THIS SEARCH     THIS DOCUMENT     THIS CR ISSUE     GO TO
Next Hit        Forward           Next Document     New CR Search
Prev Hit        Back              Prev Document     HomePage
Hit List        Best Sections     Daily Digest      Help
                Contents Display    

In 1998, the Governor of California banned the fuel additive MTBE because it has a tendency to leak out of gasoline storage tanks at a much faster rate than other blended gasoline, such as ethanol. We have just been through an ethanol fight on the floor of the

[Page: S4595]  GPO's PDF

   Methanix, whose subsidiaries produce methanol, which is the M in the MTBE, filed a chapter 11 claim on the grounds that the ban diminishes their expected profits. Methanix claims that this public health law discriminates against the flow of capital and therefore discriminates against the goals of NAFTA .

   I am not sure any of us would say that makes a lot of sense, but the arbitration panel has yet to agree, and the case demonstrates exactly why we need to protect legitimate health and welfare laws.

   The Methanix case is the most expensive of any pending claim. They are seeking compensation and almost $1 billion in damages. It is not just California that would suffer. All of us as a consequence would suffer because each State is subject to the same kind of problem, and that State, California in particular, would lose money out of education funds, highway funds, or other grants from the Federal Government were that case to succeed.

   A less well known case, but perhaps more egregious, is the case against a jury finding by a Mississippi court against the Lowen Group, which is a Canadian-owned funeral parlor chain. Lowen was sued by a Biloxi funeral home for unlawful anticompetitive actions designed to drive up local insurance costs, forcing smaller funeral parlors into selling. A Mississippi State court agreed with the Biloxi funeral home and awarded $500 million in damages.

   Lowen appealed to the State supreme court which refused to reduce the bond amount needed to receive a stay. Instead of paying a bond, Lowen settled the case for $175 million. It then proceeded to the NAFTA tribunal to file a claim. Lowen's

   chapter 11 case is predicated on the argument that the trial court's refusal to vacate the verdict was tantamount to an expropriation, and the case is now pending.

   The message of this case and of the Methanix case could not be more clear: Anytime a foreign corporation dislikes the outcome of a U.S. jury trial, it can run to an international arbitration panel and try to get the ruling reversed. That is not what we wanted to have or intended to have happen in NAFTA , but the only way to protect it is to change that law now.

   There are other cases. Let me call attention to the Mondev case which has nothing to do with the environment but everything to do with our sovereignty. The doctrine of sovereign immunity is centuries old in this country, and it holds that you cannot sue a government unless such a lawsuit is expressly permitted. But a claim against an action taken by the city of Boston by Mondev International, a Canadian real estate developer, has challenged this concept before a NAFTA tribunal.

   The Mondev case is an example of those cases where we ultimately see the sovereignty of the Supreme Court of the United States being subjected to second-guessing and questioning by a secret tribunal of NAFTA , over which we have no control of the standards because the standards have not been set to respect the Constitution of the United States.

   I can remember how many times Senator Helms from North Carolina has come to the Senate Chamber and said we should not sign a treaty that somehow obviates the demands of the Constitution of the United States. It seems to me that is precisely the principle which is at stake here, which is why Senator Helms, who I know will not be here to vote, supports this amendment as others who believe the Constitution should not be subjected to second-guessing by an international tribunal.

   These second-guessing efforts will have a chilling effect in the end on investment. They create expensive litigation. Just the threat of the litigation is, in and of itself, a chilling effect. I believe, based on these claims, chapter 11 , as it currently stands, can be used to threaten governments from enacting public health measures.

   The Canadian Government has now sought to ban the use of the words ``light,'' ``mild,'' and ``low tar'' from cigarette advertising. Philip Morris recently issued a warning to Canada under NAFTA that Canada must compensate investors when measures expropriate investments in Canada. We are going to go back and forth on this. We are going to have a constant second-guessing and a constant challenging of these standards.

   It seems to me we ought to recognize that the Baucus bill, as amended, does not ensure that long-held U.S. case law on expropriation is upheld. The Baucus bill allows cases still to be decided against the United States when regulatory or statutory actions result in a partial taking. Such a case would stand on far more tenuous grounds in U.S. courts based on U.S. law and legal precedents.

   My amendment would ensure that foreign companies could use investment dispute mechanisms. We do not say they cannot do it. We honor the concept of NAFTA or any treaty creating a dispute mechanism, but when a Government action causes physical invasion of property or denial of economic use of that process, that should be consistent with U.S. Supreme Court holdings.

   In the Concrete Pipe case which was decided by the Supreme Court in 1993, the Court said:

   Our cases have long established that the mere diminution of a value of property, however serious, is insufficient to demonstrate a taking.

   We should not subvert that holding of the Supreme Court by refusing to embrace in this legislation a recognition of American sovereignty in court procedure.

   I reserve the remainder of my time.

   The PRESIDING OFFICER. Who yields time?

