Abstract
This essay will examine the emergence of transnational governance via supranational economic agreements which promote global imposition of liberalizing policies in the interests of transnational investors. The stalled multilateral World Trade Organization (WTO) process has given way to a plethora of regional and bilateral economic agreements covering a range of new issues—investment, intellectual property, services, and regulations—which trench ever more deeply on domestic decision-making. Informed by Phillip Cerny’s conception of “competition states”, Colin Crouch’s (2000) lament about “post-democracy”, Carroll and Sapinski’s analysis of “global corporate elites”, and David Held’s depiction of “global governance complexes”, the essay will examine the role of transnational corporate and institutional elites in advancing economic agreements which narrow the scope for democratic governance. These authors depict the combination of constraint and empowerment of states induced by these transnational agreements which force most liberal democracies to cut or tweak programs and regulations in economic and social fields to protect investor rights, while boosting restraints on citizens in areas like intellectual property—what Cerny (1997) calls the “paradox” of the competition state. Given the number and complexity of these transnational governance arrangements, this essay will focus on the transnational constraints of investor state arbitration and disputes settlement systems. This will be illustrated by examining the growth of investor disputes settlement claims in bilateral treaties and major European and North American economic agreements and the rise of arbitration cases which impose costs on states for violations of investor rights. The essay considers the implications of these new forms of transnational governance for democratic governments’ responsive to popular demands. It concludes by suggesting the need for revisions to theories of the democratic state, which may be morphing into pluralistic plutocracy.
Highlights
Issue This article is part of the issue “Supranational Institutions and Governance in an Era of Uncertain Norms”, edited by Russell Alan Williams (Memorial University, Canada) and Reeta Tremblay (University of Victoria, Canada)
The analysis focuses on investor rights provisions, which may constrain what governments can do on threat of monetary or trade penalty, tilting public policy away from regulatory and spending initiatives which may be popular with voters but which impinge on investor freedoms and profits
Critics portray the Investor–State Dispute Settlement (ISDS) mechanism as a threat to democracy and public policy, with a chilling effect on social and environmental programs and regulations. It is considered as unnecessary between developed states like the EU and the US, in view of the strength of investment protections in their national legal systems. These views are articulated by most trade unions, a large number of nongovernmental organizations (NGOs), consumer organisations and others who responded in the EU consultations on ISDS in Trade and Investment Partnership (TTIP) and the US consultations on the updated model bilateral investment treaty (BIT)
Summary
“[B]ilateral and regional trade agreements are a primary means through which greater investor protections, commodification of social services, guaranteed rights of investor access to investment opportunities, privatization of public service goods, and generally the diminution of sovereign control are being realized.” (Gathii, 2011, p. 421). The forces driving the measures can be considered plutocratic in promoting the interests of wealth; and pluralistic as they represent diverse transnational coalitions with diversifying ethno-national bases, including emerging states and sectoral concerns, with energy, natural resources, pharmaceuticals, finance being prominent examples This is led by the interests which have promoted financialization of the global economy. 1920) note that this is a loose coalition of transnational institutions, corporations, private lobbies, think tanks and “epistemic communities” whose actions have reduced the variations possible among “competition state” models in the contemporary global economy (Cerny et al, 2005) These powerful allies have a vested interest to promote liberalization including enhanced capital flows, investor rights, intellectual property protections and deregulation with teeth through disputes settlement arrangements. The result could be a weakening of democratic accountability, with states bound to transnational agreements which constrain their actions, while requiring greater restrictions on citizens in the paradox that is pluralist plutocracy
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