There's a good back and forth on ISDS in TTIP between Lauge Poulsen, Jonathan Bonnitcha, Jason Yackee, on one side, and Freya Baetans, on the other. I'm going to get 4 or 5 blog posts out of all this!
I'll start with something from Poulsen, Bonnitcha, and Yackee:
One of the most contentious issues in existing legal and academic debates about investment treaties is whether the constraints they impose on the exercise of government powers should be understood as ‘costs’ or, rather, as standards of ’good governance’ that it would be in the interest of every state to meet, even in the absence of investment treaties (Bonnitcha, 2014, sec. 2.4.3). This debate raises complex and contested questions about the manner and extent in which governments should intervene in their economies. In this paper we do not propose an overarching theory of desirable and undesirable forms of government regulation. All the member states of the EU are democracies. We suggest that, in a democracy, the appropriate benchmark for valuing the cost associated with any restriction on policy space is the government of the day’s own assessment of the public interest. Accordingly, the impact of TTIP’s investment protection provisions on EU policy space can be understood as the extent to which the treaty prevents the EU and the EU member states from adopting or applying policies that the relevant government would have preferred to apply in the absence of the treaty.
Good governance as an issue for international law is a relatively hot topic these days in legal academia, but there are no easy answers. International oversight of domestic governance, through ISDS or otherwise, is a complex issue. People have very different perspectives on these matters. One person might say that a particular government action was good governance; another might say it was bad governance.
To take one example, you may have heard of the issue of flame retardant chemicals in furniture and kids' clothing. This is something certain governments started requiring many years ago, purportedly for fire safety reasons. As the Chicago Tribune described it, however, such laws resulted from lobbying by cigarette companies and chemical companies, and the health risk from exposure to the chemicals far exceeded any fire prevention benefits.
So what does "good governance" look like on the issue of a government pursuing "safety" in this way? It's easy to imagine how foreign investors would be affected, either by the decision to adopt such measures or recent attempts to pull them back, so it's the kind of issue where an ISDS claim is certainly possible. If such measures were reviewed by an ISDS tribunal, would the tribunal be able to decide whether the measures constituted "good governance", in the sense of complying with a general standard such as "fair and equitable treatment"? Should flame retardant chemicals have been required for safety reasons? Should they have been prohibited for health reasons? What is the appropriate "governance" here, and can investment treaties get us to it?
I know what I think of the flame retardant chemical issue, but these can be very difficult judgements to make. (And there are lots of them out there. This is not an isolated case, although it may be an extreme one.) What role should there be for ISDS (and other international courts) to make these judgements? ISDS tribunals are already doing this, so we really need to talk about it, but it doesn't seem like it has become part of the policy debate (as opposed to the legal academic discussion) on ISDS yet, at least not in a clear and coherent way. There's lots of vague talk about "policy space," but good governance requirements go beyond the issue of carving out certain policies from international economic law rules, as they apply to any and all policies.
