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Exxon’s poker-face: a probe into the oil giant’s deck raises questions about its climate change research, denial and actions

By Meric Sar

An ongoing investigation by the New York Attorney General into whether one of the world’s largest oil-producers misled markets about the risks posed by climate change may prove to be a groundbreaking and watershed moment. As other state and federal authorities are expected to pursue similar actions, it is becoming increasingly clear that the fossil fuel industry is facing a bolder regulatory environment, especially with regard to the integrity of the industry’s marketing and research practices. This trend is particularly meaningful when reviewed in tandem with the Obama Administration’s achievements in steering America and the world towards renewable energy, sustainability and energy independence.

THE INVESTIGATION INTO EXXON

The investigation began with a subpoena issued by Eric Schneiderman, New York Attorney General, to Exxon in early November 2015, requesting a massive discovery of Exxon’s corporate records going as far back as 1970s. The Attorney General is seeking to understand if Exxon breached New York State’s Martin Act by misleading the market and greater public about climate change.

For the prosecutor, a case could be built if enough evidence exists to prove that Exxon actually knew – or reasonably should have known – that climate change is real, but failed to properly disclose this information and its potential implications on the company’s business outlook. Since the risks associated with climate change would potentially hurt Exxon’s stock prices, Exxon may also be accused of causing market-price distortion by concealing this “inconvenient truth” and even orchestrating efforts to re-frame the public opinion, to the extent of substantially influencing “independent” scientific research on global warming.

Several investigative reports by Inside Climate News and the Los Angeles Times spurred Schneiderman’s investigation. These reports allegedly document that in 1970s, when global warming began attracting scientific attention, Exxon “assembled a brain trust [that deepened] the company’s understanding” of climate change. According to the reports, in the late 1980s, the company went into a policy change and adopted a strategy of “climate denial,” manufacturing “doubt about…global warming,” despite the potential research information available to the company that proves otherwise. For years, as a commercial company, Exxon has downplayed the possible effects of climate change-related regulations in public reports to investors by referring to the issue as “uncertain,” “difficult,” or “not possible” to reasonably predict.

FREE SPEECH AND CORPORATIONS 

According to some, lying is an ordinary American pastime, especially in politics, and this investigation represents a cynical and heavy-handed government action to curb free speech in the climate change debate. Yet, Exxon is not an ordinary citizen with a big mouth. Energy companies are savvy Washington juggernauts, and have been historically instrumental in shaping the policy debate and scientific discourse surrounding our understanding of climate change. Today, under a series of laws and court rulings, including the much-debated Citizens United case, corporations enjoy extensive free speech rights, which has been criticized by some as too broad and counter-intuitive to democracy. However, the exercise of political speech by a commercial enterprise can conflict with its other duties towards the market.

Under the U.S. Constitution, even dishonest or misleading political speech is generally accepted to be free, and punishment of people (or corporations) for expressing merely political speech is unconstitutional. However, restriction of free speech is common on various state and federal law grounds, especially in relation to securities fraud. In New York, the Martin Act gives state prosecutors broad powers to prosecute financial fraud, and sets a lower threshold to prove direct harm and causation in comparison to federal laws. The U.S. Securities and Exchange Commission (“SEC”) regulates and prohibits even truthful speech by companies in many situations. A duty of truthfulness about material business information for publicly traded companies is essential to balance the asymmetrical power of influence that the corporations are enjoying in shaping the U.S. politics, especially in the aftermath of the Citizens United.

THE MARTIN ACT OF NEW YORK

The Martin Act is an almost century-old New York state enforcement statute that predates the SEC. Originally, the law only conferred the power to pursue civil suits but was later amended to allow for criminal prosecutions. The Act gives broad powers to state prosecutors in issuing remedial measures to maintain the integrity of the markets. It has been used to stop Ponzi schemes, mortgage fraud and Wall Street abuses in the past. Hence, using it with respect to climate change may play a crucial role in bridging the shortcomings of federal authorities due to the legal constraints on their powers.

In his subpoena to Exxon, Schneiderman is seeking a myriad of documents related to Exxon’s internal research on the causes and effects of climate change, and how this information was used in business decisions, projects, analysis and communications with trade groups. Experts think the issue of what counts as a “material” information will be the decisive factor in the case. Not all undisclosed research is material information that needs to be disclosed to the public if the resulting information is obvious or otherwise generally available to the knowledge of investors. This, of course, entails another question: whether Exxon or other similarly situated energy companies are in a unique position, holding certain information that is not available to the rest of the world on the issue of climate change.

