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Dispute Resolution After the TPP Trade Agreement

Wednesday, 22nd October 2015

&quot;The recently concluded Trans-Pacific Partnership (TPP) trade agreement stands to open vast new markets to foreign investors. Now&nbsp;legislators in each of the 12 participating countries&mdash;collectively representing 40 percent of the world&rsquo;s economy&mdash;must decide whether to sign the accord into law. In the meantime,&nbsp;private investors would be well-advised to consider the implications of pursuing compensation, should new investments go awry, through the TPP&rsquo;s Investor-State Dispute Settlement (ISDS) mechanism.<p style="margin: 0px; box-sizing: border-box; padding: 0px; border: 0px; font-family: 'Droid Sans', sans-serif; font-size: 14px; line-height: 24px; vertical-align: baseline">ISDS has been part of the international economic landscape since 1959, and currently exists in over 3,000 trade agreements, including the North American Free Trade Agreement (NAFTA) and several US-EU bilateral investment treaties. Under ISDS, investors would be able to challenge actions by a host country that are&mdash;or appear to be&mdash;in violation of their property rights. While this can be viewed as encouraging investment into newly opened markets, companies initiating actions perceived by the media or other public commentators to be unfair to the host country may suffer considerable financial and reputational fallout as a result.</p><p style="margin: 0px; box-sizing: border-box; padding: 0px; border: 0px; font-family: 'Droid Sans', sans-serif; font-size: 14px; line-height: 24px; vertical-align: baseline">To avoid the need for ISDS in the first place, a thorough understanding of the host country&rsquo;s political, economic and social dynamics should be part of any pre-investment plan. Advance understanding of these issues can also help to inform any subsequent legal strategy initiated under ISDS. &nbsp;</p><p style="margin: 0px; box-sizing: border-box; padding: 0px; border: 0px; font-family: 'Droid Sans', sans-serif; font-size: 14px; line-height: 24px; vertical-align: baseline">Avoiding the ISDS Rabbit Hole</p><p style="margin: 0px; box-sizing: border-box; padding: 0px; border: 0px; font-family: 'Droid Sans', sans-serif; font-size: 14px; line-height: 24px; vertical-align: baseline">Although ISDS stands to offer investors some protection against local discrimination or expropriation, investors should proceed with caution. In controversial cases involving heated disputes between corporate and state interests, protracted legal proceedings could stoke resentment and severely damage a company&rsquo;s public image, not to mention increase the costs associated with doing business in a new market. ISDS has been sharply criticized for allowing large multinational companies to circumvent domestic legal processes, threaten the sovereignty of host governments, and offer foreign companies access to privileges not available to domestic investors.</p><p style="margin: 0px; box-sizing: border-box; padding: 0px; border: 0px; font-family: 'Droid Sans', sans-serif; font-size: 14px; line-height: 24px; vertical-align: baseline">Rather than relying on the availability of ISDS, companies seeking to invest in TPP member countries should exercise increased vigilance as to the underlying risk factors that might lead to adverse action against an investor in the first place, and evaluate whether any potential ISDS suit would be worth the financial and/or reputational cost. Targeted intelligence gathering can help companies identify and fill existing information gaps as well as develop precise questions to bear in mind during subsequent phases of investment and/or litigation. Such intelligence may also include an assessment of political risk factors, environmental sensitivities, indications of civil unrest, and even the identification of potential allies and foes.&quot;</p><p style="margin: 0px; box-sizing: border-box; padding: 0px; border: 0px; font-family: 'Droid Sans', sans-serif; font-size: 14px; line-height: 24px; vertical-align: baseline">&nbsp;</p><p style="margin: 0px; box-sizing: border-box; padding: 0px; border: 0px; font-family: 'Droid Sans', sans-serif; font-size: 14px; line-height: 24px; vertical-align: baseline">Select the link to read this article in full.&nbsp;</p>


Web-link: http://www.corpcounsel.com/home/id=1202739910611/Dispute-Resolution-After-the-TP...
Language: English
Contact: Barbara Yu Levy


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