When You Thought Trade Deals Could Not Get Any Worse — Enter Wall Street.

Paul Keenlyside of Sierra Club

What connects two proposed gold mines, one in the high-altitude wetlands of Colombia and one in the Carpathian Mountains of Romania?

Both mines would require huge quantities of cyanide and threaten watersheds used by millions of people for drinking water. One would damage a unique, legally protected ecosystem and the other would destroy an ancient, UNESCO-nominated settlement. Both have been opposed by scientific bodies, protested by tens of thousands of people, and restricted by domestic courts.

And in both cases, the Canadian mining corporations behind the projects (Eco Oro in Colombia and Gabriel Resources in Romania) have responded to the mining denials by using trade and investment deals to sue the governments in private tribunals. In fact, Eco Oro just launched its case last week. Using this backdoor process called “investor-state dispute settlement” (ISDS), the corporations can demand up to billions of dollars from the taxpayers in both countries. These ISDS claims are possible due to far-reaching rights that trade and investment deals grant to corporations.

But there is another common element driving both cases: big money from Wall Street.

Both ISDS claims are being funded by the same Wall Street hedge fund — Tenor Capital Management. Tenor helps cover the companies’ legal costs in exchange for a cut of any award. These speculative ISDS bets have already paid off for Tenor. The hedge fund won big in April 2016 when it secured 35 percent of a $1.4 billion ISDS ruling against Venezuela, a return of over 1,000 percent on the $36 million that Tenor had provided for the legal costs of the company that brought the case.

The risks of such arrangements, known as “third-party funding,” are clear: When Wall Street speculates on the outcome of ISDS cases, it inflates the number of corporate suits against governments, leading to higher costs for taxpayers and higher risks for policymakers that challenge harmful investments.

Indeed, to maximize their profits, Wall Street firms have an incentive to “invest” in a large number of ISDS cases, given each case’s relatively low probability of a massive payout. And if this sounds like casino-style investing, recall that the biased nature of ISDS tribunals ensures that the odds are rigged in the third-party investors’ favor. As Chris Hamby’s investigation into ISDS for BuzzFeed News recently revealed, financiers already have created a sophisticated marketplace around ISDS cases, and insiders expect that Wall Street firms will soon be trading ISDS cases “on an industrial scale”

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