Moving Beyond Opposition

Constructing Tangible Alternatives to the Corporate Investment Consensus in Regional and Global Institutions

Dr Luke Cooper
Anglia Ruskin University
SMALL GROUP PROJECT: SEPTEMBER 2018 – AUGUST 2019

Abstract

With the crisis of 2008 the dangers of a deregulatory approach to economic governance became clearer to policy-makers. Yet despite this many states and institutions continue to put deregulation at the centre of their vision for global investment policy. Recent developments, such as the public debate over the Transatlantic Trade and Investment Partnership (TTIP), have however given greater visibility to the opposition to corporate-focused globalisation.

            A key concern within this shifting arena has been the unchecked nature of the power neoliberal/orthodox agreements have granted to corporations and major investors, particularly through the use of the Investor State Dispute Settlement (ISDS) process in international arbitration, and the deregulatory implications of the focus on ‘non-tariff barriers’ to trade. Hitherto, however, alternative perspectives have remained too oppositional: conscious of what they are against but less clear what they are for.

            This project will develop a new approach by bringing together a uniquely interdisciplinary research team comprising specialists and practitioners in the fields of Law and Political Science. It will develop an alternative model for global investment treaties based on democracy, human rights, and environmental protection. The project seeks to develop a framework for cooperation which sees global governance as a mechanism to ensure human security by undertaking actions on the world stage that states are unable to pursue on the national level alone.

To achieve these aims the project advances a methodology called ‘problem solving dialogues’, a synthesis drawn from Peter Reason’s (1994) concept of cooperative enquiry and Etienne Wenger’s (1998) notion of the community of practice. By establishing a workshop and other forms of knowledge exchange (‘problem solving dialogues’) between practitioners and scholars working towards a shared goal, the project endeavours to pioneer cutting edge solutions to fill the impasse created by the crisis of the corporate trade and investment agenda.

The Research Idea

The financial crisis of 2008 illustrated the severe dangers of a deregulatory approach to sound economic management. Despite this warning many states continue to put this idea at the centre of investment negotiations with this usually taking the guise of dismantling ‘non-tariff barriers’ to trade. This issue is particularly relevant given how Brexit posits the need for the UK to negotiate new investment agreements.

The orthodox model, rooted in neoliberal economic assumptions, has combined this deregulatory agenda with the creation of investor protection mechanisms (Investor-State-Dispute Settlement, or ‘ISDS’) that disempower democratic institutions. The wave of opposition in Europe and beyond (Ecuador, South Africa, Indonesia) around investor protection has left these policies in crisis. This opposition has arisen because of the downward effect ISDS places on regulation and the unwarranted power it hands to foreign businesses and investments vehicles.

The purpose of this project is to develop a new alternative model, which, rather than sparking a ‘race to the bottom’, enhances democracy, human rights, and environment protection. As such, it seeks to develop a framework for regulatory cooperation that levels rights and protections upwards and seeks to utilise international institutions to curtail excess corporate power. 

To achieve these aims the P-I and Co-Is will bring together a uniquely inter-disciplinary research team comprising legal academics and professionals, political scientists, and policy experts from the NGO and business world. Utilising an action research methodology these experts will constitute a ‘community of practice’ discussing papers and positions to generate a new synthesis.

Background

The corporate trade and investment agenda has been subject to considerable scholarly critique over recent decades (Chang 2002, 2007, 2010; Kelsey 2010). But amongst legal scholars the literature has until recently been dominated by ‘black-letter’ (undisputed matters of law) approaches (e.g. Lew, Mistelis, and Kröll 2003). This body of work has taken a largely uncritical perspective in relation to the politics of investment agreements, focusing instead on understanding and streamlining the mechanics of the operative clauses. More recently, critical legal studies have supplemented this literature, exploring topics such as the impacts of trade agreements on democracy and sovereignty (Tienhaara 2011), and critically assessing whether they will deliver the benefits they purport (De Ville and Siles-Brügge 2015).

These analyses can all be broadly situated within a perspective critical of free market globalisation, highlighting the impacts of investment agreements on labour rights or the environment (Fowles 2017) and the risks of a regulatory ‘race to the bottom’ in protective standards (Dearden 2014). But while these approaches have always been mindful of the need to pursue an alternative (rather than ‘anti’) globalisation, added impetus for this has been created by the financial crisis of 2008. Rejecting a lurch into national protectionism, many writers have argued for a pioneering international reform agenda to curtail the excesses of corporate and financial power (Dunn 2015; Kaldor and Stiglitz 2013; Rodrik 2012).

The project is situated within this turn to ‘protection without protectionism’ and will seek to develop positive policy proposals for new global investment rules.

