Neocolonial ISDS, Abused, Biased, Costly, and Grossly Unfair

David Legge Avatar

Jomo Kwame Sundaram, Feb 7 2024 (IPS) – Investor-State Dispute Settlement (ISDS) provisions in international trade and investment agreements – long abused by opportunists with means – are slowly being rejected by cautious governments.

Developing country governments need to be much more wary of ISDS and its implications, and should urgently withdraw from existing commitments. They should expunge ISDS clauses in existing trade and investment agreements and exclude them from new ones.

ISDS ripe for abuse
ISDS allows a foreign investor to sue a ‘host’ government for compensation by claiming new laws, regulations and policies adversely affect expected profits, even if changed in the public interest. It involves binding arbitration without going to court.

ISDS provisions are included in many free trade agreements (FTAs) and bilateral investment treaties (BITs). These were invoked in 84% of cases before the World Bank Group’s International Centre for Settlement of Investment Disputes (ICSID), the most used arbitration forum. Investment contracts and national investment laws are also invoked.

ISDS decisions are made by commercial ‘for-profit’ arbitrators prone to conflicts of interest. Foreign investors can thus seek compensation amounting to billions of dollars via a parallel legal system favouring them.

ISDS provisions in such agreements enable foreign investors to sue governments for billions of dollars in compensation by claiming changes in national law or policy will reduce profits for their investments.

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2 responses to “Neocolonial ISDS, Abused, Biased, Costly, and Grossly Unfair”

  1. Peter Sainsbury Avatar
    Peter Sainsbury

    I have never been able to understand any reason whatsoever why a (to use a currently popular term) sovereign government that was truly interested in the welfare of its citizens/residents would agree to an ISDS clause, assuming that we’re talking about something approaching a democracy, rather than say a plutocracy or dictatorship. Why would you cede control of the making and implementation of your laws to an unelected, foreign, private organisation that has no particular interest in the welfare of your country or its people??

  2. In 1974 the UN (driven by the NAM and G77) declared a New International Economic Order (NIEO, see which included a provision authorising sovereign governments to expropriate the assets of foreign corporations in the national interest. The NIEO was crushed by the 1980s debt crisis and structural adjustment but the corporations have long memories and in 2001 through the OECD they sought to persuade the world to adopt a multilateral agreement on investment (MAI) (see The world refused, in part because of the strength of civil society opposition so they tried again through bilateral investment agreements. While the principal stakeholders concerned about expropriation are the corporations, the sovereign governments, home to the TNCs are also beneficiaries of the foreign investors through the export earnings which support their balance of payments.
    I guess in the negotiation of investment agreements there are a lot of issues on the table, as well as various forms of coercion (eg Super 301), so in the interests of more immediate and pressing benefits such as trade preferences, sovereign governments have been willing to give away ISDS.

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