Showing posts with label privatization. Show all posts
Showing posts with label privatization. Show all posts

Sunday, September 12, 2021

FOIA committee ponders access amid privatization

I had the great privilege last week to speak to the U.S. Freedom of Information Act (FOIA) Advisory Committee, working under the aegis of the Office of Government Information Services (OGIS) in the National Archives and Records Administration (NARA) on the subject of access to the private sector in the public interest.

The OPEN the Government Act of 2007 augmented FOIA to follow public records into the hands of government contractors.  But the federal FOIA's reach into the private sector remains extremely limited relative to other access-to-information (ATI) systems in the United States and the world.  U.S. states vary widely in approach; the vast majority of state open records acts reaches into the private sector upon some test of state delegation, whether public funding, function, or power.  The same approach predominates in Europe.

The lack of such a mechanism at the federal level in the United States has resulted in a marked deficit of accountability in privatization.  The problem is especially pronounced in areas in which civil rights are prone to abuse, such as privatized prison services, over which the FOIA Advisory Committee and Congress have expressed concern.  By executive order, President Biden is ending the federal outsourcing of incarceration.  But access policy questions remain in questions about the past, in waning contracts, and in persistent privatization in some states.

As I have written in recent years, and examined relative to ATI in the United States, Europe, and India, an emerging model of ATI in Africa advances a novel theory of private-sector access in the interest of human-rights accountability.  I was privileged to share this model, and the theory behind it, with the committee.  I thank the committee for its indulgence, especially OGIS Director Alina Semo for her leadership and Villanova Law Professor Tuan Samahon for his interest in my work now and in the past.

Monday, February 22, 2021

Sovereign immunity shields Texas power overseer from liability for now: not so privatized after all

NASA satellite image of Houston with area blackouts, Feb. 16
The cold-induced electric-power disaster in Texas is raising questions about the accountability of "ERCOT," the Electric Reliability Council of Texas.

ERCOT is responsible for about 90% of the Texas electricity market.  During the storm and record cold of last week, Texans experienced rolling outages and some prolonged blackouts.  Deaths and injuries, from hypothermia and carbon monoxide poisoning, are attributed to the cold and blackouts, as well as billions of dollars in property damage.  Governor Greg Abbott has blamed ERCOT for failure to prepare the state's electrical system for a foreseeable winter weather event and promised an investigation.

National Weather Service Tower Cam, Midland, Feb. 20
Naturally, many Texans are wondering about legal liability for ERCOT.  I noticed a tweet from Houston Chronicle business reporter Gwendolyn Wu, who said that ERCOT has "sovereign immunity."  I found that hard to believe.  Wu cited a Chronicle story (subscription), from the bygone innocent age of fall 2019, in which business writer L.M. Sixel said just that.  As it turns out, the problem of ERCOT immunity is sitting, undecided, in the Texas Supreme Court at this very moment.

Legally, ERCOT is a nonprofit corporation formed in 1970 to oversee electric power distribution in Texas.  Because Texas has its own grid that doesn't cross state lines, the power system is not regulated by the federal government.  ERCOT has been at the heart of Texas's love affair with deregulation and privatization, a push that began in earnest in 1999 and found no bounds at the threshold of critical infrastructure.  State legislation in 1999 called on the Texas Public Utility Commission (PUC) to designate an exclusive "independent system operator" to oversee the Texas power grid, and ERCOT easily got the job that it more or less already had.

Yet ERCOT is neither wholly private nor a success story.  Its near monopoly control of Texas power comes with PUC oversight.  Despite that oversight, ERCOT has posted a remarkable record of abuse and failure.  As Sixel recounted in the Chronicle, executives went to prison in the 20-aughts for a financial fraud aggravated by lack of transparency and exposed by whistleblowers.  About the same time, Texans saw rolling blackouts, even while their deregulated electricity prices shot 30% over the national average.  Then, in 2011, a winter storm with single-digit temperatures caused blackouts across Texas.  It was that event that led federal regulators to recommend that ERCOT and the PUC winterize the system, a recommendation that was never heeded.