Exxon embraced the need to curb greenhouse gases in 2006, following the company’s change in its chairman and CEO. Since 2009, the Texas-based company has advocated for a revenue-neutral carbon tax as the fairest way to cap harmful emissions. According to the General Counsel of Exxon, the “[company] scientists have been involved in climate research and related policy analysis for more than 30 years, yielding more than 50 papers in peer-reviewed publications.” Its scientists have participated in the United Nations Intergovernmental Panel on Climate Change since its inception and were involved in the National Academy of Sciences review of the third U.S. National Climate Assessment Report.

Despite the rosy picture Exxon tries to paint, many environmental organization take issue with Exxon’s climate denial activities. In a 2007 report, the Union of Concerned Scientists accused the company of financing “a sophisticated disinformation campaign…to deceive the public” about global warming. The report argues that Exxon Mobil gave $16 million to 43 groups that preached climate change skepticism from 1998 to 2005. If Exxon knowingly lied or downplayed the risks of climate change to the public or investors, as the 2007 report argues, they may have broken the law.

RISE OF A GREENER REGULATORY CULTURE?

The current probe comes after the New York Attorney General Schneidermann reached a settlement with the largest U.S. coal mining company, Peabody Energy, after the company was accused of misleading investors about the financial risks of climate change. In the settlement, Peabody agreed to include more comprehensive disclosures in its disclosures to the market about the potential costs of climate-related regulations. Settlements such as this – although do not represent a binding judicial authority – reflect a growing consensus and a pattern of self-correcting behavior among the high echelons of the American economy, which is gearing up for a sustainable energy future.

A discussion on the causal link between climate change and the fossil fuel industry often slips away from having its day in the courtroom. A judicial inquiry into the truth of global climate change as a fact has been thus far too elusive for the courts to handle despite widespread consensus among the scientific community about the anthropogenic climate change. The magnitude of the phenomenon defies a conclusive study, and the divisive nature of the surrounding public debate moves the courts to defer to a regulatory culture that has been traditionally protective of the global interests of U.S. and global energy conglomerates – an industry that has been a historical stalwart of the U.S. economy. Whether this investigation ends in a trial or not, big changes may be on the horizon.

Meric Sar is a Staff Writer for Rights Wire.

The views expressed in this post remain those of the individual author and are not reflective of the official position of the Leitner Center for International Law and Justice, Fordham Law School, Fordham University or any other organization.

Photo Credit: Mike Mozart/Creative Commons


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Czech Republic: the refugee crisis and systematic human rights violations

By Sarah Ben-Moussa

As refugees travel to Europe in search of sanctuary, some have been crossing through the Czech Republic, which is often merely a passing point on the way to other parts of Europe, such as Germany or Sweden. The Czech Republic received over 1,350 asylum requests through November 2015, a small figure compared to Germany’s 1.1 million asylum seekers in 2015. Notwithstanding this fact, refugees passing through or requesting asylum in the Czech Republic often face detention, arbitrary fines, lack of access to justice and widespread xenophobia.

SYSTEMIC ABUSES

On Oct. 22, 2015, Zeid Ra’ad Al Hussein, the High Commissioner for Human Rights, criticized the Czech Republic for systematic violations of the human rights of refugees attempting to cross through the Czech Republic on their way to Germany.

Refugees face detention for up to 90 days, and are sometimes fined 250 CZK (10 USD) to finance their own detention, he said. Refugees have also reportedly been strip-searched on a regular basis and any money on their persons has been confiscated. In the first nine months of 2015, over 7,000 refugees were detained by the Czech government, most for 90 daya.

Conditions in detention centers, particularly in the Bela-Jezova center, are “worse than a prison”, according to the Czech Justice Minister, Robert Pelikán. Anna Sabatova, the Czech Ombudsman, reiterated this criticism, and warned that children risked being traumatized while in detention by the constant presence of armed guards, who often degraded refugees in front of their children. Moreover, the Czech Ombudsman has noted that the treatment of children in these centers violates the U.N. Convention on the Rights of a Child, to which the Czech Republic is a party. The Committee on the Rights of the Child itself has also criticized the detention of children and minors based on the migration status of their parents as a violation of international law, which the Office of the High Commissioner on Human Rights also emphasized in its statement.

