The American judicial system aspires to the ideal that everyone has equal access to justice. All Americans—from individuals to small businesses to the largest corporations—can seek justice in the same courts and before the same judges. But now that equality is threatened by a little-known trade provision that would empower foreign investors—and only foreign investors—to bypass domestic court systems. It’s all in the yet-to-be-revealed details of the Investor-State Dispute Settlement (ISDS) provisions in the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership.

Despite details of the trade deals being unavailable to the public, the Senate recently granted the president fast-track trade authority, including ISDS. Now the debate moves to the House, where they are expected to vote on fast track soon.

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As an alternative to domestic courts, ISDS offers foreign investors special access to a private arbitration system that is rigged in their favor. Under ISDS, foreign corporations, and the foreign subsidiaries of U.S. corporations, can challenge domestic U.S. policies that result or could result in loss of profit. U.S. corporations can also use ISDS to attack the domestic regulatory policies of our trade partners. These cases would not be heard by a judge or jury but rather by a tribunal of private lawyers, many of whom rotate between being arbitrators and bringing cases for corporations against governments. The doors would be closed, without public observation of proceedings.

Under ISDS, there is no meaningful appeals process. There is also inadequate oversight and accountability of arbitrators. ISDS thus weakens the rule of law by removing procedural protections and creating an effectively unreviewable system of adjudication.

What’s more, ISDS is a one-way street that’s unequal by design. While powerful foreign investors can use the threat and expense of ISDS proceedings to force nations to abandon important public policies, neither foreign governments nor other actors, like civil justice groups or labor unions, can bring any claims.

Nobel prize-winning economist Joseph Stiglitz notes that “the real intent of these provisions is to impede health, environmental, safety, and, yes, even financial regulations meant to protect America’s own economy and citizens.” In recent years, corporations have brought actions against Canada for banning a toxic gasoline additive, Germany for deciding to phase out nuclear power, and the Czech Republic for failing to bail out a bank that was partially owned by a foreign company.

In an Australian court, two tobacco manufacturers lost their lawsuits over plain packaging rules for cigarettes. But after Phillip Morris Asia created a “new” subsidiary in Hong Kong (which has an ISDS provision in an agreement with Australia), the subsidiary challenged the plain packaging rules in an ISDS tribunal, forcing Australia to spend years defending a public health measure already deemed appropriate by its own court system. What’s to stop the foreign subsidiary of any big tobacco company or other industry from seeking to upend decades of U.S. public health and environmental protections outside the U.S. court system? And what happens when a private tribunal can decide if an increase in the U.S. minimum wage unfairly impacts the profits of a garment manufacturer with factories in the U.S and Bangladesh?

Sometimes public health, environmental, and labor policies stand in the way of profit, and often with good reason. When laws and regulations protecting everyday Americans are at issue, that’s a decision only the U.S. judicial system should make.

Allowing corporations exclusive access to an alternative judicial system will increase already unprecedented corporate governance, and threaten many rights and protections as we now know and rely on them. In the first 30 years of ISDS, there were fewer than 100 ISDS claims worldwide. Over the past few years, hundreds of cases have been filed against approximately 100 governments.

Inherently unfair, unequal, and lacking the procedural safeguards that are essential to impartial justice, ISDS marks a dramatic departure from the ideals of the U.S. justice system. Yet ISDS proponents have failed to explain why foreign investors need this special alternate legal system that’s available only to them. Including ISDS in trade agreements sends precisely the wrong message about American justice and access to our courts. It says that the U.S. is one nation, with liberty and justice for some, not all.



Nan Aron is the president and founder of Alliance for Justice, a national nonprofit organization that for more than 35 years has worked to ensure the federal judiciary advances core constitutional values, preserves human rights and unfettered access to the courts, and adheres to the even-handed administration of justice for all Americans. Learn more at www.afj.org.