Frmr. Gov. Rick Perry tours ERCOT on March 14, 2012.
Apparently, an embarrassing record has not dampened the mood at ERCOT.  The "nonprofit," which is run by a board majority comprising power industry heavyweights, brought in $232m in revenue in 2018, Sixel reported in 2019, and chief executive Bill Magness took home $750,000 in 2017.  Sixel described ERCOT HQ (pictured below) near real-estate-red-hot Austin: "Its sprawling, modern glass and metal building has plush interiors with on-site fitness facilities that include a gym and sport court for volleyball, basketball and pickleball."  In contrast, the PUC "operates from two floors of crammed cubicles in ... a dilapidated structure close to the campus of the University of Texas at Austin.  DeAnn Walker, the commission chairman, earns $189,500 a year."

It was also in 2011 that ERCOT set out toward the immunity question now pending.  After the rolling outages of the 20-aughts, ERCOT wanted to see new sources of power added to the system.  Enter Panda Power, which invested $2.2bn to construct three power plants.  Alas, Panda later alleged in court, ERCOT had deliberately inflated market projections to incentivize investments; the power plants delivered only a fraction of the anticipated returns.  Panda sued ERCOT for $2.7bn in damages on theories including fraud and breach of fiduciary duty.

After almost a year of defending the case, ERCOT devised a new theory of sovereign immunity in Texas common law.  ERCOT performs exclusively governmental, not private, functions, it alleged, and works wholly under the control of the PUC.  Despite its statutory role as an "independent system operator," ERCOT insisted that it is not an independent contractor.  Rather, ERCOT styled itself as "a quasi-governmental regulator, performing an essential public service."  Panda argued that ERCOT is not entitled to sovereign immunity because it is "a non-governmental, non-profit corporation that receives no taxpayer dollars and retains discretion," particularly, Panda exhorted, when it furnishes false market data to power providers. 

In April 2018, reversing the district court, the Texas Court of Appeals agreed with ERCOT.  In a functionalist analysis, the intermediate appellate court grounded its decision in the legislative delegation of ultimate fiscal authority over ERCOT in the PUC.  The court wrote (citations omitted):

[A]s to separation-of-powers principles, [the statute] shows the legislature intended that determinations respecting system administration fees and ERCOT's fiscal matters, as well as any potential disciplinary matters or decertification, should be made by the PUC rather than the courts. Further, as the certified [independent service operator] provided for in [the statute], ERCOT is a necessary component of the legislature's electric utility industry regulatory scheme. A substantial judgment in this case could necessitate a potentially disruptive diversion of ERCOT's resources or a decertification of ERCOT not otherwise intended by the PUC.

According to Sixel, that decision rendered ERCOT "the only grid manager in the nation with sovereign immunity."

Pixabay image by Clker-Free-Vector-Images
Panda appealed to the Texas Supreme Court, which heard oral argument (MP3, PDF) on September 15, 2020, but has not ruled.

Meanwhile, a curious procedural imbroglio arose in the lower courts to gum up the works.  While Panda was busy lodging its appeal with the Texas Supreme Court, it didn't head off the intermediate appellate court's mandamus order to the district court to dismiss the case, which it did.  Panda then appealed that dismissal on a separate track, and the intermediate appellate court stayed oral argument on that second appeal, waiting to see what the Supreme Court would do with the first appeal.

One month after the Supreme Court heard oral argument, it ordered the parties to file supplemental briefs, which they did in November 2020 (ERCOT, Panda), to answer whether the district court's dismissal mooted the case in the Supreme Court.  Panda insisted that there is a live controversy still before the court.  ERCOT wrote that Panda should have asked for a stay of dismissal in the lower court, and it didn't.  Bad Panda.

House chamber in the Texas Capitol (picryl)
It looks to my outsider eyes like the Supreme Court badly wants not to decide the case.  And that was before the winter storm of 2021.  If the court does kick the case, the intermediate appellate court's ruling for sovereign immunity will stand, and any 2021 complainants will be out of luck.  ERCOT's supplemental brief read anyway with a good deal of confidence about how things would go in the Supreme Court, so maybe it's only a question of which appellate court will bear the people's ire.  While the courts dithered, Panda Energy, a division of Panda Power Funds, folded, and Texas froze.

The best answer to the people's woes lies in their state legislature.  Maybe Texas legislators can be made to understand that privatization is not really privatization when the reins, along with sovereign immunity and a market monopoly, are simply handed over to a nominally independent and hardly nonprofit oligarchy.

Or maybe legislators are on their way to CancĂșn and points warmer.

