Back in the 1950s, a new, democratically elected Iranian government nationalized foreign...

Back in the 1950s, a new, democratically elected Iranian government nationalized foreign oil interests. The UK and the US then backed a coup, deposing the progressive government with one more hospitable to foreign corporations:

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This nasty piece of geopolitical skullduggery led to the mother-of-all-blowbacks: the Anglo-American puppet was toppled by the Ayatollah and his cronies, who have led Iran ever since.

For the US and the UK, the lesson was clear: they needed a less kinetic way to ensure that sovereign countries around the world steered clear of policies that undermined the profits of their oil companies and other commercial giants. Thus, the "investor-state dispute settlement" (ISDS) was born.

The modern ISDS was perfected in the 1990s with the Energy Charter Treaty (ECT). The ECT was meant to foam the runway for western corporations seeking to take over ex-Soviet energy facilities, by making those new post-Glasnost governments promise to never pass laws that would undermine foreign companies' profits.

But as Nick Dearden writes for *Jacobin*, the western companies that pushed the east into the ECT failed to anticipate that ISDSes have their own form of blowback:

The Global Laws That Help Corporations Block Climate Action

Companies have long used international treaties to try to prevent Global South countries from asserting economic sovereignty. In recent decades, corporations have used such laws to stymie European governments’ attempts to tackle the climate crisis.

jacobin.com

When the 2000s rolled around and countries like the Netherlands and Denmark started to pass rules to limit fossil fuels and promote renewables, German coal companies sued the shit out of these governments and forced them to either back off on their democratically negotiated policies, or to pay gigantic settlements to German corporations.

ISDS settlements are truly grotesque: they're not just a matter of buying out existing investments made by foreign companies and refunding them money spent on them. ISDS tribunals routinely order governments to pay foreign corporations all the profits they *might* have made from those investments.

For example, the UK company Rockhopper went after Italy for limiting offshore drilling in response to mass protests, and took $350m out of the Italian government. Now, Rockhopper only spent $50m on Adriatic oil exploration - the other $300m was to compensate Rockhopper for the profits it *might* have made if it actually got to pump oil off the Italian coast.

Governments, both left and right, grew steadily more outraged that ISDSes tied the hands of democratically elected lawmakers and subordinated their national sovereignty to corporate sovereignty. By 2023, nine EU countries were ready to pull out of the ECT.

But the ECT had another trick up its sleeve: a 20-year "sunset" clause that bound countries to go on enforcing the ECT's provisions - including ISDS rulings - for *two decades* after pulling out of the treaty. This prompted European governments to hit on the strategy of a simultaneous, mass withdrawal from the ECT, which would prevent companies registered in *any* of the ex-ECT countries from suing under the ECT.

It will not surprise you to learn that the UK did not join this pan-European coalition to wriggle out of the ECT. On the one hand, there's the Tories' commitment to markets above all else (as the Trashfuture podcast often points out, the UK government is the only neoliberal state so committed to austerity that it's actually dismantling its own police force). On the other hand, there's Rishi Sunak's planet-immolating promise to "max out North Sea oil."

But as the rest of the world transitions to renewables, different blocs in the UK - from unions to Tory MPs - are realizing that the country's membership in ECT and its fossil fuel commitment is going to make it a world leader in an increasingly irrelevant boondoggle - and so now the UK is also planning to pull out of the ECT.

As Dearden writes, the oil-loving, market-worshipping UK's departure from the ECT means that the whole idea of ISDSes is in danger. After all, some of the world's poorest countries are also fed up to the eyeballs with ISDSes and threatening to leave treaties that impose them.

One country has already pulled out: Honduras. Honduras is home to Prospera, a libertarian autonomous zone on the island of Roatan. Prospera was born after a US-backed drug kingpin named Porfirio Lobo Sosa overthrew the democratic government of Manuel Zelaya in 2009.

The Lobo Sosa regime established a system of special economic zones (known by their Spanish acronym, "ZEDEs"). Foreign investors who established a ZEDE would be exempted from Honduran law, allowing them to create "charter cities" with their own private criminal and civil code and tax system.

This was so extreme that the Honduran supreme court rejected the plan, so Lobo Sosa fired the court and replaced them with cronies who'd back his play.

A group of crypto bros capitalized on this development, using various ruses to establish a ZEDE on the island of Roatan, a largely English-speaking, Afro-Carribean island known for its marine reserve, its SCUBA diving, and its cruise ship port. This "charter city" included every bizarre idea from the long history of doomed "libertarian exit" projects, so ably recounted in Raymond Craib's excellent 2022 book *Adventure Capitalism*:

Pluralistic: 14 Jun 2022 – Pluralistic: Daily links from Cory Doctorow

pluralistic.net

Right from the start, Prospera was ill starred. Paul Romer, the Nobel-winning economist most closely associated with the idea of charter cities, disavowed the project. Locals hated it - the tourist shops and restaurants on Roatan all may sport dusty "Bitcoin accepted here" signs, but not one of those shops takes cryptocurrency.

