Academic journal article Canada-United States Law Journal

TPP and ISDS: The Challenge from Europe and the Proposed TTIP Investment Court

Academic journal article Canada-United States Law Journal

TPP and ISDS: The Challenge from Europe and the Proposed TTIP Investment Court

Article excerpt

The following is the text of the 9th Annual Canada-United States Law Institute Distinguished Lecture given at Western University Faculty of Law by Ian Laird on November 16, 2015.


I.   Introduction
II.  Where Are We Now? Or "How ... is This Possible?"
     A. Substantive and Procedural Objections
III. TPP--Where From Here? Arbitration versus Court--Which Will
IV.  Conclusion


The Trans-Pacific Partnership Agreement ("TPP") is an ambitious trade, services, and investment treaty on which final agreement was reached by the twelve parties from the Asia-Pacific region on Monday, October 5, 2015. (1) The parties completed negotiations during the Canadian federal election, and at the beginning of the U.S. presidential primary process. The agreement is not likely to be signed and ratified for well over a year from the completion of negotiations. In the meantime, there will continue to be heightened political debate about TPP's costs and benefits. One of the more heated areas of discussion will be the main topic of this paper: the TPP chapter on Investor-State Dispute Settlement ("ISDS"). (2) In asking whether the TPP is an example of "promise or peril" for Canada, the debate around ISDS will likely play a role. (3)

The new Liberal Government in Canada has promised a vigorous review of TPP in Parliament before ratifying it. (4) U.S. presidential candidate Hillary Clinton has said that she opposes TPP. (5) Senator Elizabeth Warren has warned that ISDS involves "rigged, pseudo-courts" (6); while President Obama has responded by saying "those arguments are made up." (7) Even comedian John Oliver has brought ISDS into popular culture in his recent commentary on Philip Morris's investment arbitration claim against Australia over tobacco plain packaging regulations. (8)

During TPP negotiations, another groundbreaking trade agreement that has been under consideration between the United States and the European Union ("EU") is the Transatlantic Trade and Investment Partnership ("TTIP"). Combined, the members of TPP and TTIP represent almost sixty-four percent of the world's Gross Domestic Product. (9) The ISDS has also been equally contentious, if not more so, during the negotiation of TTIP.

The long and winding path to the ISDS provisions in these treaties is in many ways a story grounded in the earlier experience and debate surrounding Chapter 11 of the North American Free Trade Agreement ("NAFTA"). Both sides of the current debate use NAFTA to support or critique TPP and TTIP. The first part of this paper makes a small contribution to addressing the question, how did we get to where we are now with ISDS? We will take a short tour of some vignettes from the last fifteen years of NAFTA experience with ISDS. We will see some of the origins of the debate about the legitimacy of ISDS that continues to inform the current TPP and TTIP discussion.

In the second part of this paper, the arbitral model for dispute settlement in TPP is contrasted with the new proposal of the EU for an international investment "court" in TTIP. The United States has taken its NAFTA experience and produced an investment chapter in TPP rooted in the values and procedures of international arbitration. In contrast, we see a dramatic, new proposal by the EU to include in TTIP a purported court-based model that seeks to repudiate the arbitration model. The justification for this change is based on the accusation that the current arbitration model is illegitimate. We will examine the legitimacy debate, comparing the arbitration and court models.


What are the roots of this so-called "legitimacy" debate surrounding ISDS? First, what does it even mean to be legitimate? The word "legitimate" is most properly used as a synonym for lawful. (11) In the public realm, for a policy to be legitimate, there needs to be a broader sense of acceptance grounded in understanding and familiarity of that policy by the general public and key stakeholders. …

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