In
recent years I have spent quite a bit of time in the fabled walled city of
Dubrovnik, on the Adriatic coast of Croatia, a small city of 50,000 or so people,
of which something like 500 live inside its medieval walls, and a city that is
already choked with tourists every summer.
Perhaps I became too familiar with
the city, because I used to tell my resident friends, more as a joke than a
criticism, that it is a city of military fortifications and churches, neither
of which interests me. So litle do they interest me that I never set foot inside
any of the churches through which squads of tourists were marshalled every day,
a press of people so intense that they were rationed to half an hour at a time,
My question always was: this is a holiday?
Of course that the whole stone site
--- construction, buildings, churches, walls and all--- was built in medieval times makes it a very impressive
example of human ingenuity and taste, which I suppose is why tourists flock to
see it from China, Japan, Korea, and every other known country. (The Japanese tourists, I can report on the
basis of months of observation, are the
most polite and most elegantly and tastefully
dressed, the Chinese more rowdy and exuberant, and the Koreans seem to
come somewhere between the two, as Korea does on the map.)
My especial friend, the one I was
visiting, is an Englishwoman, Sheila van Bloemen, (raised in Montreal) who went
to live in Dubrovnik in 1973, and, now 90 years of age, is still living in the same house,
overlooking the walls, and above the city’s small harbour. The story of how she
came to be there is a saga in itself, and one that I told in a small booklet I
wrote while visiting her, but it will have to await a later Chronicle.
Still, of immediate interest is that
Dubrovnik, which lies on a piece of flat land at sea level, beneath a towering
hill, known to everyone as Srd (pronounced “Surge” to my untrained ear), is threatened with a development, against which the residents have been fighting a rearguard action for 14
years.
Initiated by some international investors, this development is proposed to
occupy a 359-acre piece of flat land just on the other side of Srd, that will
have two golf courses, and a gated community of 240 residences, plus 400 apartments,
constituting altogether a huge playground for the rich that, the residents
discovered in 2010, will be equal in size to the entire city of Dubrovnik, and
20 times bigger than the fabled walled section.
The residents are only too conscious
of the fact that the old city’s infrastructure is falling apart, and are
outraged that the investors expect the city to finance the entire
infrastructure for this vast new project.
Golf courses, especially in this relatively
barren landscape, require huge amounts of water, and this project will require
three times as much water as Dubrovnik currently needs during the tourist
season, when its resources are already over-charged. “This is completely crazy,
and unacceptable for us,” says Duro Capor, a resident spokesperson, in a very
persuasive video they have put together, of which I recently received a copy,
from my friend’s son, Marc van Bloemen, who operates one of the highest-rated
small tourist establishments in the old town.
The residents have done everything
they could to bring the project to a halt, even organizing a referendum, which
voted 85 per cent against the project. Meanwhile, every organ of government at
every level, local to national, was supporting the project, having already
issued the necessary permits to the investors. They don’t say so in the video, but this no
doubt raises some issues around the subject of corruption, which appears to be
endemic throughout what was once Yugoslavia. “So we had to go to the court, to
show that this project was bad for Dubrovnik, bad for the environment, and
illegal,” says Capor, in the video. “We fought them for two and a half years in
the courts, where we in fact won, and had two court judgments in our favour, so
they issued judgments killing the permits for the project.”
But, as so often happens in this modern
world, the rich and powerful are always organized to snatch victory from the
jaws of defeat (and, as we shall see
from the rest of this story no one knows this better than Canadians). “The
investors found a legal backdoor”, says Pia Eberhardt, another resident, “and
this backdoor is called ISDS”, something that she says “is found in many trade
and investment agreements, and with the help of a letter-box company in the
Netherlands, the investors are now suing Croatia, claiming $500 million dollars
in compensation.
This ISDS is presented in the video
as if it is a sinister, half-hidden entity that suddenly springs up to bite
them, but in fact it is well-known to Canadians, for the acronym stands for
Investor-State Dispute Settlement, and it is one of the most cunning stich-ups
created by the world’s wealth-owners to ensure that even when they lose, they
win. In fact ISDS first gained international acceptance when Brian Mulroney and
his team of so-called negotiators agreed to its inclusion when the original
NAFTA was negotiated in the 1980s. That
any government could agree to a clause under which a company could sue a
government for prospective losses caused by some government action was one
thing about that agreement that particularly left me speechless. That was the nadir of the Reagan-Thatcher
propaganda argument that the governments they headed were the real problem. For
me, on the contrary, governments have always seemed like the essential instrument
needed if wealth redistribution is ever undertaken. Naturally the wealth-owners
of international investment were quick to take advantage of this berserk
provision of law.
“As a teacher I try to teach kids about
values, about how to be active citizens and to respect the law,” says Capor,
“and I cannot understand how something like this can exist, despite all our
efforts, despite all our court decisions, and wins, despite the referendum and
will of the citizens, now three foreign arbiters will decide, and we will not
have a say about what is happening in our future”.
Ms. Eberhardt says, “ this is just one of 1,000
ISDS cases around the world that we know of, and in many cases corporations use
ISDS decisions to bypass decisions by domestic courts and undermine democratic
political processes, like in Dubrovnik where people rejected a project, because
it would have been in the interests of a tiny elite.”
“As soon as the arbitration claim was
submitted, the State issued new permits to the investors which were identical
to the permits that had previously been cancelled. And as if this wasn't
enough, the investor sued the citizens group, which called itself “Sjd is Ours”, to prevent our critique of this process, which
we called racketeering, and they want an amount that is capable of shutting
down our environmental organization.”
