There are two new pieces on ISDS that are very good, one from UNCTAD and one from ECIPE. Both have lots of good data on ISDS cases. I'll let the data speak for itself, but I wanted to comment on the ECIPE piece, which is authored by Roderick Abbott, Fredrik Erixon, and Martina Francesca Ferracane. I know Roderick reads this blog, and I'll tell Fredrik about this post, so perhaps we can get some dialogue going. I'm going to quote a few of their statements, then offer a brief response.
"In contrast to a mechanism to resolve disputes between states, like the World Trade Organisation’s dispute-settlement mechanism, [ISDS] is not an instrument that “puts on trial” laws and regulations in a host country, with the consequence that a government has to change a law or a regulation in the event they lose a case."
A couple thoughts here. First, the WTO's dispute settlement system is actually somewhat flexible, and governments have, on occasion, responded to adverse decisions by accepting trade sanctions or negotiating compensation. So, it is a trial of sorts, but no one has to go to jail.
Second, even if ISDS does not require a government to change its laws or regulations, the financial penalties the government may face strongly encourage it to do so at times.
And finally, I believe there are a few ISDS decisions which suggest the possibility of forcing a change in national laws/regulations, although I can't give you a cite off the top of my head.
"Nor do investment-protection agreements demand that a country fully transpose the general principles of such an agreement into national laws and regulation."
I feel like their implication here is that it would be more intrusive to require these principles in national law than to impose them directly through international courts. I'm not sure I see it the same way. If a treaty established flexible standards that governments could then incorporate more concretely in domestic law (which would apply to both domestic and foreign investors!), using the traditional domestic law-making process, I think there might be fewer objections. For example, would anyone have a problem with an obligation that governments incorporate due process standards in domestic law? Expropriation is a bit more sensitive, but these days I think there is pretty wide support for rules in this area as well. So, perhaps we would be better off with an international effort to convince everyone to create national standards in this regard, rather than rely on international courts.
"One wing of the argument [from critics] appears to entirely disapprove that states enter international agreements that constrain their flexibility to change policy in future."
I suppose there might be some people who make this argument, based on the view that governments should never delegate power to international institutions. But my sense is this is a fairly small contingent. The main criticism I see is that these agreements should not constrain good faith public interest regulation, such as for health or environmental protection. These critics do not object to international constraints in general, but rather the specific constraints here, which they worry will get in the way of such regulation. In fact, many of these people would be happy to see other constraints imposed, but in different policy areas.
The key here is the substance. What have governments committed to in the international agreement? National treatment and MFN are probably acceptable constraints. Regulatory expropriation and fair/equitable treatment, by contrast, are perhaps too intrusive.
"Another wing goes even further and claims that courts, including national courts, have no legitimate role in defending companies against democratic decisions by a government. These views are not challenging because they undermine ISDS – they are challenging because they refute constitutional democracy, the principle that subjects of the state have rights, including legal recourse to defend against state actions, and because they make it impossible for a government to enter an international binding agreement."
I can't speak for what is going on in Europe, but I can say that in the U.S., you will be hard-pressed to find anyone who objects to constitutional democracy. With only a handful of exceptions, it is pretty well accepted on both the left and right.
The criticism of ISDS is that the international courts at issue lack legitimacy. One point in this regard is that there is not enough democratic input in the process. National constitutions have a well-developed set of checks and balances (e.g. appointment of judges), which is not the case with international investment obligations.
Another point here is that constitutional protections for foreign investors only seems biased and unfair. Many of those who object to ISDS would like to see an expansion of international protections to a number of other oppressed individuals and groups. So it's not really an objection to courts defending companies, but to courts defending only companies.
