The corporate threat to democracy

Big companies are taking advantage of new free-trade agreements to undermine national sovereignty and erode protection for workers and the environment.

Published January 31, 2002 5:37PM (EST)

Chapter 11 is all the rage right now. Many of the biggest and brightest corporations are doing it. But while the multibillion dollar bankruptcies of Enron and Global Crossing are grabbing all the headlines, there is another Chapter 11, one you most likely haven't heard of, that poses an equally great danger to our democracy.

The "other" Chapter 11 is an obscure clause buried within the 555-page NAFTA document. It's being used by multinational corporations "to challenge the powers of government to protect its citizens, to undermine environmental and health laws, even to attack our system of justice."

So reports Bill Moyers in a disturbing new documentary, "Trading Democracy," airing Tuesday, Feb. 5, on PBS. According to Moyers, the fourth estate's preeminent defender of democracy, this outrageous end run around the Constitution could end up costing us billions of dollars. But, as they say, at least we've got our health, right? Only this Chapter 11 also jeopardizes both our health and the safety of the communities we live in.

"This story reflects what Enron is all about," Moyers told me, "that corporations have the power to trump the public interest at will these days. This is not just one corruption in a small corner of the picture; it represents the systemic corruption that money has brought to American politics."

In theory, Chapter 11 is designed to compensate companies if foreign governments seize their property. But the lawyers who helped draft NAFTA inserted language making it possible for companies to also seek compensation when government regulations cause a dip in their future bottom line. Many of these same lawyers are now selling their services to the very corporations using their legal handiwork to sue for millions.

Just how business-friendly is the provision? "They could be putting liquid plutonium in children's food," says Moyers, quoting a trade lawyer's advice to the Canadian government. "If you ban it and the company making it is an American company, you have to pay compensation."

About two dozen companies have cashed in, or are in the process of trying to cash in on Chapter 11. Among the outrages Moyers exposes is the case of Methanex, a Canadian corporation that is suing the U.S. government for $970 million because California decided to phase out a cancer-causing gasoline additive the company produced.

But even more egregious than the notion that taxpayers should have to pay off polluters is the process by which Chapter 11 cases are decided: behind closed doors. The cases are ruled on by a secret NAFTA tribunal whose decisions are not subject to appeal in U.S. courts. That's right, if Methanex wins, we'll have to foot the bill, but we'll never know exactly why because we don't have the right to hear the facts.

That giant sucking sound you hear is the public good being slurped up by voracious corporate interests.

But it's not just foreign companies suing Uncle Sam. Moyers shows us what happened in Mexico when a U.S. firm's efforts to reopen a toxic waste dump south of the border were thwarted by local citizens convinced that the noxious landfill had led to a boom in cancer cases in the region. The company, Metalclad, invoked Chapter 11 and was awarded $16 million in compensation.

The mere threat of these mega-buck claims is now being used to intimidate government officials considering new regulations. In "Trading Democracy," Moyers reveals how big tobacco used its high-powered lobbyists and the threat of a massive Chapter 11 lawsuit to bully the Canadian government into backing off on its plans to regulate cigarette packaging.

As William Greider, author of "Who Will Tell The People," puts it to Moyers: "If you're a civil servant, or even a political leader, you've gotta think twice when a corporate lawyer comes to you and says, quite forcefully, we're gonna hit you for half a billion dollars if you do this."

In an interesting wrinkle, the tobacco companies' arm-twister-in-chief was Carla Hills, who, before starting her own international consulting firm -- surprise, surprise -- led the U.S. negotiation of NAFTA, and whose firm was among 29 corporate heavyweights that signed a letter last year to U.S. Trade Representative Robert Zoellick demanding that the Chapter 11 provision be included as the administration seeks to expand NAFTA to 31 additional countries.

And round and round it goes. Where it stops, we don't know exactly -- what with the tribunals being secret, and all. But we have a pretty good idea: more carcinogens in your water, more toxic chemicals in your air, and more profits for unscrupulous corporations with deep pockets and teams of well-connected lawyers.

By Arianna Huffington

Arianna Huffington is a nationally syndicated columnist, the co-host of the National Public Radio program "Left, Right, and Center," and the author of 10 books. Her latest is "Fanatics and Fools: The Game Plan for Winning Back America."

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