Lawmakers Urge U.S. Officials to Address Investor-State Dispute Settlement System

A group of lawmakers has written to U.S. Secretary of State Antony Blinken and Ambassador Katherine Tai, expressing concerns over the Investor-State Dispute Settlement (ISDS) system present in the United States' trade and investment agreements with foreign nations.

The letter, signed by several senators and members of Congress, highlights the potential exploitation of this dispute settlement regime by large corporations, which they argue undermines democracy and favors corporate interests over those of workers, consumers, and small businesses worldwide.

The lawmakers commend President Biden's commitment to exclude ISDS from future trade deals, as well as Ambassador Tai's alignment with this stance. They call on the relevant agencies to explore all available options to eliminate ISDS liability from existing trade and investment agreements.

ISDS allows disputes to be resolved through arbitration tribunals rather than the judicial system, a process that critics argue lacks transparency and accountability. The absence of set procedures, precedents, and evidentiary standards within these tribunals gives an advantage to large corporations, enabling them to seek substantial compensation from taxpayers without an opportunity for appeal.

The lawmakers emphasize that ISDS provisions disproportionately favor multinational corporations, granting them special rights and privileges not afforded to ordinary citizens. They contend that the system incentivizes offshoring and erodes the sovereignty of the United States and other governments.

Furthermore, the letter highlights the negative impact of ISDS on human rights and efforts to address climate change. It references a recent ISDS case filed against Honduras by U.S. company Honduras Próspera under the Dominican Republic–Central America Free Trade Agreement (CAFTA-DR). The claim, amounting to nearly $11 billion, seeks a significant portion of Honduras' national budget. The case stems from the company's desire to continue operating under the abolished Zonas de Empleo y Desarrollo Económico law, a policy that enabled private governance zones with administrative autonomy.

The lawmakers argue that ISDS poses a threat to democratic policymaking and cite the rise in ISDS cases in the Americas, resulting in substantial payouts by governments to corporations. They urge the U.S. administration to uphold its commitment to exclude ISDS from future trade agreements and address existing ISDS mechanisms being exploited by corporations.

The lawmakers reference the renegotiated U.S.-Mexico-Canada Agreement (USMCA), which they claim reduced ISDS liability but left a loophole benefiting U.S. fossil fuel companies in Mexico. They request the administration's support for Honduras in the Próspera ISDS case, suggesting the use of statements, amicus briefs, and other means to defend the nation's sovereignty and democratic decision-making.

The letter concludes with a call to investigate and pursue the removal of consent to ISDS arbitration in existing bilateral investment treaties and free trade agreements. The lawmakers express their willingness to work with the administration to eliminate these provisions from trade and investment agreements, signaling that trading partners prioritizing the public interest will not be penalized.

The letter was signed by Senator Elizabeth Warren, Representative Lloyd Doggett,