Powers of Transnational Corporations (TNCs) in WTO Competition Law Framework

Powers of Transnational Corporations (TNCs) in WTO Competition Law Framework

1. TNCs' RIGHTS TO SUE STATES IN COURTS CONTROLLED BY WTO DISPUTE SETTLEMENT

EU has proposed (again 7 weeks ago) a WTO framework on competition law to control countries to have competition laws which realize "core principles" of "transparency, non-discrimination and procedural fairness".

"The best guarantee for a transparent and non-discriminatory enforcement of competition law is to recognize all firms, whether domestic or foreign, effective means to seek redress against anti-competitive" private and public practices.

TNCs would get effective compensations by their "right to bring complaints before... authorities and... right of action before the courts". And "the credibility of an enforcement system" must be guaranteed by "the availability of sanctions at a level severe enough to have a deterrent effect" (WT/WGTCP/W/115, 12.4.-99 p. 7-8)

"Procedural fairness" requires credibility of "guarantees" of TNCs' access "to the agency or court applying the law", their "right of appeal against administrative decisions" and "availability of effective and adequate domestic remedies" for TNCs, guaranteed by "powers and sanctions, capable of... deterring effectively". (EU's new WTO proposal "Core principles", 19.11.2002; WT/WGTCP/W/222, paragraphs 25-26 and 8-9)

To guarantee rights and remedies for TNCs, WTO dispute settlement would control domestic laws and courts :

"Affirming... transparency, non-discrimination and procedural fairness as WTO commitments", shall make them "binding core principles"; "compliance with these principles is subject to dispute settlement" of WTO (W/222;parag 16) (even though Doha ministerial gave no mandate for dispute settlement in competition!)

So, even though it distorts competition to control it by monopolizing powers to set trade sanctions, which easily bureaucratically restrict rights of action, which could be competitive under democratic laws of an economy, still EU proposes :

If TNCs consider that country's democratic decisions would restrict particulary transnational profit making, TNCs would have right to get compensation and remedies by national courts and procedures
If not pleased with the remedies given for TNCs, their home countries ask WTO dispute settlement to change host countries' laws and court procedures through the threat of trade sanctions.

2. RIGHTS OF INVESTORS TO REMEDIES FROM THE LOSS OF COMPETITIVITY OF INVESTMENT

"Effective equality of competitive opportunities" of "trade and investment of other WTO Members" should be "at the centre of the interaction between trade and competition" in the WTO according to the EU.

States would be obliged to arrange for TNCs compensation from all such restricting "impact on international... investment" which is caused by "private and public undertakings" . (W/115, pages 11-12).

TNCs get rights to "direct access to the courts and review of administrative decisions" to get compensation from loss of competitivity of their investments, "in relation to regulatory policies or other forms of government intervention" (W/115 ; page 13)

"Competition agency is the appropriate vehicle to replace... procedures to vet foreign investment and other establishment requirements" and to move "away from ... methods of ex ante screening of foreign investment" ("The relation between investment and competition policy" 12.11.1998)

WTO "framework agreement should ... reinforce... the process of trade and investment liberalisation" by obliging to enact competition law, which guarantees for TNCs "right of appeal against administrative decisions" and "effective domestic remedies" through "sanctions ... established at a sufficient level to constitute effective deterrence" ("A Multilateral Framework Agreement on Competition Policy";25.9.2000; WT/WGTCP/W/152; pages 4, 6,7,14)

3. LAWS OF DEVELOPING COUNTRIES WOULD BE CHANGED FOR THE NEEDS OF TNCs

Change of countries' laws by effective deterrences and threats of trade sanctions to give remedies for TNCs, is far from being "compatible with existing" key elements of "national competition regimes" and their differences - which compatibility EU pretended on 19.11.2002 to promise by saying "consistently" to developing countries :

WTO "framework agreement would not require a harmonisation of domestic competition laws".

On 18.12.2002, the International Chamber of Commerce (ICC) published opposite news:

"Competition rules must be harmonized, ICC hears" from EC Director General for Competition who with his US collegues "agreed that competition systems...had to respond" by harmonization, as "increasingly international... business transactions and the proliferation of different rules has exposed inconsistencies between national systems". "In the World Trade Organization... it... remained unclear" (between the US and EU) only ; "which system the world should converge towards" to harmonize. (ICC homepage)

EU and US would have no reason to urge so strongly such harmonization by a new WTO framework of "core principles", if there would already exist such a wide international harmony in "core of commonality regarding... competition law and policy" (as EU said to DCs there to exist), that :

The "proposed framework would be fully compatible with... differences in national competition regimes" because of their "core of commonality" in the status of "core principles" of "non-discrimination, transparency and procedural fairness" (EU-communication W/222 to WTO-members in 19.11.; paragraphs 2-3).

Even US told 6.11.-02 the very opposite regarding the "core principles" - "procedural fairness" for example - :

"There is currently no broad international consensus on what constitutes procedural fairness" and it is "unlikely" for WTO to reach "a consensus on detailed... guidelines that respect differences in legal systems and do not infringe on national sovereignty or violate the independence of enforcement... and courts".

