Category Archives: Spin by ISDS promoters

Reply to EFILA

This post is by David Schneiderman (University of Toronto), Kyla Tienhaara (Australian National University), and Gus Van Harten (Osgoode Hall Law School).

We respond to the European Federation of Investment Law and Arbitration (EFILA) paper called “A Response to the Criticism Against ISDS” (17 May 2015). EFILA is a pro-ISDS group that appears primarily to represent the ISDS arbitration industry. Among other things, the EFILA paper purports to address “often voiced myths” and “one-sided” arguments made by “radical critics” against ISDS. We reply here from the perspective of specialist academic researchers in ISDS who reject these dismissive descriptions of ISDS opponents.

We do not intend to give an exhaustive reply to the EFILA paper, or to reproduce EFILA’s claims in any detail. Rather, we intend to respond briefly to some of the more troubling points made by EFILA and to take note of a few things with which we agree. Our broader aim is to contribute to the debate over ISDS in the hope of improving dialogue about ISDS.

On Pro-Investor Interpretation in ISDS:

EFILA argues — as do many ISDS promoters — that concerns about pro-investor interpretations of investment treaties are misplaced because the majority of ISDS case are not decided in favour of the investors. This argument is based on a massaged presentation of the numbers on “wins” and “losses” in ISDS because it (1) conflates the results at the jurisdictional and substantive stage of ISDS cases as outlined here; (2) puts aside the large number of settlements in which foreign investors are also fairly described as “winners” and states as “losers” based on the expectation that ISDS helped the investors to get a public pay-out or a regulatory change that was not otherwise available; and (3) downplays the inability of states to be “winners” in ISDS, in the manner of a foreign investor, because the treaties do not allow states to sue and recover a damages award from a foreign investor. Put differently, ISDS is like a football game in which foreign investors take a series of penalty kicks and states have to stop them all in order to avoid losing.

Also, critics do not contend that ISDS is completely fixed such that foreign investors win all or the great majority of cases. Indeed, concerns about potential bias in ISDS may work against some investors, especially when they bring claims against a powerful state such as the United States. Also, if investors won all of the time, states would withdraw and the system would collapse. Nevertheless, investors win a substantial percentage of cases and, for the reasons below, they appear to win more cases that one would expect them to win in a judicial process. In such a process, for example, it is reasonable to expect that a great number of ISDS cases would not be allowed to proceed. About half of ISDS cases appear to relate to a contract that is likely to have its own clause on dispute settlement. In a judicial process, such cases would typically be referred to the contractually-agreed forum and not allowed as a parallel treaty claim. Not so in ISDS, as constructed by ISDS arbitrators.

Primarily, critics of ISDS point to expansive interpretations – such as the informal policy in favour of parallel treaty claims –  embraced by investment tribunals. The EFILA paper takes notice of one study by Van Harten which shows that ISDS arbitrators are more likely than not to take jurisdiction over an investor’s claim, especially in cases where investors are nationals of capital-exporting states. However, EFILA complains that there is no equivalent study revealing an expansive approach on questions of substantive rather than jurisdictional interpretation.

As it happens, a follow-up study not yet published by Van Harten deals with the resolution of substantive issues (arising from the same dataset as the jurisdictional study). The follow-up study confirms the findings in the previous study and supports the hypotheses in that study. In summary, it was found that arbitrators tended by a ratio of about 3 to 1 to resolve substantive issues expansively and that this tendency increased significantly when the investor was from a major Western capital-exporting state, particularly the United States, United Kingdom, or France. The cumulative results of both studies also indicated that the tendency toward expansive resolutions decreased significantly when the respondent country was the United States.

In any event, perhaps the most essential point in Van Harten’s empirical study was the same as that stressed in the Corporate Europe Observatory and Transnational Institute report that is criticized by EFILA: the inherent uncertainty in empirical studies on potential bias in adjudication reinforces the case for institutional safeguards of independence to protect against reasonably perceived bias as well as actual bias. In our view, that CEO/ TNI report has done more than any single publication to draw the attention of policy-makers and the public to the important and glaring absence of judicial safeguards in ISDS.