   Mr. GRAMM. Mr. President, I yield myself 10 minutes.

   The PRESIDING OFFICER. The Senator from Montana.

   Mr. BAUCUS. I yield 10 minutes to the Senator from Texas.

   The PRESIDING OFFICER. The Senator from Texas is recognized for 10 minutes.

   Mr. GRAMM. Mr. President, we just heard a wonderful dissertation on the trade equivalent of single-entry bookkeeping. Our dear colleague has talked on and on about investment protections in the United States, but he has not said one word about investment protections in other countries for American investors.

   I want to take a moment to remind my colleagues of a little history that I think is critically important in understanding this issue.

   At the end of World War II, we negotiated a series of treaties known as Friendship, Commerce, and Navigation Treaties. Later, in the 1980s, we began entering into what are known as bilateral investment treaties, and today we have 45 such treaties. In both the FCN treaties and the bilateral investment treaties, we established procedures to protect our investors overseas. These protections, which were modeled on familiar concepts of American law, became the standard for protection of private property and investment around the world. And they made sure that our investors were protected from unfair treatment by foreign nations.

   Why does the business community in America adamantly opposed the Kerry amendment? It is not because of concerns about foreign investor protections here in America. It is because they are concerned about protections for Americans overseas. Investment is a reciprocal process. We negotiated 45 bilateral investment treaties in order to protect American investment from being confiscated by actions of other countries.

   As for foreign investment in America, our colleague argues that billions of dollars will be lost to foreign investors. But he fails to point out that never, ever, have we lost a case since these 45 treaties have been in effect. Not once since chapter 11 of NAFTA has been in effect have we ever lost a case. Not once has there ever been a judgment against the United States of America for failing to protect private property or investments.

   The problem with this amendment is very simple and straightforward. The problem is that we are not talking only about foreign investors in America. We are talking about American investors around the world as well. These investment agreements are reciprocal.

   In countries all over the world, if an investor is a large American company,

[Page: S4596]  GPO's PDF

   If we take away the investor protections we have worked for years to establish, if we carve out certain areas where investor protections will not apply, if we narrow the scope of investor protections, we will be leaving American investors vulnerable to actions by foreign governments. And in turn we will be discouraging our businesses from investing around the world. Keep in mind that United States investment abroad helps create a market for American goods, promote capitalism, promote democracy, and do everything else that we in the United States want to see done around the world. It is critically important that that investment be protected.

   Every day these investment treaties protect American investment around the world. Meanwhile, we have never lost a case under these same investment treaties.

   Let me explain further to my colleagues what happens if we do not provide investment protections. American businesses in certain countries often end up being forced to deal with government corruption. Congress passed the Foreign Corruption Practices Act to try to stop such corruption. But under this amendment to lower investor protections, hundreds of billions of dollars of American investment abroad would be jeopardized. We are the largest investor in the world, and these protections are critically important to us.

   Let me just recap, then. Today, we have 45 bilateral investment treaties in effect, and each one of them contains a procedure whereby if American investors have their property taken, if they are discriminated against, if they cannot send their earnings back to their home country, they have in place procedures under which they can get access to justice.

   In 57 years since we have had investment treaties, never, ever has the United States of America lost a case. But every day these same treaties protect American investments in Central and South America, in Africa, in Asia, in the developing world, in the very countries we say we want to see develop capitalist and democratic systems.

   If we adopt the Kerry amendment, not only would we be responding to a circumstance that has never existed, since America has never lost a case, but we would be undercutting protections for the hundreds of billions of dollars' worth of American investments abroad. And, because of the massive economic damage that would result, we would lose the support of the business community for the trade promotion authority bill.

   What would we gain if we adopted the Kerry amendment? We simply would gain some ``degree of protection'' in cases that seem silly on their face. It is hard for me to imagine that any of the cases mentioned could possibly result in an affirmative judgment, but that is speculation since no judgment has been made. In 57 years we have never had a judgment against the United States of America.

   Remember, investment agreements are reciprocal. If the Kerry amendment applied only to investment in America, this would be a largely symbolic but not a very harmful amendment because American protections are solid. But investment protections are reciprocal. Therefore, whatever protections we pledge to apply to foreign investors in America are going to apply to our investors in Mexico, our investors in Africa, our investors in South America, and our investors in developing countries in Asia. Since the Kerry amendment would affect not only foreign investors here but our investors there, we would be stripping away the protections that American investment now have. We would be hurting American companies, and their hundreds of billions of dollars of potential investment, and we would lose the jobs, economic growth, and economic opportunity that has resulted from our status as the world's largest investing nation and the world's largest exporting nation.

   The Kerry amendment should not be adopted. There is no basis for adopting it. It does our interests virtually no good in America, but it does massive harm to our interests everywhere else in the world.

   I reserve the remainder of my time.

   Mr. KERRY. How much time do I have remaining?

