Speaker 1: Welcome back to Drilled Season five l Lucha Longla. When
Speaker 1: we left off, Chevron was strategizing some new ways to
Speaker 1: deal with the case in Ecuador. In September two thousand
Speaker 1: and nine, the company filed another international arbitration complaint against
Speaker 1: the government of Ecuador. This time, the Lago Agriolle case
Speaker 1: was named directly. Chevron claimed that by virtue of letting
Speaker 1: the case continue in its courts, Ecuador was violating its
Speaker 1: bilateral investment treaty with the United States. Specifically, it argued
Speaker 1: that the case violated various contracts between Texaco and the government,
Speaker 1: like that nineteen ninety eight contract that we keep hearing
Speaker 1: about where the government signed off on Texaco's remediation work.
Speaker 1: That complaint and the tribunals response has gone on to
Speaker 1: become a major part of Chevron's story about this case.
Speaker 1: So we're going to do something a little different today
Speaker 1: and do a bit of an explainer about international investment arbitration.
Speaker 1: Don't go this stuff sounds so boring, but I swear
Speaker 1: it's really really interesting and beyond that is just important
Speaker 1: to know, especially if you care about environmental issues or
Speaker 1: climate change. In broad strokes, this system gives companies a
Speaker 1: certain amount of legal cover that they claim enables them
Speaker 1: to confidently invest in foreign countries. There are currently more
Speaker 1: than twenty six hundred preferential trade agreements. Those can be
Speaker 1: free trade agreements, bilateral investment treaties, all kinds of different things.
Speaker 1: Most of them provide access to the investment arbitration system.
Speaker 1: Here's how it works when a so called investor state
Speaker 1: dispute arises. When a company wants to take government to
Speaker 1: task for something, companies can file formal complaints with international tribunals.
Speaker 1: There are a handful of these tribunals in the world,
Speaker 1: and a few different sets of guidelines for how they work.
Speaker 1: Important to note here companies can choose which tribunal to
Speaker 1: file with and which guidelines will govern the dispute. The
Speaker 1: tribunals pull together arbitral panels, generally consisting of three international
Speaker 1: law experts. These people are not judges, and the company
Speaker 1: that's complaining gets to pick one of them. The panels
Speaker 1: hear arguments and then decide whether the state in question
Speaker 1: has breached either a trade agreement or its own laws, and,
Speaker 1: if so, the monetary value of that breach. In some cases,
Speaker 1: the proceedings and relevant documents are made public, but in others,
Speaker 1: as in the Chevron Aquador case, they're kept completely secret.
Speaker 1: This system has been getting used more and more by
Speaker 1: companies that want to punish countries for passing environmental regulation.
Speaker 1: Just this month, a report from the International Institute for
Speaker 1: Environment and Development highlight how these investment treaties and the
Speaker 1: arbitration system might make climate action that much harder around
Speaker 1: the globe. Just think about it. Most of the world's
Speaker 1: coal plants and drilling sites are in countries that have
Speaker 1: signed on to agreements like these, which would enable fossil
Speaker 1: fuel companies to file complaints against governments whose emissions regulations
Speaker 1: interfere with their profits. Because so much of arbitral proceedings.
Speaker 2: Are kept secret, it wouldn't be a huge surprise if
Speaker 2: you've never heard of this, let alone how it works,
Speaker 2: or how much influenced the system has on global politics.
Speaker 2: So we called up Marcos Oriana, the expert we heard
Speaker 2: from last week, to guide us through the details. That
Speaker 2: conversation coming up right after this quick break.
Speaker 3: I'd love to have you start with sort of a
Speaker 3: general kind of what is international arbitration and how is
Speaker 3: it used by American companies sure.
Speaker 4: Sure At its core, international investment arbitration is a system
Speaker 4: that allows corporations to sue states for damages before panels
Speaker 4: of arbitraders. These days, most arbitration cases are brought under
Speaker 4: international treaties on investment protection. These instruments typically grant corporations
Speaker 4: the right to claim compensation in cases where the government
Speaker 4: takes a measure that breaches the standards of protection in
Speaker 4: the treaty and that results in economic laws for the investor.
