*This post is not about the politics of the Trans-Pacific Partnership.
Dickered vs. Boilerplate terms in the TPP
Here's the big thing for me (and why I think Huffinton Post is just wrong for allowing the "outrage" at ICSID to be carried through the article):
THESE ARE NOT THE TERMS WE SHOULD WORRY ABOUT. They are boilerplate for 8 of the 9 countries in the TPP as they are already subject to ICSID. On top of that, the operational terms
Take-Away- Practitioners
1) It is silly to think that foreign corporations could operate in the US with absolute impunity from our domestic laws. Just like a foreigner visiting the U.S. who commits a crime on sovereign soil can be at the very least, deported back to their own country or prosecuted, Foreign companies violating our domestic laws can be forced out and subject to sanctions for failure to adhere. (expropriation is just taking the company over, not barring a particular offender from working within our borders) We have made this agreement in several treaties before, and we still face as much issue with violation of US laws on US soil by US companies as we do from foreign ones.
2) ICSID is really not a big deal. For those of you actually conducting international business, the chance of your company being expropriated (probably less than .001% given the number of companies in the world operating internationally) and then NOT being paid adequately compensated (another minuscule percentage) and having your only recourse be ICSID is low low low.
3) This doesn't affect private disputes between two private entities.
4) The TPP has been in negotiation since 2008. 13 rounds later, no final deal. the draft leaked can't even settle on whether to call these "business activities" or "business investments".
5) Use the common sense sniff test if you are worried about expropriation: I would worry about a country with a sultanate running it with routine reports of violence against citzens (Brunei). Or a country in civil strife (Syria). The chances of Australia taking your company's subsidy in Australia away from you are probably slim to none. Do your research on a jurisdiction, including transparency of the legal system, whether they adhere to the CISG (for goods shipments), their proclivity for corruption (CPI index), and whether some act of god or war would cause them to be desperate enough to take your company from you (Argentina has been expropriating energy, natural gas and utility companies for years- DON'T go to Argentina if you are in one of those industries).
ISSUE
I recently read an article in the Huffington Post which has decried the US agreement within the Trans-Pacific Partnership FTA to adhere to ICSID. However, In an effort to simplify the complex issues surrounding the negotiation of international trade dispute resolution within the larger Trans-Pacific Partnership trade agreement, the article presents a "sky is falling" scenario of the USTR's office and President Obama giving up legal enforcement of international trade disputes within the U.S. Courts in favor of this other body while allowing foreign corporations to operate in the U.S. in violation of our domestic laws. Sigh. Sometimes I really wish people would read the agreement first, maybe research the international arbitration bodies to which they are so outraged in the first place, or even begin to study law before they bash it.
Rest-assured that while I think both the Citizen's Trade Campaign and the Sierra Club may have legitimate public policy concerns relating to the larger agreement (IP law agreements and environmental accountability standards in trade, respectively), the portion of the document relating to the preference for ICSID should not be it.
For those of us who would be affected by this recourse (parties in the 9 TPP negotiating states: Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, USA, and Vietnam)- here is a little run-down on what ICSID is, why it's largely ineffectively, and how this leaked portion of the TPP is actually more boiler plate than dickered terms.
Nitty-Gritty
What is ICSID?
ICSID, or the International Centre for the Settlement of Investment Dispute, is an autonomous international institution founded by a multi-lateral treaty formulated by the executive directors of the World Bank back in 1965/1966 (open for signature/entered into force). Out of the 193 member states of the United Nations, 149 of them have submitted articles of ratification. Notable UN Member States who have not domestically ratified adherence to ICSID include: The Russian Federation, Brazil, Mexico, Canada, and Thailand.
What does ICSID really do?
Nothing. Ok, they actually do SOME things. ICSID is basically the main body for hearing arbitration cases regarding the settlement of investment dispute in the world- but only between a private party of one state and another Sovereign State that adheres to the convention. ICSID also orders settlement amounts to be paid; but a large portion of these payments seem to get "lost in the mail".
HYPO: If a U.S. Co. wins a settlement from Thailand and ICSID orders Thailand to pay U.S. Co., and Thailand doesn't cough up the money, what happens?
ANSWER: Nothing really. Unless U.S. Co. is a big enough company for the U.S. that the U.S. Gov't is willing to lay down sanctions on Thailand (embargoes, restrictions on imports, freezes on Thai Assets held in U.S. Banks, etc.). If you expect to be paid out through ICSID, you have to hope that your government cares enough about you to be willing to cause an international political conflict.
GOOD NEWS: If you are trading widgets, operating tech services, sourcing agricultural products, you usually a) aren't a big enough need for the offending government to go through the hassle and b) you usually don't have a large enough footprint in one particular foreign jurisdiction to where the foreign government would gain enough by taking over your company. If you are a Ford, Boeing, G/E, Apple... well then you are probably integral enough to your domestic market to get your government to put pressure on the foreign one.
How does this affect the leaked portion of the TPP draft?
