Regulating the Cockpit: Investor-State Disputes

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Investor-state dispute settlement (ISDS)cases+are decided by extrajudicial tribunals composed of three corporate lawyers. Although ISDS has existed for decades, its scope and impact has grown sharply in the last decade. As ISDS has been written into over 3,000 Bilateral Investment Treaties (BITs) and numerous Free Trade Agreements (FTAs), the opportunities for ISDS claims are huge and growing.

Originally justified as necessary to protect foreign corporate investments abroad from nationalization or expropriation by governments controlling national judiciaries, [it is claimed that] foreign corporations have used ISDS to change sovereign laws and undermine national regulations...Already, India, Indonesia and Ecuador have advised their treaty partners that they are considering ending their BITs because of ISDS. To reduce abuses, investors could be required to first prove discrimination in national courts before being allowed to proceed to ISDS arbitration. Alternatively, national courts could exercise judicial review over ISDS awards. Also, arbitrators could be required to be independent of the ISDS process, with set salaries, security of tenure and no financial ties to litigants while investor status for ISDS claims could be defined more strictly.

Excerpts from Jomo Kwame Sundaram ISDS Corporate Rule of Law, IPS, Dec. 1, 2016

+While ISDS is often associated with international arbitration under the rules of ICSID (the International Centre for Settlement of Investment Disputes of the World Bank), it often takes place under the auspices of international arbitral tribunals governed by different rules or institutions, such as the London Court of International Arbitration, the International Chamber of Commerce, the Hong Kong International Arbitration Centre or the UNCITRAL Arbitration Rules. ISDS has been criticized because the United States has never lost any of its ISDS cases, and that the system is biased to favor American companies and American trade over other Western countries, and Western countries over the rest of the world (wikipedia)

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