Speaker 4: Arbitual tribunals are typically composed by three panelists. One of
Speaker 4: the panelists is pointed by the corporation and the claimant
Speaker 4: the in theory, as the World Bank and capital exporting
Speaker 4: countries often argue international investment arbitration helps foster economic development
Speaker 4: in developing countries, and they it does so by building
Speaker 4: confidence in foreign investors. It's argued that it is a
Speaker 4: tool to build confidence because foreign investors may be more
Speaker 4: inclined to do business in countries that may be unstable
Speaker 4: or risky if they have legal security in case something
Speaker 4: goes wrong. It is argued that these international financial flows
Speaker 4: capital investments does contribute to development because otherwise these countries
Speaker 4: would not receive this capital and would not benefit from
Speaker 4: the concessions the works, the infrastructure, or the business form
Speaker 4: foreign investor.
Speaker 5: That's the theory.
Speaker 4: In practice, however, corporations are using the arbitration system to
Speaker 4: discipline governments for their own interests, and this is often
Speaker 4: done at the expense of the public interest. How does
Speaker 4: it work or how does this happen?
Speaker 6: Well?
Speaker 4: In the arbitrations, corporations often argue that their expectations for
Speaker 4: profit have been frustrated, that they have been frustrated by
Speaker 4: the government that adopts a law or a decision or regulation,
Speaker 4: and they corporations demand to be compensated for the profits
Speaker 4: they expected to make.
Speaker 5: Since arbitral awards.
Speaker 4: Can run up to tens or hundreds of millions of dollars,
Speaker 4: and since even the legal fees involved the council and
Speaker 4: the costs of the arbitration it can run into the
Speaker 4: millions of dollars, this puts a lot of pressure on
Speaker 4: government officials to pass, to adopt, or even maintain public
Speaker 4: interest measures. Let's recall that many of the respondents states
Speaker 4: in these cases.
Speaker 5: They have limited budgets.
Speaker 4: There might be small developing countries that are that are
Speaker 4: facing a set of priorities, competing priorities, and they have
Speaker 4: to struggle to satisfy health and education, and times, food
Speaker 4: and water and environmental protection, and so talking about tens
Speaker 4: of millions of dollars of costs can really put a
Speaker 4: dent into the budget of a state. So those are
Speaker 4: the basic contours. The international investment arbitration can be described
Speaker 4: as a private system of adjudication that decides on the
Speaker 4: propriety of governmental measures, but it lacks the safeguards for
Speaker 4: accountability and transparency that characterized constitutional democracies governed by the
Speaker 4: rule of law. If we look back in time. In
Speaker 4: its origins, international investment arbitration came to replace colonial systems,
Speaker 4: colonial systems of extraction of domination when the former colonies
Speaker 4: acquired independence in the advent of decolonization, largely after the
Speaker 4: Second World War and the advent of the United Nations.
Speaker 4: The former imperial powers needed a legal system to protect
Speaker 4: the economic interests of their corporations, and international investment arbitration
Speaker 4: offered such an alternative. Today, in this current day of age,
Speaker 4: many in civil societies see the arbitration regime as yet
Speaker 4: another tool of corporate globalization. And this is because when
Speaker 4: governments regulate in the public interest, they become the targets
Speaker 4: of corporations that utilize the arbitration system to challenge those
Speaker 4: acts of authority. I would comment that this is particularly
Speaker 4: problematic in the age of climate change, because governments must
Speaker 4: reduce the emissions of greenhouse gases to face the climate emergency,
Speaker 4: the existential risks that flow from climate change, and of
Speaker 4: course this change in direction affects the expectations and the
Speaker 4: interests of the oil and gas of the oil and
Speaker 4: gas industry. One last thing at comment on is is
Speaker 4: the tension that in practice arises between international investment arbitration
Speaker 4: and international human rights. And this is because international law
Speaker 4: has to recognize how a clean and healthy environment is
Speaker 4: indispensable for the enjoyment of human rights. The investment arbitration system, however,
Speaker 4: puts an obstacle to the abilities of governments to take
Speaker 4: measures to transition to towards sustainable development and to secure
Speaker 4: respect and protection of the fundamental right to live in
Speaker 4: a healthy environment.
Speaker 3: I'd love to have you maybe give an example of
Speaker 3: how you know how a company might use this to,
Speaker 3: for example, take a country to court over an environmental
Speaker 3: law that they don't like. I don't know if you
Speaker 3: have like a good case example that you could share.
Speaker 4: Yeah, there are many examples of a state's passing environmental
Speaker 4: laws and then being taken to court by by corporations
Speaker 4: that are dissatisfied by those laws. One ext sample comes
Speaker 4: to mind concerns hazardous wastes in Mexico, so called the
Speaker 4: tech med case exemplifies the issues that arise in these arbitrations.
