Following up on this post, the State Department's Advisory Committee on International Economic Policy (ACIEP) recently held a review of the U.S. Model BIT. The report issued by the Committee has a discussion of many issues under BITs, including the investor-state dispute mechanism. It's too long to quote the whole thing here, but here are some key portions of the different views on investor-state:
Some Subcommittee members strongly support investor-state dispute settlement. These
members noted that such provisions are contained in virtually all of the over 2,600 BITs around the world and argued that they provide an objective, fair and non-politicized forum in which investors overseas can seek redress for treaty breaches (and sometimes contract breaches) by foreign countries, including discriminatory treatment, uncompensated expropriation, and denials of fair and equitable treatment....
Other Subcommittee members strongly believe that the international dispute resolution
mechanism provided in the Model BIT poses significant risks to the public interest. They were concerned that international arbitrators may lack expertise in and understanding of local laws and societal values and, where these laws and values are at the heart of an investment dispute, the arbitration panels’ decisions risk undermining the domestic laws and values. They believed that where investment disputes raise constitutional questions, such as the allocation of powers among governmental organs or permissible limitations of property rights, the principles of democratic accountability require that domestic courts adjudicate such disputes whenever possible....
Some Subcommittee members believed that investors should first be required to exhaust
domestic remedies before taking claims to international arbitration. They asserted that the
exhaustion requirement is a fundamental principle of international law and a policy of the State Department before it will consider espousing the claims of U.S. nationals against foreign governments....
Other Subcommittee members argued that the adoption of an exhaustion requirement would run contrary to current international legal practice, undoing a half-century of progress in
international law and would in many cases effectively deny U.S. investors the realistic ability to seek justice for bad acts or omissions by foreign governments.
In addition to this discussion, there is a separate statement by some committee members opposing investor-state dispute settlement: "We recommend that the administration replace investor-state dispute settlement with a state-to-state mechanism. If the administration continues to include an investor-state dispute settlement mechanism, investors should be required to exhaust domestic remedies before filing a claim before an international tribunal. That mechanism should also provide a screen that allows the Parties to prevent frivolous claims or claims which otherwise may cause serious public harm."
For those who don't follow the issue closely, I think Judge Stephen Schwebel's individual statement (towards the bottom of the linked page) helps explain what is going on here:
For more than 150 years, the United States strongly espoused the protection of foreign
investment. That position was constructively developed by the terms of the 1994 U.S. Model
BIT. However the United States sharply modified its traditional position with the advent of
NAFTA, not by the terms of that Treaty but by interpretation of it and by the positions it took in cases brought by Canadian investors against the U.S. Government. The United States made the remarkable discovery that treaty obligations run in more than one direction; foreign investors could take advantage of U.S. obligations just as U.S. investors could invoke the BIT obligations of other States. That led the United States to shift to a “defensive posture” emphasizing restrictions upon the viability of foreign investment rather than its protection, both by the terms of the 2004 Model BIT and in the litigious positions it took in NAFTA cases (such as Glamis Gold)
In a nutshell, the U.S. wanted investor-state dispute settlement (and expansive substantive rules) as long as U.S. companies were filing complaints against developing countries, and companies from those countries were not filing disputes against the U.S. (there wasn't much foreign investment in the U.S. by such companies). This system was fairly uncontroversial here in the U.S., aside from a few people who advocated for developing country causes. However, now that Canada (and also Mexico) are filing investor-state cases against the U.S. pursuant to NAFTA, various groups in the U.S. have taken notice. They fear that complaints against the U.S. could undermine important domestic policies, and thus are trying to limit the scope of these provisions. As a result, the U.S. position on these issues has changed somewhat, in the sense that when defending its laws in investor-state complaints, it has advocated for narrowing the substantive scope of investment treaty law.
I'm not sure where this is all going. Some days I think investor-state is now so well-established that it will always be with us and will continue to spread throughout the world, maybe even effectively bringing us an MAI after every country is covered in relation to every other. Other days, though, I think we are one big judgment against a U.S. environmental law away from seeing the U.S. abandon the whole idea (other countries might react just as strongly). Is there a middle ground? Would someone propose applying investor-state only in relation to countries who are unlikely to bring complaints against the U.S.? From a public relations standpoint, in terms of how the U.S. looks in the eyes of the rest of the world, that might not come across very well. But in terms of U.S. domestic politics, it might be an acceptable compromise.
