In 2002, Hillary Clinton laid out a marker for what good investment protections would like. The vehicle for this proposal was a suggested amendment to the Republican fast track trade legislation.
How well does the Trans-Pacific Partnership (TPP) final text match up?
As it turns out, the TPP falls short of some of the protections Clinton prescribed for both investors and states. It also presents different procedural provisions than what Clinton had in mind.
On the investor side, Clinton called for eliminations of exceptions to national treatment, free capital transfers and performance requirements rules. The TPP largely maintains the exceptions of past trade pacts, and even builds some new ones into place.
On the state side, Clinton called for new pacts to align international investor rights with the US Constitution, and its due process and takings provisions. U.S. nationals do not get to sue the U.S. government outside of U.S. courts (and there are limitations on when it may do so domestically – rarely for cash compensation), although TPP investors will be able to do so. U.S. citizens do not get to appeal a U.S. Supreme Court decision, although a SCOTUS ruling could be the subject of an investment arbitration claim under the TPP. All investment disputes involve the former, and many have involved the latter. The TPP does not change that. Investment tribunals have used broader expropriation and fair-and-equitable treatment standards than those contained in U.S. takings and due process jurisprudence. U.S. takings, regulatory takings and due process doctrine evolves over time, and the TPP does not require that its rules be aligned with U.S. standards in the present or future.
Finally, as for procedure, Clinton called for broad home state state authority to block claims by its own investors against other countries. The TPP includes no such broad requirement. In contrast, in financial services, the home state has a say in some cases as to whether the host state can invoke a prudential defense (Article 11.22.2), whether the TPP should trump a host state’s tax treaties (Article 29.4.4), and whether a host state’s taxation measures constitute an expropriation (Article 29.4.8).
Clinton’s meatiest procedural recommendation – the creation of an appellate body – is not included in the TPP (Article 9.22.11). Also contra her recommendations, there are no changes to upgrade the “efficiency” of arbitral selection, or mechanism for host state governments to get input from affected domestic parties (although this may exist under TPP countries’ domestic law).
Finally, Clinton made several calls for improvements to the transparency of ISDS proceedings. The TPP will require that respondent governments promptly make most major documents public,which actually exceeds her recommendations that only requests for dispute settlement be made public. However, this requirement does not seem to be backed up with any mechanism to ensure that governments do so (Article 9.23.1). There are various restrictions on respondents’ disclosing of confidential information. The TPP does not explicitly require that “all” hearings be open to the public (as Clinton recommended), only that some of its hearings be open (Article 9.23.2). Finally, unlike Clinton’s recommendation that tribunals allow non-disputing parties to make submissions, it will be up to each TPP tribunal whether they accept amicus briefs – and these are subject to various requirements of pertinence (Article 9.22.3 – Article 9.23).
For a full side-by-side comparison of Clinton’s 2002 recommendations to the TPP, see this memo: Pro-state and pro-investor changes in TPP. It updates the one I put out last week comparing the TPP to various preceding documents.