Shadow Courts. Haley Sweetland Edwards

      CONTENTS

Acknowledgments

Introduction

Chapter One

      Buenos Aires

      Chapter Two

      A Very Short History of Investors’ Rights

      Chapter Three

      The Battle of La Pedrera

      Chapter Four

      Panning for Gold

      Chapter Five

      Property Rights

      Chapter Six

      Boxing Ghosts

      Chapter Seven

      A Bridge Too Far

      Chapter Eight

      Not Your Grandmother’s Globalization

      Further Readings

      Endnotes

       Acknowledgments

      A huge thank you to the dozens of lawyers, negotiators, arbitrators, activists, and policymakers who, over the course of my reporting this book, gave me hours of their personal time in interviews. I am particularly grateful to those who disagreed with me and yet, quite out of step with modern times, engaged with me anyway, talking through each point with patience and grace. This book is better for it. An extra thanks to those practicing lawyers who, had they billed the hours they spent talking with me, would be today many thousands of dollars richer.

      I am also deeply indebted to the goodhearted people—Todd Tucker, Rachel Wellhausen, Henry Farrell, Jay Newton-Small, and Barry Lynn—who read versions along the way. Thank you for your shrewd insight, criticism, and support. The inadequacies of the book are mine; the good bits are thanks to you. Many thanks also to my editors Nicholas Lemann and Jimmy So, publisher Camille McDuffie, and to friends and colleagues at Time magazine for letting me shirk my duties for a bit to write on international investment law.

      And last but certainly not least, thank you to my husband, Paul Stephens, my parents, Jane Sweetland and Lee Edwards, and all my wonderful family, genetic and otherwise, including The Compound of greater northeast D.C., for your enduring support. I am so grateful to all of you.

       Introduction

      The environmental activist Jane Kleeb was driving down Highway 281 near Lincoln, Nebraska, on a gray day in January 2016, when she got a call from a reporter.

      At the time, Kleeb was still riding high off of her success organizing local farmers, ranchers, and environmentalists in opposition to the Keystone XL pipeline, which would have carried petroleum products from Canada’s tar sands across the Nebraska plains to the Gulf of Mexico. Thanks to her and other activists’ efforts, President Barack Obama had announced in November 2015 that his administration would deny the Canadian company TransCanada permission to move forward with the project, ending an eight-year-long effort to get the pipeline built.

      The reporter was calling to ask Kleeb about a new twist in the saga. Earlier that day, TransCanada had announced it was suing the U.S. government for $15 billion on the grounds that Obama’s decision to block the project violated the North American Free Trade Agreement. It was the first Kleeb had heard of the suit. “I’m an organizer, so my reaction was, ‘When are the hearings? Where is this happening? Who’s the judge?’” she said recently. If TransCanada was challenging the decision in court, she wanted to be there. Could she protest on the courthouse steps? Arrange for a rally in a nearby town?

      But that, Kleeb learned, was not how this case would go down. TransCanada wasn’t suing the U.S. in a U.S. court, or in a Canadian court for that matter. Its argument would not be heard by a judge, and the merits of the case would not be considered under the auspices of either country’s legal system. There would be no protest on any courthouse steps. Instead, the case would be heard by a tribunal, manned by three private arbitrators, operating under a supranational legal system that Kleeb had never heard of. “It was totally strange,” she told me. “A foreign company can sue us in some secret tribunal? How is that even possible?”

      Investor-state dispute settlement, or ISDS, first appeared in treaties in 1969. The idea behind the mechanism was straightforward: If a foreign investor believed that his host country—the nation where his company was operating—had violated an international treaty by seizing or destroying his factories, oil fields, or other assets, he could file an ISDS claim directly against that country. He could do that without involving his own government and without having to wait endlessly for a developing country’s corrupt or biased court system to dispense judgment.

      By filing an ISDS claim, the investor would trigger the formation of a special arbitration tribunal, which would exist temporarily outside the jurisdiction of any nation’s judiciary or any international body. Its sole purpose would be to determine how much, if anything, the country owed the investor in compensation for property that had been seized or demolished. For example, in the late 1980s, the Sri Lankan government destroyed a British seafood company’s shrimp-processing plant during a military raid on rebels. The British investor filed an ISDS claim, a tribunal was formed, and the arbitrators determined that the Sri Lankan government must pay the company $460,000 in compensation for the destroyed plant. That was it. Case closed. The British company did not have to rely on Sri Lankan courts. The episode did not become a major diplomatic incident. The U.K. did not have to step in to defend its investors’ interests.

      And that was the whole point: ISDS was supposed to be a cool, efficient, and apolitical dispute resolution system that kept powerful nations from interfering in the affairs of weaker countries, and that offered an extra layer of protection for foreign investors operating in countries with unreliable courts. But in the last 20 years, the mechanism has quietly changed, evolving into something much more powerful—and very political indeed.

      One factor in this evolution is the explosion of new claims. Between the 1960s and 2000, ISDS was almost never used. Investors brought about 40 claims total in 40 years. Since 2000, there have been 647. In 2015 alone, there were 70 new cases. That uptick is partly because there are thousands more treaties today that include ISDS. For