This is from Judge Stephen Schwebel:
Opponents of investor-state arbitration claim that it faces a “legitimacy crisis.” There are three essential contentions advanced by such critics: (1) tribunals are biased toward multinational enterprises; (2) arbitration is asymmetrical because of investors’ freedom to bring claims against states, while states cannot bring claims against investors; and (3) arbitral awards are often conflicting. These criticisms are more colorful than they are cogent.
People say a lot of things about the investor-state system, and I'm not really sure, empirically speaking, what the top three criticisms of investor-state litigation are. But I do hear these three a fair amount. For me, though, they are not particularly strong points.
Are the tribunals biased towards the corporate complainants? I'm not even sure what that means. I doubt most of the tribunal members themselves are biased. In terms of the outcomes, investors win some cases and lose some cases. Nothing unexpected there.
Should states be able to bring claims against investors? I'm not sure what purpose that would serve. Presumably they can already do so under domestic law.
And are arbitral awards conflicting? Courts are often unclear and contradictory. That's true everywhere.
So, while people do say these things, and there may be something to some of these criticisms, I think there are better arguments out there. Here are three of my favorites:
1. The main problem ISDS was designed to address has largely disappeared. Back in the 1950s, 1960s and 1970s, there was a big problem with expropriation. That problem has diminished considerably (and now a larger issue is treatment of foreign investors that is too good, in the form of subsidies). So what exactly is ISDS supposed to address? Bad behavior by governments of some sort, but nobody seems to be able to define it clearly. What kinds of government actions? And in what countries are these bad acts taking place? Until we have some clearer answers here, based on empirical evidence rather than anecdotes, it's not at all clear to me what the problem is that ISDS is supposedly dealing with.
2. In today's globalized world, "foreign" has lost much of its meaning. If Burger King becomes a Canadian company, can it then bring ISDS cases against the U.S. government in relation to its U.S. operations? It may depend on the precise structure of the corporate entity that is created, but it's quite possible that the answer is yes. That would be odd, to say the least. Similarly, could Fiat bring cases against the U.S. government on behalf of Chrysler if ISDS is included in TTIP? And could Chrysler bring cases against the EU on behalf of Fiat? Or both? The system hasn't kept up with the rise of global companies. It seems as though with the right corporate structure you could make yourself "foreign" in all countries where you invest!
3. International law gives rights to rich people, but not poor people. ISDS should not be looked at in isolation from the rest of international law. It's part of a larger system. And that system doesn't do much to protect the rights of the poor and oppressed. Generally speaking, there is very limited effective recourse to international tribunals for these people, and it's hard to believe there will be any time soon. By contrast, through ISDS, foreign investors -- i.e., rich people and corporations -- have a fairly effective way to assert their rights. That contrast between the rights of the rich and the poor under international law doesn't look "fair and equitable", in my view.
