For two decades the Democracy Center’s work has been based on one fundamental principle: that citizens everywhere in the world have the right to influence the public decisions that impact their lives. That is what real democracy means. In my work with citizen activists across the U.S., Europe, Latin America, Africa and Asia I have seen up close the many threats to that right – armed soldiers in Bolivia, mountains of corporate campaign cash in the U.S., the repression of civil rights in Vietnam, and more.

The Democracy Center has just released a report that documents a new, rising menace to democracy that threatens us all, regardless of country. That threat comes from the growing web of international investment rules used by multinational corporations to undermine and overturn citizen victories on everything from environmental protection to public health. Under that system a Canadian mining company is suing the people of El Salvador for prohibiting the dumping of toxic chemicals into their drinking water. Phillip Morris, the tobacco giant, is suing Uruguay and Australia for adding strict health warnings to cigarette packaging. Germany faces a billion dollar legal assault over introducing a moratorium on nuclear power.

All of this is taking place under a system that is growing year by year and is set to become even more powerful under the proposed Trans Pacific Partnership being negotiated in secret by the Obama administration. Our new report is called Unfair, Unsustainable, and Under the Radar: How Corporations use Global Investment Rules to Undermine a Sustainable Future. Last week I was in New York and spoke about the report and this rising threat with Amy Goodman on Democracy Now. You can watch that interview here. Our publication announcement is below, with links to the report, an accompanying article we just published on AlterNet and other material.

From the demand for clean water to the movement for action on climate change – all of this is threatened by a system designed to put global corporations in the driver’s seat. I hope that you will take time to look at our new report and to pass on the announcement below via email, Facebook, Twitter, and old-fashioned word-of mouth. It is democracy that is under fire and we need to rise to its defense.

Jim Shultz

The Democracy Center

Announcing: New Report from the Democracy Center

A new paper from the Democracy Center sheds an urgent public light on the system of international investment rules and arbitration tribunals that is being used by corporations to undermine citizen and government action on a range of urgent social and environmental issues.

“With this new report, the Democracy Center brings us conclusive evidence and analysis that show the inherent incompatibility between sustainable development and international investment rules. It is a must read for social and environmental justice campaigners.”

- Cecilia Olivet, Project Coordinator, the Transnational Institute 

Unfair

Citizens and governments everywhere are grappling with the challenge of the 21stcentury: how to allow people to lift themselves out of poverty while respecting the natural boundaries of the earth. However, at the same time multinational corporations are spinning a web of power that threatens our ability to take even basic actions toward sustainable development. This is being done by means of thousands of little-known trade and investment agreements that corporations are using to compromise countries’ sovereign right to regulate in the public good.

“Trade and investment agreements allow these corporations to be above our national sovereignty and even our country’s constitution”

- Francisco Pineda (El Salvador),
Goldman Prize recipient 2011

Unsustainable

The paper shows how the system is being used to punish El Salvador for blocking poisonous gold mining, against Germany for stopping nuclear power, and to attack public health regulations for the tobacco industry in Uruguay – along with many other similar cases. And we flag the next target for the system: government ability to regulate ‘fracking’.

“Current international investment rules encourage governments to attract foreign investment by any means necessary – regardless of the costs for long-term sustainability and democracy.”

- Sarah Anderson,
Global Economy Project Director,
Institute for Policy Studies

Under the Radar

Unfortunately, wide knowledge of this system and how it works doesn’t really exist beyond a small collection of lawyers and advocates. Our paper aims to help put a much wider public spotlight on this corporate power grab while there is still time to fight it.

“Three private individuals are entrusted with the power to review, without any restriction or appeal procedure, all actions of the government, all decisions of the courts, and all laws and regulations emanating from parliament.”

- Juan Fernández-Armesto,
arbitrator from Spain

Find out more

• Read and download the paper 
• The paper is also available in Spanish
• Watch an interview with director Jim Shultz on Democracy Now!
• Check out this article in Alternet
• Listen to an interview with author Thomas Mc Donagh on FSRN
• Watch this quick video about global investment rules:

• Share news of this report on Facebook
• Tweet your followers about the report

Get in Touch

If you are looking for an interview, would be interested in an article on this topic, or would like to discuss any aspect of this issue further with us, please contact Maddy Ryle or Thomas Mc Donagh

About Us

The Democracy Center is well-versed in this system. We helped beat Bechtel when it used the World Bank’s trade tribunal to sue Bolivia for $50 million after the Cochabamba Water Revolt. Supporting citizen action against corporate power has been a cornerstone of our work for many years and together with IPS Washington we now coordinate the Network for Justice in Global Investment to analyse and challenge this latest weapon being deployed by corporations against communities and the planet.

