A Dubai real estate mogul had a prison sentence disappear. Manufacturing executives in El Salvador dodged having to clean up a case of dangerous lead contamination. Two global financiers embezzled $300 million from an Indonesian bank but got off light.
Welcome to the world of international arbitration court. BuzzFeed reporter Chris Hamby spent 18 months penetrating the court and tracing its influence.
“A court so powerful that nations often must heed its rulings as if they came from their own supreme courts, with no meaningful way to appeal. That it operates unconstrained by precedent or any significant public oversight, often keeping its proceedings and sometimes even its decisions secret. That the people who decide its cases are largely elite Western corporate attorneys who have a vested interest in expanding the court’s authority because they profit from it directly, arguing cases one day and then sitting in judgment another. That some of them half-jokingly refer to themselves as ‘The Club’ or ‘The Mafia.’”
No need to leave it to the imagination now. Today Hamby tells us how he discovered the court and then uncovered and laid bare its workings.
Here are a few highlights from our conversation:
Sapien: What’s your earliest memory of being introduced to this extraordinarily secretive system of justice?
Hamby: I think it was when I saw something on a mining case in El Salvador. It was Pacific Rim. That whole debate over that mining project just sparked controversy, and I think a small part of the story that I read mentioned something about this legal system in which the company can file a challenge. I had never heard of it that there was a private parallel justice system that exists for corporations or individuals for foreigners to basically sue entire countries. It was a little startling to me and I thought this can’t really be that big of thing or else I would’ve heard of it by now. I took this to my editors and said, “I’m looking into this system,” and their reaction was similar, was, “There’s no way. If this really existed and it was really important, we would know about it.”
We were skeptical from the start, but the more and more we dug into it, the more and more we found that not only was this a real thing, but it was a significant legal system that has global reach that is being used a lot, and increasingly so.
Sapien: At one point, you interviewed a former top lawyer at an Indonesian mining ministry. He dropped a bomb on you.
Hamby: We met at a restaurant, where they just bring out everything and put it on the table, it’s incredibly spicy, and he’s just looking over it as I’m eating this really spicy food. It’s a test. Then I felt like I passed the test and we started talking. It was one of those interviews where you leave and you say, “Oh my God. Wow.”
He was in charge of drafting the decrees that gave these mining companies these exemptions from this environmental law. He described in detail the meetings when the mining companies would come in and threaten to file arbitration claims and what specifically they said and why this was so concerning to the government. Then he said repeatedly, and it’s one of those things where I said I just want to make sure I understand what you’re actually saying to me, “This is the only reason why we issued these decrees was because we did not want to be sued in this international arbitration system. We could’ve lost billions of dollars, and so we gave them exemptions.” That’s the key thing. Of course I’m not relying just on him, but that was a critical interview.
Sapien: What’s the history of this system? It sounds like it was developed with an intention that was far different from what it became. Can you walk us through that transformation?
Hamby: The idea of this system dates back to the 1950s. Some western European nations were worried about these newly independent colonies seizing their assets, like mines and oilfields and factories that they have in these countries. It starts with the idea that we want to replace the use of physical force with a legal regime in which we have right to collect fair compensation if you basically steal our assets or do something blatantly discriminatory to favor your domestic companies over foreign companies. That’s the original idea.
It was after NAFTA, the North American Free Trade Agreement, really included these provisions and you have this awakening among a lot of elite lawyers who see a new lucrative field of practice here. They start to push novel and different cases and you really see an explosion.