Reuters | 12 Mar 2015
Push against investment rules in US trade deals picks up
Law professors from across the United States urged lawmakers to keep rules to protect foreign investors out of trade pacts on Wednesday, warning they would give big companies too much power.
The warning came in a letter from 129 law professors and lecturers, from schools including Columbia and Harvard. It marked the latest step in a campaign against investor-state dispute settlement, or ISDS, laws spearheaded by influential Democratic Senator Elizabeth Warren.
"ISDS threatens domestic sovereignty by empowering foreign corporations to bypass domestic court systems and privately enforce terms of a trade agreement," the letter said.
Warren told reporters that the letter showed rules allowing private companies to seek compensation from governments "should raise alarm bells for everyone."
United Nations figures show investor-state claims have jumped since 2002, with high-profile cases such as a challenge by tobacco company Philip Morris’ Asian arm to Australia’s plain cigarette packaging law.
Consumer group Public Citizen and the libertarian Cato Institute have both warned that cases against the United States may increase as more large companies are headquartered outside the country.
The U.S. Trade Representative’s office released a fact sheet to rebut what it said were incorrect claims and said most ISDS cases were brought by individuals or small and medium sized businesses.
"ISDS arbitration is needed because the potential for bias can be high in situations where a foreign investor is seeking to redress injury in a domestic court, especially against the government itself," USTR said.
National Association of Manufacturers Vice President Linda Dempsey said many foreign governments discriminated against U.S. companies, stole technology and denied them fair treatment.
"ISDS provides an internationally recognized enforcement mechanism that ensures investors an objective hearing if a foreign government denies the most basic internationally recognized rights," she said.
A Center for Strategic and International Studies report found 40 percent of claims arose in sectors with high levels of state intervention, such as oil, and most are against countries with weak legal institutions, like Argentina and Venezuela.
U.S. companies have brought 15 percent of pending cases before the World Bank’s International Center for Settlement of Investment Disputes. There are no pending cases against Washington, which has never lost a case.
The rules are also a source of controversy in a proposed trade pact with the European Union, with particularly fierce opposition in Germany, Europe’s largest exporter.
(Reporting by Krista Hughes; Editing by Lisa Von Ahn and Tom Brown)