Can the Language of the Trans-Pacific Partnership Still Contribute to the International Investment System? An Analysis of TPP's Language Regarding States

Arbitration Brief Volume 5 | Issue 1 Article 3 2018 Can the Language of the Trans-Pacific Partnership Still Contribute to the International Investment System? An Analysis of TPP's Language Regarding States' Powers to Regulate Yurica Ramos Montes Follow this and additional works at: https://digitalcommons.wcl.american.edu/ab Part of the Commercial Law Commons, Dispute Resolution and Arbitration Commons, International Law Commons, and the International Trade Law Commons Recommended Citation Ramos Montes, Yurica (2018) "Can the Language of the Trans-Pacific Partnership Still Contribute to the International Investment System? An Analysis of TPP's Language Regarding States' Powers to Regulate," Arbitration Brief: Vol. 5 : Iss. 1 , Article 3. Available at: https://digitalcommons.wcl.american.edu/ab/vol5/iss1/3 This Article is brought to you for free and open access by Digital Commons @ American University Washington College of Law. It has been accepted for inclusion in Arbitration Brief by an authorized editor of Digital Commons @ American University Washington College of Law. For more information, please contact . THE ARBITRATION BRIEF CAN THE LANGUAGE OF THE TRANS-PACIFIC PARTNERSHIP STILL CONTRIBUTE TO THE INTERNATIONAL INVESTMENT SYSTEM? AN ANALYSIS OF TPP’S LANGUAGE REGARDING STATES’ POWERS TO REGULATE Yurica Ramos Montes1 Abstract ...................................................................................... 23 Resumen .................................................................................... 24 I. Introduction ............................................................................ 24 II. Investment and Exception Chapters...................................... 27 A. Regarding “Rare Circumstances” .................................... 28 B. Regarding the Provision “Otherwise Consistent With This Chapter” ................................................................................. 31 C. The TPP Does Not Include Environment and Health Issues As Carve Outs. ....................................................................... 34 Conclusion ................................................................................. 36 ABSTRACT States around the world have signed several modern investment treaties and free trade agreements over the past few decades. Some of them are still in the process of being ratified, such as the TransPacific Partnership (TPP). People worldwide have severely criticized the content of the TPP and have pointed out that the TPP principally protects the rights of the investors while leaving citizens 1 Fellow Research Center on International Commercial Arbitration at American University Washington College of Law. Email: . The opinions expressed herein are those of the author and do not represent the views of the Center. The author would also like to thank Horacio Grigera Naón and Aristeo López Sánchez for reading this article and sharing their comments with the author. 23 AN ANALYSIS OF TPP’S LANGUAGE REGARDING STATES’ POWERS TO REGULATE in vulnerable conditions. For instance, the language of the TPP states in general that a measure adopted by a State to protect a legitimate welfare objective should not be considered as indirect expropriation except in rare circumstances. This exception and other issues, regarding the regulatory powers of a State, have been at the center of several debates. This article reviews some of these debates and highlights the impact of the TPP’s language for future treaties and agreements. RESUMEN Estados alrededor del mundo han firmado de manera creciente varios tratados modernos de inversión y acuerdos de libre comercio en las últimas décadas. Algunos de ellos todavía están en proceso de ratificación, como el Acuerdo Transpacífico de Cooperación Económica (TPP en sus siglas en ingles). Personas de todo el mundo han criticado severamente las negociaciones del TPP y han señalado que el TPP protege principalmente los derechos de los inversionistas y deja a las comunidades en condiciones vulnerables. Por ejemplo, el lenguaje de TPP establece en general que una medida adoptada por un Estado para proteger un objetivo de bienestar legítimo no debe ser considerada como expropiación indirecta excepto en raras circunstancias. Esta excepción y otras cuestiones relativas al poder regulador de un estado han creado varios debates. Este artículo recolecta estos debates y destaca el impacto del lenguaje del TPP en futuros tratados y acuerdos. I. INTRODUCTION The Trans-Pacific Partnership (the “TPP” or “the treaty”) was signed on February 4, 2016. It was the end product of five years of negotiations between twelve countries and is the largest global trade agreement in the last twenty years.2 Prior to the 2 Once ratified, TPP would become the largest trade bloc on earth, concentrating forty percent of the world’s gross domestic product. The signatories represent around 40 percent of the global economy and a quarter of world trade. Membership to the TPP is also open to other Asia-Pacific 24 THE ARBITRATION BRIEF expansion in 2016, the TPP was a regional free trade agreement between the United States, Canada, Australia, New Zealand, Japan, Singapore, Malaysia, Vietnam, Mexico, Chile, Peru and Brunei (“TPP Member States”).3 The TPP made history as the first ever mega-regional treaty to be concluded.4 However, its ratification has been tainted by uncertainty after the United States Government signed an executive order to withdraw from TPP negotiations and the treaty overall.5 Notwithstanding the result of the TPP’s negotiations, the language of the TPP set the basis for Bilateral Investment Treaty (BIT) and Free Trade Agreement reforms that are pending approval, ratification, and renegotiation. Critics of the TPP, including experts in law and economics, have warned about the dangers of the Investor-State Dispute Settlement (ISDS) mechanism included in the TPP.6 One major critique is that this mechanism impacts the sovereign rights of a State7 and weakens the rule of law.8 Critics contest that States’ countries, with both Republic of Korea and Indonesia expressing a strong interest in becoming signatories. See GITANJALI BAJAJ ET AL., DLA PIPER , THE TRANS-PACIFIC PARTNERSHIP SERIES: NAVIGATING A NEW ERA OF TRADE IN THE PACIFIC RIM : PART I – INVESTMENT PROTECTIONS & INVESTOR -STATE DISPUTE SETTLEMENT, 2 (2016), https://www.dlapiper.com/~/media/Files/Insights/Publications/2016/04/TPP%20 Series_Part_1.pdf. 3 Id. (“The signatories represent around 40 per cent of the global economy and a quarter of world trade. Membership to the TPP is also open to other Asia-Pacific countries, with both Korea and Indonesia expressing a strong interest in becoming signatories.”). 4 See PETER DRAPER ET AL., EUROPEAN CTR . FOR INT’L POLITICAL ECON ., MEGA -REGIONAL TRADE AGREEMENTS: IMPLICATIONS FOR THE AFRICAN , CARIBBEAN , AND PACIFIC COUNTRIES 8, (2004), http://ecipe.org//app/uploads/2014/12/OCC22014.pdf (coining the term (...truncated)