The United States is in the final stages of negotiating the Trans-Pacific Partnership (TPP), a massive free-trade agreement with Mexico, Canada, Japan, Singapore and seven other countries. Who will benefit from the TPP? American workers? Consumers? Small businesses? Taxpayers? Or the biggest multinational corporations in the world?
One strong hint is buried in the fine print of the closely guarded draft. The provision, an increasingly common feature of trade agreements, is called “Investor-State Dispute Settlement,” or ISDS. The name may sound mild, but don’t be fooled. Agreeing to ISDS in this enormous new treaty would tilt the playing field in the United States further in favor of big multinational corporations. Worse, it would undermine U.S. sovereignty.
ISDS would allow foreign companies to challenge U.S. laws – and potentially to pick up huge payouts from taxpayers – without ever stepping foot in a U.S. court. Here’s how it would work. Imagine that the United States bans a toxic chemical that is often added to gasoline because of its health and environmental consequences. If a foreign company that makes the toxic chemical opposes the law, it would normally have to challenge it in a U.S. court. But with ISDS, the company could skip the U.S. courts and go before an international panel of arbitrators. If the company won, the ruling couldn’t be challenged in U.S. courts, and the arbitration panel could require American taxpayers to cough up millions – and even billions – of dollars in damages.
If that seems shocking, buckle your seat belt. ISDS could lead to gigantic fines, but it wouldn’t employ independent judges. Instead, highly paid corporate lawyers would go back and forth between representing corporations one day and sitting in judgment the next. Maybe that makes sense in an arbitration between two corporations, but not in cases between corporations and governments. If you’re a lawyer looking to maintain or attract high-paying corporate clients, how likely are you to rule against those corporations when it’s your turn in the judge’s seat?
If the tilt toward giant corporations wasn’t clear enough, consider who would get to use this special court: only international investors, which are, by and large, big corporations.
Why create these rigged, pseudo-courts at all? What’s so wrong with the U.S. judicial system? Nothing, actually. But after World War II, some investors worried about plunking down their money in developing countries, where the legal systems were not as dependable. They were concerned that a corporation might build a plant one day only to watch a dictator confiscate it the next.
Those justifications don’t make sense anymore, if they ever did. Countries in the TPP are hardly emerging economies with weak legal systems.
Conservatives who believe in U.S. sovereignty should be outraged that ISDS would shift power from American courts. Libertarians should be offended that ISDS effectively would offer a free taxpayer subsidy to countries with weak legal systems. And progressives should oppose ISDS because it would allow big multinationals to weaken labor and environmental rules.
If a final TPP agreement includes Investor-State Dispute Settlement, the only winners will be multinational corporations.
Warren, a Democrat, represents Massachusetts in the Senate.