Investor-State Dispute Settlement (ISDS): Extraordinary Corporate Powers in "Trade" Deals
At the heart of today's "trade" agreements like NAFTA are provisions that grant multinational corporations shocking new rights and powers that make it easier to offshore jobs and attack the environmental and heath laws on which we all rely.
Individual foreign corporations are empowered to sue governments before a panel of three corporate lawyers to demand unlimited compensation from taxpayers if they think a law or government action violates their new rights.
This corporate power grab is formally called Investor-State Dispute Settlement (ISDS).
How ISDS works
Deals like NAFTA give multinational corporations the power to sue the U.S. government in front of a tribunal of three corporate lawyers. These lawyers can order U.S. taxpayers to pay the corporations unlimited sums of money, including for the loss of “expected future profits” that the corporation would have earned in the absence of the public policy it is attacking.
The multinational corporations only need to convince the lawyers that a law protecting public health or the environment violates their special “trade” agreement rights. The corporate lawyers' decisions are not subject to appeal. And if a country does not pay, the corporation can seize a government’s assets - bank accounts, ships, airplanes – to extract the compensation ordered.
Not only do corporations get a special system of “justice” outside our courts, but it’s totally rigged in their favor.
One day a corporate lawyer can sit on an ISDS tribunal deciding cases and the next day they can attack our laws on behalf of a corporation. And, the lawyers deciding cases also get to decide who pays their large hourly fees. That means even when government’s “win” they often have to pay millions in legal costs.
Consequences of Expanded Corporate Power
This extreme ISDS system already has been included in a series of U.S. "trade" deals and investment treaties. ISDS tribunals have ordered taxpayers to hand more than $4.5 billion to corporations for toxics bans, land-use rules, regulatory permits, water and timber policies and more.
And sometimes governments cave before the final ruling to try to limit how much they will pay. For instance, Canada lifted a ban on a gasoline additive banned in the U.S. as a known human neurotoxin after an investor-state attack by Ethyl Corporation under NAFTA. Canada also paid the firm $13 million and published a formal statement that the chemical was not hazardous.
Increasingly, the tribunals of lawyers are ordering massive payments. A tribunal ordered payment of more than $1.4 billion to a multinational oil firm after it violated the terms of its contract with the Ecuadorian government to explore for oil in the Amazon. TransCanada demanded $5 billion from the U.S. when the Obama administration rejected the Keystone XL pipeline.
Just under U.S. deals, more than $54 billion remains pending in corporate claims against climate and energy laws, medicine patent policies, pollution cleanup requirements, and other public interest policies we rely on to protect the environment, our health, safety and financial stability.
In the past few years, the number of such investor-state attacks has surged. From the 1950s – when this system was first established – until 2000, only 50 cases were initiated.
But now, more than 50 cases have been filed each year for the past five years, with a total of 760 cases launched. A whole industry of third-party financing and specialized law firms has sprung up to help multinational corporations extract our taxpayer dollars and roll back key public interest policies using the ISDS system.
Some countries are challenging this outrageous system: South Africa, Indonesia, India and Ecuador are terminating or renegotiating their treaties with ISDS provisions. Venezuela and Bolivia have already done so.
- Alternatives: The New Rules of the Road: A Progressive Approach to Globalization
- Lori Wallach in the Kluwer Arbitration Blog: Brewing Storm over Investor-State Dispute Resolution Clouds Trans-Pacific Partnership (TPP) Talks Part 1 | Part 2 — Japanese translation available here (January 2013)
- Chart: See all corporate investor-state cases and claims launched under U.S. 'free trade' deals
- Case Studies: Investor-State Attacks on Public Interest Policies
- Find out more on the blog: Read the latest on investor-state on Eyes on Trade
- Railroad Development Corporation (RDC) v. Guatemala
- Pacific Rim Mining Case: CAFTA Investor Rights Undermining Democracy and the Environment
- Commerce Group Mining Case: CAFTA Investor Rights Undermining Democracy and the Environment
- Challenge by Ethyl Corporation leads Canada to Repeal Public Health Law
- Ethyl Briefing Paper: Ethyl Corporation vs. Government of Canada
- Review of cases under NAFTA: NAFTA Chapter 11 Investor-to-State Cases: Bankrupting Democracy