But the real danger to Prospera came from democracy itself. When Xiomara Castro - wife of Manuel Zelaya - was elected president in 2021, she announced an end to the ZEDE program. Prospera countered by suing Honduras under the ISDS provisions of the Central America Free Trade Agreements, seeking $10b, a third of the country's GDP.

In response, President Castro announced her country's departure from CAFTA, and the World Bank's International Centre for Settlement of Investment Disputes:

An open letter by progressive economists in support of President Castro condemns ISDSes for costing latinamerican countries $30b in corporate compensation, triggered by laws protecting labor rights, vulnerable ecosystems and the climate:

Honduras Ratchets Up Battle With Crypto-Libertarian Investors, Rejects World Bank Court

After the Honduran president repealed a law granting unfettered authority to outside investors, the crypto groups took the dispute to World Bank arbitration court.

The Intercept

As Ryan Grim writes for @TheIntercept_English_rss, the ZEDE law is wildly unpopular with the Honduran people, and Merrick Garland called the Lobo Sosa regime that created it "a narco-state where violent drug traffickers were allowed to operate with virtual impunity":

Honduras Ratchets Up Battle With Crypto-Libertarian Investors, Rejects World Bank Court

After the Honduran president repealed a law granting unfettered authority to outside investors, the crypto groups took the dispute to World Bank arbitration court.

The Intercept

The world's worst people are furious and terrified about Honduras's deaprture from ISDS. After 60+ years of wrapping democracy in chains to protect profits, the collapse of the corporate kangaroo courts that override democratic laws represents a serious threat to oligarchy.

As Dearden writes, "elsewhere in the world, ISDS cases have been brought specifically on the basis that governments have not done enough to suppress protest movements in the interests of foreign capital."

It's not just poor countries in the global south, either. When Australia passed a plain-packaging law for tobacco, Philip Morris relocated offshore in order to bring an ISDS case against the Australian government in a bid to remove impediments to tobacco sales:

Philip Morris vs. Australia: ISDS used to delay public health policies

isds.bilaterals.org

And in 2015, the WTO sanctioned the US government for its "dolphin-safe" tuna labeling, arguing that this eroded the profits of corporations that fished for tuna in ways that killed a lot of dolphins:

WTO Ruling on Dolphin-Safe Tuna Labeling Illustrates Supremacy of Trade Agreements

International trade deals like the TPP need to be carefully examined piece by piece because they can take precedence over a country's own laws.

The Intercept

In Canada, Conservative hero Steven Harper entered into the Canada-China Foreign Investment Promotion and Protection Agreement, banning Canada from passing laws that undermined the profits of Chinese corporations for *31 years* (it expires in 2045):

Harper's successor, Justin Trudeau, went on to sign the Canada-EU Trade Agreement Harper negotiated, including its ISDS provisions that let EU corporations override Canadian laws:

Harper OKs potentially unconstitutional China-Canada FIPA deal, coming into force October 1

It's official: Prime Minister Stephen Harper has approved the controversial Canada-China Foreign Investment Promotion and Protection Agreement (FIPA) today.In a short, two-paragraph news release, International Trade Minister Ed Fast said the deal was now ratified. It will come into force on October 1, 2014, and will be effective for 31 ye

The Vancouver Observer

There was a time when any challenge to ISDS was a political third rail. Back in 2015, even *hinting* that ISDSes should be *slightly* modified would send corporate thinktanks into a frenzy:

EU Proposes To Reform Corporate Sovereignty Slightly; US Think Tank Goes Into Panic Mode

Back in May, we wrote about the European Commission’s sharing “concerns” about corporate sovereignty chapters in trade agreements. The Commissioner responsible for trade, Cecilia …

Techdirt

But over the years, there's been a growing consensus that nations can only be sovereign if corporations *aren't*. It's one thing to treat corporations as "persons," another thing altogether to elevate them above personhood and subordinate nations to their whims.

With the world's richest countries pulling out of ISDSes alongside the world's poorest ones, it's feeling like the end of the road for this particularly nasty form of corporate corruption.

I'm touring my new, nationally bestselling novel *The Bezzle*! Catch me this weekend at Wondercon in Anaheim (Mar 29-31), the Boston (Apr 11), Providence (Apr 12) and beyond!