Hehir on ISDS


Protectionist critics of the , however, allege that ISDS undermines national self-government by allowing foreign businesses to sue member states over legitimate policy decisions. NZ First MP Fletcher Tabuteau is so concerned about this that he has a bill before Parliament to outlaw free trade agreements that include ISDS provisions altogether – something that would preclude our participation in the .

Consistent with its Hamlet-like agonising on the subject, Labour has pledged to support Tabuteau’s bill to a first reading (despite the fact that it will almost certainly back the treaty when it comes to the crunch).

In fact, concerns over ISDS are probably overstated.

In the first place, ISDS is now a well-established aspect of international trade. Globally, there are already about 3000 treaties and deals with ISDS in place. Our own recent free trade agreements with Malaysia, South Korea and the People’s Republic of China include such provisions (and did so, it should be added, with Labour’s support).

Yes, ISDS is not some new thing dreamt up by the US. Labour agreed to ISDS clauses in most of the FTAs they signed.

Those still wavering can take further comfort in the fact that, in any event, no ISDS procedure will be able to overturn any of our laws or enjoin our government from any particular course of action. The most an aggrieved party could ever win would be compensation for harm suffered. And if our Government didn’t want to pay the damages, nobody could force it to – though our international reputation would take an (entirely deserved) beating if that happened.

This is not to say that we should go along with ISDS in any form whatsoever. We should only sign treaties we intend to honour and a badly drafted ISDS regime could expose the Government to unmeritorious claims that could soon become a serious nuisance. If the risk of that happening outweighs the benefits of the treaty, then the Government should refuse the deal.

When all is said and done, however, there is nothing conceptually untoward about ISDS provided our overall national sovereignty is not threatened (more on that next time). The devil will be in the detail, of course, but in all probability New Zealanders will have more to gain from the mechanism than our government stands to lose from it. It is not, in principle, a sound reason to oppose the TPP.

As Hehir says, there are some ISDS forms which would be bad for NZ. But our negotiators have negotiated ISDS clauses in several previous FTAs, and we’ve never had a problem to date with them.

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