Further Reading

Our partners at the Institute for Policy Studies in Washington recently published an updated version of their ‘Mining for Profits’ report which goes into further detail about how mining, oil and gas corporations are using the system of investment rules and arbitration tribunals to subvert government attempts to regulate these industries.

Take a look at ‘Profiting from Injustice’, the new report from our colleagues at the Transnational Institute and the Corporate Europe Observatory, which reveals the small club of international law firms, arbitrators and financial speculators fuelling an investment arbitration boom that is costing taxpayers billions of dollars and preventing legislation in the public interest.

by Thomas Mc Donagh

In 2009, when the government of El Salvador refused to issue an environmental permit to a Canadian mining corporation, community activists in Las Cabañas rejoiced. For years they had been fighting a pitched battle against the efforts of the company, Pacific Rim, to mine for gold in their region – plans that included the dumping of toxic arsenic in their rivers. It was not a campaign without risk. Four Salvadoran anti-mining activists have been assassinated in the course of their courageous efforts. That victory, however, may well prove to carry a high cost for the people of El Salvador. In a legal assault filed in a World Bank trade court, Pacific Rim is now demanding $315 million in compensation payments from the Salvadoran government, an amount equal to one third of the country’s annual education budget.

That is just one example among many where citizens have fought for and won an important policy victory only to find that victory undermined by corporations using the growing web of international investment rules and arbitration courts. There are many others. Public health campaigners in Uruguay won a huge victory in 2010 when the national government passed new health laws to discourage tobacco consumption. Even though those new laws (including aggressive new warnings on cigarette packages) directly mirrored the guidelines of the World Health Organization, the U.S. corporate tobacco giant Philip Morris retaliated with a $2billion legal action against the government.

Nowhere is this muscle-flexing by multinational corporations a greater threat than on issues related to sustainable development. The result is a little known but enormous legal obstacle planted directly in the policy path toward a sustainable future. The Democracy Center has just documented that threat in an important new report released this week: Unfair, Unsustainable and Under the Radar:  How Corporations Use Global Investment Rules to Undermine a Sustainable Future.

For many this system of corporate-driven investment rules and “dispute resolution” burst into public view a decade ago when Bechtel, the San Francisco-based engineering conglomerate, sued the people of Bolivia for $50 million following the now-famous Cochabamba Water Revolt, after investing just $1 million in the country. A global citizen campaign aimed at the corporation ultimately forced Bechtel to drop that case for a token payment of 30 cents. Yet in the years since, the pile of corporate cases has only grown ever higher.

Another typical current case features dangerous exposure to lead in Peru. When the national government there revoked the operating license for a smelter plant in La Oroyo (operated by Doe Run Peru) in July 2010, the health of the local population and the surrounding environment got some badly needed respite. The village, located high in the Peruvian Andes, has been declared one of the most polluted sites on earth, and in 2007 99% of the children under seven in the neighborhood closest to the town’s smelter had dangerously high levels of lead in their blood. The government deemed that Doe Run Peru’s failure to meet environmental cleanup commitments at the site constituted a breach of the country’s environmental legal standards. However Doe Run’s parent company, the Renco group, has other ideas. The corporation, owned by US billionaire Ira Rennert, has hit back with an $800 million damages claim, enough money to pay the yearly salaries of almost 15,000 Peruvian school teachers (or nearly 6,000 Peruvian health workers).

The world today is covered by an expanding web of over three thousand bilateral and multilateral trade and investment agreements. These agreements grant rights to corporations and allow them to sue governments for policy initiatives that they claim interfere with their profits. The resulting legal cases, despite their far-reaching local consequences, are settled far away and behind closed doors by a small group of unaccountable private lawyers in international dispute arbitration tribunals. Flying in the face of democratic principles and judicial independence, these tribunals operate with little or no public scrutiny and where the communities directly affected are denied a voice.