EFILA was selective in its presentation of Van Harten’s empirical research, especially because it did not discuss his book published by Oxford University Press in 2013, which reported, based on a content analysis of over 160 cases, that there is little evidence of court-like restraint by tribunals in the exercise of their review function. The absence of such restraint was clearest in their review of legislative and executive decision-makers. The extensive findings in this book offer further evidence that the lack of judicial safeguards in ISDS has had a meaningful impact on outcomes in ISDS at the expense of the institutional role of legislatures and governments.

On Divergent Interpretation in ISDS:

Like most supporters of ISDS, EFILA sees little problem with divergent, even directly conflicting, tribunal interpretation of investment treaties. Consistency and predictability in the ability of states and citizens to enact policy agendas – and plan for their financial costs – appears not to be a pressing concern for EFILA.

On Lack of Independence and Impartiality in ISDS:

Though it is supported by empirical evidence revealing expansive interpretation of investment treaties by ISDS tribunals, this concern also is treated dismissively by EFILA. We find it problematic that supporters of ISDS are often eager to accuse others of being motivated by self-interest but not themselves even though, in our experience, most ISDS supporters are members of the ISDS arbitration industry.

On the Elite Group of Party Arbitrators in ISDS:

EFILA does not dispute the fact that a small club of arbitrators dominate ISDS. This is a matter of “party choice,” they claim, and parties are “able to change it.” The emphasis on party choice highlights the privileged status of foreign investors in ISDS, considering that no other affected parties – domestic companies, local communities, or private individuals accused of misconduct in an ISDS dispute – can have full standing alongside the state in ISDS proceedings.

EFILA’s position also downplays the power of default appointing authorities, especially at the World Bank, to choose arbitrators. Because those appointing authorities appoint from the club, states and investors both have an incentive to continue to draw from this same small pool. The legitimate fear of the parties is that they will be disadvantaged if they appoint “outsiders” who are less likely to have power or influence over co-panelists because they are not senior members of the club.

On Exorbitant Costs in ISDS:

EFILA admits that costs of investment arbitration are high but so are costs, they argue, in domestic courts. Costs in domestic courts, at least in the first instance, are not going to be as stratospheric as those in a privatized system of justice where everyone in the room, even the owner of the room, is paid a fee. EFILA also does not address the key reason why costs have exploded in ISDS: the system allows special access to a uniquely wide-ranging and retrospective remedy of compensation against the state for its legislative, policy, and judicial decisions. In plain language, ISDS is costly because it offers a lucrative opportunity for lawyers to earn high fees and to enrich their clients at public expense. Contrary to EFILA’s impression, in the vast majority of cases, the clients enriched by the public have been large corporations or very wealthy individuals.

On the Chilling Effect due to ISDS:

EFILA alleges that there is “no basis in political science or analysis of international (investment) law and ISDS statistics” to claim that investment arbitration results in regulatory chill. EFILA relies on a study by Caddel and Jensen which purports to show that most ISDS cases (47%) concern executive or administrative acts, while a minority of disputes (9%) concern legislative acts. There are several problems with relying on this study.

First, the authors appear to assume that executive and administrative decisions are not made in the public interest or that they cannot be chilled. This is belied by many ISDS cases such as the recent Bilcon ruling against Canada. That ruling concerned an administrative decision by an independent Canadian environmental review panel, and adopted by two levels of government, that recommended that Bilcon’s proposal for a quarry be denied because of potential adverse social and environmental affects. The dissenting tribunal member declared in a separate opinion that the decision was “a significant intrusion into domestic jurisdiction” and that it “will create a chill on the operation of environmental review panels.”

Second, there is a big methodological problem with EFILA’s reliance on this study. Caddel and Jensen coded cases as ‘executive’ or ‘administrative’ only if they viewed the primary target as being an executive or administrative act, even if a legislative measure also was being challenged. If one examines a similar dataset and counts every case that involved a challenge to a legislative action, then the percentage is much higher than EFILA reports (approximately 37% not 9 %).

