US Congressional Democrats want ISDS removed from trade deals

May 8, 2023: Dozens of Democrat members of the House and Senate sent a letter on May 2, 2023, to US Trade Representative (USTR) Katherine Tai and Secretary of State Antony Blinken, asking the Biden administration to remove Investor-State Dispute Settlement (ISDS) provisions from existing and future trade and investment agreements.

They argued that ISDS disputes are handled not through the judicial system but by “industry-friendly” tribunals that have no set procedures, precedents, or standards of evidence and allow “mistruths or exaggerations [to] go unpunished.” These provisions “tilt the playing field even further in favour of large corporations,” the letter said, “incentivizing offshoring and undermining the sovereignty of the United States and other governments.”

President Biden committed during his presidential campaign not to include ISDS in any future trade agreements, and USTR Tai said early in her tenure that she would “pursue a trade agenda in line with that commitment.”

However, the lawmakers believe ISDS should be removed from existing agreements as well, because “large multinational corporations” are weaponizing ISDS “to benefit their own interests at the expense of workers, consumers, and small businesses globally.” For example, they said, governments in Latin America “have been ordered by ISDS tribunals to pay close to $28 billion to corporations, with far more in pending ISDS claims … simply for putting in place sound public policy to protect the environment and the health and economic well-being of their communities.”

The lawmakers therefore called on the Biden administration to “investigate and pursue an effective path to removing consent to ISDS arbitration by the US and our treaty partners in existing bilateral investment treaties and free trade agreements.” Noting that ISDS liability was largely removed in the US-Mexico-Canada Agreement, they also urged the White House to ensure that the Americas Partnership for Economic Prosperity it is negotiating with 11 countries in the Caribbean and Latin America does not include ISDS provisions and to address such provisions if and when it updates FTAs already in place with eight of those countries.

The policy of the Albanese Labor government is to exclude ISDS from future trade agreements, and to remove it from existing trade agreements by negotiation. Clive Palmer registered his company in Singapore and has initiated a A$300 billion ISDS claim against Australia, using the ISDS provisions of  the Australia – ASEAN – New Zealand FTA. This case demonstrates the urgency of removing ISDS from existing agreements.