Investor-State Dispute Settlement: Unfair to Whom?

European trade commission commissioner Cecilia malmström wants to replace the investor-state dispute settlement otherwise known as isds at the global level joining me is Gary Hofbauer senior fellow at the Peterson Institute to discuss the ramifications such a move would have thank you for joining me Gary thanks so what is isds well it's an old idea and it started with the United States treaties called friendship commerce and other navigation treaties back in the 1930s and 40s and it's the idea that when there's a investment dispute in another country we should have a neutral arbitrator decided not the courts of one country not the court to another and not by diplomatic means that is countries sending their ministers back and forth this to resolve it so it's an arbitration mechanism between governments and firms when there's some kind of investment disputes basically expropriation or something that looks like expropriation so why did the United States not want to use the domestic court's well we're quite happy to use the domestic court's but we're not so happy our business firms are not so happy about using the domestic court's I'll take an extreme example in Venezuela everybody knows what's happening in Venezuela but you can take other countries as well which at one time in their history were very friendly to business and then they turn to government changes and they become very unfriendly and so this arbitration mechanism is meant to provide some certainty over changes in government policy over a period of time so why is es isds so controversial well it's controversial for two reasons one it's an acronym it sounds kind of bad you know like NAFTA sounds bad to people so let's get rid of something bad that's the kind of the populist reason underneath that is the argument that highest yes is favorable to corporations and some people say well if it's people to corporation it can't be good for workers I disagree with that pathetic in view so that's what's going on dislike of global corporations bad acronym let's get rid of it so one of the biggest complaints about the is TS procedure is that it's done in a secretive manner so why is it's done in such a secretive way okay the the terms of isds are totally public it's in it's in a bilateral investment treaty or free trade agreement and as I said the old friendship Commerce and navigation trees so the terms are completely opened the secretive part is that when we come to an arbitration between the government and a company you know the arbitration is often not always secret and the idea there is that like any other business arbitration maybe if you keep things out of the press the parties might agree on a settlement before it runs before it's concluded indeed that often happens now maybe that's a mistake to have these arbitration secret maybe that should be changed but that's a very small part of the overall a concept of IIST yes so are there any alternative solutions that are viable and politically feasible well yes actually the the concrete objections are that one you have these rotating arbitrators you don't have a permanent group of arbitrators and we could choose a permanent group of arbitrators in fact the Canadians and the Europeans just did that in their trade agreement secondly is the argument that we related to that that some of the arbitrator's are corporate lawyers of course and they represent corporations on other issues and maybe they're biased so having a permanent set of non biased arbitrators might deal with it I think those are the kind of concrete objections to the ISPs another issue which i think is yesterday's issue is that somehow this mechanism will be used to override environmental health and safety regulations in fact the modern isds agreement make explicit reference to the necessity to have good regulation and pretty well rule that out thank you Gary thank you

Channel: Peterson Institute for International Economics

Views: 2,597

Rating: 3.7428572 out of 5

Keywords: free trade agreements, PIIE, Gary Clyde Hufbauer

Id: sJ3reZSvTAE

Length: 4min 33sec (273 seconds)

Published: Tue Jan 16 2018