While we are reluctant to invoke anecdotal evidence, leading arbitration lawyer Toby Landau stated on Australian radio that:

[Regulatory chill] definitely exists, and there’s palpable evidence of it. There are those who deny it, but I can say that, in my role as counsel, on a number of occasions now, I’ve actually been instructed by governments to advise on possible adverse implications or consequences of a particular policy in terms of investor-state cases.”

EFILA then claims that the current disputes “most commonly mentioned as causes of regulatory chill,” namely the Australian plain packaging initiative, “are still pending and have not led to actual changes in legislation.” EFILA appears not to be aware of evidence reported in the scholarly literature, such as research by Schneiderman concerning abandonment of a similar plain packaging initiative by Canada in 1994. The proposal was dropped after a threat by former US Trade Representative Carla Hills, on behalf of two large U.S. tobacco manufacturers, that the Canadian government would be sued for hundreds of millions of dollars under NAFTA.

The point we wish to stress is that governments may have abandoned a range of public interest measures, sometimes without public knowledge, due to the threat of an ISDS claim or an actual claim. In our experience, governments prefer not to make public such cases of regulatory change due to ISDS. We are aware of such cases that are not public and not reported in the literature, based on confidential interviews with government officials. It is irresponsible to deny the existence of regulatory change due to ISDS for any particular government or country (let alone all of them!) in the absence of independent, thorough, and public investigation of the issue, for any individual government or treaty.

A final argument in the EFILA paper is that measuring regulatory chill is “virtually impossible.” As scholars who have directly studied regulatory chill, we would be the first to admit that this topic is complex and presents challenges for researchers. But this does not mean that the regulatory chill hypothesis can simply be rejected. The appropriate response is to devote resources into overcoming the methodological obstacles. Above all, governments should be pressed to organize independent, thorough, and public reviews of the prospect of regulatory chill due to ISDS where there is a reasonable basis to expect its existence.

On the Rule of Law in the US and EU:

It is apparently of little consequence to EFILA that European and North American countries have efficient and well-functioning courts that can resolve disputes between investors and states. This should be “irrelevant,” they claim; countries “that enact laws and regulations with due process and respect the rule of law having nothing to fear from international arbitration.”

This claim by EFILA flies in the face of the available evidence. Canada is the only Western developed country that has accepted broad-based ISDS with the United Sates. Canada has faced 35 investor claims under NAFTA, and is among the five most sued countries in the world. Canada has, by our count, won seven and lost seven, with numerous significant cases ongoing. The U.S. has also faced a significant number of claims by Canadian investors and, as is well known, has yet to lose a NAFTA case. It seems, according to EFILA’s logic, Canada is a state that enacts laws without due process and that does not respect the rule of law whereas the United States upholds both principles perfectly.

On Brazil’s Record of Attracting FDI Without BITs:

To its credit, EFILA accepts that evidence of a correlation between signing BITs and attracting inward FDI is ambivalent. The results are “heterogeneous,” they acknowledge. In addition to methodological difficulties, Brazil’s record of attracting new inward investment without having any BITs in force has proven awkward for ISDS proponents. All of this, we notice, contradicts the unfortunately misleading claim in the EFILA paper that ISDS “will encourage” investment flows.

In response to the Brazilian example, the EFILA paper offers two principal arguments. First, EFILA admits that there are other determinants to inward investment other than the signing of BITs. We agree with this statement. Second, no study has shown that signing BITs had a negative impact on FDI flows. Even Brazil’s new investment treaties, which do not include ISDS, underscore the necessity for an international legal framework, according to EFILA. If this is an endorsement of the Brazilian BIT model as a preferable alternative to ISDS, we support that position.