Speaker 4: And in that case, the hazardous waste confinement was located
Speaker 4: in the downtown rmo Ceo in Mexico, and the government
Speaker 4: was concerned and the people around the confinement were concerned.
Speaker 5: That the trucks.
Speaker 4: Going day and night in and out of the confinement
Speaker 4: with these hazard is wastes were posing a risk to
Speaker 4: the environment and to the health of the population. The
Speaker 4: company in question began to enlarge the confinement without having
Speaker 4: the necessary permits, and as a result, it was it
Speaker 4: was fined it was There were proceedings by the administrative
Speaker 4: agencies in Mexico and and the government began to study
Speaker 4: the possibility of moving this confinement outside of the of
Speaker 4: the of downtown area. Laws were passed that required that
Speaker 4: hazardous waste confinement be located from urban centers and the company. However,
Speaker 4: the negotiations with the company did not progress very far. Eventually,
Speaker 4: the government decided that it would not renew the concession
Speaker 4: for the operation of the hazardous waste confinement, and at
Speaker 4: that time the company took the government to court to
Speaker 4: the arbitral system, and that's when the arbitrators replace the
Speaker 4: role of domestic courts and begin to apply loosely defined
Speaker 4: treaty standards. They eventually considered that the corporation had an
Speaker 4: expectation to make a profit out of its investment it
Speaker 4: was a Spanish corporation, but that that profit had been
Speaker 4: frustrated by the measures that had been taken by the
Speaker 4: government to protect the people around the confinement. So also
Speaker 4: comment that in that specific case, the community mobilized. They
Speaker 4: began to protest the trucks against the illegal expansion and
Speaker 4: so forth, and so the government was also giving expression
Speaker 4: to the concerns and the interests of the people that
Speaker 4: were mobilizing. The tribunal, however, considered that those protests could
Speaker 4: not be foreseen and that they were they did not
Speaker 4: have a scientific basis. There was no evidence that hazardous
Speaker 4: waste had indeed compromised the health of the population and
Speaker 4: so doing. Then they declared that Mexico was liable to
Speaker 4: pay the company millions of dollars for the measures it
Speaker 4: had taken. So this again goes to show how in
Speaker 4: a domestic court, the balancing of the public health, the
Speaker 4: environmental issues, the human rights issues would have received a
Speaker 4: different light than the unidirectional character of the arbitration that
Speaker 4: focuses on the corporation and whether the government's measure has
Speaker 4: frustrated its expectations.
Speaker 3: Okay, so I know that you are not involved in
Speaker 3: this Chevron, Ecuador case, but as someone who knows this
Speaker 3: system well and has seen lots of different types of cases,
Speaker 3: I'm curious just when and if it popped up on
Speaker 3: your radar as an international arbitration kind of expert, and
Speaker 3: what your thoughts are on that case in particular, and
Speaker 3: how it kind of played out.
Speaker 4: This is a massive case. It's a massive case. The
Speaker 4: arbitration is just one of the forums where this case
Speaker 4: has been litigated. The arbitration itself spans thousands of pages,
Speaker 4: numerous awards and procedural decisions. Prior to the arbitration, there
Speaker 4: had been litigation in federal court in New York for
Speaker 4: nine years. There was also litigation in Lago Agree in
Speaker 4: Ecuadorian trial litigation, appellate court litigation, Supreme court litigation in Ecuador.
Speaker 4: The Ecuadorian Constitutional Court was also seized. There has been
Speaker 4: litigation in Argentina, Brazil, Canada, the Netherlands. The International Criminal
Speaker 4: Court received a letter as well, and they're still ongoing
Speaker 4: litigation by Chevron against the Plaintiff's Council in the United States.
Speaker 4: So that's perhaps one first observation about how broad and
Speaker 4: how complex the massive and it goes to show how
Speaker 4: difficult it is to hold a big oil company accountable
Speaker 4: for environmental harm. Chevron has spent hundreds of millions of
Speaker 4: dollars in legal fees. Those moneys could have been used
Speaker 4: to prevent environmental harm or to clean up the pollution.
Speaker 4: How does it compare to other cases, Well, one thing
Speaker 4: I would notice that the arbitral system is opaque. It is
Speaker 4: known for its lack of transparency. This is a big
Speaker 4: problem because the arbitrations, as we were discussing, they involve
Speaker 4: the public interest, They involve the scrutiny of public law measures,
Speaker 4: and so they should be heard under the safeguards of transparency.
