Investor-state dispute settlement is a complex, difficult issue. Reasonable people can disagree on it. I've come out against it, but I see why people would be for it.
However, when people do support it, I wish they would get the law and the facts right. It doesn't bother me when business groups and NGOs put out their spin; I expect that. But when there is an op-ed by an economics professor that gets things wrong, I feel compelled to respond. This piece in the Canadian magazine Maclean's drove me nuts. I'll try to keep from ranting as I address various points.
First off, here is the sub-title: "Excitable nationalists and their wild imaginings about the Canada-China foreign-investment deal have led to all manner of silly arguments." It seems to me that if you want to debate an important policy issue, you should set the right tone. This is not it.
Second, as part of the author's attempt to address criticisms of investor-state (in italics), there's this mis-statement of investment law (following the italics):
2. Foreign-owned corporations can sue Ottawa if a new policy reduces their profits. As we’ll see shortly, that’s not true. Foreign firms have to show that they’ve received different treatment than their Canadian-owned competitors.
As every reader of this blog knows, discriminatory treatment is one basis for a complaint, but it's not the only one. Importantly, it's not the one people generally criticize. There may be someone, somewhere who objects to national treatment obligations in investment treaties, but for the most part, that's not what critics focus on. The biggest problem area is "fair and equitable treatment", which, noticeably, does not appear at all in the op-ed.
Later, the author blurs together non-discrimination and expropration in a way that leaves me confused:
It’s not enough to simply promise to treat foreign-owned firms the same as domestically owned firms. Even if discriminatory regulations and/or fees are subsequently overturned, the lost revenues—not to mention the legal costs—still amount to an effective expropriation. What FIPAs do is ensure that governments can’t expropriate foreign-owned assets without compensation.
So, past discrimination should be counted as expropriation? I thought past discrimination just gave rise to liability on its own. This goes beyond my expertise, but it seems a bit off in terms of explaining how the obligations work.
Then the author points to some exception provisions, one in NAFTA and one in the Canada-China FIPA. He seems to think these are general exceptions, although he doesn't really make clear what their significance is. The one in NAFTA (Article 1106(6)), however, is not a general exception; it's only an exception from the performance requirements provisions. This undercuts the point quite a bit.
On the other hand, the Canada - China FIPA exception (Article 33(2)) is a general one, presumably applicable to all obligations, although only for the limited policy purposes set out there. How this would work in practice for an FET claim or an indirect expropriation claim is unclear at this point. As I've said before, I'd like to see how this plays out. Can general exceptions save investor-state? Maybe, but it's not a standard provision yet.
I'd really like there to be a good debate on ISDS. I've put a lot of criticisms out there, and I'm always eager to hear responses. I know it's difficult to talk about these issues, because they are quite complex. NGOs and business groups keep up an endless stream of spin, but hopefully everyone else can get beyond that and do some deep thinking about it all.
(Was that too much of a rant? Maybe I need to take a break from ISDS and get back to the calm and relaxed world of WTO disputes!)