The case is In re Panda Power Infrastructure Fund, LLC, No. 18-0792 (now pending), appealing Panda Power Generation Infrastructure Fund, LLC v. Electric Reliability Council of Texas, Inc., No. 05-17-00872-CV (Tex. Ct. App. 5th Dist. Dallas Apr. 16, 2018), reversing No. CV-16-0401 (Tex. Dist. Ct. 15th Grayson County 2017).  The latter appeal is Electric Reliability Council of Texas v. Panda Power Generation Infrastructure Fund, LLC, No. 05-18-00611-CV (oral argument stayed Aug. 20, 2019).

[UPDATE, April 3, 2021.] The Texas Supreme Court ducked the immunity issue in ERCOT v. Panda with a "hotly contested" "non-decision."  DLA Piper has the story (Mar. 29, 2021).

Tuesday, February 16, 2021

Courts extend European accountability laws to private actors: Italian soccer federation, Irish wind farm

Two recent court decisions in Europe construed European directives on public accountability to reach ostensibly private actors, the Italian soccer federation and an Irish wind-power producer.

Stocksnap by Michal Jarmoluk CC0
The problem of accountability for private actors performing public functions is as old as the corporate form.  Burgeoning corporatocracy in the electronic era has rendered new challenges to the classical public-private dichotomy, in recent years, especially, in the area of social media regulation (e.g., pro and con).  I have written about rethinking this problem in the context of access to information, regarding reform in both the United States and Europe, and I continue to research emerging models in the developing world.  As a general matter, Europe has been much less reticent than the United States to breach the public-private line with accountability mechanisms such as transparency laws.

In early February, the Court of Justice of the European Union (CJEU) in Luxembourg ruled that the Italian Football Federation, or Federazione Italiana Giuoco Calcio (FIGC), an ostensibly private entity, is sometimes a public body for purposes of the 2014 European directive on public procurement.  The directive defines public bodies within its purview:

(a) they are established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character;

(b) they have legal personality; and

(c) they are financed, for the most part, by the State, regional or local authorities, or by other bodies governed by public law; or are subject to management supervision by those authorities or bodies; or have an administrative, managerial or supervisory board, more than half of whose members are appointed by the State, regional or local authorities, or by other bodies governed by public law.

The definition is not unlike formulations in state freedom of information acts in the United States, which tend to press harder against the public-private line than the federal Freedom of Information Act (FOIA) does.  A classic example of disparate approaches in the states concerns access to the wealthy private foundations that lurk behind public universities.  My colleague Professor Robert Steinbuch has been bearing the transparency standard on this front in Arkansas and is supporting a bill there now.

At issue in the Italian case was a contract for porter services when foreign squads visit Italy.  A disappointed contractor challenged the process and won a round in Italy's high administrative court, and the appellate Council of State in Italy referred the interpretation question to the CJEU.  Both in the United States and globally, governing bodies in sport, often set up as private or quasi-public entities, have posed aggravating challenges in public accountability like the university-foundation problem.  Inapplicability of the FOIA to the US Olympic Committee has been cited as a contributing factor in sexual-assault cover-ups, and last summer, I took in no fewer than three books and a TV series on the intractable corruption in world soccer.

The CJEU opinion determined that the FIGC, constituted under private law, can act as a private body when it has autonomy to form private contracts.  However, the Italian National Olympic Committee (NOC) is a public body and has supervisory power, sometimes with a controlling stake, over some FIGC functions.  Insofar as the NOC is calling the shots on contracts, the FIGC is a public body, subject to public procurement rules.  The CJEU opinion now goes back to the Italian courts to parse the specifics. 

Cronelea Wind Farm in County Wicklow, 2008
Meanwhile, in late January, the High Court of Ireland ruled that electric company Raheenleagh Power DAC (RP) is a "public authority" for purposes of the Irish enactment of the European directive on public access to environmental information.  The law and directive define public authorities:

(a) government or other public administration, including public advisory bodies, at national, regional or local level;

(b) any natural or legal person performing public administrative functions under national law, including specific duties, activities or services in relation to the environment; and

(c) any natural or legal person having public responsibilities or functions, or providing public services, relating to the environment under the control of a body or person falling within (a) or (b).

Reversing the Irish Commissioner for Environmental Information, the High Court determined that RP came within the definition's latter terms.  The court explained, "RP is a joint-venture company which operates a wind farm in a forest in the Wicklow Mountains. The wind farm supplies electricity to the national grid."  Complicating the analysis, the RP venture includes a one-half stake by the national-monopoly Electricity Supply Board (ESB), which the court described as "an independent semi-State company."

