Effective Climate Change mitigation in the EU needs ban of contested ISDS-clause in trade treaties
How Green Politics suffocate under pressure of multinational corporations
A recent report of Milieudefensie regarding the investor-state dispute settlement (ISDS) mechanism – that exists 50 years this year – reveals insight into a systematic restraint of policy-making for Climate Change mitigation. Milieudefensie - is an environmental activistic and political organisation of the Netherlands. It wants everything but to celebrate the anniversary of this notorious agreement. In particularly, it wants to alarm society for the tremendous political influence of multinational corporations via ISDS mechanisms that pressure governments to reject environmental policies which would have led to environmental protection and emission reductions. Over time, a vast amount of 100 billion euros has been claimed via the Dutch judiciary system (Knottnerus, van Os, Verbeek, Dragstra, & Bersch, 2018). By establishing a B.V. in the Netherlands, multinational corporations are able to sue states via an ISDS-clause of Dutch trade treaties. The system gives the multinationals a powerful position that enables them to continue the conduct of business that is harmful to humans and the environment. Almost 60% of the cases concern environmentally relevant sectors (Emma Jayne Geraghty, et al., 2004). Therefore, the ISDS-clause must no longer be part of future Dutch and European trade treaties due to its immoral presumptions and its discouraging character of effective progress in environmental policy-making.
First of all, the restrictive effect of the ISDS-system for climate change mitigation in policy-making is observed in a multitude of cases. The case of Germany v. Vattenval in 2007 exemplifies this. Vattenfal was granted a provisional contract for the construction of a coal-fueled power plant, which entailed several environmental limitations in order to protect the waters of the Elbe river (Bernasconi, 2009, p. 1). To meet EU’s water framework directive, additional environmental restrictions were added before the final approval. Yet, the energy Company Vattenfall claimed that the new policies made their project unviable (Emma Jayne Geraghty, et al., 2004, p. 9). Therefrom, Vattenfal decided to go to court claiming €1,4 billion costs plus interest under the Energy Charter Treaty. Eventually, this led to a settling in court, and, consequently, to the lowering of environmental standards formulated in the original license permit.
This case, amongst many others, has led to a total of €12 billion of compensation sought in environmental-related cases (Emma Jayne Geraghty, et al., 2004, p. 8). These high claims lead to a paradoxical situation for national governments. Even though, they might have widespread public and political consensus, they would still decide on not pursuing progressive environmental policies due to their awareness of their restriction to trade treaties and lawsuits from multinationals.
Furthermore, discouragement of environmental advancements are being cloaked. The organisation Friends of the Earth Europe compiled ISDS data that revealed the lack of transparency around investor-state arbitrations. This report highlights the damage this system has on EU taxpayers and European democracy. The EU is not allowed to communicate this information and is often not in possession of valuable information. The lawsuits can be hosted in private international tribunals who issue their decisions behind closed doors (Friends of the Earth Europe, Stop the Trojan Treaty, 2015). This leads to an institutionalised moral blind spot for European government but also its citizenry. Moral blindspot can be defined as a state of unawareness or insensibility to moral issues in relation to both oneself and to one’s relations to others (Raphael, 1955).
Owed to a moral blind spot, the ISDS-system is able to install itself on a global scale and claims of multinationals continue to grow (Knottnerus, van Os, Verbeek, Dragstra, & Bersch, 2018, p. 19). Ergo, corporations continue to not take responsibility for their impact on the World’s Ecological Footprint justified by their pursuit of economic progress embodied in trade treaties.
Figure 1: illustration (Knottnerus, van Os, Verbeek, Dragstra, & Bersch, 2018)
According to Universal Subjectivism (van den Berg, 2012), this creates an immoral veil of ignorance. If citizens are unaware of the barriers that lead to change, they are unable to democratically retaliate their worst-off positions. The fact is that citizens who suffer due to corporate activity do not have access to the international tribunals. Even in the case that multinational companies are responsible for right violations, the system remains a one-way mechanism; only foreign investors are able to appeal to the ISDS-clause and not the states or the citizens themselves (Friends of the Earth Europe, Stop the Trojan Treaty, 2015).
Considering Social Contract Theory, it disregards moral patients of all layers of the circle of moral inclusion. Hobbes’ theory dictates that social deliberation should be decided on by rational moral agents (Hobbes & Gaskin, 1998). Since the moral agents only consider ethics of Corporate Egoism (van den Berg, 2012) – in this case, the pursuit of self-interest of multinational companies –, it neglects interest of the moral patients such as citizens and nonhuman animals. One can argue that the social contracts of corporation-state undermine the citizen-states social contracts, which entails insurance of societal protection and environmental protection. Consequently, the moral patients suffer from the current social contracts in place.
With regard to Singer’s preference utilitarianism (Singer, 1990), sufferance should weigh more than happiness. In the current situations, the moral patients suffer due to unequal consideration of interest. Therefrom, the moral argument dictates that the current ISDS-system creates happiness and progress for multinational companies but instigates sufferance for a vast amount of people that are unable to change their own position. Thus, the system needs to change so that it will not create more sufferance. Furthermore, citizens will via a future social contract that will replace the ISDS-mechanism be able to have a say in these international tribunals and fight against the present inequity.
In conclusion, the ISDS mechanism is limiting the advancements of realising environmental policy goals. It is notorious for its lack of transparency, which creates a veil of ignorance. Moreover, it is disputed that it grants multinational corporations an overwhelmingly powerful position. Contrastingly, it leaves governments and citizens powerless to realise effective Climate Change mitigation as they are bound to social contracts that put them in a powerless position. This leads to the serious amount of sufferance, which is highly immoral and unethical. Therefore, it is of utmost importance that the EU gets rid of the ISDS-clause in their future trade treaties. If not, Effective Climate Change mitigation will never be and future generations will inherit sufferance.
Bernasconi, N. (2009). Background paper on Vattenfal v. Germany arbitration. International Institute for Sustainable Development. Greenpeace Germany. Retrieved from https://www.iisd.org/pdf/2009/background_vattenfall_vs_germany.pdf
Emma Jayne Geraghty, N. C., Geraghty, E. J., Cingotti, N., Gater, F., Hyland, J., & de Clerck, P. (2004). “The hidden cost of EU trade deals”. The Netherlands: Milieudefensie. Retrieved from https://milieudefensie.nl/publicaties/rapporten/the-hidden-cost-of-eu-trade-deals
Friends of the Earth Europe, Stop the Trojan Treaty. (2015). Investment Court System: ISDS in Disguise. Friends of the Earth Europe.
Hobbes, T., & Gaskin, J. (1998). Leviathan. Oxford: Oxford University Press.
Knottnerus, R., van Os, R., Verbeek, B.-J., Dragstra, F., & Bersch, F. (2018). 50 jaar ISDS. The Netherlands: Milieudefensie. Retrieved from https://milieudefensie.nl/publicaties/rapporten/50-jaar-isds-een-mondiaal-machtsmiddel-voor-multinationals-gecreeerd-en-groot-gemaakt-door-nederland/
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Singer, P. (1990). Animal Liberation: A New Ethics for our Treatment of Animals (6th ed.). New York: New York Review of Books.
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