   The PRESIDING OFFICER (Mr. JOHNSON). Fifteen minutes twenty-four seconds.

   The Senator from Montana.

   Mr. BAUCUS. I ask unanimous consent that the underlying time agreement be extended an additional 30 minutes equally divided.

   The PRESIDING OFFICER. Without objection, it is so ordered.

   The Senator from Massachusetts.

   Mr. KERRY. Mr. President, let me answer my friend from Texas. There is no stronger debater, there is nobody obviously we know who is more capable of making an argument, but this is an argument in which the Senator is flat, dead wrong.

   Only five cases are pending today that were brought against

   the United States in which we are a defendant under chapter 11 . No case has yet been decided. When he says we have never lost a case, no case has been decided in which the United States is a defendant. We are currently a defendant in five cases, and there were only six cases until 1998. Since then, there have been another five cases. What the attorneys general of our States and the conference of mayors of our States and those responsible for the taxpayer--I mean, the businesses are sitting there, many of them with offshore interests, many of them not paying any taxes. It is not going to come out of their pocket, but the average American taxpayer is going to feel the bite if we have an expropriation case decided against an American company that comes against, say, the State of California or another State, and that is going to come out of the pockets of our citizens.

   Secondly, the Senator from Texas is absolutely incorrect when he suggests this is going to leave our companies defenseless abroad. Let me be very specific. If a foreign government overreaches, the same investor-state mechanism will exist. We do not take away the investor-state relationship. We honor it. We do not take away the investor-state mechanism for resolution of disputes. We leave it in place. All we do is say the standard by which it should apply should not be less than the standard applied by the Constitution of the United States. It is very simple. Our businesses, our States, our taxpayers, should not have another country or another business from another country suing us and claiming that one of our health laws or one of our environmental laws has taken away the profits of that company and then some international arbitration panel, without any American judge who applies the standards of the American courts' case law that has been settled, are going to decide, oh, yes, we think that is a great idea.

   Let's hit the taxpayers of California to pay us because our investors are losing a lot of money.

   No one should doubt this is coming down the road. Chapter 11 has yet to be put to the test. Before it is put to the test, we ought to have the courage to say we are happy to honor the concept of an international standard, but don't undo the case law established by the Supreme Court of the United States. That is all we are saying.

   My colleague from Texas tries to say we will undo years of settled procedure for companies doing business abroad. That is just not true. That is not what we are going to do. We are suggesting a U.S. investor abroad can still win a claim, provided the investor can show they are discriminated against on the grounds of national treatment, which is the international standard we have agreed to; a performance requirement is the basis of the offensive State action; the offending legislation as enacted or applied is discriminatory in purpose; and if there is a wrongful expropriation under the standards by the Supreme Court.

   I remind my colleague that under the standards of the Supreme Court is Justice Scalia who has argued what that appropriate standard ought to be. Let me be specific. In the 1999 case College Savings Bank vs. Florida Prepaid Postsecondary Education Expense Board,

[Page: S4597]  GPO's PDF

   That is an opinion authored by Justice Scalia. We are suggesting what the Senator from Texas is allowing for is some arbitration panel with a group of people who do not believe in the Supreme Court standard, to suddenly say we will apply a different standard to the takings. That does a disservice to our businesses and a disservice to the American taxpayer.

   I reserve the remainder of my time.

   The PRESIDING OFFICER. The Senator from Texas.

   Mr. GRAMM. I have 2 minutes, and I would like to respond very briefly.

   First, under the Kerry amendment, if you were an American investor, you could not even file a claim against a developing country that has taken your property unless the U.S. Government agrees to it. And what if the U.S. Government were in some sensitive negotiation with that country? They would want you to simply go away. Whoever heard of having investor protections that are determined on a case by case basis by a government rather than pursuant to an agreement?

   Second, it is one thing for an amendment to say that we should borrow part of the evolving takings standard--and we all know that the takings doctrine is evolving--from the Supreme Court. But it is another thing to convert that evolving standard into a new international principle, with the result that if a developing country takes only 99.9 percent of an investor's property, the investor has no claim or protections.

   Clearly, governments that are interested in shaking down American investors are not interested in taking the investor away; they are interested in being paid off for the right to do business in their country. A key purpose of the investment treaties we negotiated over the past 57 years was to prevent our investors from being forced to pay off corrupt governments abroad. That is what we have been trying to stop. Through the Cold War, where we did not have these agreements in place, American businesses had no choice but to pay off corrupt local governments, which the Communists then pointed to as capitalism. That caused us problems all over the world. We negotiated these agreements to put an end to those problems and instill the rule of law worldwide.

THIS SEARCH     THIS DOCUMENT     THIS CR ISSUE     GO TO
Next Hit        Forward           Next Document     New CR Search
Prev Hit        Back              Prev Document     HomePage
Hit List        Best Sections     Daily Digest      Help
                Contents Display