Like in the Italian case, the court reasoned that ESB control and management of RP brought it within the purview of public accountability law.  The ruling is important for the example it sets amid the wide range of public-private hybrids providing critical utility and infrastructure across Europe and the world.

Even so, I would like to have seen the court hang its hat more firmly on the functional analysis of the cited paragraph (b), rather than resorting to the paradigm of state control.  The urgent communal interests at stake in environmental protection have been a salient inducement to the extension of transparency law in Europe and Africa.  Western social democracies have been keen to ameliorate the effects of climate change, and many African regimes have awakened to lasting environmental damage inflicted by colonial enterprises.

The Italian case is FIGC v. De Vellis Servizi Globali Srl, nos. C‑155/19 and C‑156/19, ECLI:EU:C:2021:88 (CJEU Feb. 3, 2021).  Cain Burdeau has coverage for Courthouse NewsSven Demeulemeester, William Timmermans, and Matthias Ballieu have commentary for Altius in Belgium.

The Irish case is Right to Know CLG v. Commissioner for Environmental Information, [2021] IEHC 46 (High Ct. Jan. 25, 2021) (Ireland).  Mr. Justice Alexander Owens delivered the judgment.  Right to Know is a transparency advocacy organization headed by activist, blogger, and entrepreneur Gavin Sheridan and former and working journalists.  Jonathan Moore and Patrick Reilly have commentary for Field Fisher in Dublin.

Monday, March 23, 2020

Book chapter examines information access in context of Polish privatization, law and development

My colleague Gaspar Kot and I have published a book chapter entitled Private-Sector Transparency as Development Imperative: An African Inspiration.  The chapter appears in the new book, Law and Development: Balancing Principles and Values, from Springer, edited by Professors Piotr Szwedo, Dai Tamada, and me (more in the next entry on this blog).  Here is our abstract:
Access to information (ATI) is essential to ethical and efficacious social and economic development. Transparency ensures that human rights are protected and not overwhelmed by profiteering or commercial priorities. Accordingly, ATI has become recognised as a human right that facilitates the realisation of other human rights. But ATI as conceived in Western law has meant only access to the state. In contemporary development, private actors are crucial players, as they work for, with, and outside the state to realise development projects. This investment of public interest in the private sector represents a seismic shift in social, economic, and political power from people to institutions, akin to the twentieth-century creation of the social-democratic state.
Contingent on state accountability, Western ATI law has struggled to follow the public interest into the private sector. Western states are stretching ATI law to reach the private sector upon classical rationales for access to the state. In Poland, hotly contested policy initiatives over privatisation and public reinvestment have occasioned this stretching of ATI law in the courts. Meanwhile, in Africa, a new model for ATI has emerged. Since the reconstruction of the South African state after Apartheid, South African ATI law has discarded the public-private divide as prohibitive of access. Rather than focusing on the nature of a private ATI respondent’s activity as determinative of access, South African law looks to the demonstrated necessity of access to protect human rights.
This chapter examines cases from South Africa that have applied this new ATI model to the private sector in areas with development implications. For comparison, the article then examines the gradually expanding but still more limited Western approach to ATI in the private sector as evidenced in Polish ATI law. This research demonstrates that amid shifting power in key development areas such as energy and communication, Polish courts have been pressing ATI to work more vigorously in the private sector upon theories of attenuated state accountability, namely public ownership, funding, and function. We posit that Poland, and other states in turn, should jettison these artifices of state accountability and look instead to the South African model, since replicated elsewhere in Africa, for direct access to the private sector. ATI law should transcend the public-private divide, and the nations of the North and West should recognise human rights as the definitive rationale for ATI in furtherance of responsible development.
Gaspar Kot
With Mr. Kot's help, this chapter extends to a European context my previously published comparative work on private-sector information access. Gaspar's expertise was invaluable for Polish legal research, to be sure, but moreover to help me to understand Poland's richly complex, on-again-off-again courtship of privatization.

In earlier works, I compared the South African approach with the United States FOIA and with Indian RTI law.  I am excited about this approach in access-to-information law, which is now gaining traction elsewhere in Africa, because I believe it to be a potential game-changer in saving democracy and human dignity from corporatocracy. I am spending some of my sabbatical time this semester in Africa and other parts of the developing world studying how this approach is especially salient in the context of problems in social and economic development.

