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Tomorrow members of Congress plan to take a controversial, career-defining vote on Fast Tracking the largest expansion to date of the unpopular status quo trade model. A majority of the U.S. public, most House Democrats and a sizeable bloc of House Republicans stand in opposition.
The coalition opposing Fast Track for the Trans-Pacific Partnership (TPP) is larger and more diverse than in any preceding trade policy fight, including Internet freedom advocates, family farmers, environmentalists, Main Street businesses, labor unions, feminists, faith groups, consumer advocates, development organizations, LGBT groups, and retirees. The breadth of the opposition reflects the wide scope of broadly-held goals that the sweeping TPP pact would undermine: middle class jobs, Wall Street reform, food safety, Internet freedom, a clean environment, and affordable healthcare, to name a few.
But if that weren’t enough for members of Congress still on the fence, a new legal analysis reveals that the TPP may also undermine the U.S. Constitution.
That’s the conclusion of Alan Morrison, a constitutional law professor and associate dean at George Washington University Law School who has practiced law for 45 years, taught at six law schools including Harvard, and argued 20 Supreme Court cases.
Morrison warns in a letter to Congress that the TPP’s proposed expansion of a controversial parallel legal system for foreign corporations, known as “investor-state dispute settlement” (ISDS), “improperly removes a core judicial function from the federal courts and therefore violates Article III of the Constitution.”
TPP’s expansion of ISDS would newly empower thousands of foreign corporations to bypass the entire U.S. legal system and challenge U.S. laws before private international tribunals comprised of three attorneys.
These three individuals would not be constitutionally appointed and salaried U.S. judges, but private lawyers who are paid by the hour. As Morrison points out, “many of those who serve as arbitrators in one ISDS case represent investors challenging governments in another.” The three ISDS lawyers, though acting like a court, would not be bound by a system of legal precedent. They would be authorized to rule against U.S. laws and order U.S. taxpayer compensation in decisions that could not be appealed on the merits or reviewed in U.S. courts.
If you think that the Founding Fathers might have frowned on this system, you’re not alone. The U.S. Constitution states in Article III that U.S. courts, presided over by salaried U.S. judges, have judicial authority over challenges to U.S. laws. Instead, the TPP would empower an ad-hoc group of three bill-by-the-hour private lawyers operating outside of the U.S. legal system to issue binding decisions on corporate challenges to U.S. laws.
Morrison concludes, “The Administration owes it to Congress and the American people to explain how the Constitution allows the United States to agree to submit the validity of its federal, state, and local laws to three private arbitrators, with no possibility of review by any U.S. court.”
The TPP’s expansion of this constitutional aberration would threaten the policies that we rely on for a clean environment, stable economy and healthy communities. Since ISDS tribunals, unlike U.S. judges, are not bound by legal precedent or substantive appeal, they are free to concoct broad governmental obligations to foreign investors and then rule against environmental, financial and health policies.
Indeed, they are incentivized to do so, since some of the tribunalists, unlike U.S. judges, get paid and picked by those who launch the cases (i.e. foreign investors). Imagine if the plaintiff (or defendant) in a U.S. court case got to select and pay the judge. The more that ISDS tribunalists rule in favor of foreign investors and against government policies, the more they boost investors’ interest in launching further ISDS cases and picking them as the highly-paid tribunalists.
It is little surprise then that ISDS tribunalists have repeatedly used creative interpretations of foreign investors’ rights to rule against public interest policies under existing ISDS-enforced pacts. This includes ISDS rulings against the Czech Republic’s decision not to bail out a bank, a Canadian province’s nondiscriminatory requirement for oil corporations to support local research and development, and a Mexican municipality’s decision not to authorize a waste facility near a nature reserve that is an UNESCO World Heritage Site and home to indigenous communities.
Pending ISDS cases include a U.S. natural gas firm’s challenge of a Canadian moratorium on fracking, a Swedish energy company’s case against Germany’s phase-out of nuclear power after the Fukushima nuclear disaster, and Philip Morris’ ISDS attacks on anti-smoking policies from Uruguay to Australia.
While ISDS tribunals cannot directly require governments to overturn laws, their imposition of massive penalties on taxpayers can have that effect. Morrison explains:
If a law is found to be inconsistent with an investor protection provision, it may remain in effect, but other investors could also bring claims seeking U.S. taxpayer compensation. Thus, an adverse arbitral decision under TPP may well result in repeal or amendment of the offending law…Indeed, the mere instigation of an ISDS proceeding has resulted in other governments, including Germany and Canada, reversing specific regulatory decisions as part of compensation packages for investors.
The TPP would dramatically expand the threat posed by this constitutionally-suspect system, as the deal would roughly double U.S. exposure to ISDS attacks against U.S. laws. The TPP would newly empower more than 1,000 additional corporations in TPP countries, which own more than 9,200 additional subsidiaries in the United States, to launch ISDS cases against the U.S. government. No other U.S. pact has subjected the United States to such an increase in ISDS liability.
What kinds of U.S. laws and regulations would be vulnerable to corporate challenge under this unprecedented expansion of U.S. ISDS liability? Morrison spells out some examples:
* E-cigarette regulations: “If Congress decided to regulate [e-cigarettes] after enactment of the TPP, a non-U.S. investor from a TPP country that makes e-cigarettes here could ask an ISDS panel to rule that its investment-based expectations were improperly violated and thus that it is entitled to damages under the minimum standard of treatment provisions.”
* Water rationing for drought-stricken California: “A similar challenge could be made by a TPP investor who owned farm land in California and objected to an intensification of mandatory water rationing for farms enacted after the TPP goes into effect, even if such rules also applied to U.S. owners of land that would be adversely affected by them.”
* A $15 minimum wage: “Or the non-U.S. TPP-owner of restaurants in Los Angeles could demand arbitration over a post TPP-enactment of an increase in the minimum wage to $15 an hour, which, he claims, violates his investment-based expectations when he decided to purchase the restaurants.”
Such TPP threats are among the many that have spurred today’s widespread opposition to Fast Track. After years of mounting evidence that the TPP would threaten middle class stability and commonsense consumer and environmental safeguards, members of Congress have plenty of reasons to vote “no” on Fast Track tomorrow. But for those who need yet another reason, the TPP’s apparent violation of the U.S. Constitution should suffice.
Ben Beachy is research director of Public Citizen’s Global Trade Watch.
Learn more at www.tradewatch.org.