Arbitration and the Trans-Pacific Partnership

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Trans Pacific Partnership Arbitration

In the current American political season, there has been opposition to international trade agreements, such as NAFTA, and the Trans-Pacific Partnership (TPP) on both sides of the aisle. Once, international trade agreements were seen as necessary for global economic growth. Now they are seen by many as impediments to national sovereignty. The political and economic merits of these agreements aside, they contain arbitration provisions giving private parties the right to bring a claim against a state actor for certain civil acts. The arbitration which arises from such a treaty provision is called investor-state arbitration.

Investor-state arbitration is important because it gives private actors recourse against state actors, even in those situations where a private actor might feel that the playing field would otherwise be not quite level in a claim against a state actor. This recourse, in turn, gives private parties a sense of comfort that allows them to go ahead with business in a foreign country. International commerce grows, jobs are created, and wealth is spread, as the theory would have it. If the political tide turns against international trade agreements, the framework for international business, including investor-state arbitration, evaporates.

Until the future of these trade agreements is clear, it is still possible to carry on with international trade, with a few adjustments. Parties undertaking investor-state projects would be wise to adopt a belt and suspenders approach. While having the arbitration provision of the treaty is important and comfort giving, careful and crafty drafting of private agreements could duplicate much of the protection contained in a treaty. In the unlikely and unfortunate event of American withdrawal from international trade regimes, parties could continue with business, knowing that they have taken precautions which are not dependent on a treaty.