The number of these investment cases has exploded in recent years, with 2012 breaking all records. By far the most popular tribunal system used by global corporations is the World Banks’ infamous International Center for the Settlement of Investment Disputes (ICISID).  Corporations can use this and other tribunal systems to demand hundreds of millions of dollars in compensation from governments – not just for what they have actually invested in a country, but also vast amounts more for the profits they expected to earn into the future. The lawyers at these tribunals move seamlessly from the role of ‘independent’ arbiter to that of corporate attorney.  Some have strong ties to multinational corporations and serious questions have been raised about their independence in an unaccountable system in which they have such a huge vested interest. Although previously used as a court of last resort by aggrieved investors, these tribunals have become the weapon of choice for corporations in their attempts to clear the path for profiting at the expense of public health and the environment.

The proliferation of these investor-state cases has three major impacts. First, in cases where the corporations win (as they often do) the result is a massive transfer of scarce public resources to wealthy private corporations. Second, even if governments are successful in mounting a legal defense, doing that comes at a cost of potentially millions of dollars in legal fees paid to one of the handful of high-priced law firms that specialise in such cases. Third, the net impact is a dangerous chilling effect on the willingness of policy makers to implement policies in the public interest for fear of costly international arbitration cases.

The international investment rules/tribunals system has been used to attack anti-nuclear efforts in Germany, public control of water in Argentina and Bolivia, anti-mining efforts across a host of nations, and today has new targets in its sights. One new likely battleground is citizen and community efforts against oil and gas extraction by hydraulic fracturing or ‘fracking’. The proposed investment chapter of the Canada-EU free trade agreement, if approved, may give corporations the legal fire-power to challenge government regulation of this highly controversial practice. Efforts to curb the dumping of climate-changing carbon into the atmosphere are also at risk. The South Korean government has shelved a plan to introduce a low-carbon incentive system for the auto industry because of fears that the law would breach a provision in the US-South Korea free trade agreement. If the government were to move ahead with the measure it would risk landing itself before theseinternational trade and investment courts.

Today, just as communities in El Salvador and Peru have taken up the battle to protect their natural resources, a whole global movement is emerging to rethink the relationship between economic development and social and environmental well-being, and is pushing governments to take policy action in that urgent direction. This important shift, however, is in direct conflict with the interests of transnational corporations hard-wired to maximize short-term profit and pass on the environmental and social costs of their operations to others. The Democracy Center’s report puts a spotlight on how global corporations are using the investment rules system to undermine the policies essential to sustainable development and the democratic process essential to such policies.

Long an obscure interest of trade and investment lawyers, the system of international investment rules and tribunals has remained off the radar for most of the groups and communities that it affects. This is slowly beginning to change. As the number of controversial cases rises, the injustice of the current system is becoming increasingly clear.

Much as the deregulation of financial markets encouraged by the banking sector helped lead to economic collapse, the system of international investment rules works pushed by multinational corporations is leading us toward environmental collapse. As we hurtle towards a number of ominous tipping points in terms of many of the earth’s natural systems, there has never been a more urgent time for activists, academics, development workers and others to understand the legal and political barriers that block us from changing course. This de facto privatized justice system for big business is a massive such barrierthat urgently needs to be brought down.

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Thomas McDonagh is a project coordinator and researcher with the Democracy Center.

On this page you can read an article and a summary of the report, listen to an interview with the author, watch the video, and share the news on social media.

Here you can read the full report.

Versión en español se encuentra aquí.

By my calculation this is the 95^th issue of The Democracy Center Newsletter, a publication we started on a lark in early 1997 with a few hundred readers and which has grown in the sixteen years since to have more than 6,000 readers worldwide.  This year the Democracy Center marks our 20^th anniversary and as we prepare to celebrate that big occasion during the course of this year we’d like your help and your ideas for how we should do that.

