On 26 June, the Senate voted in favour of giving US President Barack Obama the mandate to conclude international trade agreements without prior consultation of and debates in the US Congress, which thereby have in effect failed their own democratic mandate and betrayed their constituents. The international treaties in question are the so-called free trade and investment agreements TTIP and TPP, which have far-reaching effects on the sovereignty of the states which enter into them. In the following interview the renowned expert in the fields of human rights and international law Alfred de Zayas clarifies how this whole issue is to be assessed from the perspective of international law.
Current Concerns: How important are the free trade agreements such as TPP, TTIP or TiSA for the coexistence of peoples, especially as seen in terms of international law aspects?
Prof. Dr. Alfred de Zayas: The core problems are State sovereignty and democratic controls. These treaties, if adopted, constitute a frontal attack on the State’s regulatory function and on the possibility for democracies to operate on the basis of the will of the people. There is a “certain mythology of the market”, described by Joseph Stiglitz, the Nobel laureate in economics, as market fundamentalism, as a cult of the market. It is almost a religious issue, where advocates swear that free trade would bring about the common weal as well as economic progress and development for all humankind. No-one has as yet demonstrated this empirically, as there are examples of progress, but also of setbacks, boom and bust episodes, of financial crises and unemployment. Moreover, “progress” cannot be gauged simply in terms of money or gross domestic product (GDP) – instead, contentment and peace and social justice must also be taken into account. These trade and investment agreements go back mainly to the period after the end of the Cold War. Most bilateral investment treaties (BIT), of which there are more than 3,200, were at that time accepted with much enthusiasm, because the states were promised economic development. However, they did not notice that diverse Trojan horses were hidden in these treaties.
How is this to be understood?
Meanwhile we have all become aware that the treaties, most of them equipped with a new arbitral jurisdiction, are creating a new kind of world order, namely one that is no longer democratic, where key decisions are taken by the corporations and not by democratically elected grovernments. The treaties appeared attractive because of the expectation that lower tariffs would be a motor of production and employment, but this also had adverse impacts and contributed to increasing the gulf between rich and poor both domestically and internationally. Besides, why further lower custom duties, which today are very low?
So it is a matter of much more than a few “free trade agreements”.
These agreements are geopolitical constructs, as recognized by economists Paul Krugman (also a Nobel laureate) and Professor Robert Wade. With respect to TPP, TTIP or TiSA, it is not just a matter of rejecting the new proposed treaties, but addressing the problems raised by 3,200 existing bi-lateral investment treaties. The entire system which has come into existence during the past 30 years must be radically reformed, as UNCTAD recognizes in its 2015 World Investment Report. The diagnosis is clear: The agreements entail the loss of democracy and constitutionality. But there is enormous resistance to reform and the transnational corporations disseminate disinformation and have powerful lobbies in most world parliaments.
How does this work in concrete terms?
The rule of law requires transparency and responsibility, it presupposes an open discussion of issues, legislation, treaties. But here treaties have been negotiated in secret, and key stakeholders including human rights experts, environmental experts, health experts, labour unions, consumer unions were excluded – they were not allowed to participate in the elaboration and conclusion of the treaties in question. And precisely in order to silence any discussion in Congress, precisely the TPP is now to be adopted without any debate by way of “fast tracking” and to be presented as a fait accompli. It is not possible to act in a less democratic way. Two weeks ago, the US Senate accepted “fast tracking” by a single vote. This treaty will enter into force as soon as Obama signs it. That is just a formality, because he would like to enter into these free trade agreements as soon as possible. The law is called “Trade Promotion Authority”.
What effect will this law take?
It forbids any discussion or vote in parliament on the drafting of these treaties. There will only be one final vote, yes or no, and the business-oriented Republican majority in Congress will vote for it. Thus the whole democratic process is eliminated. When parliament “emasculates” itself, this is a totalitarian act and a breach of Article 25 of the Covenant of Civil and Political Rights, which requires public participation in the conduct of public affairs.
The democratic process is levered out, in order to put the economy above the democratic order.
No, it is not the economy that is being promoted, but rather the interests and ambitions of major transnational corporations, banks and investors. The economy itself may even suffer as a result of the agreements, unemployment in many countries will grow, human rights protection will be lowered, and the possibility of preventing financial crises like in 2007-08 will be diminished. Yes, that is why basically they are no free trade agreements, but they are political agreements to abolish our democratic system.
