During a 1997 investor-state dispute, a Canadian attorney noted that “it wouldn’t matter if a substance was liquid plutonium destined for a child’s breakfast cereal. If the government bans a product and a U.S.-based company loses profit, the company can claim damages under NAFTA.” The corporate lawyer’s statement summarizes the power of Investment State Dispute Settlement (ISDS) systems, which allow corporations to sue governments in secretive ad hoc tribunals. How depressing that international white-shoe firms continue to push corporations toward claims that threaten to undermine the public good. With the help of their lawyers, corporations are preparing to shake down governments around the world for adopting regulatory measures addressing the health and economic effects of the COVID-19 pandemic.
For decades, economists and human rights advocates have argued against the inclusion of ISDS clauses in free-trade deals. The tribunals allow foreign companies to extract dubious lost or expected profits from governments that have promulgated regulations involving water access, land rights, and labor disputes. The governments cannot exert their own claims to fight violations by corporations because the tribunals create one-way rights. Moreover, the ISDS system has often exposed weaker economies to the greed of investors involved in third-party litigation funding. No wonder that a former European Union trade commissioner once declared ISDS as the “most toxic acronym in Europe.”
The efforts to reform investor-state legal mechanisms are too slow. As the Columbia Center on Sustainable Investment (CCSI) argued in May, we need an immediate moratorium on all ISDS claims during the COVID-19 pandemic and its aftermath. As autumn approaches, there is no doubt that governments need to continue directing their capital and legal resources to the public health emergency. Law firms, however, have ignored the alarm from the CCSI and 650 other civil society groups. For example, Ropes & Gray has been working on pro bono COVID-19 matters while alerting paying clients to consider actions under investment treaties. As Anand Giridharadas, who critiques the way elites treat philanthropy, has said: the arsonists are not, in fact, the best firefighters.
Professor Robert Howse at the New York University School of Law tweeted that “we need to start getting the World Bank, IMF on side to establish that debtor countries w(ith) Covid-fragile economies should NOT be paying ISDS awards.” Enforcement jurisdictions, Howse argued, need to take legal actions to bar ISDS payouts. Similarly, we need major law firms to reconsider their international practices. It is difficult to imagine that corporations would sue and expect damages from governments over COVID-19 regulations without the aggressive and nauseating marketing from firms.
As a recent law graduate, I recognize that there is a role for law students and professors to play here as well. As the pandemic disrupts the fall semester and bar examinations, the legal academic community must speak up against the egregious ISDS practices. They can refuse to let ISDS profiteers recruit on-campus during the crisis. The Me Too-related campaign that started on law school campuses to end the use of mandatory arbitration clauses at Orrick, Skadden, and other firms also serves as a practice guide for how law students can monitor corporate behavior.
As we reach almost 1 million deaths worldwide and 30 million COVID-19 cases, we cannot afford to let corporate lawyers weaken public health efforts. How lawyers shape their international practices over the next few weeks matters.