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"Outdated trade rules like ISDS can pose a real threat to states' sustainable energy initiatives and the good-paying jobs they create," said one lawmaker from Maine.
More than 300 state lawmakers signed a letter Monday calling on U.S. President Joe Biden to "eliminate the threat of Investor-State Dispute Settlement from all U.S. trade and investment agreements," joining hundreds of civil society groups and dozens of members of Congress in speaking out against rules that allow foreign corporations to challenge state laws.
The legislators—who include Democrats, Republicans, and Independents—expressed support for the official position of the National Conference of State Legislatures (NCSL) regarding ISDS, as the conference convened its annual summit in Louisville, Kentucky.
The NCSL opposes trade deals "with investment chapters that provide greater substantive or procedural rights to foreign companies than U.S. companies enjoy under the U.S. Constitution."
The Biden administration has agreed with the NCSL's call to exclude ISDS from any new trade agreements, but the U.S. is currently a party to more than 50 trade and investment deals that contain the rules.
"It's long overdue that we change course. Getting rid of ISDS, which embodies the runaway corporate power embedded in our trade deals, is a great place to start.
ISDS rules empower corporations to sue governments if they claim their profit margins are harmed by public programs, such as public health regulations, environmental rules, food safety guidelines, or climate laws aimed at reducing fossil fuel emissions.
"The outcomes of these cases, which can result in billions of U.S. tax dollars paid to foreign corporations in compensation, are
determined in unaccountable tribunals presided over by unelected corporate lawyers whose rulings are not subject to appeal," reads the Monday letter from state lawmakers, including North Carolina state Rep. Pricey Harrison (D-61), New York state Sen. Liz Krueger (D-28), and Florida Rep. Anna Eskamani (D-42).
According to the letter, "even cases that get dismissed can result in countries paying millions in tribunal costs."
Harrison said in a statement that "the era of corporate-dominated trade policy" has contributed to a loss of 40% of North Carolina's manufacturing jobs.
"It's long overdue that we change course," said Harrison. "Getting rid of ISDS, which embodies the runaway corporate power embedded in our trade deals, is a great place to start. These extreme corporate rights undermine democracy and critical public interest protections here at home and around the globe. I'm glad to see so many colleagues from across the political spectrum joining me in this effort."
Last November, 200 civil society groups demanded the elimination of ISDS within APEP, and three dozen members of Congress wrote to U.S. Trade Representative Katherine Tai and Secretary of State Antony Blinken last May saying the U.S. should end the system's use in its trade agreements.
Allowing corporations to sue over laws that cut into their profits, wrote the lawmakers on Monday, "threatens the policy space we need to maintain high-level public health standards, create clean energy jobs, protect the digital privacy and data-security of those we represent, and much more."
Maine state Sen. Craig Hickman (D-14) expressed concern about ISDS both as a lawmaker and "an organic farmer committed to curtailing the severe impacts of climate change and strengthening rural economies."
"Outdated trade rules like ISDS can pose a real threat to states' sustainable energy initiatives and the good-paying jobs they create,"
said Hickman. "I urge the administration to eliminate this antiquated mechanism that stands in the way of sustainable food systems and the clean energy economy we need to build for our children and grandchildren."
Note: This article has been edited to correct a reference to U.S. trade deals containing ISDS and the Americas Partnership for Economic Prosperity.
"Giant corporations have and continue to weaponize ISDS—a secretive and rigged arbitration system," said Sen. Elizabeth Warren. "It's time to shut the door and eliminate ISDS from all existing trade agreements once and for all."
Prominent Democrats on Wednesday called for ending corporate-backed arbitration provisions in trade agreements as the Sierra Club issued a report showing that fossil fuel companies use the provisions to block climate action.
The report calls for the U.S. government to not only stop signing trade agreements with Investor-State Dispute Settlement (ISDS) provisions, as President Joe Biden has already done since taking office, but also end or modify existing agreements that have them. ISDS provisions allow companies to protect their investments in a foreign country and seek compensation from an ad hoc arbitration tribunal, rather than the country's courts, if they are threatened by legislation, regulation, or the cancellation of a project.
"While it has correctly rejected ISDS for future trade agreements, the Biden administration has made no effort to remove these egregious provisions from existing agreements," Rep. Lloyd Doggett (D-Texas) said in a Sierra Club statement. "Powerful multinational corporations continue abusing ISDS to intimidate countries from strengthening environmental and human rights protections."
Many ISDS cases pit powerful corporations against low- and middle-income countries, but wealthy nations are also liable to be sued. TC Energy, a multinational fossil fuel company, sued the US for $15 billion following the discontinuation of the Keystone XL pipeline project, and Canada faces a $20 billion suit over a canceled liquefied natural gas project in Québec. Overall, nearly 20% of the world's 1,206 known ISDS arbitration cases have been brought by fossil fuel companies, according to the Sierra Club report.
The investor-state dispute settlement (ISDS) regime gives polluters license to sue governments for their public interest policies, including those that would reduce the production of fossil fuels.
Now is the time to end ISDS for good.
— Iliana Paul (@iliana_m_paul) May 29, 2024
"ISDS mechanisms corruptly advance the power of big corporate polluters over the interests of the public and the planet. This new report from the Sierra Club makes it clear that ISDS's time is up," Sen. Sheldon Whitehouse (D-R.I.) said in the group's statement. He, too, is pushing the Biden administration to remove ISDS provisions from existing agreements.
