U.S. Trade Deals Mean Justice for Some, Not Justice for All

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2017 was another banner year of justice for sale, reveals the United Nations Conference on Trade and Development’s annual review of investor-to-state dispute settlement (ISDS) cases. What’s the report say? It reveals lots of new ways global investors are undermining democracy in private tribunals.

 

What’s ISDS? It’s a private justice system. ISDS means any investor—usually a corporation, but sometimes an individual, who buys property in a foreign country, from a hectare of land to stocks and bonds—can use this private justice system to sue host countries over laws, regulations and court decisions that may affect the investor’s current or future profits.

ISDS means justice for some, rather than justice for all. Those with the means to become international wheeler-dealers can access ISDS. The rest of us have to rely on public courts—the same ones that investors say are “inadequate” to handle their needs. That’s not fair, and that’s not right.

In 2017, 65 new known cases were filed, for a total of 855 known ISDS cases. Some cases are secret, so we’ll never really know how many cases have been filed.

The U.S. is the most frequently claimed “home state” of investors using the system, which tells us that U.S. trade and investment treaties (such as the North American Free Trade Agreement and the U.S.-Panama Trade Promotion Agreement) are pretty effective at promoting outsourcing to our trading partners (or else there wouldn’t be anything to sue over).

Spain is the third most sued country, and Canada is the sixth most sued, which tells us that ISDS isn’t really about “deficient” justice systems in poor countries—it’s about empowering economic elites to challenge democracies. Of all ISDS cases that have been decided on the merits, the investor wins 61% of the time, winning $504 million on average.

Two of last year’s cases approved the right of Chinese state-owned companies to use ISDS, despite claims by host countries that the Chinese government was actually calling the shots. In two other cases, investors were allowed to pursue their cases even though their original investments were illegal under the laws of Uzbekistan and Peru, the host countries. And in an extremely rare appellate case, one tribunal said it was OK for another tribunal to order a country not to enforce the rulings of its own domestic courts. Since one of the arguments made by those who favor ISDS is that the tribunals can only order monetary damages—rather than tell governments what their laws can be—this result is shameful. And maybe it is just the kick in the pants that governments need to abandon ISDS altogether.

In the NAFTA renegotiations, the U.S. has proposed to nearly (but not quite) eliminate the unfair ISDS system, but Canada and Mexico are saying no. The U.S. proposal would allow countries to opt out of the system entirely, and even if they do opt in, it would place restrictions on the kinds of cases investors could bring. The AFL-CIO supports this U.S. proposal and asks Canada and Mexico, “What are you waiting for?”

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