Legal reprieve is often also hard to obtain. Although the High Commissioner noted that there have been refugees who have challenged their detention and prevailed, he said that many were not in a position to seek judicial remedy, due to lack of information about their right to free legal aid and the restricted access of civil-society groups in some detention facilities. In November 2015, refugees in one detention center went on a hunger strike in protest of the long detention times and the possibility of being repatriated to their home country.

Furthermore, Czech President Miloš Zeman has repeatedly made xenophobic comments against refugees, contributing to a toxic atmosphere in a country where 70 percent of the population opposes the arrivals of refugees, according to a 2015 poll. President Zeman has gone on record warning against the influx of refugees, arguing that refugees will bring Sharia law with them, endangering Czech society. “The beauty of our women will be hidden, as they’ll be forced to wear burkas,” Zeman said. He was quick to add, “Though I can think of some for whom this would be an improvement.”

In December 2015, Zeman called the refugee influx an “organized invasion” of Europe, and called on refugees to stay in their home countries to fight the Islamic State. And in January 2015, Zeman said that it is “practically impossible” to integrate Muslims into European society, and that the surge of refugees was planned and coordinated by the Muslim Brotherhood of Egypt in an effort to gain control of Europe. These comments have spurred violence against refugees in the Czech Republic, drawing condemnation from the Czech Prime Minister Bohuslav Sobotka.

CZECH RESPONSE TO CRITICISM

In response to international criticism, Czech Interior Minister Milan Chovanec stated that he disagrees with the U.N. that Czech policies violate human rights law. He added that conditions have been improving and said that the High Commissioner was welcome to come to the Czech Republic and examine the situation.

The President’s office, however, was much more defensive, responding to the U.N. criticism via Facebook, and posting that the “verbal attack” by the OHCHR was not the first, and was part of an “intensifying” campaign against the Czech Republic. The spokesman for his office later added that the President stands by his opinion and will not change his mind due to pressure abroad.

It should be noted, however, that the President does not hold a large amount of policy power, and instead functions as a ceremonial head of state. Although they do not use the same inflammatory rhetoric, the center-left government of the Czech Republic still remains the only state currently detaining refugees and migrants for such long periods of time. They also faced criticism from human rights advocates and Jewish groups in 2015 for numbering refugees as they arrived off of trains, a practice with deep historical ties to the Second World War. They quickly abandoned the practice after the backlash.

A BETTER WAY FORWARD?

The Czech Republic has been defiant in its stance on refugees, denying any human rights violations. The lengthy detention of refugees and the dehumanizing treatment they face serves no legitimate purpose but to degrade refugees and create an additional obstacle in their already difficult journey to safety. As Europe braces for more refugees in 2016, the question is if the Czech Republic will continue adhering to its policies that fly in the face of international law and human rights standards, or seek a new, rights-based way forward.

Sarah Ben-Moussa is a Staff Writer for Rights Wire.

The views expressed in this post remain those of the individual author and are not reflective of the official position of the Leitner Center for International Law and Justice, Fordham Law School, Fordham University or any other organization.

Photo credit: Lukas Krasa/Creative Commons


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How the Trans-Pacific Partnership fails human rights

By Rodrigo Bacus

On Nov. 5, 2015, the Obama administration released the full text of the Trans Pacific Partnership Agreement (TPP), triggering a three-month Congressional review for approval. The TPP was negotiated between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the United States, representing around 40 percent of the world economy. The TPP covers a broad range of topics including patents, intellectual property, labor trade, free trade, investments and the environment. Since 2008, the TPP has been negotiated in secret, attended mostly by large corporations and their lawyers, prompting criticism from various groups that were concerned over the effects of the agreement’s provisions. These concerns were exacerbated when WikiLeaks released some draft provisions of the agreement in 2013, confirming many groups’ fears over human rights protections in the agreement. The full 2015 text of the TPP has not made much of an improvement in its rights protection language since 2013, notably lacking any reference to the term “human rights” in any of its chapters. The TPP’s controversial provisions have prompted different rights organizations to actively campaign against the agreement, highlighting various issues relating to labor, the environment and healthcare. What’s worse is that the TPP’s primary enforcement mechanism, which prioritizes the rights of corporations, pulverizes national sovereignty in the interest of profit. Given these provisions, the TPP is deliberately set up to benefit private corporations and the global elite.

