and conference
rooms in cities around the world. Known as investor-state dispute settlement,
or ISDS, it is written into a vast network of treaties that govern
international trade and investment, including NAFTA and the Trans-Pacific
Partnership, which Congress must soon decide whether to ratify.
These trade pacts have
become a flashpoint in the US presidential campaign. But an 18-month BuzzFeed
News investigation, spanning three continents and involving more than 200
interviews and tens of thousands of documents, many of them previously
confidential, has exposed an obscure but immensely consequential feature of
these trade treaties, the secret operations of these tribunals, and the ways
that business has co-opted them to bring sovereign nations to heel.
The BuzzFeed News
investigation explores four different aspects of ISDS. In coming days, it will
show how the mere threat of an ISDS case can intimidate a nation into gutting
its own laws, how some financial firms have transformed what was intended to be
a system of justice into an engine of profit, and how America is surprisingly
vulnerable to suits from foreign companies.
The series starts
today with perhaps the least known and most jarring revelation: Companies and
executives accused or even convicted of crimes have escaped punishment by
turning to this special forum. Based on exclusive reporting from the Middle
East, Central America, and Asia, BuzzFeed News has found the following:
- A Dubai real estate mogul and former
business partner of Donald Trump was sentenced to prison for collaborating
on a deal that would swindle the Egyptian people out of millions of
dollars — but then he turned to ISDS and got his prison sentence wiped
away.
- In El Salvador, a court found that a
factory had poisoned a village — including dozens of children — with lead,
failing for years to take government-ordered steps to prevent the toxic
metal from seeping out. But the factory owners’ lawyers used ISDS to help
the company dodge a criminal conviction and the responsibility for
cleaning up the area and providing needed medical care.
- Two financiers convicted of embezzling more
than $300 million from an Indonesian bank used an ISDS finding to fend off
Interpol, shield their assets, and effectively nullify their punishment.
When the US Congress
votes on whether to give final approval to the sprawling Trans-Pacific
Partnership, which President Barack Obama staunchly supports, it will be
deciding on a massive expansion of ISDS. Donald Trump and Hillary Clinton
oppose the overall treaty, but they have focused mainly on what they say would
be the loss of American jobs. Clinton’s running mate, Tim Kaine, has voiced
concern about ISDS in particular, and Sen. Elizabeth Warren has lambasted it.
Last year, members of both houses of Congress tried to keep it out of the
Pacific trade deal. They failed.
ISDS is basically
binding arbitration on a global scale, designed to settle disputes between
countries and foreign companies that do business within their borders.
Different treaties can mandate slightly different rules, but the system is
broadly the same. When companies sue, their cases are usually heard in front of
a tribunal of three arbitrators, often private attorneys. The business appoints
one arbitrator and the country another, then both sides usually decide on the
third together.
Conceived of in the
1950s, the system was intended to benefit both developing nations and the
foreign companies that sought to invest in them. The companies would gain a
fair, neutral referee if a rogue regime seized their property or discriminated
against them in favor of domestic companies. And the countries would gain the
roads or hospitals or industries that those foreign corporations would, as a
result, feel confident building.
“It works,” said
Charles Brower, a longtime ISDS arbitrator. “Like any system of law, there will
be disappointments; you’re dealing with human systems. But this system
fundamentally produces as good justice as the federal courts of the United
States.”.. read more:
Parts 2 & 3:
Close inspection of all these so-called trade deals reveal them to be straightforward corporate power grabs. This latest justification - that they're actually intended to raise up the impoverished masses of the developing world - only lends further weight to the old Galbraith observation:
"The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness"