While the Sierra Club report focuses on ISDS's climate impacts, the authors argue that the effects of the provisions, which give corporations extraordinary power, are much broader. "The dangers of ISDS are stark not just for climate change, but for a broad swath of public interest policies including ones related to public health, labor protections and workers' rights, green jobs policies, and more," they wrote.
Democrats voiced agreement about the broad consequences of the provisions, which have been the subject of a growing chorus of criticism by politicians and public interests groups.
"Giant corporations have and continue to weaponize ISDS—a secretive and rigged arbitration system that multinational companies use to bypass domestic courts and challenge protections for the environment, workers, and consumers around the world. It's time to shut the door and eliminate ISDS from all existing trade agreements once and for all," said Sen. Elizabeth Warren (D-Mass.) in the Sierra Club statement.
In November, Sierra Club, Public Citizen, the AFL-CIO and more than 200 other organizations called on the Biden administration to dismantle ISDS provisions between the U.S. and countries in the Americas, saying that the president should "free public interest policies from the shadow of ISDS."
That followed an April letter to Biden in which more than 300 law and economics professors, including Nobel laureate and Columbia University professor Joseph Stiglitz, called for an end to ISDS in existing trade agreements, arguing that there's a "bipartisan consensus" for such reform.
"The ISDS regime is undemocratic: It was created for and by powerful, well-organized corporations, and has served their interests almost exclusively," said one critic.
More than 200 civil society groups on Thursday called on the Biden administration to protect climate, health, and other public interest policies across the Americas by dismantling a trade regime that the United States spearheaded nearly three decades ago—giving corporations broad authority to sue governments if they claim their profit margins are harmed by public programs.
Public Citizen, Sierra Club, and the AFL-CIO led hundreds of organizations in sending the letter to President Joe Biden, urging him to take legal action to terminate the Investor-State Dispute Settlement (ISDS) system within the Americas Partnership for Economic Prosperity (APEP), a trade framework between the U.S. and 11 countries in Central and South America and the Caribbean.
As Lori Wallach and Daniel Rangel, the director and research director of ReThink Trade, explained in a column in July, "ISDS elevates multinational corporations and foreign investors to equal status with national governments."
Under 43 ISDS-enforced agreements among the 12 APEP countries, corporations have launched more than 230 legal attacks, including a demand for $15 billion from the U.S. government—funded by taxpayers—by the Canadian firm that proposed the Keystone XL pipeline.
"The ISDS regime is undemocratic: It was created for and by powerful, well-organized corporations, and has served their interests almost exclusively," said Mario Osorio, senior fellow at the Center on Inclusive Trade and Development at Georgetown University Law Center. "It also poses a real threat to the world's climate action efforts, having already been used against them."
There are currently 73 pending ISDS cases totaling $47 billion in corporate claims, the civil society groups noted on Thursday.
"ISDS claims are often in the millions or billions of dollars," the groups wrote in the letter. "An unaccountable three-person tribunal decides the fate of each case. The tribunal can even decide a company should be paid for the 'expected future profits' it may have earned in the absence of the government policy in question. The ISDS regime has been especially detrimental to public health, climate and environmental protections, Indigenous land rights, financial regulations, and democratic sovereignty."
The system, said Cathy Feingold, international director at the AFL-CIO, "creates an unfair playing field that prioritizes the needs of corporations over those of workers, their families, and the environment."
"ISDS should be removed from our trade framework and replaced with policies that promote good jobs, strong communities, and a sustainable environment," Feingold added.
The organizations acknowledged that Biden has thus far followed through on a campaign promise to not pursue new trade and investment agreements with ISDS, but as Sen. Elizabeth Warren (D-Mass.) said in a statement supporting a report on the system released last week by ReThink Trade, "future agreements are only part of the battle."
"The United States is still locked into many preexisting agreements that allow corporations to weaponize ISDS when we do something that they don't like. I'm going to keep on fighting until every last one of our trade agreements is ISDS-free," said Warren, who has previously criticized the scheme.
The senator also sent a letter to Biden this week, along with more than 40 colleagues, calling on him to remove ISDS from existing APEP agreements.
Thursday's letter came a day before Biden was scheduled to host the heads of state of Latin American countries for an APEP meeting.
The report by ReThink Trade detailed legal mechanisms that the U.S. and its APEP partners can use to terminate ISDS liability, including:
Joseph Stiglitz, economics professor at Columbia University, noted that the call to exit ISDS is "especially relevant" because Biden launched APEP partially with the aim of "fighting climate disaster and economic inequality, improving public health, [and] strengthening democracy."
"To achieve any of these goals, ISDS has to go. It is a direct hindrance," said Stiglitz. "Launching this as a group exit would be very helpful in protecting our neighbors from one of the factors that leads some countries not to exit. That is the fear, not grounded actually with much evidence but still it's a fear, that investors will see an individual country leaving the system as a signal of some sort that they're not committed to good investment. When a bloc of countries exit together, there's safety in numbers."
The civil society groups noted that "the tide is turning" against ISDS in other countries, with 10 European countries abandoning the Energy Charter Treaty due to its ISDS rights for fossil fuel companies, and countries such as South Africa, Indonesia, and India working to exit similar agreements.
"Continued movement away from ISDS by the United States," said the groups, "would be a powerful signal to other governments considering taking similar action."