by Colin Todhunter
March 11, 2014
Since the economic crisis hit Europe, international investors have begun
suing EU countries struggling under austerity and recession for a loss of
expected profits, using international trade and investment agreements.
Speculative investors are claiming more than 1.7
billion Euros in compensation from Greece, Spain and Cyprus in private
international tribunals for the impact of measures implemented to deal with
This is the conclusion from a new report
released by the Transnational Institute (TNI) and Corporate Europe
The report, 'Profiting
from Crisis - How Corporations and Lawyers are Scavenging Profits from
Europe's Crisis Countries', exposes a growing wave of corporate
lawsuits against Europe's struggling economies, which could lead to European
taxpayers paying out millions of Euros in a second major public bailout,
this time to speculative investors.
These lawsuits provide a warning of the potential high costs of the proposed
trade deal between the US and the EU, which has just begun its fourth round
of negotiations in Brussels.
Pia Eberhardt, trade campaigner with CEO and co-author of the report
"Speculative investors are already using
investment agreements to raid the cash-strapped public treasuries in
Europe's crisis countries. It would be political madness to grant
corporations the same excessive rights in the even more far-reaching
EU-US trade deal."
The report examines a number of investor
disputes launched against Spain, Greece and Cyprus in the wake of the
European economic crisis.
In most cases, the investors were not long-term
investors, but rather invested as the crisis emerged and were therefore
fully aware of the risks. They have used the investment agreements as a
legal escape route to extract further wealth from crisis countries
when their risky investment didn't pay off.
For example, in Greece, Poštová Bank from Slovakia bought Greek debt after
the bond value had already been downgraded and was then offered a very
generous debt restructuring package, yet sought to extract an even better
deal by suing Greece, using the bilateral investment treaty between Slovakia
In Cyprus, a Greek-listed private equity-style
investor, Marfin Investment Group is seeking €823 million in compensation
for their lost investments after Cyprus had to nationalize the Laiki Bank as
part of an EU debt restructuring agreement.
In Spain, 22 companies (at the time of writing),
mainly private equity funds, have sued at international tribunals for cuts
in subsidies for renewable energy. While the cuts in subsidies have been
rightly criticized by environmentalists, only large foreign investors have
the ability to sue.
Cecilia Olivet, co-author of the report for TNI said:
"At a time when ordinary people across
Europe have been stripped of many basic social rights, it is perverse
that the EU supports an international investment regime which provides
VIP protection to largely speculative foreign investors.
It is time to reject a privatized justice
system that supports predatory corporate vultures and undermines crucial
regulation in the public interest."
The report also unveils how speculative
investors have been backed by international law firms that actively
encourage investor-state lawsuits.
Law firms are reaping substantial financial
rewards in the process. UK-based
Herbert Smith Freehills, hired to represent
Spain in at least two cases, for example, could earn up to 1.6 million Euros
for the cases.
Growing controversy around
the EU-US trade talks has forced the
European Commission to temporarily halt negotiations on the investor
rights chapter in the proposed transatlantic deal and announce a public
consultation on the issue expected to start this month.
'Investor rights' is essentially a big business agenda that constitutes
little more than a recipe for the further plundering of economies by
This agenda allows big business to bypass
democracy and bully sovereign states into instituting policies that trample
over ordinary citizens' rights in the name of even higher profits.
However, the Commission has already indicated that it does not want to
abandon these controversial corporate rights, but rather reform them.
"The investor-state arbitration system
cannot be tamed.
Profit-greedy law firms and their corporate
clients will always find a way to attack countries for actions that
threaten their profits - even when it is much needed legislation to get
out of a financial crisis.
Corporate super-rights should be abolished."
The report's findings show how the global
investment regime thrives on economic crises.
While speculators making risky investments are
protected, ordinary people have no such protection and through harsh
austerity policies are being stripped of basic social rights.
Corporate investors have claimed in arbitration disputes more than 700
million Euros from Spain, more than one billion Euros from Cyprus and
undisclosed amounts from Greece. This bill, plus the exorbitant lawyers'
fees for processing the cases, will be paid for out of the public purse at a
time when austerity measures have led to severe cuts in social spending and
increasing deprivation for vulnerable communities.
In 2013, while Spain spends millions on
defending itself in lawsuits, it cut health expenditure by 22 per cent and
education spending by 18 per cent.
The report's authors conclude that the European Commission (EC) has
played a complicit and duplicitous role, effectively abetting this wave of
corporate lawsuits battering crisis-hit countries. Some of the lawsuits have
arisen due to debt and banking restructuring measures that were required as
part of EU rescue packages.
Moreover, the EU continues to actively promote
the use of investor-state arbitration mechanisms worldwide, most prominently
in the current negotiations for the controversial EU-US trade agreement.
This whole scenario is but one more ploy to facilitate what has been the
biggest shift of wealth from the poor to the rich in modern history.
The authors state that it is time to turn a
spotlight on the bailout of investors and call for a radical rewrite of
today's global investment regime. In particular, European citizens and
concerned politicians should demand the exclusion of investor-state dispute
mechanisms from new trade agreements currently under negotiation, such as
the proposed EU-US trade deal.
A total of 75,000 cross-registered companies
with subsidiaries in both the EU and the US could launch investor-state
attacks under the proposed transatlantic agreement.
Europe's experience of corporate speculators
profiting from crisis should be a salutary warning that corporations' rights
need to be curtailed and peoples' rights put first.