Speaker 4: And accountability that characterize due process and the rule of law.
Speaker 4: But these arbitrations often are conducted behind closed doors, without
Speaker 4: the public having access to the proceedings. That being said, however,
Speaker 4: in some cases, high profile cases involving environmental protection measures,
Speaker 4: the arbitrations have opened up and they have allowed for
Speaker 4: public hearings and they have allowed for the public to
Speaker 4: present so called amicus courier briefs. This is the Latin
Speaker 4: term for a written brief that presents a perspective that
Speaker 4: may not have been developed by the disputing parties and
Speaker 4: that is helpful for the tribunal to receive.
Speaker 5: In this case.
Speaker 4: However, in the Chevron, Ecuador case, hearings were held behind
Speaker 4: closed doors. Civil society was not allowed to intervene as
Speaker 4: sami ki, and from that angle, the outcome in favor
Speaker 4: of Chevron is not surprising. But all that said, however,
Speaker 4: the outcome is surprising in some aspects. And one of
Speaker 4: the aspects that I think is has to some degree
Speaker 4: startled a number of observers is the far reaching.
Speaker 5: Character of the awards, and this.
Speaker 4: Is because the the arbitration system is often sold to
Speaker 4: policy makers and to the public as one of simple
Speaker 4: compensation for laws. The bottom line, it is argued, is
Speaker 4: that if a foreign investor suffers economic harm because of
Speaker 4: something that the government did, then it should be compensated.
Speaker 4: And the example of the caricature even that's often presented
Speaker 4: is a corporation owns a mind that is expropriated by
Speaker 4: a military junta that gives the property to the to
Speaker 4: the nephew.
Speaker 5: Of the general and power.
Speaker 4: Then of course the company should receive compensation. But that's
Speaker 4: not what's going on. That's not what went on in
Speaker 4: this case, and not generally what's going on in the field.
Speaker 4: In this case, the panel, the arbitual panel, crafted a
Speaker 4: range of remedies that go well beyond the issue of
Speaker 4: compensation for laws. Directed Ecuador to preclude enforcement of the
Speaker 4: judgment of its national courts. So preclude enforcement that shows
Speaker 4: how deep this system penetrates the sovereignty of the state.
Speaker 4: The panel also declared that Ecuador would be liable to
Speaker 4: Chevron for any recovery that the plaintiffs in the Lago
Speaker 4: Agrio litigation managed to obtain. So, in other words, if
Speaker 4: if the Lago Agrio plaintiffs are able to enforce the
Speaker 4: judgment rendered by the Ecuadorian courts. In some jurisdiction around
Speaker 4: the world where they can find Chevron's assets, Ecuador would
Speaker 4: be liable to Chevron for any recovery that the plaintiffs make.
Speaker 3: Wow.
Speaker 4: Yeah, it is not just an award that typically that
Speaker 4: the state has adopted Measure X.
Speaker 5: This measure has caused.
Speaker 4: Why harm and we order the tribunal orders the state
Speaker 4: to pay fifty million dollars to the company. That's not
Speaker 4: what's what's happening here. So one of the things that
Speaker 4: this shows is that international investment arbitration is not just
Speaker 4: about money. It is foremost about governance, Who takes decisions
Speaker 4: and for whom, who benefits from those decisions. That sense,
Speaker 4: it is a system that removes the scrutiny of governmental
Speaker 4: measures from courts of law and places it in the
Speaker 4: hands of three arbitrators. In this specific case, one of
Speaker 4: the arbitrators often sits in arbitral panels because he is
Speaker 4: appointed by corporations. Let's recall that typically there are three
Speaker 4: arbitrators and the corporation the foreign investor, gets to appoint
Speaker 4: one of the arbitrators. So in that sense, it was
Speaker 4: no surprise that this person would favor Chevron's interests.
Speaker 5: The other two arbitrators.
