December 1, 2020

Corporate Sovereignty Lawyers Prepare To Sue Governments For Bringing In Measures To Tackle COVID-19 And Save Lives

By Glyn Moody
Regular readers of Techdirt will be all too familiar with the problem of corporate sovereignty — the ability of companies to sue entire countries for alleged loss of profits caused by government action. Also known as investor-state dispute settlement (ISDS), there have been indications that some countries are starting to drop ISDS from trade and investment treaties, for various reasons. But a worrying report from Corporate Europe Observatory suggests that we are about to witness a new wave of corporate sovereignty litigation. Hard though it may be to believe, these cases will be claiming that governments around the world should be reimbursing companies for the loss of profits caused by tackling COVID-19:

In the midst of a crisis like no other, the legal industry is preparing the ground for costly ISDS suits against government actions that address the health and economic impacts of the coronavirus pandemic. In written alerts and webinars law firms point their multinational clients to investment agreements’ vast protections for foreign investors as a tool to “seek relief and/or compensation for any losses resulting from State measures”

No claims have been filed yet, but experts are so worried about this threat that they have called for an immediate moratorium:

on all arbitration claims by private corporations against governments using international investment treaties, and a PERMANENT RESTRICTION on all arbitration claims related to government measures targeting health, economic, and social dimensions of the pandemic and its effects.

Law firms specializing in corporate sovereignty are already well advanced in their preparations for demanding money from governments because of the “damage” the pandemic response has inflicted on corporate profits. Corporate Europe Observatory links to numerous reports and client alerts from these ISDS firms, which spell out the grounds on which big claims might be filed. These include:

ISDS claims against government action to provide clean water for hand-washing

Challenging relief for overburdened public health systems

Lawsuits against action for affordable drugs, tests and vaccines

Investor attacks on government restrictions for virus-spreading business activities

ISDS suits against rent reductions and suspended energy bills for those in need

Disputes over debt relief for households and businesses

Legal action against financial crises measures

Tax justice on trial

Suing governments for not preventing social unrest

The idea that governments around the world struggling to contain the pandemic and save thousands of lives might also have to fight such ISDS claims in court, and even pay out billions in fines when funds are needed for rebuilding lives and businesses, is bad enough. But the fact that law companies evidently have no qualms about recommending the use of corporate sovereignty in these difficult circumstances is a hint of even worse to come.

If these kinds of ISDS actions succeed, and governments are ordered to make huge payments to companies because of national pandemic responses, it is highly likely that similar cases could and would be brought over action to tackle climate change. That in itself might discourage some countries from adopting urgently needed measures. And for those that do, there is the prospect of big fines at just the time when maximum resources will be needed to deal with the environmental, social and economic effects of a climate catastrophe.

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