What is to be conceived by that?
The large transnational corporations have initiated a sort of revolution against the concept of the State that has evolved since the Peace of Westphalia of 1648. The idea involves a shift away from the rule of law, away from state jurisdiction, on which the world has been working for more than 300 years now in order to ensure stability, predictability, legal certainty and to develop institutions which make it possible to take action against the violations of the law. With the introduction of extra-judicial arbitration courts called investor-State-dispute-settlement mechanism (ISDS) as they will be effected in these treaties this will be undermined, because ISDS is not accountable to democratically elected governments and their awards are not appealable. Moreover, the ISDS system is a one-way street. Whereas investors can sue governments, governments cannot sue the investors before ISDS, e.g. for environmental damage.
How should we envisage these arbitration courts?
First of all, they are secret. There is neither any transparency in this system nor is it possible to hold the “judges” accountable. The corporations have established a separate, non-democratically legitimized jurisdiction and overridden the Westphalian principle of sovereignty.
In other words, these agreements serve to invalidate the sovereign nation-state with its national legal system.
Yes. There are two ontologies we have to pay attention to. The ontology of the state defines why a state exists in the first place. The state is an organized society that legitimises itself by the fact that the state assumes the responsibility for legislation so as to protect the interests of the people. The second ontology is the ontology of the market, the ontology of business and trade. If I invest, if I am a businessman, if I work for a transnational company, I expect a profit. In order to achieve this profit I have to take a risk. The ontology of capitalism entails risk-taking. In the form of this investor state dispute settlement mechanism, the new arbitration courts that are not really courts of law but private arbitration, the corporation receives a guarantee of its “expected profits” and imposes a huge financial burden on the State. In short, it is an utterly corrupt system with “arbitration tribunals” that are made up of corporate-friendly arbitrators, frequently in situations of flagrant conflict of interest.
How does this arbitration work?
The judges are mostly lawyers working for large corporations, and I know the profession, since I worked for years on Wall Street and advised international corporations. These arbitrators are top lawyers from top firms in New York, Washington, London, who charge $ 1,000 an hour, advise companies, but also states. This is a fantastic business. Today they are arbitrators; tomorrow they are consultants and the day after CEOs of a company. You really have to understand this system as a Trojan horse. Governments entered into treaties without realizing that they were sacrificing their sovereignty. In the nineties, people were in no way able to imagine that such a thing was possible.
Where should we begin?
The system is deliberately complex and difficult to reform, but reform we must. International law provides the tools in the Vienna Convention on the Law of Treaties. ISDS arbitrations have proven to be against all standards of public decency. The term “contra bonos mores” is the international legal term for treaties or contracts that violate the bonum commune, i.e. which go against the common good, against the interests of society. Such agreements, which are contra bonos mores, are invalid according to Article 53 of the Vienna Convention on the Law of Treaties.
What would that then mean for the great number of treaties?
What I am proposing in my report to the Human Rights Council is to take a closer look at all bilateral and multilateral treaties with ISDS provisions. Where they act against the common good, they have to be amended accordingly in accordance with the Vienna Convention. There is also an international legal method applicable, which is called “severability”, i.e “cutting off”, which allows the suppression of chapters or articles of treaties that are contra bonos mores, without abrogating the entire treaty. It is enough to delete the chapter or those parts of the treaty that infringe the common good, and without replacement at that. This is enshrined in international law.
Does that mean you could proceed against all agreements that violate the common good? Why has no one done so up to date?
Because the system is complex and there are many economic inter-relationships to marshal. Besides, the victims are not organized whereas transnational corporations are very well organized.
Victims are the respective state and its population?
Yes of course. If a state such as Ecuador, Bolivia or Venezuela has to pay a compensation of three billion or 5 billion to a transnational corporation, this means that these 5 billion are no longer available to the state for other tasks which it has to address in order to meet its necessary social obligations. This means that money is lacking in all areas, for example infrastructure, labour standards, health, and of course education and vocational training, etc. So here we are dealing with an abnormal situation which had in no way been discussed as such, when such treaties were adopted. It is not right to say that there were states which deliberately accepted and ratified these treaties, because there was no full disclosure of the texts, no public discussion, and no one really imagined at the time that there was a jurisdiction contra bonum mores in existence, nor could it anticipated that the arbitrators would disregard human rights standards and put profit ahead of the common good.