INADEQUATE LABOR RIGHTS 

The Office of the United States Trade Representative, among other supporters of TPP, promises that the agreement will “level the playing field” of labor rights and standards. Yet, the actual provisions of the TPP belie modest improvements to labor rights that do not address other important concerns of labor organizations around the world. The TPP does not reference the fundamental conventions of the International Labor Organization (ILO), which protect the right to organize, collective bargaining and equal remuneration, and also prohibit child labor, forced labor and discrimination. The agreement refers only to core labor rights in the ILO Declaration of 1998 and completely omits the core right to equal remuneration (sometimes referred to as “equal pay for men and women”). Lacking a reference to ILO Conventions limits the ability to hold state governments and corporations accountable to labor rights to the TPP’s enforcement mechanism. Failing to include the core right to equal remuneration ignores the impact that globalization and free trade has had on the welfare of women laborers around the world.

Moreover, the TPP allows for derogations from “acceptable conditions of work” if the company’s lowered standards do not otherwise impose forced labor, child labor, discrimination, or restrictions on collective bargaining and unionization. This means that a company does not have to meet minimum wage, work hours or health and safety standards so long as their conditions do not violate core labor rights, except for equal remuneration, and the company is outside of export processing zones or other special zones. As a result, most laborers are more vulnerable to violations of labor rights under the TPP.

Not to mention, the TPP omits reference to or protections related to other contemporary labor issues championed by labor organizations around the world. Many labor organizations have been pushing for the creation of a living wage standard, which takes into account the needs of laborers around the world as it is tied to their welfare and conditions inside and outside of work. The language suggested by labor rights organizations is reflected in the ILO’s Minimum Wage Fixing Recommendation, which makes the goal of the living wage standard “to overcome poverty and to ensure the satisfaction of the needs of all workers and their families.” In comparison, the TPP’s provision of adopting and maintaining “acceptable conditions of work” is weak, omitting the goal of standards of wage and labor conditions to address poverty and limiting the interpretation of “acceptable” to TPP’s self-contained enforcement mechanism.

WEAK ENVIRONMENTAL STANDARDS

There are similar concerns that the TPP’s provisions on environmental preservation are noncommittal, and trump actual obligations by nation-states under multilateral environmental conventions. The TPP does not prohibit the trade of lumber and wildlife products acquired through means that violate environmental laws, obligate countries to abide by trade-related provisions related to conservation or ban certain forms of industries that affect wildlife and environmental conservation. Instead, it asks countries “to combat” illegal trade, “endeavor not to undermine” country obligations to the conservation of fish and other industries and only “promote” the conservation of sharks and other species. The TPP’s language on environmental issues is essentially retrogressive of many multilateral environmental conventions that have been made in the past. Moreover, it only mentions one such multilateral environmental convention, the Convention on International Trade in Endangered Species of Wild Flora and Fauna, binding only the TPP signatories who are also parties to that convention.

Despite a global message from people’s movements fighting against climate change, the TPP makes no mention of “climate change” in its chapter on the environment. What it does have are weak provisions on emissions and the protection of the ozone layer. The low emissions provision only “acknowledges” a “transition” to a low emission economy. The provisions on the ozone layer only control the production, consumption and trade of substances in the Montreal Protocol on Substances that Deplete the Ozone Layer. The Montreal Protocol only lists various fluorocarbon gases known to deplete the ozone layer (CFCs, HCFCs and HFCs); it does not cover a wide range of other products that directly impact climate change, such as fossil fuels. The TPP does give corporations the ability to enforce their expectations of profit on fossil fuel extraction on signatory states through the TPP’s self-contained enforcement mechanism. Looking at analogous trade agreements suggests that such a mechanism will have a chilling and damaging effect on efforts to protect the environment. As an example, El Salvador’s choice to listen to its people and hold off on resource exploration to preserve the environment was met with an arbitration case with damage claims far exceeding the country’s GDP.

INADEQUATE ACCESS TO AND AVAILABILITY OF LIFESAVING MEDICINE 

The TPP’s provisions on intellectual property also raise concerns about healthcare and the access and availability of affordable lifesaving medication. Modeled after the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement, the TPP’s patent provisions significantly strengthen the ability of pharmaceutical companies to easily acquire patents over newly developed medication and, in most cases, extend the monopoly period of such medication after the patent is acquired. In return, the TPP includes some “understandings” that merely “affirm” the signatories’ commitment to public health and provides for a limited option for countries to protect public health during health crisis situations. Countries may take other measures, but they are not otherwise obligated and are still subject to the TPP’s self-contained enforcement mechanisms when taking such measures, which will be discussed later.