- Updated Quote Sheet: Selected Government Statements and Actions Against Investor-State Dispute Settlement (October 19, 2016)
- Polling Memo: Public Anger About Corporate Power Dominant Factor in Views on Trade and TPP. Graphs Available Here. (July 13, 2016)
- Secret TPP Investment Chapter Unveiled: It’s Worse than We Thought (November 5, 2015)
- See all corporate investor-state cases and claims launched under U.S. 'free trade' deals (March 2017)
- Debunking Ten Common Defenses of Controversial Investor-State Corporate Privileges (May 11, 2015)
- Analysis of Leaked Trans-Pacific Partnership Investment Text (March 25, 2015)
- U.S. Experience Shows Structural Incentives Favoring Corporations in Investor-State System Not Fixable via Changes to Trade Pact Terms (December 15, 2014)
- Tens of Thousands of U.S. Firms Would Obtain New Powers to Launch Investor-State Attacks against European Policies via CETA and TTIP (December 9, 2014)
- Case Studies: Investor-State Attacks on Public Interest Policies (November 13, 2014)
- Myths and Ommissions: Unpacking Obama Administration Defenses of Investor-State Corporate Privileges (October 2, 2014)
- Ecuador's Highest Court vs. a Foreign Tribunal: Who Will Have the Final Say on Whether Chevron Must Pay a $9.5 Billion Judgment for Amazon Devastation? (December 10, 2013)
- Updated and Expanded Memo: U.S. Pharmaceutical Corporation Uses NAFTA Foreign Investor Privileges Regime to Attack Canada's Patent Policy, Demand $100 Million for Invalidation of a Patent (March 15, 2013)
- Rebutting Misleading Industry Claims on Investor-State Case that Ignored CAFTA Annex (March 15, 2013)
- Eyes on Trade: U.S. Corporations Launch Wave of NAFTA Attacks on Canada's Energy, Fracking, and Medicines Policies (December 14, 2012)
- Renco Uses U.S.-Peru FTA to Evade Justice for La Oroya Pollution (December 2012)
- U.S.-Peru FTA Investor Rights: Lessons Learned and New Approaches Needed for TPP (available in Spanish here) (November 28, 2012)
- Rebutting Misleading Industry Claims on Investor-State Case that Ignored CAFTA Annex (November 17, 2012)
- Occidental v. Ecuador Award Spotlights Perils of Investor-State System (November 2012)
- Investors Use Runaway "Fair and Equitable Treatment" Standard in 75% of "Successful" Cases Against Governments (September 5, 2012)
- TPP's Investment Rules Harm Public Access to Essential Services (August 20, 2012)
- TPP's Investment Rules Harm Environmental Protection (August 20, 2012)
- TPP's Investment Rules Harm Public Health (August 20, 2012)
- CAFTA Investor-State Ruling: Tribunal Ignores CAFTA Annex, Cites Another Tribunal to Rule against Guatemala (July 19, 2012)
- Global Trade Watch's analysis of the leaked TPP investment chapter (leaked chapter found here) (June 13, 2012)
- Obama's Model BIT: What Changed and What Didn't (April 20, 2012)
- "Loewen" NAFTA Case: Foreign Corporations Unhappy with Domestic Jury Awards in Private Contract Disputes Can Demand Bailout from Taxpayers (April 16, 2012)
- Renco Uses Trade Pact Foreign Investor Privileges to Chill Peru's Environment and Health Policy, Undermine Justice (March 12, 2012)
- Key Elements of Damaging U.S. Trade Agreement Investment Rules that Must Not Be Replicated in TPP (February 28, 2012)
- Backgrounder: CAFTA Investor Rights Undermining Democracy and the Environment: Commerce Group Case (June 30, 2011)
- CAFTA Investor Rights Undermining Democracy and the Environment: Pacific Rim Mining Case (May 26, 2010)
- Rainforest Chernobyl Revisited: Human Rights Brief (February 10, 2010)
- Testimony of Global Trade Watch's Todd Tucker (July 29, 2009)
- Ethyl Briefing Paper: Ethyl Corporation vs. Government of Canada (October 2, 2001)
- New Interactive Map Shows TPP Would Expand Multinational Corporations' Power to Attack U.S. Laws (September 8, 2016)
- TPP Fight Escalates as Sen. Warren and Hundreds of Academics Oppose Tribunal System at Heart of Pact (September 7, 2016)
- Statement: TransCanada Demands $15 Billion in NAFTA Investor-State Tribunal for XL Pipeline Rejection (January 6, 2016)
- TPP Leak Reveals Extraordinary New Powers for Thousands of Foreign Firms to Challenge U.S. Policies and Demand Taxpayer Compensation (March 25, 2015)
- As Growing European Government Opposition to Investor-State Regime Shadows This Week's U.S.-EU Talks, New Report Takes on Obama Administration Defense of Parallel Legal System for Foreign Corporations (October 2, 2014)
- Obama-Merkel Summit Presents Perfect Opportunity to Drop Controversial Foreign 'Investor-State' Rights in U.S.-EU Trade Pact (May 1, 2014)
- State Legislators From 50 States Urge TPP Negotiators to Reject Investor-State Dispute Settlement (July 5, 2012)
- CAFTA Ruling Continues Corporate Attack on Environmental Protection (June 2, 2012)
- Announcement of Flawed Investment Rules Show Agenda Motivating Obama Trade Talks (April 20, 2012)
- Will Chevron Case Take Down Investor-State Enforcement System? (February 17, 2012)