Speaker 4: One a commercial lawyer who recently passed away and so
Speaker 4: may he rest in peace, and the other an international
Speaker 4: law professor. So I think it's fair that we can ask,
Speaker 4: can we expect two white males sitting thousands of miles
Speaker 4: away from the lands polluted by Texaco to appreciate the
Speaker 4: significance for the indigenous peoples that lived in those territories
Speaker 4: of the environmental destruction that Texaco cost in the nineteen
Speaker 4: seventies in Ecuador. I think that their decision shows that
Speaker 4: they did not. They did not so appreciate the significance
Speaker 4: that the arbitrator simply focused on Chevron and its narrative
Speaker 4: in disregard of the environmental and human rights calamity caused
Speaker 4: by Texaco, and to be fair Texaco and Petro Ecuador,
Speaker 4: I think that the disregard for this calamity shows the
Speaker 4: unidirectional character of the investment arbitration regime, a regime that
Speaker 4: focuses on the corporation's interests and its narrative and does
Speaker 4: not regard the environment and human rights. Perhaps I could
Speaker 4: elaborate on an example to illustrate this point.
Speaker 3: Yeah, that would be great, And then I do want
Speaker 3: to have you talk about, you know, just how this
Speaker 3: undermines the Ecuadorian constitution and the right to a healthy environment,
Speaker 3: and I mean, like just in general undermines country's sovereignty.
Speaker 3: I mean, you've kind of made that point a few
Speaker 3: different ways already, but I'm curious for your thoughts on
Speaker 3: the Ecuadorian constitution in particular.
Speaker 4: That is exactly one of the issues that the arbitral
Speaker 4: Tribunal addressed. Now, in a democracy, one would expect, by
Speaker 4: design a constitutional question to be addressed by a constitutional court.
Speaker 4: But in this instance, there was an issue concerning contract
Speaker 4: between Texaco and the Ministry of Minds and Representation of
Speaker 4: the Government that raised this issue and the arbitration. So
Speaker 4: perhaps to step back, I think this is a good example.
Speaker 4: In one of their words, the arbitrators set out to
Speaker 4: interpret the right to a healthy environment in the in
Speaker 4: Ecuador's constitution. Chevron argued that it had been released from
Speaker 4: liability for collective claims under the right to a healthy
Speaker 4: environment by virtue of a release contract that had been
Speaker 4: concluded between Ecuador and Texaco. Texaco would carry out some
Speaker 4: remediation work in exchange of release for liability from the
Speaker 4: state and Petro Ecuador. But the scope of work in
Speaker 4: this contract was limited. This left sources areas of contamination unremedied.
Speaker 4: There's evidence that indicates serious shortcomings in the remediation efforts
Speaker 4: that were actually carried out. Despite all this, in nineteen
Speaker 4: ninety eight, Ecuador approved Texaco's works and released it from
Speaker 4: liability related to contamination from the oil operations. So this
Speaker 4: is the contract and the release that Chevron argued was
Speaker 4: an issue in this case and precluded the exercise of
Speaker 4: jurisdiction by Ecuadorian courts of claims concerning the collective dimensions
Speaker 4: of the right to a healthy environment, and so it
Speaker 4: asked the Arbitral Tribunal to declare so and declare that Ecuador,
Speaker 4: by allowing its courts to exercise jurisdiction, was violating the
Speaker 4: contract and the bilateral investment treaty between the United States.
Speaker 5: Ecuador.
Speaker 4: The tribunal approached this and despite the pollution was not
Speaker 4: cleaned up. Despite that environmental problems were not resolved, the
Speaker 4: tribunal concluded that the contract between Ecuador and Texaco meant
Speaker 4: that Chevron could not be sued on the basis of
Speaker 4: the collective dimensions of the right to a healthy environment
Speaker 4: in the Ecuadorian Constitution. The tribunal considered that the government
Speaker 4: could dispose and did in fact dispose of this constitutional
Speaker 4: right by a contract. Now, I would comment that the
Speaker 4: tribunal's decision is not compatible. It doesn't comfort with international
Speaker 4: human rights law, or with constitutional law for that matter.
Speaker 4: This is a largely a commercial frame looking at contract
Speaker 4: law to approach what are public law issues of constitutional
Speaker 4: human rights theory. A state cannot contract human rights away.
Speaker 4: Human rights are inalienable. They belong to humans, They belong
Speaker 4: to the people. The state cannot approgate human rights, least
Speaker 4: of all by contract. The notion that a country and
Speaker 4: a corporation can, in a contract deprive the people of
Speaker 4: a state from a basic human right can only be
Speaker 4: understood by reference to the arbitration as a system for
Speaker 4: advancing corporate interests at the expense of the rights of peoples.
Speaker 3: Yeah wow.