How is this to be understood?
The arbitrators have carried out and implemented an interpretation of the contracts which contravenes the national and international “ordre public”. This interpretation violates articles 31 and 32 of the Vienna Convention. No person with common sense would arrive at their profit-oriented expansive interpretations of the treaties. They have transformed the concept of confiscation or expropriation as follows: If my expected profit is reduced by the fact that the government raises the minimum wage or that it strengthens its environmental regulations, so that the corporation is obliged to take measures to prevent the contamination of the water, then this generates additional costs for the investor and thus reduces profits. This means “expropriation”!!!! So a perfectly normal and predictable state measure which definitely does not confiscate a foreign business is considered a confiscation because of the “profit” reduction.
Were the states not able to anticipate this?
There had been no decisions of these arbitral tribunals at the time of the conclusion of the treaties. Nobody knew that the introduction of environmental or health legislation could ever be considered as expropriation. If a state (eg. Germany) wants to opt out of nuclear power, this is a decision that can and must be made in a democratic way within a state. But this will reduce the profit of the nuclear industry. This reduction of profit is then declared to be an expropriation and thus a violation of the obligations of the state towards the corporation. The state must then recompense the corporation for the loss of expected profit.
Do you know any specific examples?
Currently Vattenfall, a large Swedish energy group sueing Germany for 4 billion because of its nuclear phase-out. Veolia, a French service provider that specializes in water supply for communities, has filed a lawsuit against Egypt, because Egypt has increased the minimum wage.
This is absurd. What is there to do?
I have two main proposals. It must be clearly understood that the UN Charter establishes binding internationally recognized standards, which constitute peremptory interntional law (jus cogens). The UN Charter guarantees the sovereignty and self-determination of the states. The UN has altogether been constructed on the basis of the sovereignty of states. It is an ontological or essential function of every state to regulate its internal affairs, which means that it has the obligation and competence to determine and decide on the amount and the use of the taxes paid. These things are laid down in Articles 1 and 2 of the UN Charter. Articles 55 and 56 establish human rights obligations. If a treaty violates these or other UN articles or is incompatible with them, the Charter takes priority, “it trumps” all other contracts. Article 103 of the UN Charter says that if there is a conflict between the UN Charter and any other treaty or contract, then the UN Charter must be applied and not the competing treaty. This is the law, but it should be reaffirmed and further developed by the International Court of Justice.
What does that mean in concrete terms for these dishonest contracts that violate common decency, good faith, the principle of democracy, and thus the common good as well as human rights?
The solution lies with the International Court of Justice in the Hague, the highest judicial instance the the UN system. The United Nations member states, whose delegates sit in the General Assembly, must demand of the International Court of Justice that an advisory opinion be established recognizing the situation exactly as it stands and telling the states clearly that they can not enter into treaties that constitute a violation of the UN Charter. All these bilateral and multilateral trade agreements, TTP, TTIP, etc. must fall, or at least those parts of them which violate the Charter must be cut off (principle of severability). But that needs to be taken up at the General Assembly. The International Court is not active motu proprio, that is, it does not start a court process of its own accord. Someone has to take the initiative and to submit these things to the international court.
Who could do that?
According to Art. 96 of the Charter the UN General Assembly can. There are other UN bodies that have the same competence, as for example the International Labour Organization, the ILO, the World Health Organization, the WHO, the Children’s Fund, UNICEF, the Food and Agriculture Organization of the United Nations, the FAO, and others to the extent that the bilateral and multilateral investment treaties adversely impact their areas of competence. The consequences of these agreements are multiple violations of labor law, violations of the right to health, the right to environmental protection, the right to life, because often enough international companies carry out these large projects which then lead to people losing everything, being driven to famine, enforced migration and sometimes to suicide. •
Professor de Zayas, thank you very much for this interview.
(Interview Thomas Kaiser)
The discussion expresses the personal opinion of Professor de Zayas and has not been conducted officially in his capacity as a Special Rapporteur.
See also www.alfreddezayas.com and http://dezayasalfred.wordpress.com.
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