Thursday, January 31, 2019

Research examines accountability through journalism and right to information in India

I've published a research article (available on SSRN), "Accountability in the Private Sector: African Ambition for Right to Information in India," in the latest volume (25:3) of the Panjab University Research Journal Social Sciences.  Here is the abstract:

The right to information (RTI) has come to recognition as a human right in international law. Conventionally, RTI is a means for a person to demand information from a public body. RTI has proven especially potent in the hands of journalists, who seek information on behalf of the electorate to hold public institutions accountable. But in the recent decades in which RTI has attained human rights stature, power in society has shifted in substantial measure from public to private sector. Journalistic inquiry is frustrated by the inapplicability of access laws to private bodies. In India, direct access to the private sector through RTI law was considered and rejected in the 1990s; however, the 2005 RTI Act allows a generous measure of access to non-governmental actors with public ties. A legal movement has been gaining steam in Africa to push past the public-private divide and recognise the importance of RTI to protect human rights regardless of the public or private character of the respondent. Different approaches are emerging with respect to journalist access in the African model. Amid trending privatisation and burgeoning private power, the time might be coming for India to reconsider the road not taken.

The Research Journal Social Sciences is a peer-reviewed publication of Panjab University in union-administered Chandigarh, India.  Panjab is a public university on 550 acres, enrolling 17,000 students in 78 departments and 15 centers for teaching and research, including a law school.  More than 250,000 more students are enrolled in 198 constituent and affiliated colleges and centers throughout the region.  Founded in 1882, Panjab was split in the 1947 partition of India from the University of Punjab, now in Pakistan.

Dr. Verma
This issue of the journal is dedicated to development and mass communication.  I was fortunate to be invited to contribute by the special editor of the issue, Dr. Manish Verma (LinkedIn), who serves as director of international affairs and director of the School of Media at Amity University Jaipur in Rajasthan.  Dr. Verma is a Ph.D. graduate of Panjab University and an alumnus of the Executive Program in Management and Leadership in Education at Harvard University.  He's also a top-shelf colleague.

Tuesday, January 29, 2019

Research proposes U.S. FOIA reform upon South African example

I've published in the Villanova Law Review, "Access to Information in the Private Sector: African Inspiration for U.S. FOIA Reform" (available from SSRN).  The article appears as part of a symposium edition of the law review (63:5) on FOIA reform.  The special edition commemorates 50 years of the FOIA, which was passed by Congress in 1966 and went into effect in 1967.  I was privileged to present the piece at the Villanova University Charles Widger School of Law in 2017, upon generous invitation to the Norman J. Shachoy Symposium.  Here is the foreword (footnotes omitted):
The Freedom of Information Act of 1966 (FOIA) was a landmark global example of transparency, or access to information (ATI), to ensure democratically accountable governance.  Government had grown in the twentieth century, especially in the new administrative state, and FOIA re-balanced the distribution of power between people and public authority.  Today in the twenty-first century, much power in American society has migrated from the public sector to the private sector, specifically into the hands of corporations.  Even insofar as it works well, FOIA operates only against the conventional state by enabling an individual’s capacity to realize civil and political rights.  FOIA simply was not designed to enable the attainment of human necessities such as education and housing, much less environmental protection and healthcare, especially when the greatest threat to those rights is not government deprivation, but the commercial marketplace.

ATI in Africa is a different story.  Three decades after FOIA, planted among the unprecedented ambitions of the South African constitution was a right to ATI.   And within that right lay an extraordinary new provision.  As guaranteed by the South African constitution and enabling law, a person may request records from a nongovernmental respondent, a private body, if the person can show that the records are “required for the exercise or protection of any rights.”   In other words, South African ATI law jettisoned the historic barrier between public and private sectors.  South African lawmakers were informed by the experience of apartheid, in which the private sector’s complicity had been a vital and brutal partner in state-sanctioned human rights abuse.
Blossoming beyond even the visioning of an apartheid remedy, ATI in the private sector has been construed by the courts in a wide range of applications, from intrafamilial business disputes to environmental conservation.  South African courts have struggled to define “required” and “rights” in applying the ATI law.  But South Africa has demonstrated that ATI in the private sector can work.  The public-private division justifies a change in the terms of access, but not an absolute barrier.  In the last five years, the South African approach has been reiterated in the domestic law of at least five other African countries and in pan-African human rights instruments meant to inspire more domestic adoptions.

In this article, I suggest that the African example inspire U.S. FOIA reform.  In its time, FOIA shone a light into the darkest corners of American politics.  Now America deserves a new approach to restore power to the people in the age of the corporation.