Ensuring Tax Exempt Organizations the Right to Appeal Act

Floor Speech

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Mr. SCHATZ. Madam President, I wish to join my colleagues in voicing my opposition to granting fast-track authority. I oppose the procedures contained in the bill, and I am seriously concerned about using fast-track to pass trade agreements that don't reflect the best interests of the American people and can undermine the prerogatives of the Congress.

Some who support fast-track would have us believe that opposing this bill and TPP means opposition to a free market, to trade, and to commerce; but that is not true. Commerce is essential, and we should be promoting it. But corporate interests should not be the driving force for public policy decisions on public health, consumer safety, and the environment.

Just this week, a WTO ruling on our country-of-origin food labeling law provided a striking example of how what is called free trade can be used to erode consumer protection. The country-of-origin labeling law was passed by Congress, and it requires producers of meat and chicken to provide information to consumers on where the animal was raised and slaughtered. If we ask most people, they would say they want to know if their beef is from Texas or from Taiwan. And even if one isn't particularly passionate about that issue, I think most people would agree that it is squarely within the prerogatives and the constitutional duties of the U.S. Congress to decide.

Consumers in the U.S. want to know where their food comes from. Through a legitimate, democratic process, we passed a law to provide consumers with this information. But no matter how we have revised the rule pursuant to the law, it is apparently still not in compliance with our WTO commitments. It seems that we will have to repeal the law to avoid trade sanctions.

While our WTO obligations are not the same as our commitments under a free-trade agreement, it doesn't require too much imagination to see how other U.S. laws will buckle under future trade agreements. This is why the deal-breaker for me is the investor-state dispute settlement, or ISDS for short.

ISDS provides a special forum outside of our well-established court system that is just for foreign investors. These investors are given the right to sue governments over laws and regulations that impact their businesses--a legal right not granted to anyone else. This forum is not available to anyone other than foreign investors. It is not open to domestic businesses. It is not open to labor unions, civil society groups or individuals that allege a violation of a treaty obligation. The arbitrators that preside over these cases are literally not accountable to anyone, and their decisions cannot be appealed. To date, nearly 600 ISDS cases have been filed. Of the 274 cases that have been concluded, almost 60 percent have settled or have been decided in favor of the investor.

It is true that when a tribunal rules in favor of the investor, the arbitrators can't force the government to change its law, but they can order the government to pay the investor, which has the same effect. There is no limit to what compensation foreign investors can demand. The largest award to date was more than $2 billion.

For a developing country that must pay this award, sometimes it represents up to a third of their GDP. Most governments cannot risk such a settlement and end up avoiding this kind of conflict altogether. The government often agrees to change the law or regulation that is being challenged and still pays some compensation. The threat of a case can be enough to convince a government to back away from legitimate public health, safety or environmental policies.

ISDS cases cost millions of dollars to defend and take years to reach their final conclusion. The high profile cases filed by Philip Morris International challenging cigarette packaging laws have had a chilling effect around the world. Several countries have been intimidated into holding off on passing their own laws to reduce smoking. Every year of delay is a victory for tobacco companies. They get 1 more year to attract new, young smokers. In the case of tobacco, the cost of ISDS could be human life.

I would hope that if we empower corporations to challenge democratically elected laws and regulations, that we would be doing so for an extremely compelling reason. But here is the thing: The rationale behind ISDS is extremely thin. Advocates claim that investor protections such as ISDS draw foreign investment into a country, but no one has actually been able to demonstrate that this link exists. Studies have not even been able to show a significant correlation between investor protections and the level of foreign investment in that country. Instead of driving decisions to invest, ISDS provisions are being manipulated by multinational corporations.

Some companies seem to be setting up complex corporate structures explicitly for the purpose of taking advantage of existing ISDS provisions. This is what Australia is alleging that Philip Morris did to challenge Australia's tobacco laws. The Philip Morris Hong Kong entity bought shares in Philip Morris's Australian company just 10 months after Australia announced its cigarette plain packaging rules. It seems that Philip Morris did this for no other purpose than to gain access to the ISDS provision in the Hong Kong-Australia Bilateral Investment Treaty.

ISDS is just another arrow in the quiver of legal options available to multinational corporations and no other entity or person. The consequences for public health, safety, and the environment far outweigh any real or imagined benefit of ISDS. For these reasons, I oppose fast-track and any trade agreement that contains an ISDS provision.

I yield the floor.

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