So if under WTO framework countries would aim "to read individualized notions of fairness into procedural fairness guidelines", this creates "invitation to attack any Member's system for failure to comply" and can thus violate "national sovereignity or... independence of enforcement... and courts" (USA; WT/WGTCP/W/219)

But EU indeed proposes for TNCs such ability to attack with support of WTO trade sanctions to remove the sovereignity and independence of developing countries' laws and court processes :

4. BINDING COMMITMENT TO NON-TRANSPARENCY of the legislatory effects OF "CORE PRINCIPLES"

"A WTO Agreement would... lock Members into these principles" (W/222 parag 6) so that (for the threat of trade sanctions) countries must change their laws and procedures to guarantee for TNCs "availability of effective... remedies" from countries' economies. And after changing their laws, countries can not step back.

"Core principles" would be thus "unambiguous" to lock the laws of countries into the hands of the WTO dispute settlement "but without... a detailed description of how they would operate"; of how they would affect and change the substance of other laws (W/222 parag 5).

How could countries commit their "laws, regulations and guidelines" to become locked to such principles, whose operation and effects - on the substance, scope and enforcement of laws - are not properly known... but are bound to become bindingly decided (afterwards) by WTO dispute settlement ? (parag 14)

To drop so blindly and arbitrarily laws of countries into such a black hole, would be indeed quite the opposite of any due transparency, procedural fairness and non-discrimination.

What shall be in national laws and courts "adequate... powers and sanctions, capable of... deterring effectively" would be decided by WTO dispute settlement without any further "detailed definition of the substantive scope" of such laws or "of the powers of enforcement authorities" of these laws (W/222 parag. 8).

WTO would oblige states to enact "competition law...based on...non-discrimination" of firms, guaranteeing for TNCs "right of appeal against administrative decisions" and "effective domestic remedies" (W/152; p. 6-7)

Competition law must prevent "in a progressive manner" measures "which deny foreign firms effective equality of competitive opportunities" in investment or trade (W/115, page 6).

EU says that "non-discrimination" in WTO competition framework would not mean "national treatment to be applied to" "firms under a range of other policies" or other forms of "law and regulation", but only to the treatment under "the domestic competition law regime". (W/222 paragraphs 12-15).

EU provides however nothing to exclude the decisions of other policies from the binding application of national treatment :

a) EU leaves all "more detailed definition of the substantive scope" or "enforcement" on application of domestic competition law regimes to become determined bindingly by WTO dispute settlement. (parag 8)

b) This blind structure of ruling would be established to expand so that "additional core principles could emerge from... future negotiations" (W/222 parag 10))

c) EU defines rights in competition laws primarily as rights of firms and not as rights of public administrations :

"Rights of private parties... are central for the application of... non-discrimination" ; TNCs get such "right to... complaints... and... right of action before the courts", that their "ability to compete on an equal footing will not be undermined by measures taken by governments".
Regarding the competitivity of investment, for which there would be enacted - also by WTO investment framework ? - rights of non-discrimination, the investors can seek redress for various public measures.
"Direct action by private parties before the national courts" shall make various "remedies... available" for TNCs through "injunctions, cease and desist orders, administrative sanctions or fines, criminal penalties, nullity of contracts, award of damages etc." (W115; pages 7-8)

d) As TNCs would be so free to make complaints on competition in various sectors, also even USA wonders :

how could a country "demonstrate that its decisions to follow up on some complaints but not others were fair"
and as "an antitrust authority shares jurisdiction for competition matters with other government agencies or regulators, would the decisions of those entities also be reviewable ?" (USA; WT/WGTCP/W/219)

So various development policies of countries can become punished as 'anti-competitive' restrictions.

5. COMPENSATIONS FOR TNCs PAID BY COUNTRIES' SELF-DETERMINATION AND DEMOCRACY

WTO would oblige developing countries' economies to pay from their democratic development policies big compensations for TNCs, or othervise trade sanctions (mainly of the US and EU) will follow to change or remove (not individual decisions of courts, but) the democratic laws or courts' etc. procedures.

And even though many "WTO members ... want to include other substantive issues in their ... competition laws such as abuse of a dominant position, monopolisation and merger control", still "a WTO agreement should not ... include such substantive provisions".

Remedies for such essential "anti-competitive practices of concern for developing countries" do not get support in the binding WTO control of the national laws (W/222, parag 8).

Even the development dimension is understood by the EU to mean that "enforcement assistance... would reflect the principle of special and differential treatment in a future competition agreement" so that :

"Assistance could cover the drafting of domestic legislation" as "authorities in developing countries need enforcement assistance from more experienced authorities" (WT/WGTCP/W/184)

So EU would 'assist' to write developing countries' laws to make them obliged and controlled to provide effective and adequate domestic remedies for TNCs - even without domestic control of countries' own laws, courts and procedures :

"What is crucial is not necessarily that such laws and authorities be national" but that effective remedies for TNCs are guaranteed by "adequate...powers and sanctions, capable of...deterring effectively"; "Failing to provide adequate protection...could...expose a competition authority... to claims for damages" (W/222,paragraphs 8-9, 25 and 27-28)

Ville-Veikko Hirvelä, WTO-campaign of the Finnish NGOs