- Commerce Group CAFTA Ruling Highlights Threat of Foreign Investor Rules Also Included in Korea FTA: Even as Mining Firm's Frivolous Challenge of Environmental Policy Is Dismissed on Technicality, El Salvador Must Pay $800,000 (March 15, 2011)
- Pacific Rim CAFTA Challenge of Salvadoran Environmental, Mining Safety Policies Given Go-Ahead by Tribunal (August 3, 2010)
- U.S. Dodging Bullet on Methanex Ruling Does Not Remedy Threats from NAFTA Chapter 11 Foreign Investor Protection Mechanism (August 10, 2005)
- Canadian Cattlemen's NAFTA Challenge Demanding U.S. Taxpayer Compensation for Mad Cow Import Restrictions Is Latest Example of Trade Model's Assault on Democratic Policymaking, Vital Consumer Safeguards (February 22, 2005)
- 12 U.S. Senators Outline TPP's Fundamental Flaws, Tell President Obama it Shouldn't Be Considered Until Renegotiated (September 29, 2016)
- Official Government Statements and Actions against Investor-State Dispute Settlement (ISDS)
- Sen. Brown Statement on Released Trans-Pacific Partnership Investment Provisions (March 26, 2015)
- Rep. DeLauro Statement On ISDS Trans-Pacific Partnership Chapter (March 26, 2015)
- Rep. Pascrell, Ways and Means Democrats Urge President Obama to Exclude Investor State Dispute Settlement Provisions from Trans-Atlantic Trade and Investment Partnership (December 18, 2014)
- Sens. Warren, Markey and Baldwin Write to Express Their Concerns With the TPP's Threats to Financial Stability (December 18, 2014)
- Rep. Waters Leads Group of Congressional Leaders in Writing to Secretary Lew and Ambassador Froman About Financial Stability Provisions in TTIP (December 1, 2014)
- Small Business Leaders to Trump: End Advantage for Multinationals Over U.S. Small Businesses in NAFTA (July 12, 2017)
- 220+ Law and Economics Professors Urge Congress to Reject the TPP and Other Prospective Deals that Include Investor-State Dispute Settlement (ISDS) (September 7, 2016)
- Consumers Union and Consumer Federation of America Urge Congress Not To Support Approval of the TPP (September 6, 2016)
- Pending Trade Deals Threaten Efforts to Keep Fossil Fuels in the Ground; more than 450organizations urge opposition to the Trans-Pacific Partnership (June 6, 2016)
- Sierra Club Report: Looming Trade Deals Threaten Efforts to Keep Fossil Fuels in the Ground (March 23, 2016)
- Interactive Map of the Fossil Fuel Investments Owned by Corporations That Would Be Empowered to Use ISDS Under the TPP and TTIP (March 23, 2016)
- Senior Legal Experts, including Obama's Harvard mentor Lawrence Tribe, pronounce ISDS contrary to American legal traditions (April 30, 2015)
- Maryknoll Office for Global Concerns: TPP investment chapter will further threaten God's Earth and vulnerable people (March 31, 2015)
- Faith Groups Declare TPP Investment Chapter Unjust and Puts Profit Ahead of People (March 26, 2015)
- Lawyers Write to Congressional Leaders to Oppose the Inclusion of Investor-State Dispute Settlement (ISDS) Provisions in the TPP (March 11, 2015)
- 241 Civil Society Organizations Send a Letter to the UNCTAD Secretary General on the Implications of Investment Protection Treaties (October 15, 2014)
- 14 Civil Society Organizations Write to Froman Expressing Concerns with ISDS in TPP and TTIP (September 4, 2014)
- Public Citizen, More Than 40 Other Organizations Call for Public Consultations on Investor Rights in Trade Deals (March 4, 2014)
- CATO Proposes A Compromise to Advance the Trade Agenda: Purge Negotiations of Investor-State Dispute Settlement (March 4, 2014)
- Public Citizen, More Than 40 Other Organizations Call for Public Consultations on Investor Rights in Trade Deals (February 28, 2014)
- AARP and U.S. Health Groups Write to President Obama on Concerns that TPP Would Undermine Access to Affordable Health Care (November 8, 2013)
- U.S. Civil Society Groups Urge Obama Administration to Ensure U.S. Trade Policy is Consistent with Global Development Goals (February 19, 2013)
- The Interfaith Working Group on Trade and Investment Speak Out Against Onerous Investor State Provisions in the TPP (September 11, 2012)
- National Conference of State Legislators Policy on Free Trade and Federalism (August 2012) – see the 2011 resolution here.
- State Legislators From 50 States Urge TPP Negotiators to Reject Investor-State Dispute Settlement (July 5, 2012)
- Legal Academics from the U.S. and Potential TPP Member Countries Express Concern with the TPP Intellectual Property Chapter (May 9, 2012)
- An Open Letter from Lawyers to the Negotiators of the TPP Urging the Rejection of ISDS (May 8, 2012)
- Letter to Three Panelists in the Chevron Corp. v. Republic of Ecuador Investor-State Tribunal from Amazon Watch, Public Citizen and Rainforest Action Network (February 8, 2012)
- Civil Society Coalition: Key Elements of Damaging U.S. Trade Agreement Investment Rules that Must Not Be Replicated in TPP (February 2012)