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Fracking, Free Trade Agreements, and the Mechanisms of Corporate Power

Source: Democracyctr.org

October 16, 2014

The resurgent trade justice movement presents an important opportunity for climate change activists to challenge corporate dominance while people are listening.

by Thomas Mc Donagh

Two major international days of grassroots activism took place around the world last weekend.

Dublin fracking

Anti-fracking activists in Ireland

On the back of the recent global ‘Climate March’ mobilizations, climate change and water activists once again hit the streets of towns and cities around the world on October 11th for the third annual Global Frackdown.

Fracking remains a highly controversial issue globally, with some countries having imposed a moratorium and others, like the UK, on the verge of allowing widespread use of the method (against strong public opposition). The aim of the Frackdown is to continue to build power in the anti-fracking movement and to apply pressure on decision makers to ban fracking and to accelerate the transition to a clean energy future.

Standing in the way are those with most to lose from the transition. They are among the most powerful corporations in the world and, together with the governments that do their bidding, they have a massive vested interest in the continued burning of fossil fuels, no matter how difficult or dangerous it is to extract them.

If the climate change movement is going to effectively challenge corporate power, an important first step is understanding the mechanisms by which it operates. Which brings us to the other day of action that took place on October 11th.

TTIP fracking image 1

The #noTTIP rally in London on October 11th 2014

In Europe social movements and civil society groups organized a continent-wide day of action against the three new trade and investment agreements being negotiated by the European Union: the TTIP (the Trans-Atlantic Trade and Investment Partnership), CETA (the Comprehensive Economic and Trade Agreement) and TiSA (the Trade in Services Agreement).

The global spider web of trade and investment agreements has become the core legal framework for corporations operating internationally. The three proposed new deals will have implications for a broad range of issues from the availability of medicines and the privatization of public services to food safety standards. But perhaps none is more urgent than the possible ramifications on energy and climate.

Expanding fossil fuels and weakening regulation

A leaked document from the TTIP negotiations in late 2013 showing that the EU is pushing the Obama administration to loosen restrictions on crude oil and natural gas exports led to consternation from environmentalists. According to Oil Change International, the proposal to lift the ban on exports of crude oil from the US, would mean 9.9 billion barrels of additional crude between 2015 and 2050, which would release as much carbon dioxide as 42 coal-fired power plants.

The proposed increase of trade in oil and gas will inevitably incentivize more fracking in the US and continue the cycle of dependence on fossil fuels on both sides of the Atlantic, and may discourage the development of green energy in the EU.

Meanwhile just last week a crucial piece of EU climate/energy policy appears to have been watered down in the context of the CETA negotiations with Canada. The European Fuel Quality Directive (FQD) was conceived to reduce transport-related emissions in the EU by a series of measures, including an obligation on businesses to report the carbon intensity of their transport fuels. The directive originally included provisions whereby crude oil from the tar sands in Canada would be labelled as “dirty” and given a 20 percent higher carbon value than conventional oil, disincentivizing its use. But after heavy lobbying from the Canadian government and oil industry in the CETA negotiations, this provision has been dropped, to the dismay of campaigners.

Just by coincidence, the FQD implementation plans were released on October 7th – one week after the negotiations on the CETA trade deal were completed. According to the vice-chair of the committee of international trade at the European Parliament, this important piece of European climate policy has been “sacrificed on the altar of free trade”.

ISDS – Corporate trump card

Although local resistance to fracking is growing around Europe, regulation has so far been piecemeal. Indeed pushing for national and EU regulations will be a central plank of climate change struggles in Europe going forward.

If passed, the TTIP and CETA would give corporations a new weapon with which to undermine future bans and regulation in Europe. The deals’ investment chapters will grant corporations a range of new rights and give them access to a system of private international tribunals to enforce those rights.

TTIP fracking image 2

A message from the London rally

This system, known as the investor-state dispute settlement mechanism (ISDS), is already being used by a US corporation to attack fracking bans elsewhere. In the Canadian province of Quebec, the government has introduced a moratorium on fracking pending further tests and research. One of the corporations involved, Lone Pine Resources, is using the investment chapter of the North American Free Trade Agreement (NAFTA) to bring an ISDS case for $250million.

The ISDS system allows corporations to sue not just for what they have invested in a country when a government changes a policy or regulation but for what they expected to earn into the future.

Cases take place in private tribunals overseen by arbitrators working on a for-profit basis that move seamlessly from supposedly ‘independent’ arbitrators to corporate lawyers. Cases can only be brought by foreign corporations and there is no corresponding right for domestic companies, or indeed for governments or citizens when corporations cause human rights abuses.

If there was any doubt as to the intention of corporations to use this system in conflicts in Europe, thecontribution to the consultation on the TTIP in the US by the Chevron corporation- with fracking interests in several EU countries – is illuminating. It dedicated its entire response to the area of ‘investment protection’- what it called “one of our most important issues globally”.

