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Last year in my Masters Thesis to Professor Moomaw at the Fletcher School of Law and Diplomacy, regarding the Trans Pacific Partnership (TPP),  I quoted the open confession of Juan Fernandez-Armesto, an arbitrator from Spain and participant in UNCITRAL and other Investor-State Dispute Settlement (ISDS) arbitral panels:

“When I wake up at night and think about arbitration, it never ceases to amaze me that sovereign states have agreed to investment arbitration at all….Three private individuals are entrusted with the power to review, without any restriction or appeal procedure, all actions of the government, all decisions of the courts and all laws and regulations emanating from parliament.”

CEO/TNI, Profiting from Injustice, How law firms, arbitrators and financiers are fueling an investment arbitration Accessed 2/4/15.

ISDS has been the “lightning rod” for TPP opposition which sees an abdication of national sovereignty in ISDS whereby private foreign corporations may sue a party sovereign nation (or any constituent government thereof) before a 3-arbitrator panel making decisions potentially payable by taxpayers without any of the due process or public purpose guarantees of domestic judiciary systems.  Through treaties containing ISDS, member states relinquish government authority in exchange for private investor rights and market access.  Investor-state panel state arbitrators focus upon the rights of foreign investors as written in the investment agreements and limit consultation to other sources of law, leading to “an expansive interpretation of foreign investor rights and a commensurate reduction of public policy space for host States.’  Miguel Solanes and Andrea Jouravlev, Revisiting Privatization, foreign investment, international arbitration and water, CEPAL-SERIE Recursos naturales e infrastructura No. 129, Santiago Chile November 2007.

In opposition to public sentiment against according “fast track” trade promotion status to TPP last year, the United States Trade Representative (USTR) touted statistics that the U.S. had never lost a NAFTA claim.  Predictions now are that TransCanada’s NAFTA Chapter 11 claim for $15 billion in  U.S. taxpayer dollars likely will be the first such loss. As publicized in TransCanada General Counsel and EVP Kristine Delkus’s Wall Street Journal piece of January 14, 2016, “Why We’re Suing Obama Over Keystone,” TransCanada argues that “the politically-driven denial of Keystone’s permit application was arbitrary—contrary to all precedent, inconsistent with reasonable and expected application of relevant rules and regulations, discriminatory and expropriatory and represented a denial of core investment protections such as most favored nation treatment,” citing the State Department’s official Record of Decision to the effect that permitting the pipeline to proceed would “undermine U.S. climate leadership,” including negotiations at the recent Paris climate conference.

Labor and environmentalists’ only solace would be if attention to TransCanada’s NAFTA claim galvanized Congressional opposition to TPP which stands to double the U.S. exposure to ISDS claims.   Notably, in the parallel TTIP (Transatlantic Trade and Investment Partnership) negotiations, a groundswell of opposition renders doubtful the inclusion of ISDS provisions which are perceived to offer no benefits countervailing substantial risks to the public interest.

For a recently published academic treatment of international arbitration, including investment arbitration, see Practising Virtue: Inside International Arbitration.  Oxford Univ. Press (2015 (per the introduction, a tome about “what international arbitrators do, and what they ought to do.”)  Interestingly, the authors opine that investment arbitral tribunals “do not merely interpret and apply investment treaties, but actively make the meaning of investment treaties by interpreting and applying them.”  Ibid., 12.