What does Hillary Clinton think of #ISDS in #TPP?

Hillary Clinton made waves yesterday by announcing her opposition to the Trans-Pacific Partnership, or TPP.

As Simon Lester notes, her opposition seems to be based on two issues: the TPP’s lack of disciplines on currency manipulation and some of the pharmaceutical provisions.

Where does Hillary stand on investor-state dispute settlement, or ISDS – one of the most controversial provisions in the TPP?

The campaign has not yet announced a position, but the candidate has made statements in the past that give some hints.

As HuffPo has reported, her 2014 book Hard Choices has the following passage:

Currently the United States is negotiating comprehensive agreements with eleven countries in Asia and in North and South America, and with the European Union. We should be focused on ending currency manipulation, environmental destruction, and miserable working conditions in developing countries, as well as harmonizing regulations with the EU. And we should avoid some of the provisions sought by business interests, including our own, like giving them or their investors the power to sue foreign governments to weaken their environmental and public health rules, as Philip Morris is already trying to do in Australia. The United States should be advocating a level and fair playing field, not special favors. (Emphasis added.)

Seems very critical, especially the framing of investor rights as “special favors”.

But it is unclear if “avoid” refers to giving the companies standing in the first place or having the result of a weakening of policy.

The latter is not so much an issue, since the remedy is typically an order to make a cash payment, not a change in underlying policy. However, some scholars have found examples of governments claiming that investor challenges led them to choose to weaken law. On the one hand, it’s hard to establish causality with any certainty – are governments just blaming ISDS for decisions they would have taken anyway? On the other, it would be surprising if ISDS had no independent influence on government policymaking over time.

The former – the reference to “giving them or their investors the power to sue” – could be big. It might have implications for whether governments would have to mount a costly defense and argue the case, or whether the litigation would be blocked in the first place.

A bit more detail comes from legislation Hillary co-sponsored in 2002 (as an amendment to Fast Track legislation):

The principal negotiating objective of the United States regarding foreign investment is to reduce or eliminate artificial or trade distorting barriers to trade-related foreign investment.

A trade agreement that includes investment provisions shall–

(A) reduce or eliminate exceptions to the principle of national treatment;

(B) provide for the free transfer of funds relating to investment;

(C) reduce or eliminate performance requirements, forced technology transfers, and other unreasonable barriers to the establishment and operation of investments;

(D) ensure that foreign investors are not granted greater legal rights than citizens of the United States possess under the United States Constitution;

(E) limit the provisions on expropriation, including by ensuring that payment of compensation is not required for regulatory measures that cause a mere diminution in the value of private property;

(F) ensure that standards for minimum treatment, including the principle of fair and equitable treatment, shall grant no greater legal rights than United States citizens possess under the due process clause of the United States Constitution;

(G) provide that any Federal, State, or local measure that protects public health, safety and welfare, the environment, or public morals is consistent with the agreement unless a foreign investor demonstrates that the measure was enacted or applied primarily for the purpose of discriminating against foreign investors or investments, or demonstrates that the measure violates a standard established in accordance with subparagraph (E) or (F);

(H) ensure that– (i) a claim by an investor under the agreement may not be brought directly unless the investor first submits the claim to an appropriate competent authority in the investor’s country; (ii) such entity has the authority to disapprove the pursuit of any claim solely on the basis that it lacks legal merit; and (iii) if such entity has not acted to disapprove the claim within a defined period of time, the investor may proceed with the claim;

(I) improve mechanisms used to resolve disputes between an investor and a government through– (i) procedures to ensure the efficient selection of arbitrators and the expeditious disposition of claims; (ii) procedures to enhance opportunities for public input into the formulation of government positions; and (iii) establishment of a single appellate body to review decisions in investor-to-government disputes and thereby provide coherence to the interpretations of investment provisions in trade agreements; and

(J) ensure the fullest measure of transparency in the dispute settlement mechanism, to the extent consistent with the need to protect information that is classified or business confidential, by– (i) ensuring that all requests for dispute settlement are promptly made public; (ii) ensuring that– (I) all proceedings, submissions, findings, and decisions are promptly made public; (II) all hearings are open to the public; and (III) establishing a mechanism for acceptance of amicus curiae submissions from businesses, unions, nongovernmental organizations, and other interested parties.

While some of this language is pretty similar to the Republican Fast Track legislation, some of it is a big departure.

The biggest change would be the creation of a standing appellate body. Currently, arbitral decisions are subjected to very limited review. Because each tribunal is made up of different people – appointed and paid by the parties to the case and dismissed at the end – interpretation of key rules has been unpredictable and varied. Having an appellate body would change that, much as our own Supreme Court contributes to a reduced spread among lower courts. And if the members were appointed by states only, there would likely be more deference to sovereign interests – unlike the current system where investors get a say on one to two of the three arbitrators.

Clinton’s 2002 proposal also has some differences in emphasis from current law, such as a little stronger presumption of public health law compatibility with investment obligations, and a bit more insistence on US legal standards as the ceiling for some investor rights. Nonetheless, the ongoing inclusion of vague provisions like fair and equitable treatment would still allow quite a bit of arbitrator discretion.

I’d be surprised if the campaign articulated a much more specific critique, but – hey – I was surprised at the announcement of TPP opposition in the first place!

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