Earlier this month I sat down to write a brief history of the Democracy Center’s past two decades (read that history here) and it turned out that it was hard to be brief.  We began in the fall of 1992 in San Francisco, diving into the battle for immigrant rights, setting up a progressive organization on state budget issues, and leading advocacy training workshops for groups ranging from the leaders of the state PTA to formerly homeless women campaigning for the rights of the poor.   In 1998 the Democracy Center moved to Bolivia and soon after was at the center of the Cochabamba Water Revolt, the global campaign against the Bechtel Corporation, and documenting Bolivia’s brave challenge to the injustices of globalization.  In the years since we have developed new projects aimed at corporate power, the crisis of climate change, and have trained and supported thousands of wonderful citizen activists across five continents.  This week I leave for Bulgaria to work with UNICEF on their children’s rights advocacy there.

Each of you joined us somewhere along that long and diverse two-decade path.  So how should we celebrate, together, twenty years of building real democracy from the ground up?  The theme of the Democracy Center’s anniversary this year is Celebrating Citizen Activism – honoring that spark that makes a person an activist for the first time and that keeps us sustained and effective over a lifetime of fighting for social, economic, and environmental justice.  We are planning birthday parties later this year in San Francisco, New York and other cities where our friends might want to join us.  We are producing a new video featuring the voices of all those who have worked at the Democracy Center these two decades and others we have worked with around the world.

The Democracy Center is also using this anniversary to make a new commitment to the next generation of activists.  As we look at the growing impact of climate change and the steep climb of getting our political systems to take real action, it is very clear that the next generation has been handed a very, very difficult challenge.  Not since the Vietnam-era in the U.S. has a generation of young people had such a significant and direct stake in the political system.  Effective, inspired activism by the young has never been more urgent.  We are in the process of building something new we call The Democracy Web, a set of resources aimed directly at the next generation of active citizens.  Later this year, I will also be doing a speaking tour of U.S. universities, to take our work of strengthening activists on the road.

We want to get you involved.  How do you think the Democracy Center should celebrate our big birthday? Please send those ideas along by replying to this email.  Are you interested in helping with an event or with a speaking invitation, let us know!  The Democracy Center has always been a small organization that does big things, thanks to the support and involvement of you, our global community of friends and allies.  We look forward to celebrating together!

See below for a couple of special announcements from the Democracy Center. Meanwhile, thanks to each of you for your ongoing interest and support of our work.

Jim Shultz

The Democracy Center

Debating Strategy on Climate Change

In December, I wrote an article that appeared in Climate Progress, Yes Magazine, AlterNet and elsewhere, which took a hard look at citizen action on the climate crisis.  I sent the article to friends in the climate and environmental movement in different parts of the world with the aim of helping spark a deeper debate over our approaches to climate activism.  That provoked a set of important responses from the U.S., Europe and here in Latin America.  We’ve begun publishing these exchanges on the Democracy Center’s Blog on activism strategy, Getting Action.  Read them here.

Job Announcement: Climate Program Coordinator

The Democracy Center is hiring a coordinator for its work on climate change. The position involves overall coordination responsibilities in three key areas: conducting fieldwork and research in the Andes; interacting extensively with civil society and social movements in the Andes and the Global North; and engaging with international climate policy issues, mechanisms, and debates. The Democracy Center is seeking a highly-motivated person who shares our sense of urgency about the global climate crisis and is ready to dig in and help make a real difference. Read the full job announcement here.

Not a Democracy News subscriber yet? Sign up.

Jim Shultz

The Democracy Center

Is the Climate Battle Global or Local?

An exchange with Jeremy Brecher, co-founder of the Labor Network for Sustainability and author of more than a dozen books on the history and prospects of social movements, including Strike! and most recently, Save the Humans?: Common Preservation in Action.

Dear Jim,

I completely agree about the crucial role of local response to the threat of climate change. I recently did a short book called “Jobs Beyond Coal: A Manual for Communities, Workers, and Environmentalists” (http://report.labor4sustainability.org/) to help local campaigns against coal-fired power plants address jobs and labor concerns. I’ve also helped initiate a Connecticut Roundtable on Climate and Jobs and am working with folks who are trying to close a coal-fired power plant in Bridgeport, Connecticut. So we are in complete agreement on the importance and appropriateness of such work.

I also share your concern about the effectiveness of the fossil fuel divestment campaign. While I support the campaign as a moral and educational endeavor, I agree that it will be very difficult for such a campaign to affect the incentive structure of the fossil fuel corporations and thereby lead them to change their policies. As an attempt to support constructive local engagement with this initiative, Brendan Smith and I have proposed that such divestment efforts be combined with local investment initiatives that combine energy alternatives, job creation, and meeting local community needs with divestment from fossil fuels. (See “Do the Math: Invest While We Divest.”)