Speaker 4: A footnote to that analysis is that in the litigation
Speaker 4: in Ecuador, after Chevron was unsuccessful before the Supreme Court,
Speaker 4: it seized the Constitutional Court, the Ecuadorian Constitutional Court, arguing
Speaker 4: a denial of due process and other constitutionally protected rights
Speaker 4: and it was complaining about the exercise of jurisdiction by
Speaker 4: Ecuadorian courts. But the Constitutional Court plainly concluded that in
Speaker 4: a contract, the government cannot dispose of rights it does
Speaker 4: not have.
Speaker 5: The right to a healthy environment is a right of all.
Speaker 4: Persons subject to ecuador jurisdiction, the court recent and the
Speaker 4: government cannot contract it away. What are some of the
Speaker 4: implications of this. One could comment that it was expedient,
Speaker 4: perhaps too for the tribunal to interpret the right to
Speaker 4: a healthy environment in Ecuador's constitution in a manner that
Speaker 4: shielded Chevron from liability, that released it from any claims. Otherwise,
Speaker 4: the tribunal may have had to look at the environmental
Speaker 4: realities in Ecuador, the lack of remediation, the contamination, the
Speaker 4: ongoing contamination, the fact that dirt was moved from pits,
Speaker 4: that certain pits that had been covered up are still leaking,
Speaker 4: that communities, many communities are still without adequate food, without
Speaker 4: adequate water, and so forth. That is something that Chevron
Speaker 4: has worked very hard to avoid in this case. And
Speaker 4: I would say that Chevan has largely succeeded. It has
Speaker 4: largely succeeded in making this case story about the plaintiff's lawyers,
Speaker 4: about Stephen Donziger. But I think it's important not to
Speaker 4: forget what this case is really about. If we recall
Speaker 4: the indigenous peoples in the Amazon, the Warani, the Kofan
Speaker 4: other indigenous peoples, they lived in a pristine rainforest environment
Speaker 4: prior to the arrival of Texaco and the oil boom
Speaker 4: in Ecuador in the nineteen sixties and early nineteen seventies.
Speaker 4: The extraction of oil by tex and Petro Ecuador was
Speaker 4: without regard to the protection of the environment. It was
Speaker 4: without regard to the rights of affected indigenous peoples. First
Speaker 4: operated by Texaco as I mentioned, and then taken over
Speaker 4: by Petrocador, oil operations severely impacted indigenous people's traditional land.
Speaker 4: The oil boom in Ecuador has imposed loss of life, health, territory,
Speaker 4: and culture. Indigenous peoples have not received reparation for the
Speaker 4: violation of their rights. The arbitraal Trade you know, concluded
Speaker 4: this was beyond their mandate and therefore it was not
Speaker 4: their problem. It is not surprising. This is not surprising
Speaker 4: as international investment arbitration focuses on whether the government has
Speaker 4: wronged the corporation, but not on the environmental damage that
Speaker 4: may have been caused by that corporation. This imbalance is
Speaker 4: creating deficiencies in the international legal system, and this award
Speaker 4: is an example of that.
Speaker 3: Can you explain sort of what happens in a case
Speaker 3: like this where the international arbitration panel is basically saying,
Speaker 3: you know, Ecuador, your courts got it wrong?
Speaker 5: Like who?
Speaker 3: I mean, I guess, like who? And and there's like
Speaker 3: ongoing other you know, legal proceedings happening. What's sort of
Speaker 3: the hierarchy there? How do those how do those things
Speaker 3: kind of intersect the the domestic court system? I guess
Speaker 3: in this case both an Ecuador and the US and
Speaker 3: this international panel.
Speaker 5: Yeah.
Speaker 4: Traditionally an international law, before a claim can be presented
Speaker 4: by a non state actor to to an international tribunal,
Speaker 4: there needs to be exhaustion of domestic remedies. This is
Speaker 4: a term of art that means that a person or
Speaker 4: a corporation that feels that it has been wronged in
Speaker 4: order to present a claim first must go to national
Speaker 4: courts and and give the state the opportunity to resolve
Speaker 4: problems before being confronted to an international claim. In investment arbitration, however,
Speaker 4: there is no requirement, at least not explicitly or typically.
Speaker 4: There so many bilateral investment treaties, thousands of them, but
Speaker 4: typically they don't establish an exhaustion of domestic remedies requirement.
