First, a quick review of some salient aspects of Chapter 28 (Dispute Settlement) and Chapter 9 (Investment) of the TPP.
- The Dispute Settlement procedures between states for trade disputes (Chapter 28) is separate from the Investor-State dispute settlement (ISDS) mechanism (Chapter 9) for disputes between private parties and governments over investment issues.
- For trade disputes between member states a panel system is established to hear disputes between states. There may be a choice of forums, for example, between the TPP system and the WTO dispute system.
- The function of the panel is to provide an objective assessment. Reference to the Vienna Convention on the Law of Treaties as to treaty interpretation is very welcomed. It sets firm guideline in interpreting treaty obligations.
- Prompt compliance is required. A state’s non-conforming practice is required to be stopped. Compensation and then suspension of trade benefits (trade sanctions — tariff surcharges) are permitted. Non-compliance procedures are provided for.
- Most important as to private commercial disputes between firms no firm may bring an action in domestic courts. “No Party may provide a right if action under its domestic law ….” However, parties shall provide for enforcement of foreign arbitral awards.
- As to foreign investment disputes between a firm and a state, they may be brought before the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) or any other arbitral tribunal agreed upon or the tribunal established by the investment agreement chapter.
- This is a modified form of the ‘Investor State Dispute Settlement’ (ISDS) procedures that have been used for years by the U.S. in its investment treaties and including NAFTA which established international panels to review investment disputes.
- This procedure is aimed at, in part, issues of nationalization and expropriation of foreign investments. Most interestingly, it includes in an annex a provision confirming the customary international law rules concerning minimum standard of treatment (MSD) and protection of investments by aliens.
Three quick observations:
- The TPP dispute resolution process, unlike the WTO’s system, does not provide for any appeals. Not sure why? Wouldn’t be that more time consuming. It would provide for an extra level of oversight and increase legitimacy.
- The investment dispute mechanism is a well known approach via the World Bank’s ICSID. It has been significantly enhanced and adjusted. That’s good.
- The inclusion of provisions specifically referencing to customary international law and the Vienna Convention on the Law of Treaties, as to treaty interpretation, clearly demonstrates that these newer provisions sit firmly within the growing international legal system for providing ‘rules of the road’ for a dynamic global economy.
My conclusion. Just based upon the above, TPP dispute resolution system is a well thought out approach to global trade and investment litigation for this ever-growing interconnected eco system. It sets the terms for future trade relations. This is good for U.S. national interests, the global economic system, and all players in this system, older ones as well as newer ones.
The next two questions: (1) Will the congress approve the TPP? (2) What will be the impact of these dispute resolution provisions on the provisions currently being discussed with the EU under TTIP? The Europeans are already pushing for a more formal and permanent international court to hear trade and investment disputes. We’ll see …..
….. “Chapter 28 — Dispute Resolution in the TPP.” (Official Text) USTR (Nov. 5th, 2015).
….. “Chapter 9 — Investment and TPP.” (Official Text) USTR Nov. 5th, 2015).
….. “Investor State Dispute Settlement.” USTR (March 2015).