ISDS: the devil in the trade deal

14 Sep 2014

A common provision allowing foreign investors to sue host governments has become a ticking time bomb inside trade agreements like the soon to be signed Trans Pacific Partnership. Some countries are now refusing to agree to the provision and are questioning its legal legitimacy. Jess Hill investigates.


The Trans Pacific Partnership, or TPP, is one of the biggest trade deals in history. If it’s signed, it will cover almost 40 per cent of the global economy and 12 countries that border the Pacific Ocean, including Australia and the United States.

US Secretary of State John Kerry was in Honolulu last month to preach the ethos of what he calls a ‘21st century agreement’. ‘In the 21st century, a nation’s interests and the wellbeing of its people are advanced not just by troops or diplomats, but they’re advanced by entrepreneurs, by chief executives of companies, by the businesses that are good corporate citizens,’ he said.

However, critics of the TPP, like the Nobel Prize-winning economist Joseph Stiglitz, say it’s being driven by the interests of corporations, and will do little for the wellbeing of citizens. The fact that negotiations are being carried out in secret has only served to enflame such criticism. The little we know about the TPP has come from negotiation leaks; we won’t even know what’s in the final agreement until it’s already been signed.

There’s one standard provision most expect to end up in the final text; it’s called investor state dispute settlement, or ISDS. It enables foreign investors from TPP states to sue the governments who sign up to it if those governments act in a way that harms their interests.

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