April 09, 2018
This might not be the best time to be alive if you worry about things like racism or climate change, but 2018 is undeniably a great time to run a multinational corporation. Ironically, Facebook’s Mark Zuckerberg helps illustrate why life is great for CEO’s of multinationals, even as the corporate behemoth he founded is experiencing a public relations crisis and a falling stock price.
Why? Because in 2018, basically the only international rules that apply to corporations are those that benefit them.
For years, pragmatic observers of international trade have worked to illuminate the intentionally boringly titled process known as “Investor-State Dispute Settlement,” or ISDS, that is embedded in modern trade deals. ISDS creates extrajudicial panels whereby multinational corporations can seek to invalidate a country’s laws by a shadowy and opaque process.
In other words, under contemporary trade deals, corporations like Facebook have the right to challenge laws or regulations that Facebook doesn’t like in countries where Facebook is not headquartered.
But contemporary trade agreements don’t just give corporations extra opportunities to undermine the regulatory efforts of democratic governments. Less frequently discussed is how ISDS gives corporate executives the ability to exert influence in countries without subjecting themselves to those countries’ legislative or criminal processes.
Consider Mark Zuckerberg and Facebook: While Zuckerberg and Facebook have been negotiating for the most favorable terms for Zuckerberg’s long overdue testimony to Congress about their platform’s role in the 2016 election and indifference to consumer privacy, ultimately every savvy observer knew that Zuckerberg was inevitably going to have to testify.
Why was Zuckerberg’s testimony inevitable? Because even as Zuckerberg tried to portray his willingness to offer Congressional testimony as an act of regal magnanimity, he didn’t really have a choice in the matter. As summed up by corporate law firm Mayer Brown, “put simply, Congress can compel the production of documents and sworn testimony from almost anyone at almost any time.” (emphasis added)
However — and this is critical — currently NO other country can compel Zuckerberg’s testimony.
That means that as the United Kingdom continues to assess the impact of the Cambridge Analytica scandal and whether Brexit was hacked, the UK parliament cannot force the unwilling Zuckerberg to give evidence. The chair of the UK’s Digital, Media, Culture and Sport Committee, Damian Collins, has continued to make requests for Zuckerberg to appear, but to no avail. That is despite the recent “huge jump” in UK specific revenues from £210.8 million in 2015 to £842.4 million (more than $1 billion in revenue in US dollars) in 2016.
In other words, while Facebook matters a lot to how people live in the United Kingdom, the needs of the United Kingdom’s government matters little to Mark Zuckerberg. That power balance in favor of Zuckerberg imperils the basic democratic principle that power rests with the people and their representatives, rather than the computer programmer lucky enough to be first to achieve serious network effects in social media.
Similarly, America’s Congress lacks subpoena power over Alexander Nix, who ran Cambridge Analytica, or the people who run its British parent company, SCL Group. The same is true for key executives of Alibaba, Samsung, or any number of other critical technology companies.
Indeed, this imbalance can go beyond testifying in front of a legislature. Remember the massive Volkswagen scandal? Volkswagen’s deliberate effort to cheat clean air tests in the United States and across the world was “one of the most audacious corporate frauds in history,” according to ProPublica, and the key perpetrators, “are beyond the reach of US prosecutors because Germany does not ordinarily extradite its nationals beyond European Union frontiers.”
It defies common sense that the officers of any company that does serious amounts of business in a country can prevent its senior officers from being subject to subpoena by that country’s legislature or from being extradited to be held accountable for criminal acts.
Trade deals should mandate cooperation with a fact-gathering legislature or criminal hearings as part of each and every trade negotiation, rather than allowing “globalization” to further reduce the accountability of the rich and powerful.
From my perch in America, the ongoing prerogatives of the British monarchy strike me as odd, but are they any worse than democratically elected legislatures begging unsuccessfully for a few moments of honest dialogue with the likes of Mark Zuckerberg?