EFILA concludes that ISDS should remain a component of investment treaties so long as it cannot be shown that the treaties are harmful to investment flows. There is very little accounting in this assessment for the potentially vast costs of ISDS to the public in the form of pay-outs to large corporations and very wealthy individuals, and the costs to the public and investors in the form of pay-outs to ISDS lawyers and arbitrators.

On The Conclusion:

The EFILA paper downplays the current controversy over ISDS. They attribute it to Europe’s “growing pains.” This symptom, they claim, is similar to the heated debate that was generated when U.S. President George W. Bush sought fast track authority from Congress in 2004. The interesting fact is that this debate continues to cycle through Congress and is occurring again this year. We do not see the controversy going away any time soon. We expect that the legitimacy of ISDS will continue to be challenged in Europe and around the world as more and more policy-makers and people become aware of the deep flaws in ISDS.

“International Law Experts” release misleading promo of ISDS

Two weeks ago, a group of “International Law Experts” released an open letter defending the expansion of ISDS in proposed mega-deals like the TPP (Trans-Pacific Partnership) and the TTIP (Transatlantic Trade and Investment Partnership).

I was sufficiently irked by the open letter to write this reply. Essentially, the open letter is a whitewashed, promotional account of ISDS, premised on a selective and rosy portrayal of ISDS and of how foreign investors and arbitrators have used their power in ISDS.

The open letter responded to another statement by over 100 U.S. law professors who criticized ISDS in strong terms. I was not a signatory of the other statement, but have also criticized ISDS as a serious threat to democracy, courts, and public budgets.

The non-disclosure of apparent financial interests among the International Law Experts

I begin by saying that those who rely on claims of legal expertise to bolster their position in a public debate should disclose any significant financial interests they have in the outcome of the debate.

I stress this point because many signatories of the International Law Experts’ open letter have worked, and presumably earned substantial income, as an arbitrator, lawyer, or expert in ISDS. Yet, this apparent financial interest was not disclosed in the open letter. Everyone has the right to free speech but, in fairness to the public, this information should have been disclosed alongside the claims of expertise.

The open letter’s origins in the Yves Fortier Chair at McGill University

The open letter emanates from a website at McGill University in Montreal, Canada, and specifically from the “L. Yves Fortier Chair in International Arbitration and International Commercial Law” at McGill. This professorial Chair is currently occupied by Andrea Bjorklund, a signatory and contact person for the open letter.

So, it is relevant to highlight that Yves Fortier is almost certainly the most active ISDS arbitrator in Canada and possibly the most active ISDS arbitrator in the world. In my research on how ISDS arbitrators have resolved ambiguous legal issues that shape their powers, Fortier—like most leading arbitrators—had a record that tended heavily toward the interests of foreign investors and against sued countries and their taxpayers.

Fortier has also presided over several tribunals whose decisions effectively blew open ISDS in key ways, facilitating the massive explosion of foreign investor lawsuits we have seen since the early 2000s. The three most significant of these tribunals, in my view, are the annulment tribunal in Vivendi v Argentina No. 1 (which put in place the arbitrators’ liberal policy of allowing parallel treaty claims even when there is a closely-related contract with its own dispute-settlement clause), the Oxy v Ecuador No 2 tribunal (which awarded, on dubious reasoning, the largest known amount, about US$2 billion, to that point), and the Yukos v Russia tribunal (which awarded, also on dubious reasoning, the almost satirically vast amount of US$50 billion). In each of these cases, Fortier presided over a decision that greatly expanded the risks and costs of ISDS for countries and their people.

Fortier’s record also provides an example of the lucrative fees billed by ISDS arbitrators. In the Yukos v Russia case, in particular, Fortier billed an astronomical US$2.3 million in arbitration fees, equivalent to about seven years’ salary for a Supreme Court of Canada judge. I am not saying that this establishes any personal impropriety on Fortier’s part. Rather, it highlights the huge amounts of money sloshing around for arbitrators, lawyers, and academics in ISDS and the importance of ISDS practitioners disclosing their financial interests when promoting ISDS to the public.

