By Fernando Arce
SUMMARY: A close examination of the arbitration world soon reveals why arbitrators, far from being neutral, have become powerful players who have shaped the pro-corporate investment arbitration system that we see today. Evidence shows that many of the arbitrators enjoy close links with the corporate world and share businesses’ viewpoint in relation to the importance of protecting investors’ profits. The following article calls attention to the dangers of this unequal relationship, namely in the context of the current illegal battle between Chevron and Ecuador.
Activists fighting for the clean-up of the Ecuadorian rain forest, which Chevron polluted for decades, are questioning the neutrality of the International Center for Settlement of Investment Disputes, which pretends to arbitrate issues between states and private investors.
The ICSID is currently hearing Chevron argue why it should be the Ecuadorian state that pays the $9.5 billion judgment issued against the corporation by that country's Supreme Court in 2011. But with a proven record of judgments favouring corporations, activists are worried the ICSID, created by the World Bank, is inherently biased.
“It's not fair, it's not legal, and it's not legitimate that a club of lawyers with proven corporate ties be the ones who have power over the judicial system of sovereign states,” said Santiago Escobar, a key witness in the case against Chevron and leading activist. “That's called corruption.”
The idea behind investment arbitrators is that because national courts are not sufficiently neutral, an external party is needed to resolve disputes between states and the corporations that penetrate their borders in search of business. The investors are therefore able to litigate based on perceived violations of Bilateral Investment Treaties signed between the two.
“(Investment arbitrators) can decide to penalise governments for ensuring people’s human rights to health, access to water or electricity as well as the right to a healthy environment,” states a report by the Corporate Europe Observatory. “This small group of elite lawyers have been granted unprecedented power to judge cases that affect millions of people.”
This is particularly worrisome given the influence that the business world has inside these tribunals. As the Corporate Europe Observatory report states, “Most of the members of this club are men from a small group of developed countries” with a very specific world-view.
“A close examination of the arbitration world soon reveals why arbitrators, far from being neutral, have become powerful players who have shaped the pro-corporate investment arbitration system that we see today,” reads the report. “Evidence shows that many of the arbitrators enjoy close links with the corporate world and share businesses’ viewpoint in relation to the importance of protecting investors’ profits.”
Yves Fortier, for instance, a Canadian arbitrator and diplomat, admitted in a 2010 interview that having sat on many corporate boards provided him with a “vista on the business world” which has “helped...as an international arbitrator.”
Of course, Fortier is no stranger to controversy when it comes to his objectivity. In September 2014, the Vancouver Observer reported that Fortier was still a TransCanada shareholder – the company behind the XL Pipeline, one of Canada's most controversial energy projects. Yet he was also the member of the entity charged with investigating what kind of information Canada's spy agency was gathering on activists opposed to the very company where he was a shareholder.
While Chevron does not deny that it polluted the Amazon between 1964 and 1991, it is currently arguing that Ecuador violated a 1993 Bilateral Investment Treaty signed by the government of the time, and should therefore be the one to pay to clean the Amazon. This is one of the latest arguments employed by the corporation since it first sued the Ecuadorian government in 2004 to try to escape responsibility. This kind of corporate-bias could adversely affect the outcome of the case, as it is essentially a showdown between corporate interests and an overtly leftist government protecting national stakes.
Of course, this also means the entire system of investment arbitration is rife with political implications. Governments pushing a neo-liberal agenda will graciously sign BITs which on one hand opens the country to investment while on the other it protects the companies doing the investment. In the case of Ecuador, the majority of BITs were signed during one of its most aggressive neo-liberal stages during the presidency of Sixto Durán Ballén. Today, there are more than 26 such agreements signed, reported El Telegrafo.
The economic incentive arbitrators receive is also a major source of concern. “Given the one-sided nature of the system, where only investors can sue and only states are sued, a pro-business outlook could be interpreted as a strategic choice for an ambitious investment lawyer keen to make a lucrative living,” reads the Corporate Europe Observatory's report. Indeed, the presiding arbitrator in the 2011 case between Chevron v. Ecuador received US $939,000, according to the report.
Together with several other countries, the state of Ecuador is promoting initiatives to curb the power private companies hold over states under the current scheme. Among others, this includes a parallel entity made up of countries in the Global South to provide their own arbitration in such disputes.
“It's time to demand accountability to this industry and the people who are profiting from sovereign states,” said Escobar. “Without these anti-democratic entities the...World Bank wont be able to keep attacking emerging economies. We must dismantle (investment-state dispute settlements)...so that democracy and sovereignty will finally be implemented.”
Historical Gathering - Eagle & Condor Prophecy Comes Alive in DC
History was made. The Inca prophecies say that when the Eagle of the North and the Condor of the South fly together, the earth will awaken. The Eagles of the North cannot be free without the Condors of the South. On April 21st, the peoples of the North and South stood together in support of Ecuador's struggle against Chevron.
A massive and historic gathering, numbering in the thousands, was held outside the World Bank in Washington, DC A new era has emerged in the relationship between the peoples of the North and the South.
Global #AntiChevron Day
When: May 21st, 2015 at 3PM
Where: RBC 315 Front Street, Toronto
More details on the Event Page found Here.