The concerns related to access and availability of medication under TRIPS and similar agreements (generally known as TRIPS plus agreements) are well-known. The traditional intellectual property rights regime creates two problems when it comes to lifesaving medication. On the one hand, pharmaceutical companies are incentivized purely through sales profits when inventing medication, thus leaving inadequate incentive to research and develop products that save the lives of poor people. In addition, even if a company has created a particular medicine, the monopoly provisions of a traditional intellectual property regime allows the company to raise the drug prices for maximum profit, which makes it difficult, if not impossible, for the poor to afford the available medication. The provisions in the TPP do not address either problem of access to and availability of lifesaving medication, leaving states to address public health crises, such as HIV/AIDS, malaria and Ebola, with whatever methods or devices they had in the past. Yet, such practices could come under attack due to the private enforcement mechanism that is available only for corporations under the TPP, which will be discussed in-depth in the next section.

PROBLEMS WITH THE INVESTOR-STATE DISPUTE MECHANISM IN THE TPP 

The biggest problem with the TPP’s provisions is its overarching enforcement mechanism that uses private arbitration tribunals to resolve disputes between companies and states. Even if the TPP’s provisions on labor, environment, and health care were more rights-respecting, such an enforcement mechanism still highly favors companies over the interests of the signatory governments, let alone the people of those countries. An arbitration tribunal comprises of a panel of arbitrators, usually three individuals, who make decisions over a dispute between two parties. Because the arbitration is private, the parties are often under contract not to disclose the details of the case. However, unlike companies, states have to be accountable to their constituents, particularly relating to their obligations under human rights law. Investor-state arbitrations are still generally private affairs, with some cases released to the public under mounting pressure from people directly affected by them.

Investor-state disputes have also historically favored corporate interests over state interests. When analyzing disputes based on their merits, corporations win a favorable decision 60 percent of the time. Arbitration panels also tend to comprise of a small group of career arbitrators, with an “elite 15” making decisions in 55 percent of investment treaty cases. This essentially creates an oligarchy of arbitrators that favor corporate interests over the state or its people. Meanwhile, the interests of the people, including their human rights and dignity, are generally left out of such a dispute. In particular, under the TPP, states are unable to uphold human rights and other obligations because they are explicitly left out of the TPP’s provisions.

The most egregious issue with investor-state dispute arbitration is that only companies have a right of action against states. States do not have a right of action against companies under the TPP, although it provides for a right of action against other states. This means that while states cannot sue or take action against companies using the TPP’s mechanisms, companies can sue countries over the loss of their expected profits, even if these profits were lost due to regulations or actions in the public’s interest. This is of particular concern for indigenous peoples, who are not adequately protected under the TPP. The TPP does not include the concept of free, prior, and informed consent, one of the foremost protections that indigenous people have to protect and retain their land and resources. With such strong protections for corporations under the TPP enforcement mechanism, corporations will be free to exploit the ancestral lands of indigenous groups for gold, timber and other natural resources.

JUNK THE TPP

Right now, if the TPP is ratified, it will only bind signatory countries. However, more countries will be able to join the TPP once it comes into force. Members of the Asia Pacific Economic Cooperation (APEC), for example, have already expressed optimism about the TPP and their interest in creating a regional market hub after its passage. This means that the TPP has the potential to drastically alter the global economy and conditions for millions of people. The fact that corporations can act with impunity within the TPP framework while benefiting their bottom line tremendously has sparked condemnation and action from human rights organizations in opposition to the agreement. Many are concerned over the effects of TPP in the long term.

In the face of water cannons, tear gas, and other forms of severe state repression, protesters of the APEC Summit, held in the Philippines, protested the summit and the unveiling of the TPP. In the U.S., over 1,500 advocacy groups signed a letter opposing the TPP. And from Malaysia to Peru, protesters have gathered to urge their governments to not sign the treaty. Rights organizations have decried the TPP’s attack on “sovereignty, human rights [and] efforts to create sustainable communities and limit climate change.” Other activists and organizations, such as KARAPATAN, a Philippine human rights organization, have criticized the agreement as imperialist, advancing the expansionist ambitions of the United States over the Asia-Pacific. While the U.S. is expanding militarily through agreements such as the Enhanced Defense Cooperation Agreement in the Philippines, it is achieving economic expansion through the TPP. With much at stake, activists and groups are calling on countries to say #NotoTPP.

Rodrigo Bacus is a Staff Writer for Rights Wire.

The views expressed in this post remain those of the individual author and are not reflective of the official position of the Leitner Center for International Law and Justice, Fordham Law School, Fordham University or any other organization.

Photo credit: GlobalTradeWatch/Creative Commons