The Focus

A wide array of actors have recently challenged status quo investment agreements:   

  • Neoliberalism Oversold (IMF, 2016), an IMF policy paper, has questioned the benefits of capital liberalisation (rather than trade liberalisation per se).
  • Public debate over the Transatlantic Trade and Investment Partnership (TTIP) and the Comprehensive Economic and Trade Agreement (CETA) has also seen considerable opposition to ISDS and the deregulatory agenda.
  • An ECJ ruling from May 2017 has created a crisis in EU investment policy by requiring national parliamentary ratification of agreements containing ISDS and portfolio investment provisions (Roberts 2017).
  • Ecuador’s decision to annul sixteen investment treaties, following similar moves by South Africa and Indonesia, also affirms the continued opposition to these policies in the Global South.

A space is, thus, opening up favourable to alternative proposals. This project will contribute to and shape this changing landscape. We will build on previous work to develop approaches to investment that are economically beneficial without posing risks to democracy and sovereignty, or policy areas such as human rights, the environment, or labour (endemic to the orthodox/neoliberal approach). Foreign direct investment (FDI), in particular, can play a positive role in development, but only if it is regulated to ensure benefits extend to citizens and the environment (Rodrik 2012). We will focus on dispute resolution: seeking to identify progressive alternatives to the discredited ISDS mechanism and the unsatisfactory ‘Investment Court System’. Contributors will also focus on developing investment agreements in the light of competing priorities in different policy areas.

Theoretical Novelty

The formulation of a new agenda on global investment is a highly germane area for critical legal scholars and political scientists to develop theoretical syntheses.

The project will advance a human security (Kaldor 2007) agenda that recognises the role globalisation has played in deepening individual precariousness while expanding the scale and rapidity of systemic risk (Kaldor and Stiglitz 2013). The global nature of these risks, however, means that action is required from regional and international institutions, which have tended to pursue deregulatory policies deepening insecurity and amplifying risk for short term or sectional gains. As Dani Rodrik (2012) has argued the tendency of the beneficiaries of free markets to seek regulatory homogeneity to reduce transaction costs (‘non-tariff barriers’) undermines the jurisdictional heterogeneity that should logically emerge where local institutions are responsive to democratic demands. This has been a key point of contention in contemporary investment policy.

A dialogue between political science and law can help overcome this quandary and develop a vision for democratic trade. A critical legal approach highlights the role transnational private law has played in providing a regulatory basis for deepening human insecurities (Zumbansen 2015). And, furthermore, shows that the question of how the rules are made, and the limits of their homogeneity, can become as important as their actual content (ibid). Through this reflective conversation between political science and critical legal studies a theoretical base can be established that aids the formulation of rules flexible enough to allow for heterogeneity but homogenous enough to end insecurity.

Methodology

The research project will utilise a form of action-based, cooperative research, which we call ‘problem-solving dialogues’. This will see the research team consciously create a community of practice (Wenger 1998) that draws together experts, politicians, legal professionals, and academic researchers to engage in creative discussions. These will take place through the exchange of papers amongst the community of practice, at a specially convened workshop, and in public through the impactful dissemination of outputs, which, in turn, generate conversations feeding back into the project. Participants in this community of practice will be tasked with developing a conception of international investment rules, which seek to expand citizen and social rights and strengthen regulatory protections.

Problem-solving dialogues is an innovative research method that synthesises Etienne Wenger’s conception of the community of practice (Wenger 1998) with Peter Reason’s understanding of cooperative inquiry, where research is undertaken ‘with’ and not ‘on’ participants (Reason 1994: 10). Wenger’s (1998) concept of the community of practice involves three dimensions. Firstly, the ‘domain of knowledge’, which, in our project, concerns the common goal of elaborating a new conception of investment rules grounded in an alternative globalisation perspective. Secondly, there is the community/identity, which will be made up of the participants engaging in the project. Thirdly, the practice/interest binding the community together, which, in our research, concerns how enquiries are distilled into tangible policy. Through these steps we will move from propositional knowledge (questions) through to reflective (analysis) and then practical (tangible policy) knowledge (Reason 1994: 12).

Work Plan

We aim to develop a collective vision of a “good agreement” and thereby influence public discourse and political debate on investment policy. The project will run according to three stages.

Stage one: Outreach (January – March) 

This will see the initial scoping of project collaborators, which will form our ‘community of practice’. Outreach will entail drawing on civil society networks and connections to MPs and individuals with relevant knowledge bases to contribute to the project. While these individuals will be united by a shared belief in the necessity of a more progressive approach to international investment policy, they will bring a range of different approaches to achieving this. Those who have begun to develop concrete proposals will be invited to present papers at the workshop. 

