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Alejandro Aguayo ITRN603 – Spring ‘14

Foreign Investor Suits against Governments ISDS’ leverage power in the Investor-State system of TTP & TTIP. Alejandro Aguayo ITRN603 – Spring ‘14. What is ISDS?. Investor-State Dispute Settlement Common in FTAs/BITs Trade Agreements’ Procedural mechanism

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Alejandro Aguayo ITRN603 – Spring ‘14

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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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