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The Impact of ISDS in TTP and TTIP: A Critical Examination of Foreign Investor Rights

This paper explores the Investor-State Dispute Settlement (ISDS) mechanism within the Trans-Pacific Partnership (TTP) and Transatlantic Trade and Investment Partnership (TTIP). It highlights the rise in ISDS cases over the past decade and critically discusses its implications for domestic law, regulatory sovereignty, and developing nations. Concerns regarding environmental regulations, the prioritization of foreign investor rights, and the potential burden of compensatory payments on states are examined. Policy suggestions are presented to enhance the legitimacy of ISDS and promote equitable investment practices.

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The Impact of ISDS in TTP and TTIP: A Critical Examination of Foreign Investor Rights

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  1. Foreign Investor Suits against GovernmentsISDS’ leverage power in the Investor-State system of TTP & TTIP Alejandro Aguayo ITRN603 – Spring ‘14

  2. What is ISDS? • Investor-State Dispute Settlement • Common in FTAs/BITs • Trade Agreements’ Procedural mechanism • Judicial review – goal; protect foreign investors against regulatory & policy changes • Arbitral tribunals – International courts • Emergence & Prominence in last 10-12 years • Rarely utilized since inception in 1950s, more than tripled in last 12 years

  3. Negatives of ISDS • Supplants Domestic Law • Encourages “Discretionary Outsourcing” • May Benefit US firms investing in foreign markets, but reduces strengths to pull outside investment • Strong rule of law • enforcement of contracts • Exceeds “National Treatment” principle • National firms have US Courts, Foreign Firms have International tribunals – reduces terms of the game domestically • Public Fear of Investor’s

  4. TTP & TTIP • Concerns for developing nations • “The investment protection chapter should cover a broad range of investors and their investments, intellectual property rights included, whether the investment is made before or after the entry into force of the Agreement • Regulations that prioritize interest of its citizens and the environment are under direct threat by investor rights. • Ex. Unconventional fuel extraction methods (Ex. Fracking) have serious environmental threats. • Compensatory payments are a burden for states, and a tool for profit for MNCs

  5. Policy Suggestions to explore • Enable International courts to all players • States, individuals, etc. • Limit access of ISDS to foreign investors • Promote smart FDI to deserving markets • Increase the legitimacy of ISDS tribunals • Reduce the liberty of laweyrs • Drop ISDS from TTIP negotiations • Allow market to dictate free trade rules

  6. Areas of Research http://www.citizen.org/documents/investor-state-chart.pdf - Foreign investor-state cases brought through NAFTA, CAFTA & other BITs. Particular description on current pending cases against the US. http://www.state.gov/s/l/c3439.htm - Investor-state Arbitrations that involve the US government. http://www.twnside.org.sg/title2/twe/2013/552/1.htm - The potential repercussions of suing the state. http://www.fas.org/sgp/crs/row/R41779.pdf - US - South Korea FTA Dispute settlement outlines. http://www.ustr.gov/about-us/press-office/blog/2014/March/Facts-Investor-State%20Dispute-Settlement-Safeguarding-Public-Interest-Protecting-Investors – USTR’s clarifications on investor-state disputes regarding public interest and US investors abroad. http://www.cato.org/publications/free-trade-bulletin/compromise-advance-trade-agenda-purge-negotiations-investor-state - CATO research on the negative aspects of ISDS for the US market.

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