Stage two: Workshop (April or May)

The workshop will bring together experts from civil society, NGOs, academia, the law, and politics. It will consist of a series of panel and audience discussions where participants can engage in mutual critique and learning.

Stage three: Publication process (May to January)

Findings will be presented for further feedback at a specially convened panel at the British International Studies Association in Bath (June 2018). The papers will then be refined based on these discussions and collected into an edited volume. The intended audience for this includes academics and lawyers but also politicians, policy makers, and members of the public. Two policy briefings will also be drafted and disseminated to maximise the impact and reach of the research.

Outcome

The project will overcome both disciplinary boundaries between law and political science, and those between the academic world and practitioners, such as legal professionals, civil society advocates, and politicians. The research team brought together reflects this approach and also seeks to break down the conventional distinctions between researchers and research subjects. With this perspective the project will engage a wider audience and seek to advance public discourse on investment rules, raising awareness of the dangers of a corporate-dominated approach whilst simultaneously developing tangible public policy alternatives.

Three legacy areas are envisaged:

  • Publications. A book proposal will be submitted to a new series, Insights: A Chatham House Series on Critical Issues in International Affairs, a choice of potential publisher which reflects the team’s desire to bring alternative perspectives on investment policy into the mainstream public policy debate.
  • Political engagement. Through their already existing links to civil society and the political sphere the research team will develop an audience amongst MPs, MEPs and influencers for new proposals. This will include formulating specific parts of the research into policy briefings presented to MPs.
  • Research networks. The project will bring together a team of individuals committed to constructing alternatives to neoliberal globalisation based on a ‘protection without protectionism’ approach. While starting with investment policy we hope to broaden this horizon to an array of potential areas such as social rights and ecology. At a time when autarchic, nationalist pressures are growing this is a vital locus of research.

References

Chang, H., Kicking Away the Ladder – Development Strategy in Historical Perspective, Anthem Press, London, 2002.

Chang, H., Bad Samaritans Rich Nations, Poor Policies, and the Threat to the Developing World, Random House, London, 2007.

Chang, H., 23 Things They Don’t Tell You About Capitalism, Allen Lane (Penguin), London, 2010.

Dearden, N., ‘Rough trade: the new corporate power grab’, Red Pepper magazine (2014) available at http://www.redpepper.org.uk/rough-trade-the-new-corporate-power-grab/ (accessed 30 August 2017).

De Ville, F., and Siles-Brügge, G., TTIP: The truth about the transatlantic trade and investment partnership, John Wiley & Sons, Oxford, 2015.

Dunn, B., Neither Free Trade Nor Protection: A Critical Political Economy of Trade Theory and Practice, Edward Elgar Pub, Cheltenham, 2015.

Fowles, S., ‘Investment Treaties and Human Rights’, Foreign Policy Centre (2017), available at http://fpc.org.uk/fsblob/1803.pdf (accessed 21 August 2017).

IMF, ‘Neoliberalism: Oversold?’, Finance and Development, 53:2 (2016), pp. 38 – 41.

Kaldor, M. Human Security: Reflections on Globalization and Intervention, Polity, Cambridge, 2007.

Kelsey, J. (eds) No Ordinary Deal: Unmasking the Trans-Pacific Partnership Free Trade Agreement. Bridget Williams Books Ltd, Wellington, 2010.

Lew, J. D. M., Mistelis, L. A., Kröll, S., Comparative International Arbitration, Kluwer, New York, 2003.

Reason, P., (eds) Participation in Human Inquiry; Research With People, Sage, London, 1994.

Roberts, A., ‘A Turning of the Tide against ISDS?’ Blog of the European Journal of International Law (2017), available at https://www.ejiltalk.org/a-turning-of-the-tide-against-isds/ (accessed 30 August 2017).

Rodrik, D., The Globalization Paradox, Oxford University Press, Oxford, 2012.

Stiglitz, J., and Kaldor, M., The Quest for Security: Protection Without Protectionism and the Challenge of Global Governance, Columbia University Press, New York, 2013.  

Tienhaara, K. ‘Once BITten, twice shy? The uncertain future of ‘shared sovereignty’ in investment treaty arbitration.’ Policy and Society 30:3 (2011), pp. 185-196.

Wenger, E., Communities of Practice: Learning, Meaning, and Identity, Cambridge, Cambridge University Press, 1998.

Zumbansen, P., ‘The constitutional itch: Transnational private regulatory governance and the woes of legitimacy in Helfand, M., A., (ed) Negotiating State and Non-State Law: The Challenge of Global and Local Legal Pluralism. Cambridge University Press, Cambridge, 2016, pp. 83-110.