Another spokesperson said she thought
the arbitration process came because “we were too powerful for them, and they
couldn’t imagine any other way to destroy us.”
They conclude by saying, in chorus::
“This has been a 14-year long struggle, but what we want to say is we will
never give up. Because what we want to say is “Srd is ours.”
The video ends with a title that says
simply,
Time to close the backdoor for corporations. Join the
movement to stop ISDS.”
* * * *
AS A MATTER OF INTEREST I RESEARCHED
SOME BACKGROUND ON ISDS, AND FOUND AN ITEM OF SUCH INTEREST TO CANADIANS (ON
THE WEB SITE OF THE INTERNATIONAL INSTUTUTE FOR SUSTAINABLE DEVELOPMENT), THAT
I THOUGHT I WOULD REPRINT THE WHOLE ITEM, AS FOLLOWS:
“The NAFTA agreement put the famous investor-state-dispute- settlement mechanism on the map. Now its rebirth as the USMCA is taking it off again --- at least between the United States and Canada.
“Bilateral investment treaties with investor–state arbitration provisions have existed since the 1980s. They were not broadly used initially; the first handful of cases went unnoticed. But when companies used NAFTA’s investment chapter to launch the first international arbitrations against Canada (then the United States and Mexico), law firms leaped at the new business opportunities, and investment arbitration took off.
“Today we know of close
to 900 arbitrations worldwide—far more than in any other field
of public international law. The early NAFTA cases are studied in university
programs that did not previously exist.
“When the first NAFTA case in the late 1990s
challenged a Canadian government environmental measure, it hit like a
bombshell. In the following years, foreign investors would sue the Government
of Canada 27 times; 26 of those cases were brought under NAFTA by U.S.
investors. These cases challenged a wide range of government actions, such as
banning products due to their health and environmental risks and denying
permits for environmentally unsound projects.
“But Canada and the United States have just
pulled the plug on this practice. Under the new USMCA, U.S. investors
already present in Canada will be allowed to use investment arbitration for
another three years. After that, they will have to go back to the good old
Canadian courts, like Canadian companies already do. And that is probably about
right.
“ ‘But what about Mexico?’ you might ask.
Mexico and the U.S. have negotiated an annex that allows investment arbitration
to continue, but only in well-defined circumstances. Established investors can
only bring claims about expropriation and non-discrimination. They can no
longer base allegations on the most worrisome and fluffy concepts like fair and
equitable treatment.
“Most interestingly, the U.S.–Mexico dispute
resolution annex has brought in a concept at the heart of
international law: claimants need to first try to resolve issues in domestic
courts and can only afterward bring disputes to the international level.
“NAFTA’s investment chapter did not follow this
international rule and allowed investors to bring claims directly to
international arbitration, sidestepping local courts altogether. In the new
United States–Mexico annex, investors cannot bypass domestic courts. They must
try to use local remedies for 30 months. International arbitration then becomes
an option if this does not reach a conclusion.
“A few sectors — including oil and gas and some
public service sectors— get special treatment. If foreign investors in these
sectors have a contract with their host government, they, allowing such, can
bring claims based on most investor protections contained in the USMCA,
including fair and equitable treatment; this includes oil and gas and some
public service sectors. In addition, they are not required to go to
domestic courts before initiating arbitration. But even claims from these
investors are subject to significant new limitations.
“All in all, Canada comes out of the investment
negotiations in a better situation than when it went in, at least with respect
to the United States. Its relations with Mexico, on the other hand, will be
regulated under the Comprehensive and Progressive Agreement for Trans-Pacific
Partnership, which includes traditional investor–state arbitration.
“How Canada will deal with these different
approaches and what path it will adopt in future and ongoing negotiations
remains to be seen. But, whatever the context of the overall renegotiations of
NAFTA, the outcome of the renegotiations on investment should pave the way for
new ideas that can provide food for thought for the Canadian administration in
its ongoing or future negotiations. At a time when many countries are
overhauling their approach to international investment governance, these
changes demonstrate willingness for new thinking.
“The dramatic turnaround on ISDS in the
renegotiated NAFTA, the agreement which triggered the explosion of ISDS cases
in the late 1990s, is significant. Perhaps it will once again spur a novel
approach to international investment governance, but one in which ISDS is no
longer the norm or is at least more tightly circumscribed.”
Incidentally, the
investors involved in the Dubrovnik case are known as Razor Golf and Leitch,
the former of which is owned by Muja Briar and her husband, Israeli investor Aaron
Frenkel, who, before initiating their law suit, stated that even after 10 years
of effort and expending 130 million Euros they cannot start the project.
“They added:
“Due to total blockage of the project and annulment
of permits already issued due to administrative failings of state bodies, we
have decided on this action to secure our rights as investors who have been
attempting for 10 years to realise this project, while investing over 130
million euros by now. By obeying procedure and striving to reach an agreement,
we sent in December of 2016 a letter to the government ahead of the arbitration
with an invitation to peaceful resolution of mutual issues, but this did not lead
to any specific progress. With the goal of protecting our investment and the
project, arbitration was the last, unwanted move we were forced into after
complete blockage the project faced, although not due to any failings on the
side of the investor,” stated Ivan Kusalić, a procurator with the Razvoj Golf
company.
This seems like one story to which my mantra “Wot the hell,
wot the hell,” does not apply.
