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Scholars Speak Out Against Troubling 'Corporate Courts' (ISDS) in TTIP

As another round of negotiations for the U.S.–E.U. trade deal (known as the Transatlantic Trade and Investment Partnership, or TTIP) began, 121 leading academic experts on trade, investment law, European Union (EU) law, international law, human rights, constitutional law, global political economy and related fields issued a statement expressing deep concern about the investor-to-state dispute settlement (ISDS) provisions that negotiators plan to include in the deal.

ISDS is a special legal right included in most U.S. trade agreements that allows foreign investors to challenge laws, regulations or any government decision in the country in which they are investing in special, private tribunals. You can think of them as special “corporate courts” that regular people (like you and me) aren’t allowed to use.

In light of growing public concern over the ISDS issue, the European Commission put together a website asking for public input. Leading scholars including Harm Schepel (Kent Law School) and Gus Van Harten (Osgoode Hall Law School) led a team of more than 120 law school faculty in criticizing ISDS for failing to protect a state’s rights to regulate, displacing the role of domestic courts and failing to ensure judicial independence. Their comments expressed their concerns about how ISDS negatively affects the democratic process and public priorities:

“At root, the system involves a shift in sovereign priorities toward the interests of foreign owners of major assets and away from those of other actors whose direct representation and participation is limited to democratic processes and judicial institutions.”

Another major concern raised by the group of experts relates to the lack of accountability and excess special interest powers. ISDS functions through extrajudicial judicial means—through a panel of unelected and unaccountable private arbitrators. This critique reveals the many ways in which the system falls short:

“To entrust these decisions to the very actors who have an apparent financial interest in the current situation and moreover remain unaccountable to society at large is a contentious situation."

They concluded that, “the [ISDS] regime falls short of the standards required of an institutionally independent and accountable dispute settlement system.”

Corporations have used ISDS to challenge laws related to building permits, anti-smoking legislation and even minimum wage increases. This system puts a government’s responsibility to protect its people and resources on the same legal footing as a single company’s profit motive.

ISDS is an unsound policy—it rolls back the countless efforts that labor, environmental and social movements have made to create laws and regulations that protect working people, their families and communities. There is growing opposition among both the general public and experts, yet it still is being considered as part of such upcoming U.S trade deals as TTIP and the Trans-Pacific Partnership (TPP). If we want to get trade policy right, now is the time, and it includes doing away with ISDS. 

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