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

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By Jomo Kwame Sundaram in Inter Press Service, 7 Feb 2024

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.

Jomo Kwame SundaramDeveloping 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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