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americas partnership for economic prosperity
'Time to Exit ISDS': Hundreds of Groups Call On US to Ditch Corporate-Friendly Trade Regime
"The ISDS regime is undemocratic: It was created for and by powerful, well-organized corporations, and has served their interests almost exclusively," said one critic.
Nov 03, 2023
More than 200 civil society groups on Thursday called on the Biden administration to protect climate, health, and other public interest policies across the Americas by dismantling a trade regime that the United States spearheaded nearly three decades ago—giving corporations broad authority to sue governments if they claim their profit margins are harmed by public programs.
Public Citizen, Sierra Club, and the AFL-CIO led hundreds of organizations in sending the letter to President Joe Biden, urging him to take legal action to terminate the Investor-State Dispute Settlement (ISDS) system within the Americas Partnership for Economic Prosperity (APEP), a trade framework between the U.S. and 11 countries in Central and South America and the Caribbean.
As Lori Wallach and Daniel Rangel, the director and research director of ReThink Trade, explained in a column in July, "ISDS elevates multinational corporations and foreign investors to equal status with national governments."
Under 43 ISDS-enforced agreements among the 12 APEP countries, corporations have launched more than 230 legal attacks, including a demand for $15 billion from the U.S. government—funded by taxpayers—by the Canadian firm that proposed the Keystone XL pipeline.
"The ISDS regime is undemocratic: It was created for and by powerful, well-organized corporations, and has served their interests almost exclusively," said Mario Osorio, senior fellow at the Center on Inclusive Trade and Development at Georgetown University Law Center. "It also poses a real threat to the world's climate action efforts, having already been used against them."
There are currently 73 pending ISDS cases totaling $47 billion in corporate claims, the civil society groups noted on Thursday.
"ISDS claims are often in the millions or billions of dollars," the groups wrote in the letter. "An unaccountable three-person tribunal decides the fate of each case. The tribunal can even decide a company should be paid for the 'expected future profits' it may have earned in the absence of the government policy in question. The ISDS regime has been especially detrimental to public health, climate and environmental protections, Indigenous land rights, financial regulations, and democratic sovereignty."
The system, said Cathy Feingold, international director at the AFL-CIO, "creates an unfair playing field that prioritizes the needs of corporations over those of workers, their families, and the environment."
"ISDS should be removed from our trade framework and replaced with policies that promote good jobs, strong communities, and a sustainable environment," Feingold added.
The organizations acknowledged that Biden has thus far followed through on a campaign promise to not pursue new trade and investment agreements with ISDS, but as Sen. Elizabeth Warren (D-Mass.) said in a statement supporting a report on the system released last week by ReThink Trade, "future agreements are only part of the battle."
"The United States is still locked into many preexisting agreements that allow corporations to weaponize ISDS when we do something that they don't like. I'm going to keep on fighting until every last one of our trade agreements is ISDS-free," said Warren, who has previously criticized the scheme.
The senator also sent a letter to Biden this week, along with more than 40 colleagues, calling on him to remove ISDS from existing APEP agreements.
Thursday's letter came a day before Biden was scheduled to host the heads of state of Latin American countries for an APEP meeting.
The report by ReThink Trade detailed legal mechanisms that the U.S. and its APEP partners can use to terminate ISDS liability, including:
- A termination of bilateral investment treaties (BITs) with an agreement to neutralize sunset clauses;
- An amendment to remove the investment chapter from foreign trade agreements (FTAs), which can be finalized if there is mutual agreement between the parties involved; and
- Withdrawal of consent to ISDS arbitration from BITs and FTAs, which would "enable countries to focus on developing new approaches to investment policy and dispute settlement that better meet their policy goals."
Joseph Stiglitz, economics professor at Columbia University, noted that the call to exit ISDS is "especially relevant" because Biden launched APEP partially with the aim of "fighting climate disaster and economic inequality, improving public health, [and] strengthening democracy."
"To achieve any of these goals, ISDS has to go. It is a direct hindrance," said Stiglitz. "Launching this as a group exit would be very helpful in protecting our neighbors from one of the factors that leads some countries not to exit. That is the fear, not grounded actually with much evidence but still it's a fear, that investors will see an individual country leaving the system as a signal of some sort that they're not committed to good investment. When a bloc of countries exit together, there's safety in numbers."
The civil society groups noted that "the tide is turning" against ISDS in other countries, with 10 European countries abandoning the Energy Charter Treaty due to its ISDS rights for fossil fuel companies, and countries such as South Africa, Indonesia, and India working to exit similar agreements.
"Continued movement away from ISDS by the United States," said the groups, "would be a powerful signal to other governments considering taking similar action."
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