Europeans don’t have to go far to see this system at work. In Germany the government changed its policy on nuclear energy following the Fukushima disaster, cancelling some planned nuclear plants. They are now being sued by energy corporation Vattenfall for over 1bn Euro in an ISDS case.

And this was not the first time. When Hamburg‘s Environmental Authority imposed quality controls for the waste waters released into the river from a planned coal-fired power plant, Vattenfall used ISDS provisionsto seek compensation of €1.4 billion. The case was eventually settled when the City of Hamburg agreed to lower the environmental requirements previously set – a telling indication of the “chilling effect” that the threat of such actions can have on setting public protection legislation.

ISDS proponents will say that it’s the norm and that it has been included in trade and investment deals for decades – but use of the ISDS system in cases against governments has only really taken off in recent years. Indeed 2012 and 2013 have set all time records for the numbers of new ISDS cases – 57 and 58 respectively.

The ISDS mechanism has gone from being a legal tool of last resort in cases of government expropriation of assets to a weapon of choice in struggles over a growing range of important social and environmental issues. The explosion of cases in recent years has led to many governments, economists and legal experts around the world openly criticizing the system and attempting to withdraw from it once they’ve seen in practice the threat that it represents to democracy and public interest policy making.

The inclusion of ISDS in the TTIP would expand this system exponentially and increase the risk of many more cases. Given the very high level of already existing trans-Atlantic trade and investment, the deal would result in 75,000 firms being newly empowered to use these private tribunals.

This is particularly worrying for fracking regulation in Europe.

ISDS is increasingly being used by energy and mining corporations to challenge environmental, health and other policies around the world. As of March 2013, there were 169 cases pending at the most frequently used tribunal, the International Center for Settlement of Investment Disputes (ICSID), of which 60 (35.7%) were related to oil, mining, or gas. By contrast, in 2000, there were only three pending ICSID cases related to oil, mining, or gas. The extractive industries, under increasing scrutiny for their role in environmental degradation, are using the ISDS weapon more and more in order to run down any challenges to their dirty operations.

Undermining Democracy – the chilling effect and corporate capture

Trade and investment deals also affect progress on climate through their effect on our democratic institutions.

The energy debate in Europe is far from straightforward – public consultations have shown that there is strong opposition to unconventional fossil fuels, but extraction projects are nonetheless underway in several member states. In order to mediate the many opinions and conflicting interests involved we rely on robust democratic processes. But as governments and policy makers get to grips with this challenge, the inclusion of ISDS in new trade deals would mean the threat of billion-dollar ISDS cases hanging over their head. This ‘chilling effect’ on the willingness of governments to implement new policies and regulations for fear of corporate attacks is one of the most dangerous effects of the system.

Meanwhile the way in which trade and investment deals are being negotiated is also undermining our democracies. While the European Commission claims to be carrying out negotiations in a transparent and participative manner, there is strong evidence to the contrary. An access to documents request from the Corporate Europe Observatory in late 2013 revealed that 93% of the Commission’s meetings with stakeholders during the preparations of the TTIP negotiations were with large corporations and their lobby groups.

Despite having implications for a broad range of important policy areas, corporate interests clearly have disproportionate access and influence.

Opportunities and Synergies

The battle against climate change has many fronts. One of the most important of these is represented by the front-line struggles of local communities against the expansion of fossil fuels. However these localised struggles take place against an often obscured and poorly understood international legal infrastructure that allows corporations to push their agenda and to behave with impunity.

While the climate movement considers the impact of the Global Frackdown in terms of groups mobilized and fracking ban proposals supported, another important measure of success is the extent to which the movement begins to understand the actors preventing progress, the power that they wield and the mechanisms by which they attain and expand that power.

The growing campaigns in Europe and elsewhere against new trade and investment deals offer an important opportunity to understand and influence a central piece of the jigsaw puzzle of corporate power. #noTTIP and Frackdown protests joined together in many European cities this weekend, demonstrating the growing awareness of the connection between these two struggles.

The synergies created between the two movements will be crucial for building the power necessary to push for a just transition to post fossil fuel societies.


Thomas Mc Donagh coordinates the Network for Justice in Global Investment project for the Democracy Center. Follow him: @TmcDIrl


Unfair, Unsustainable and Under the Radar: How Corporations use Global Investment Rules to Undermine A Sustainable Future

No fracking way: how the EU-US trade agreement risks expanding fracking

Video- NO FRACKING WAY | How the EU-US trade deal risks expanding fracking in Europe and the US

Self-Organised European Citizens’ Initiative Against TTIP and CETA

European Day of Action – Stop TTIP, TiSa, CETa
Social Media:

#globalfrackdown #banfracking #noTTIP #ISDS #noCETA #noTISA

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