Speaker 4: What many of these treaties do establish is a choice
Speaker 4: whereby the investor must choose whether to go the route
Speaker 4: of national courts or go the route of an investment arbitration,
Speaker 4: and investors usually choose they elect the investment arbitration route
Speaker 4: because they're as mentioned earlier, they get to appoint one
Speaker 4: of the typically three arbitrators, and they get to choose
Speaker 4: which arbitral rules will govern the arbitration, which is also
Speaker 4: so relevant for the conduct of proceedings and the enforcement
Speaker 4: of any award. So that's a particularity in the field
Speaker 4: where corporations are able to do some forum shopping to
Speaker 4: advance claims in whichever forum in whichever way suits their
Speaker 4: interests best. So wherein corporations are well endowed with resources
Speaker 4: and have the ability to hire scores of lawyers, they
Speaker 4: can really drown plaintiffs in litigation that is expensive in
Speaker 4: various forums. Perhaps an example can illustrate it. A few
Speaker 4: years ago Bechtel acquired a water concession in one of
Speaker 4: the poorest countries in Latin America, Bolivia, in the city
Speaker 4: of Cochabamba, and soon after taking over the water concession,
Speaker 4: it raised prices exponentially. It even began collecting water fees
Speaker 4: from water taking from wealth that had been constructed by
Speaker 4: communities so the concession. It was expected that Bechtel would
Speaker 4: invest capital to increase coverage and secure access to water,
Speaker 4: but instead it began collecting a very high feast for water,
Speaker 4: and so there were water revolts, so called the Cochabamba.
Speaker 4: The community mobilized and eventually the government decided that it
Speaker 4: had to take back the utility. And at that time
Speaker 4: Bechtel brought an arbitral lawsuit against Bolivia, but not as
Speaker 4: a US corporation. It was under a Dutch Bolivia by
Speaker 4: latter investment treaty, so it claimed that it was a
Speaker 4: company from the Netherlands and on that basis it could
Speaker 4: sue Bolivia.
Speaker 5: The tribunal sided.
Speaker 4: With Bechtel and allowed the case to proceed. So how
Speaker 4: common are these parallel legal proceedings? How common is form shopping?
Speaker 5: Quite common? Unfortunately?
Speaker 3: Okay, And then I know that there are various kind
Speaker 3: of guidelines that govern these proceedings. Can you just talk
Speaker 3: a little bit about that like that, I don't expect
Speaker 3: you to run down you know the specifics of all
Speaker 3: the different batches of rules. But how is it decided
Speaker 3: sort of which set of guidelines a tribunal is going
Speaker 3: to go with? And then what happens with the verdict
Speaker 3: in one of these arbitration cases? How you know? Is
Speaker 3: there an appeal process?
Speaker 5: Right? Right?
Speaker 4: So if we compare the process with domestic courts. In
Speaker 4: domestic courts, there's well civil procedure or criminal procedure. There
Speaker 4: are laws that govern the process and they provide all
Speaker 4: kinds of safeguards. The analogy in the arbitration system are
Speaker 4: the arbitual rules. Those arbitual rules are the rules that
Speaker 4: govern the process, who gets to speak when, what are
Speaker 4: the authorities of the arbitrators?
Speaker 5: And they also govern what.
Speaker 4: Happens at the end the decision, the award, enforcement, and
Speaker 4: so forth. An underlying theme and international arbitraration is the
Speaker 4: quest for finality. It is understood that the contending parties
Speaker 4: want to settle their dispute and it is expected that
Speaker 4: the award will be final, and so there's there's no
Speaker 4: appeal to investment decisions. Again, the arbitral rules will govern
Speaker 4: the specifics. For example, under the the Chevron Ecuador case,
Speaker 4: this was heard under the rules of the UN Commissioned
Speaker 4: International Trade Law. This is these are rules that have
Speaker 4: been designed for commercialsputes, not for the kind of denial
Speaker 4: of justice which are public disputes, public law disputes, and
Speaker 4: so the issues of secrecy in commercial disputes may be
Speaker 4: warranted in those frames, but when it comes to public
Speaker 4: law they are wholly inadequate. The uncetrulled rules. They rely
Speaker 4: on the New York Convention. There's a New York Convention
Speaker 4: for the Enforcement, for the recognition and enforcement of arbitraal awards,
Speaker 4: and that convention gives some authority to national courts in
Speaker 4: terms of recognition and enforcement. But at the same time
Speaker 4: that authority is very limited, and courts they are. They
Speaker 4: usually they give deference to the awards because of the
Speaker 4: need for finality. They can set aside, they can strike
Speaker 4: down an award if there has been corruption, if if
Speaker 4: there's a clear violation of public policy. But for the
Speaker 4: most national courts are quite reluctant to set aside or
Speaker 4: strike downwards so that those are the procedural rules that
Speaker 4: were applied in this case. There are other sets of
Speaker 4: rules by the Paris International Chambers or or the World
Speaker 4: Bank's Investment Facility. Those rules, for example, the World Banks,
Speaker 4: they exclude it's totally self contained. It's they exclude the
Speaker 4: role of national courts. They provide for procedures for annuwnment
Speaker 4: in case again that a party has not been heard,
Speaker 4: or there has been corruption or so forth. But those
Speaker 4: procedures for a moment, they don't review the merits. They
Speaker 4: don't get into whether the decision is right or wrong,
Speaker 4: whether the law has been properly applied. They get into
Speaker 4: other other causes or other situations that may affect the
Speaker 4: integrity of the process, but not the quality of the decision.