I also think we are in agreement that at present “global summitry” is a “dead end.” The strategy of influencing major governments to take effective cooperative action on climate change is not currently an effective option, though it might become so if public opinion and social mobilization reached a qualitatively different level. (In the closest parallel we have, the cold war anti-nuclear movement faced periods in which international cooperation for nuclear arms limitation was out of the question, and other times when the global movement was able to play a major role in forcing a “bidding war for peace” among the great powers. See the monumental three-volume study of “The Struggle Against the Bomb” by Lawrence Wittner.)

I think there are two areas where we are not yet in consensus.

The first is around various assertions you make concerning the global aspects of climate protection. I believe it is a mistake to counterpose local and global efforts, or to say that one can effectively address climate change without the other. Instead of counterposing them, I think we should say both are absolutely necessary, and that the problem cannot be solved without both. However, since there is bound to be “uneven development” between them (and also national level development), at any one time we should push on the levels where we can be most effective, while treating our efforts as laying groundwork for progress at the others. So I advocate closing of coal-fired power plants (and seek to integrate this with a “just transition” for those who work in them), but see that as a building block for a global climate regime that requires such transitions worldwide.

Without such a global framework, I don’t see how reducing fossil fuel use in any one industry or part of the world is anything but an incentive to corporations and governments to move/expand such operations to other industries and parts of the world and profit thereby. In short, without a global framework for fossil fuel reduction I don’t see how local efforts avoid the kind of futility you criticize in global efforts.

You state: “A truly binding commitment on carbon emissions would require that the major carbon polluting countries in the world – the U.S., China, India and others – effectively surrender some measure of their sovereignty, over energy policy for example. To believe that they will ever do so is, unfortunately, a fantasy. Their domestic politics would never allow it.” That may well be the case, but if so, we are truly doomed to an unlimited rise in greenhouse gasses. What this says to me is that unlimited claims to sovereignty are incompatible with human survival. Therefore, limiting such claims is a necessary part of a movement for human survival, and that eschewing such a goal is to collude with the sovereignty-based destruction of humanity. We must instead say that, if national sovereignty is incompatible with human survival, it is national sovereignty that must go.

Actually, though, I think this is too extreme a way of posing the problem, because national sovereignty is a much more variable thing than its more radical proponents would admit. For example, from the perspective of the anti-nuclear movements of the 1950s through 1980s and the nuclear test ban treaty, the various nuclear arms reduction treaties, and the end of the cold war by nonviolent transnational political change in the Communist bloc would have looked like unimaginable infringements on the existing system of national sovereignty. In fact they happened, and to paraphrase Kenneth Boulding, what happens is possible. I think we should argue for what is necessary for human survival, and if some people say “but that would compromise national sovereignty,” we should say, well, sometimes we have to modify the way we do things because the alternative is suicidal.

The second area where we need more discussion to reach consensus is around the question of whether campaigns should address climate change directly or focus instead on other consequences of fossil fuel production and use. My impression is that there is a tension, or even a contradiction, within your approach to this question. On the one hand, you propose focusing on issues other than climate change because “what is winning climate battles right now is talking about issues that have a much more immediate impact on people’s lives.” On the other hand, you urge focus on the impact of climate change on our children and grandchildren. That sounds like the opposite emphasis — we need to insist that people grapple with the real implications of climate change, even when our insistence may “turn people off” to immediate proposals. In fact, if they look realistically at the impact on their children and grandchildren, they will grasp the necessity for climate protection. I get the impression that you are divided in your own mind about this question.

I believe this question has changed radically in the past couple of years worldwide and especially in the US from the impact of extreme weather events and other direct impacts of climate change, and that it will change even more in the next few years as these events intensify. I think that from that changed response we need to and can develop a global movement that challenges the complicity of governments and corporations in climate change and uses the methods of nonviolent direct action globally to threaten their legitimacy if they do not change (see here).  That may not be the most likely course for history to take, but I believe it is a possibility not a fantasy.