This background for the open letter offers a symbolic link between the letter and the ISDS arbitration industry. More broadly, it raises questions about how the naming of professorial chairs at universities may give reason to doubt the credibility of a professor’s engagement in public discourse.

The International Law Experts’ claim of superior expertise

In the rest of this blog post, I focus line by line on the press release that was issued alongside the open letter. The press release was released by the letter’s organizers and it conveniently reproduces core issues and statements from the letter. And, while there is more to say about the open letter as a whole, I prefer here to keep things fairly short. Further, there is enough in what the press release highlighted to make the point that the open letter is full of misleading or inaccurate claims.

The press release begins:

Around the middle of March [2015], the Alliance for Justice (AFJ) circulated a letter signed by law professors encapsulating their objections to the inclusion of investor‐state dispute settlement (ISDS) in international economic law treaties. As the majority of signatories of the AFJ letter were not scholars of international law and may therefore be unfamiliar with the subtleties of international dispute settlement, a group of over forty international law professors have mobilized to provide a counter‐point to the AFJ letter.

Thus, the open letter was accompanied by a claim of superior expertise on the part of its signatories. The signatories were described as “scholars of international law”, compared to the other law professors who had criticized ISDS. As mentioned above, it was not disclosed that many signatories of the open letter were also financially-interested practitioners of ISDS.

In my experience, as an academic specializing in the international law of ISDS, it is very positive for scholars outside the immediate field of ISDS to pay attention to it, not least because such scholars have a more detached perspective. In particular, the statement by the professors who criticized ISDS was a welcome contribution that appeared to me to come from an admirably sophisticated understanding of ISDS and related issues of international law.

Many scholars from outside the immediate field have contributed key insights, such as the insight I attribute mostly to economist Emma Aisbett that ISDS is in effect a public subsidy for foreign investors against general risks of democracy, politics, and courts that apply to everyone else. As for any public subsidy, it is up to those who advocate for the subsidy to provide a compelling argument that the subsidy delivers a corresponding benefit to the public.

I have not seen anything close to a compelling case for ISDS in this respect; that is, to justify giving ISDS arbitrators a supreme power over legislatures, governments, and courts. Instead, one tends to see a steady and evolving stream of assertions about the alleged benefits of ISDS, not backed by systematic evidence and based often on misleading information. The open letter is a good example.

The International Law Experts’ selective and rosy portrayal of ISDS

The press release continued:

The counter‐point [in the open letter] is not provided to provide a definitive conclusion about the proper form of dispute settlement, as negotiating those boundaries is the province of states. Rather, the letter is designed to frame the discussion, to offer accurate information to inform the public, and to enable policy makers to make well‐informed choices.

The main problem with this statement is that the signatories did not live up to their commitment to the public. That is, they did not give “accurate information” to support “well-informed choices”. Likewise, they did not—as implied in the open letter—provide “facts and balanced representations” instead of “errors or skewed information”. On the contrary, the open letter gives a selective and rosy account of how ISDS arbitrators have used their power. Below, I elaborate on this criticism and offer some supporting references from my own published research.

The press release continues:

Core aspects from this letter address sovereignty, the rule of law, the procedural protections offered in investment treaty arbitration, and opportunities for transparency and public participation during investment treaty arbitration.

If the open letter was meant to contribute to well-informed choices about ISDS, its signatories should have acknowledged the key criticisms on questions of sovereignty, the rule of law, and so on.

For example, they should have acknowledged the criticisms that: (1) ISDS involves an unjustified transfer of power from legislatures, governments, and courts to foreign investors and for-profit arbitrators, (2) ISDS has the effect of removing institutional safeguards of judicial independence and due process and thus fails to live up to basic elements of the rule of law, (3) ISDS procedures are procedurally unfair because they do not allow parties whose interests are affected by the adjudicative process to seek full standing in the process, and (4) ISDS documents, in all cases, remain closed to the public in ways that an open court would not be closed and, in some cases, all ISDS proceedings and documents are kept secret.

