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December 17, 2014

The corporate threat

In 2011, of the 175 largest economic entities in the world, 111 were global corporates.  The casual disregard that so many of these corporate behemoths have for the tax systems of the countries in which they trade, begs the serious question of whether the balance of world power has shifted from the ballot box to the board room. Civic opposition from across Europe to the threat posed by the corporate world via TTIP is beginning to find its voice here too. It is still strange that we’re not hearing more from our politicians about this.



Last week, a Europe-wide petition against TTIP, the controversial and aggressively neo-liberal free trade deal between the US and EU, reached 1 million signatures. More than 180,000 of those were from the UK. Another petition here in Scotland, calling on the First Minister Nicola Sturgeon to oppose TTIP, gained almost 25,000 signatures.

Opposition to TTIP is growing at an astonishing speed as the public discover how it threatens democracy, social justice, public services and national sovereignty.

TTIP is facing particularly widespread criticism for the threat that it poses to the NHS – particularly by ‘locking-in’ privatization. But it’s also a threat to other public services in the UK, and we believe that here in Scotland it could have an impact on Scottish Water if it ever wanted to renationalise its troublesome PFI projects.

Around half of all waste water and about 80% of waste water sludge in Scotland is treated in works operated by PFI companies, under contracts signed with Scottish Water in the late 1990s. Some of these projects have been heavily criticised for mechanical failures, leakages and bad smells and Scottish Water has had to spend millions of pounds over the years to try and reduce these problems.

The treatment plant at Seafield in Edinburgh, for example, has caused many problems for local residents for a number of years from bad smells. This plant is operated by multi-national waste company Veolia under a 30 year PFI contract signed with Scottish Water in 1999.

Scottish Water has suggested in its business plans in the past that it would try and bring the PFI projects back into public ownership.

However, this could be stymied by one of the key features of TTIP: the investor-state dispute mechanism (ISDS) which allows multi-national companies to use international arbitration courts, outside of national legal systems, to sue countries if national policies threaten profits (or, crucially in this case, future profits). It’s this mechanism that we believe could be used to stop Scottish Water bringing its PFIs back into public ownership, through the companies involved suing the government for compensation for lost profits if contracts are not renewed. The cost of this compensation could be enough to put Scottish Water and the Scottish government off renationalising those PFIs.

There are many, many examples from other treaties of companies using this mechanism to sue (or even just threaten to sue – which can sometimes be enough) governments over lost profits. Just this week, Friends of the Earth Europe (FoEE) released new research showing the extent to which the inclusion of these special rights for investors in previous trade treaties has allowed corporations to sue European governments in secret courts (and how much taxpayers are footing the bill for this).

Their research identified 127 known ISDS cases that have been brought against 20 EU member states since 1994. Despite information on these secretive court cases being hard to find, the facts that FoEE was able to undercover illustrate the enormous sums of money involved in these cases. The largest known amount to be awarded by a tribunal against a state was 553 million euros (in the case of Ceskoslovenska Obchodni Banka vs Slovak Republic) and the largest known settlement was 2 billion euros, paid by Poland to Eureko, a Dutch insurance company.

Veolia, the operator of Seafield treatment works that I mentioned above, also has form when it comes to using ISDS to claim compensation for lost profits. Since 2012, Veolia (which is headquartered in France but has many offices around the world) has been suing Egypt based on the bilateral investment agreement between France and Egypt for an alleged breach of a contract for waste disposal in the city of Alexandria. The city had refused to make changes to the contract which Veolia wanted in order to meet higher costs – in part due to the introduction of a minimum wage. Also, according to Veolia, the local police had failed to prevent the massive theft of dustbins by the local population. According to media reports, Veolia wants 82 million euros in compensation.

Last month, the Scottish Parliament European and External Affairs committee of the Scottish Parliament started an inquiry into TTIP. We gave written and oral evidence to the committee, highlighting our concerns about a range of problems with the trade deal, including the ISDS mechanism and the threat that it poses to public services and laws to protect workers’ rights, the environment and public health.

The Scottish government wants the NHS in Scotland exempted from TTIP. We don’t believe that this goes far enough – and we think that the people who have signed the petitions would agree. If the Scottish government is to protect Scotland’s much loved public services and safeguard laws designed to protect workers, public health and Scotland’s natural heritage then it must go further and oppose the trade deal entirely in its current form (as indeed the SNP MEP Alyn Smith has said that he does) as well as demonstrating a robust counterweight to Westminster’s enthusiasm for it. Only that will really address the concerns of the one million citizens across Europe opposed to TTIP.