Speaker 5: So at the end of the day, when.
Speaker 4: The when the investor receives a favorable award under the
Speaker 4: New York Convention, all states that are parties to that
Speaker 4: convention are required to honor that award. And that that
Speaker 4: means that that the in practice that the Chevron Ecuador
Speaker 4: Arbitral Award directing Ecuador two make to try to avoid
Speaker 4: enforcement of the decisions in of its national courts that
Speaker 4: may have an influence in any country part to the
Speaker 4: New York Convention, any jurisdiction where the plaintiffs are trying
Speaker 4: to enforce that judgment, so it may be at the
Speaker 4: end very hard for the for the plaintiffs to to
Speaker 4: collect damages on that decision.
Speaker 6: This is something that seems to me like a corporation
Speaker 6: may not go after a European country or the US,
Speaker 6: but they're going after developing countries and countries in the
Speaker 6: global South, you know, countries with largely indigenous or brown
Speaker 6: or black populations. But yet it's so it's it really
Speaker 6: is another form of colonialism.
Speaker 4: There's much much to be said about about that.
Speaker 5: In theory, the.
Speaker 4: Instruments are bilateral. There are some regional instruments as well,
Speaker 4: and so they allow for corporations from either country to
Speaker 4: sue the other country. And so, for example, in the
Speaker 4: United States Randa by latter Investment treaty, we have not
Speaker 4: seen any random corporation suing the United States. But we
Speaker 4: have seen Canadian corporations under the terms of the North
Speaker 4: American Free Trade Agreement suing the United States. They actually
Speaker 4: have not been successful. In terms of European countries, there
Speaker 4: are disputes between European states. Germany has been sued by
Speaker 4: Swedish corporations, for example, for facing out coal and nuclear
Speaker 4: energy and so forth, so their energy matrix button fall cases.
Speaker 4: Spain has been sued for certain benefits that it was
Speaker 4: no longer able to maintain after its economic crisis, benefits
Speaker 4: that had underlined the solar energy industry. So there are
Speaker 4: cases where there have been disputes between industrialized states or
Speaker 4: cases brought against industrialized cases states. I think what this
Speaker 4: goes to show is that there is some element of
Speaker 4: colonialism and north south politics. But it's also, as I
Speaker 4: was saying earlier, many observers see here a corporate globalization
Speaker 4: where it doesn't matter if the state is rich.
Speaker 5: Or poor, or north or south.
Speaker 4: What matters is for the system is whether the state
Speaker 4: is taking measures that may affect the expected profits of
Speaker 4: a corporation. If it does so, it becomes the possible
Speaker 4: target of arbitraal claims.
Speaker 7: Drilled is an original production of the Critical Frequency podcast Network.
Speaker 7: It's created and reported by me Amy Westerveldt. My co
Speaker 7: reporter on this season is Karen Savage. Our editor is
Speaker 7: Julia Ritchie. The show's editorial consultant is Rika Murphy. Mixing
Speaker 7: and mastering by Mark Bush. Original score by b Beeman.
Speaker 7: Special thanks to Larissa Ikeda, Trevor Gowen, and Emily Gertz.
Speaker 7: Our fact checker is wu dan Yan. Our First Amendment
Speaker 7: attorney is James Wheaton with the First Amendment Project. Our
Speaker 7: artwork for this season was created by the talented Matt Fleming.
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Speaker 7: Thanks for listening, and we'll see you next week.