Investor-State Dispute Settlement: A Legal Overview (CRS Report for Congress)
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| Release Date |
April 16, 2015 |
| Report Number |
R43988 |
| Report Type |
Report |
| Authors |
Brandon J. Murrill, Legislative Attorney; Daniel T. Shedd, Legislative Attorney |
| Source Agency |
Congressional Research Service |
Summary:
Ongoing trade negotiations among the United States and several Pacific Rim countries regarding the proposed Trans Pacific Partnership (TPP) agreement and between the United States and the European Union with respect to the proposed Transatlantic Trade and Investment Partnership (T-TIP) agreement have rekindled debate over the value of including investor-state dispute settlement (ISDS) provisions in bilateral investment treaties (BIT) and trade agreements. Congress plays an important role in the approval and implementation of U.S. international investment agreements (IIA), and, therefore, in the approval of ISDS provisions within those agreements.
ISDS provisions in IIAs enable an aggrieved investor, with an investment in the territory of a foreign host government, to bring a claim against that government for breach of an investment agreement before an international arbitration panel. The United States has negotiated a number of BITs and free trade agreements (FTA) that contain ISDS arbitration procedures for resolving investors' claims that a host country has violated substantive obligations intended to protect foreign investors and investments from discriminatory, unfair, or arbitrary treatment by the host government. Under U.S. IIAs, the investor and respondent country may agree that the tribunal will conduct the proceedings according to certain procedural rules, such as the International Centre for Settlement of Investment Disputes (ICSID) Rules of Procedure for Arbitration Proceedings; the United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules; or the ICSID Additional Facility Rules for disputes in which either the investor's home country or the host country, but not both, is a member of ICSID.
This report focuses on the legal implications of ISDS provisions in U.S. IIAs. Among other things, it discusses who may bring a claim under an IIA; how arbitrators conduct such proceedings; the remedies available to the disputing parties; and how tribunals have interpreted certain substantive obligations contained in U.S. IIAs. Furthermore, the report will discuss the interplay between IIAs containing ISDS provisions, investment arbitration decisions, and domestic law within the United States, as well as the recognition and enforcement of arbitral awards against countries in U.S. courts.
Notably, the ISDS provisions within one IIA may differ from the ISDS provisions in other agreements. This report will focus on the provisions contained in the investment chapter of the North American Free Trade Agreement (NAFTA) because nearly all ISDS cases brought by investors against the United States have been brought under that agreement. It will also focus on the investment provisions contained in the United States' 2012 Model BIT, which is the document that U.S. officials use to negotiate U.S. BITs, and the Korea-U.S. free trade agreement (KORUS), which has the most recent congressionally approved FTA investment chapter, to show the types of provisions U.S. diplomats may seek to include in the TPP and T-TIP.
Table 1 of this report contains summaries of ISDS cases brought against the United States. Table 2 includes summaries of several ISDS cases under various IIAs that may be of interest to Congress.
