By Sergio Ferrari on September 7, 2022
In the last 30 years, the pressure of foreign investors against Latin American states has been increasing day by day and the number of lawsuits for “non-compliance” on their part has multiplied. From 6 known cases in 1996, there are now 1,190.
In that period, these countries were condemned to pay 33,638 million dollars, which thus vanished from the public coffers. According to the Transnational Institute (TNI), based in Amsterdam, the Netherlands, this figure represents a third more than the losses due to the impact of climate catastrophes on the continent between 1970 and 2021.
According to the recent report prepared by Bettina Müller and Luciana Ghiotto, from the TNI research team, which was just published in the last week of August – and which contains data updated to December 31, 2021 – Argentina, Venezuela, Mexico, Peru and Ecuador, with 211 lawsuits brought by multinational companies, are the countries that have endured the greatest legal pressure over the last three decades.
Neoliberal instrument of dependency
Bilateral Investment Treaties (BITs) are the instruments that allow these claims to be processed. They are agreements between two countries that aim to protect the legal security of investors.
As explained by the Spanish organization Ecologistas en Acción, they usually include a series of standard provisions that are always favorable to transnationals and that prevent, for example, direct or indirect expropriation of companies. They rarely include references to human rights.
Undoubtedly the most pernicious provision is the Investor-State Dispute Settlement (ISDS). If a company considers that a State has not complied with one or another clause of an agreement, it can evade the justice system of that country and take it before international tribunals.
These instances, to which large companies usually resort, are the International Centre for Settlement of Investment Disputes (ICSID), which is the most requested; the International Court of Arbitration of the International Chamber of Commerce or the United Nations Commission on International Trade Law (UNCITRAL). These can issue compensation awards in favor of the affected investors, which in most cases include lost profits, i.e., the profits that the investor calculates it has lost due to any of the measures taken by the defendant country and which the plaintiff considers harmful to its interests.
These agreements, described by the Spanish environmental organization as “a fundamental tool for neo liberal globalization”, benefit from three elements that make up their very essence. The extremely vague wording of most of these legal instruments, which makes it possible to prosecute a state for almost any reason. The opaque and not at all transparent methods used to resolve the processes that will ultimately be resolved by international arbitrators. And finally, as Ecologistas en Acción points out, “the unidirectionality and exclusivity of ISDS”, since investors can denounce States, but do not accept the reverse situation, i.e. when it comes to investors who breach any part of the agreement (or when they violate human rights).”
The ISDS Impacts website, which takes up TNI’s research, explains, for its part, that “the investor-state dispute settlement system (ISDS) is included in thousands of international treaties.” It is the mechanism that allows foreign investors to sue governments before international tribunals if they consider that changes introduced by them in public policies – even those designed to protect the environment or health – affect their profits.
Transnational corporations, birds of prey
According to the TNI report, in the last 30 years, the 327 lawsuits against Latin American and Caribbean states represent a quarter of the total number of accusations brought by multinationals worldwide. On the continent, the vast majority (86.8% of cases) were brought by U.S., Canadian and European investors. Among the Europeans, mainly from Spain, the Netherlands, Great Britain and France. Three out of four claims were brought before ICSID, which is one of the five organizations of the World Bank Group. The results speak for themselves: companies have won against the States in 62% of the cases resolved, either by obtaining a favorable award or by benefiting from an agreement between the parties.
Twenty-three of the 42 countries in Latin America and the Caribbean have already experienced the rigor of the international arbitration system. Particular viciousness is expressed against Argentina (62 claims); Venezuela (55); Mexico (38); Peru (31) and Ecuador (25). This mechanism of prosecuting the States of the continent intensified in particular between 2011 and 2021, a period in which from 91 claims, the number of lawsuits increased to 180, doubling the total number of lawsuits. These lawsuits mostly concern multinationals operating in the mining and oil and gas extraction sectors. But they also significantly affect companies that profit from gas and electricity, as well as manufacturing.
Argentina, which has lost 87% of its lawsuits, is the country on the continent that has suffered the most defeats before such tribunals. And it holds the record for what it paid in a single case: the 5 billion dollars transferred to the Spanish company Repsol in an agreement between the parties. The lost lawsuits meant to the South American country 9,222 million dollars that it had to pay to the investors.
Venezuela, the second most sanctioned nation in the continent by international tribunals, has 64% of the claims against it with unfavorable decisions. It has to its credit the most expensive award in the continent. In 2019, the ICSID Tribunal ordered it to pay 8,366 million dollars to the transnational Conoco Phillips.
In concrete monetary terms, States almost always turn out to be the big losers, notes the Transnational Institute in its recent report. “Lawsuits cost them millions of dollars in defense and litigation costs”. Even in cases where arbitration tribunals rule in favor of the States, it is normal for them to have to spend millions of dollars to hire law firms -for their defense-, which can charge up to 1,000 dollars per hour of advice. An emblematic case is that of Ecuador, which up to 2013 had spent 155 million dollars to guarantee its legal defense and to pay arbitration expenses.
The sums claimed by the companies since 1996 -according to the detailed report of the NGO based in the capital of the Netherlands- amount to 240,733 million dollars. However, in 68 of the 327 lawsuits the amounts demanded are not known, so this figure is significantly higher. The courts have so far ordered Latin American nations to pay US$ 33,638 million.
According to United Nations calculations, with that money, the drama of extreme poverty in 16 of the continent’s nations could be solved. “In turn. This amount represents more than the external debt of El Salvador, Nicaragua and Belize together (2020 values) and represents a third more than the total losses that the region endured between 1971 and 2021 due to climatic catastrophes,” explains TNI.
As for the pending claims (it is only known what the companies are claiming in 44 of the 96 open cases), this could mean additional losses of 49,626 million dollars for Latin America and the Caribbean.
A reality as forceful as it is dramatic of an unequal combat institutionalized as the only and universal truth. As if in the ring, two actors (a boxer and the referee) were fighting, together, against the other boxer, beaten by the blows he receives from four hands.
Source: Alai, translation Resumen Latinoamericno-US