Jonathan C. Hamilton, Commentary, “Trans-Atlantic and Trans-Pacific Trade Deals” (2015)

Where did multilateral trade and investment deals stand as of 2015, before the critical U.S. election of 2016? Attention swirled around the future of investor-state dispute settlement (ISDS) in the Transatlantic Trade and Investment Partnership (TTIP), the multilateral U.S.-European deal that is currently hanging in the balance, as well as its transpacific counterpart, the Trans-Pacific Partnership (TPP). It appeared that the globalization and its attendant dispute mechanisms hung in an uncertain balance.

The International Bar Association (IBA) blew into Washington, DC (with snow and cold) for its annual IBA Arbitration Day on February 27, 2015. The event focused on the 50th Anniversary of the International Centre for Settlement of Investment Disputes (ICSID) at the World Bank, with "a retrospective and a forecast of the future of investment arbitration." In a week of arbitration events, speakers and commentators debated the strengths, and concerns, about ICSID and investment arbitration.

Looking forward, attention swirled around the future of investor-state dispute settlement (ISDS) in the Transatlantic Trade and Investment Partnership (TTIP), the multilateral U.S.-European deal that is currently hanging in the balance, as well as its transpacific counterpart, the Trans-Pacific Partnership (TPP). U.S. Senator Elizabeth Warren published a high profile opinion column in the Washington Post last week that has prompted a wave of media attention in the US, following similar attention in European capitals last year. Warren refers to "rigged pseudocourts" allegedly favoring investors. As a Wall Street Journal article of March 3 noted, "the criticism brings together liberal critics of President Barack Obama's trade policies and libertarians and conservatives who worry the language in international deals could undermine American sovereignty."

Looking backward, the tempest accents a debate about how ICSID and how it is functioning 50 years after its inception, with a focus on the unprecedented wave of investment disputes that emerged from the widespread ratification of investment treaties in the 1990s. Many of the naysayers about ICSID focus on procedural matters that, as a practical matter, suggest tinkering with rather than tearing down the system. Indeed, it is instructive how far things have come. With respect to Latin America, for example, the region notably adopted a position against ICSID at the 1964 Tokyo round of discussions known as "EL No de Tokyo." Eventually, however, Latin American states broadly ratified the ICSID Convention. When Bolivia, followed by Ecuador and Venezuela, denounced the ICSID Convention in recent years, alarm bells sounded. But the fact is that more States have since joined ICSID than the three states that left as part of broader political and macroeconomic changes.

The historical record suggests that the sky is not falling - not through the TTIP or TPP, or at at ICSID. Trade and investment treaties may continue a path of change, as is necessary for most all institutions and legal systems. That path is already underway, as reflected in a White House response to critics of ISDS posted on February 26. The Director of the National Economic Council, Jeff Zients, posted a commentary explaining, "ISDS has come under criticism because of some legitimate complaints about poorly written agreements. The U.S. shares some of those concerns, and agrees with the need for new, higher standards, stronger safeguards and better transparency provisions. Through TPP and other agreements, that is exactly what we are putting in place."

Further, "governments have looked to international arbitration to resolve such disputes for centuries. Earlier in our history, the United States used gunboat diplomacy, sending our military to defend our economic interests abroad. The decision was made by our predecessors that it was better to rely on neutral arbitration instead." Indeed.

Debates over TTIP and TPP aligned with a debate about how ICSID and how it is functioning 50 years after its inception, with a focus on the unprecedented wave of investment disputes that emerged from the widespread ratification of investment treaties

Jonathan C. Hamilton