These criticisms have been raised on the academic record for years (such as here). Yet, none of them was acknowledged, let alone discussed in a serious way, in the press release or the open letter. For this reason, I suggest that the International Law Experts’ intervention should be viewed more as an exercise in avoiding the serious flaws in ISDS than a reliable source of information for the public.

Next the press release highlighted core aspects of the open letter. The first was as follows:

It is a hallmark of the rule of law that states must justify their acts and take responsibility for improper conduct. Far from undermining the rule of law, investment treaty arbitration ensures that states honor their obligations, thereby reinforcing the rule of law.

This statement, drawn from the open letter, sidestepped entirely the threat posed by ISDS to judicial independence, the separation of powers, and due process, each of which is a “hallmark” of the rule of law.

Instead, the open letter asserted a minimalist version of the rule of law, reducing it to the idea that states must “honor their obligations”. By this logic, two tyrants who honoured their anti-democratic commitments to each other would apparently deliver on the rule of law!

This minimalist version of the rule of law also reveals the key problem: governments are pushing for agreements that will undermine the rule of law (and democracy and sovereignty) in their countries. Moreover, they undermine these values in a way that is exceptionally powerful, compared to all of the international legal protections available to everyone except for foreign investors, and that is practically irreversible by future governments.

The press release, drawing on the open letter, goes on to say:

Experience to date suggests that bona fide government conduct will pass muster and not generate state liability.

This statement is a whitewash. For one, it is unsupported by references to systematic evidence in the press release or the open letter. Thus, it is backed almost entirely by the International Law Experts’ collective claim of expertise, again without the disclosure of apparent financial interests within the group. Moreover, it is contradicted by systematic research drawn from hundreds of ISDS decisions, such as here  and here.

Next the press release reproduces this statement from the open letter:

All systems of justice, whether national courts or international courts and tribunals, are capable of improvement. It is essential, however, that the current debate be based on accurate information and not focus on perceived, isolated shortcomings that are present in some form in any and every adjudicative body.

Well, of course, all systems of justice are capable of improvement. Virtually everything in the world can be improved!

But the pressing issue here is that no system of “justice”—except ISDS—is so flawed as to allow arbitrators, whose income depends on how they interpret the law or resolve a dispute, to determine the boundaries of permissible sovereign conduct and re-allocate public money accordingly. And, no system of adjudication worthy of the name “justice” would allow these profoundly-important decisions to be taken without requiring the adjudicator to hear from all of the parties affected directly by the adjudication—other such parties have included, for example, sub-national governments and other private parties.

The lack of independence and fairness in ISDS undermines all of the decisions that emanate from the process—giving rise to fundamental flaws in ISDS, not merely “perceived, isolated” shortcomings.

The press release, drawing on the open letter, also says:

Both investors and states have won and lost cases, though states have won in a greater proportion than investors. At current rates, states have won roughly three cases for every two cases won by investors.

It is a misnomer to say that any country has actually “won” an ISDS case, at least in the way that foreign investors are said here to have won: by receiving an award of compensation in their favour and against the other side. Countries cannot bring an ISDS lawsuit against a foreign investor; usually they have not even had their costs reimbursed when a foreign investor’s claim was rejected. At best, countries—and their voters and taxpayers—only avoid losing in ISDS.

This information in the open letter is also misleading because it does not account for the many ISDS cases that settle, off the public record. It is fair to describe these cases as “wins” for foreign investors, on the assumption that foreign investors got an outcome—typically a change to a government decision or a public pay-out—that would have been less likely or impossible in domestic law and other international processes.

Foreign investors benefit in all kinds of ways from their privileged access to ISDS and from the special opportunities it creates to pressure countries into settlements. For example, in domestic law it is usually not possible for a private party receive public compensation for a legislative or court decision. In contrast, numerous ISDS awards have required compensation for foreign investors who experienced economic loss as a result of one or the other of these types of decision. The key benefit to foreign investors lies in their special access to a process that can override the usual democratic or judicial process applying to everyone else.