Best,

Jeremy

Reply from Jim Shultz of the Democracy Center

Dear Jeremy,

I agree that we agree on several important points. One of these is the importance of local action. I am increasingly convinced that the balance of power between corporations and people is much better for people the more local we make our battles. Your work with labor and community activists as well as the case studies that we produced and published last year seem to bear that out. I also agree with you, as you noted, that the current campaign for divestment launched by 350.org is a great chance to build the moral case and to increase involvement of new people but also needs to draw that energy toward local actions, including local investments that can have an actual impact as opposed to a symbolic impact. It’s a pity that we don’t have another few decades to put our efforts behind symbolic impact, but obviously we don’t.

You are certainly right that my thinking on this is evolving and probably divided so let me respond to the things that you identified where as you so kindly put, we are not yet at consensus. I think that I am becoming radically pluralistic in the way I think about climate change strategy – meaning that I think we don’t have any choice but to do a whole lot of things all at the same time. That means that I think we have to simultaneously make the case for change based on issues like public health, green jobs, etc. and at the same time make the case for action based on the climate crisis itself. It is still hard to figure out what it is in the United States in particular that will wake people up and motivate them to support the kind of actions that are required. Maybe extreme weather will sound the alarm but I am also hopeful that reframing the issue as a children’s issue, which it most certainly is, might also be a way to get people to pay attention. So I agree with you that we have to pursue both approaches at the same time. I also think that radical pluralism on the climate crisis also means that those of us who come to it as political activists need to take seriously a whole other culture taking aim at the same crisis through the eyes of new technologies and entrepreneurship to promote them. We have a lot of brethren in that crowd and we need to see that as well.

I do also agree with you will that we cannot abandon will the search for a global agreement. I’ve had a very interesting set of e-mail exchanges with another friend in response to my article, René Orellana who serves as Bolivia’s chief negotiator in global climate talks. As you might imagine he also believes that we need to keep up the pressure to make sure that those talks deliver the goods. My point here remains that we can’t rely on global agreements to alter the policy choices that the United States and other governments will make. They will make those policy choices based on domestic politics. I remain convinced of that and haven’t seen any evidence to make me think otherwise. But I think your parallel to the nuclear arms debate in the 80s is actually a genuine piece of wisdom here. National campaigns like the nuclear freeze did create pressures on the United States to enter into agreements to reduce nuclear arms. So that is what I think we need here, national campaigns and local campaigns that can simultaneously make changes in domestic policy and increase the pressure on governments to agree to changes in international policy.

I also think that it is vitally important that we not only think about where the debate on climate issues is now but where it’s going. I just listened this week to a pair of interviews with a Republican member of the House of Representatives and a Republican in the U.S. Senate, ominous previews of coming attractions of where the politics of this is going. One of them said essentially – well maybe climate change is real and maybe humans are causing it but none of the things being proposed would actually make a difference but they would cost us so why do them? In other words abandon mitigation and focus all of our energy on adaptation (I’ll get to that in a minute). You might call this the “doomsday approach” and I suspect it is going to develop a pretty good following. The second Republican had a slightly different take. He said, well maybe climate change is real and maybe human activity is causing it, but the United States can’t take action on its own. That has to come through an international agreement that other countries would be bound to as well. On the one hand we might actually like that argument but it is coming from the very same political corners that will certainly do everything in their power to make sure that the United States is never a party to such a binding agreement. Call this the Catch-22 approach.

Which brings me to my new fear about where the politics of all this is headed. Here’s a metaphor. No one I know under the age of 35 has ever owned a landline telephone and most likely never will. They skipped directly from not having a phone to having a mobile phone. I think the politics of climate in wealthy countries is increasingly going to jump from not thinking very much about it or taking any action on it at all to jumping right to large-scale multibillion dollar infrastructure projects like the ones being talked about for New York City following Hurricane Sandy. What gets left in the dust as a result are two things, both of which are very bad news for countries like Bolivia. The first is the abandonment of mitigation. We’ll give up on that and start building concrete walls and tougher electric grids. Second, the massive price tag for all this will basically freeze out the funds needed to support adaptation in high-impact countries like Bolivia. I would also imagine that from a corporate perspective mitigation is a threat, but large-scale adaptation will be a serious money maker.

Saludos,

Jim