Basically all the states negotiating the TPP agree to acknowledge ICSID as a potential recourse for any business that has been expropriated by a state and the state cant settle the bill with the private entity it expropriated from within 3 months (the private entity can file a claim after 6 months but has to give the state a 90 day notice). If a member of the TPP is not a party to ICSID or is dealing with a private entity from a non-ICSID state, the parties may revert back to UNCITRAL as the default.
Rest-assured that while I think both the Citizen's Trade Campaign and the Sierra Club may have legitimate public policy concerns relating to the larger agreement (IP law agreements and environmental accountability standards in trade, respectively), the portion of the document relating to the preference for ICSID should not be it.
For those of us who would be affected by this recourse (parties in the 9 TPP negotiating states: Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, USA, and Vietnam)- here is a little run-down on what ICSID is, why it's largely ineffectively, and how this leaked portion of the TPP is actually more boiler plate than dickered terms.
Nitty-Gritty
What is ICSID?
ICSID, or the International Centre for the Settlement of Investment Dispute, is an autonomous international institution founded by a multi-lateral treaty formulated by the executive directors of the World Bank back in 1965/1966 (open for signature/entered into force). Out of the 193 member states of the United Nations, 149 of them have submitted articles of ratification. Notable UN Member States who have not domestically ratified adherence to ICSID include: The Russian Federation, Brazil, Mexico, Canada, and Thailand.
What does ICSID really do?
Nothing. Ok, they actually do SOME things. ICSID is basically the main body for hearing arbitration cases regarding the settlement of investment dispute in the world- but only between a private party of one state and another Sovereign State that adheres to the convention. ICSID also orders settlement amounts to be paid; but a large portion of these payments seem to get "lost in the mail".
HYPO: If a U.S. Co. wins a settlement from Thailand and ICSID orders Thailand to pay U.S. Co., and Thailand doesn't cough up the money, what happens?
ANSWER: Nothing really. Unless U.S. Co. is a big enough company for the U.S. that the U.S. Gov't is willing to lay down sanctions on Thailand (embargoes, restrictions on imports, freezes on Thai Assets held in U.S. Banks, etc.). If you expect to be paid out through ICSID, you have to hope that your government cares enough about you to be willing to cause an international political conflict.
GOOD NEWS: If you are trading widgets, operating tech services, sourcing agricultural products, you usually a) aren't a big enough need for the offending government to go through the hassle and b) you usually don't have a large enough footprint in one particular foreign jurisdiction to where the foreign government would gain enough by taking over your company. If you are a Ford, Boeing, G/E, Apple... well then you are probably integral enough to your domestic market to get your government to put pressure on the foreign one.
How does this affect the leaked portion of the TPP draft?
Basically all the states negotiating the TPP agree to acknowledge ICSID as a potential recourse for any business that has been expropriated by a state and the state cant settle the bill with the private entity it expropriated from within 3 months (the private entity can file a claim after 6 months but has to give the state a 90 day notice). If a member of the TPP is not a party to ICSID or is dealing with a private entity from a non-ICSID state, the parties may revert back to UNCITRAL as the default.
Why 99% of the world shouldn't really care that the ICSID (subsection B) is there.
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Dickered vs. Boilerplate terms in the TPP
Here's the big thing for me (and why I think Huffinton Post is just wrong for allowing the "outrage" at ICSID to be carried through the article):
THESE ARE NOT THE TERMS WE SHOULD WORRY ABOUT. They are boilerplate for 8 of the 9 countries in the TPP as they are already subject to ICSID. On top of that, the operational terms
Take-Away- Practitioners
1) It is silly to think that foreign corporations could operate in the US with absolute impunity from our domestic laws. Just like a foreigner visiting the U.S. who commits a crime on sovereign soil can be at the very least, deported back to their own country or prosecuted, Foreign companies violating our domestic laws can be forced out and subject to sanctions for failure to adhere. (expropriation is just taking the company over, not barring a particular offender from working within our borders) We have made this agreement in several treaties before, and we still face as much issue with violation of US laws on US soil by US companies as we do from foreign ones.
2) ICSID is really not a big deal. For those of you actually conducting international business, the chance of your company being expropriated (probably less than .001% given the number of companies in the world operating internationally) and then NOT being paid adequately compensated (another minuscule percentage) and having your only recourse be ICSID is low low low.
3) This doesn't affect private disputes between two private entities.
4) The TPP has been in negotiation since 2008. 13 rounds later, no final deal. the draft leaked can't even settle on whether to call these "business activities" or "business investments".
5) Use the common sense sniff test if you are worried about expropriation: I would worry about a country with a sultanate running it with routine reports of violence against citzens (Brunei). Or a country in civil strife (Syria). The chances of Australia taking your company's subsidy in Australia away from you are probably slim to none. Do your research on a jurisdiction, including transparency of the legal system, whether they adhere to the CISG (for goods shipments), their proclivity for corruption (CPI index), and whether some act of god or war would cause them to be desperate enough to take your company from you (Argentina has been expropriating energy, natural gas and utility companies for years- DON'T go to Argentina if you are in one of those industries).
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