Similarly, other international processes are not nearly as powerful in the protections they afford to, say, victims of torture (unless the victim happens to be a foreign investor who can afford to litigate in ISDS!). The wide disparity in the international protections available to foreign investors, compared to everyone else, is part of the gross imbalance created by ISDS.

The press release then adds:

Investment treaty arbitrations are procedurally complex and involve the gathering of evidence, the submission of expert testimony, the making of legal arguments, and the submission of briefs.

I agree with this statement; ISDS does often involve complex litigation. But why highlight this banal aspect of ISDS while ignoring issues central to the debate about ISDS? For example, there was no discussion in the open letter of the power of ISDS arbitrators to override legislatures and courts, especially by ordering huge amounts of public money to be paid to large corporations and very wealthy individuals (see my post on this blog in March 2015).

In a particularly white-washed statement, the press release says:

Awards are subject to review either in national courts or by ad hoc annulment committees composed of representatives drawn from rosters created by states.

The trouble with this statement, and the corresponding description in the open letter, is that it does not make clear that courts can only review ISDS awards on very limited grounds and that ISDS tribunals themselves can decide which country’s courts will have the power to review and set aside the tribunal’s decisions. Thus, absurdly, the arbitrators have the power to ensure that their own decisions receive “light touch” review.

Also, this statement does not make clear that the “annulment committees” (at the World Bank)—which are the only avenue of review of many ISDS tribunals—are themselves made up of more for-profit arbitrators and that the “rosters” from which these arbitrators are drawn are not judicial rosters. That is, the annulment rosters do not serve as a list of persons to whom cases will be assigned objectively, by rotation or random assignment for example. Instead, an executive official has the power to appoint from the roster on a case-by-case basis. It is incompatible with judicial independence for an executive official to be able to control case assignments in this way, and thus to be able to keep sensitive cases in safe hands.

Finally, the press release touched on the issue of openness in ISDS:

The United States and Canada have been key proponents of transparency in investor‐state arbitration and have made all documents in their cases readily accessible to the public; other countries have started to follow suit.

Indeed, Canada and the U.S. did push since the early 2000s for more openness in ISDS. However, they have not made all of the documents in ISDS cases “readily accessible” in the manner of an open court. For example, I have an access-to-information request to the Canadian government—which has been pending for over a year—for copies of ISDS witness statements filed in a historical NAFTA case. Such documents would be “readily accessible” in an open court; they are not in ISDS.

Also, as is also well-documented, the Canadian government recently pulled back from its past commitment to more openness in ISDS. Canada did so in the Canada-China investment treaty, which gives the governments of Canada and China an express right to keep foreign investor lawsuits completely secret, so long as the lawsuit it settled before an award is issued.

Even under NAFTA, albeit to a lesser extent, secret settlements are possible for both Canada and the U.S. Either government can settle an ISDS dispute in secret so long as the settlement is reached before a formal claim is filed. For this reason, we simply do not know how often and to what degree ISDS has actually delivered behind-the-scenes favouritism and pay-outs for foreign investors.

Lastly, Canada and the U.S. have treaties that allow complete secrecy in ISDS when a lawsuit is brought by a Canadian or U.S. investor against another country. While this may be explained partly by the other country’s desire for secrecy, it indicates that Canada and the U.S. have not used their bargaining power—almost always in treaties with smaller developing or transition economies—to insist on full openness.

The unfairness to the public

It is disappointing to see lawyers and academics promoting ISDS in misleading and at times self-serving ways.

I think such spin is particularly unfair to members of the public, who do not have the luxury and protection afforded to professors to develop their expertise freely and to research what is happening in hundreds of ISDS cases. I hope that this blog entry has at least pointed to important reasons to question how ISDS promoters go about making their case.

For examples of other statements by scholars who have specialized knowledge of ISDS and who, like me, have criticized ISDS in strong terms, see here and here. Notably, those who signed these other statements did not stand to benefit financially—and sometimes stood to lose out—from the anti-ISDS position they took.