Gaius Publius: ISDS Provisions in TPP Violate Article III of the U.S. Constitution

By Gaius Publius, a professional writer living on the West Coast of the United States and frequent contributor to DownWithTyranny, digby, Truthout, Americablog, and Naked Capitalism. Follow him on Twitter @Gaius_Publius, Tumblr and Facebook. This piece first appeared at Down With Tyranny. GP article archive here.

There’s a growing recognition within the legal community that the ISDS provisions of treaties like NAFTA, TPP, many trade agreements already signed and almost all agreements going forward … may well be unconstitutional. That is, they violate protections offered to citizens by important articles of the Constitution — for example, Article III, which establishes the judicial branch of the U.S. government, assigns its powers and establishes the right of trial by jury (my emphasis, obviously):

The judicial Power shall extend to all Cases, in Law and Equity, arising under this Constitution, the Laws of the United States, and Treaties made, or which shall be made, under their Authority;—to all Cases affecting Ambassadors, other public Ministers and Consuls;—to all Cases of admiralty and maritime Jurisdiction;—to Controversies to which the United States shall be a Party;—to Controversies between two or more States;—between a State and Citizens of another State;—between Citizens of different States;—between Citizens of the same State claiming Lands under Grants of different States, and between a State, or the Citizens thereof, and foreign States, Citizens or Subjects.

In all Cases affecting Ambassadors, other public Ministers and Consuls, and those in which a State shall be Party, the supreme Court shall have original Jurisdiction. In all the other Cases before mentioned, the supreme Court shall have appellate Jurisdiction, both as to Law and Fact, with such Exceptions, and under such Regulations as the Congress shall make.

Trial of all Crimes, except in Cases of Impeachment, shall be by Jury; and such Trial shall be held in the State where the said Crimes shall have been committed; but when not committed within any State, the Trial shall be at such Place or Places as the Congress may by Law have directed.

I recommend taking a moment to read the above. It’s from our founding document, and it’s pretty clear.

What Do Constitutional Lawyers Say About ISDS?

ISDS is shorthand for “Investor-State Dispute Settlement” provisions in current trade “agreements” — these are carefully not called treaties, apparently as an attempt to bypass the Treaty Clause of the U.S. Constitution, which mandates that treaties be ratified by a two-thirds vote of the Senate:

[The President] shall have Power, by and with the Advice and Consent of the Senate, to make Treaties, provided two thirds of the Senators present concur.

ISDS provisions are described more fully below.

I’ll offer the opinions of two constitutional experts. You can listen to conservative constitutional lawyer Bruce Fein in the following interview.

Conservative constitutional lawyer Bruce Fein agreeing with Alan Morrison: Fast Track is “defective constitutionally” (source: Thom Hartmann program)

In addition, consider the recent letter authored by Alan Morrison, described by Public Citizen as “a constitutional law professor and associate dean at George Washington University Law School who has practiced law for 45 years, taught at six law schools including Harvard, and argued 20 Supreme Court cases.” Here is what Dr. Morrison wrote in a letter to the U.S. Congress (pdf).

Bottom Line First

I’m going to quote liberally from Dr. Morrison’s letter — you read it in its entirety here (pdf). Emphasis is mine except where specified.

“The Investor-State Dispute Settlement Provisions in the Trans-Pacific Partnership Agreement Violate Article III of the United States Constitution”

Given the importance of the ISDS provisions to the TPP, the Administration owes it to Congress and the American people to explain how the Constitution allows the United States to agree to submit the validity of its federal, state, and local laws to three private arbitrators, with no possibility of review by any U.S. court. That is simply not the way that our Constitution provides for the resolution of the legality of federal, state, or local government laws, rules, or other actions. If someone from the Department of Justice has a different view, I would be more than happy to debate that person before a committee of Congress or in any other appropriate forum.

Let’s look at Morrison’s argument point by point.

What Are Investor-State Dispute Settlement Provisions?

What are these provisions? What do they allow and what do they disallow?

I am writing to call to your attention a serious, but previously undiscussed constitutional problem with the investor-state dispute settlement (“ISDS”) provisions of the proposed Trans-Pacific Partnership Agreement (“TPP”). They would allow foreign investors to challenge laws, regulations, and court decisions of our federal, state, and local governments, not in our court systems, but before three privately appointed arbitrators.


Such arbitration tribunals would be empowered to order the United States Government to pay unlimited sums in damages to the foreign investor if the investor could convince two of the arbitrators that the challenge to a governmental action violated any of its substantive rights provided by the TPP.

In other words, ISDS provisions bypass the constitutionally established court systems of all countries that sign these agreements. In addition, the ability to bypass courts is offered only to investors, as opposed to labor unions or environmental and human rights advocacy groups. Again, decisions of these extra-judicial tribunals are not subject to review by any national court.

Violating the U.S. Constitution

Dr. Morrison, as does Dr. Fein above, asserts that these provisions violate cornerstone protections of the U.S. Constitution. Morrison (entire passage emphasized in original):

I am writing this letter because I believe that the creation of private arbitral tribunals to decide whether otherwise valid federal, state, and local laws are inconsistent with the investor protection provisions of the TPP improperly removes a core judicial function from the federal courts and therefore violates Article III of the Constitution.

I can easily see a judicial challenge to all of these provisions arising out of this claim. But to continue.

ISDS “Arbitrators” Are Not Judges, But Lawyers With a Built-In Interest in Ruling in Favor of Investors

Consider for a moment that you had a dispute with a contentious neighbor, one given to filing lawsuits. When you go to court, you discover that the judge in your case is also the lawyer representing the same neighbor in someone else’s case — and that both cases were being heard simultaneously. That is, your judge was also your current opponent’s lawyer.Would you trust the impartiality of your judge?

The ability of the same individual to cross back and forth from judge to advocate provides perverse incentives in the case of the “judge.” Yet that’s basically the setup with ISDS tribunals. Morrison:

Instead of making the challenge in a court in the country where the investment was made, or before judges of a recognized international tribunal, the TPP would allow an investor to bring the case before an ad hoc tribunal of three arbitrators, one appointed by the investor, one by the nation in which the investment was made, and the third by the agreement of the other two arbitrators. The arbitrators are generally private citizens, often lawyers who specialize in international trade and investment, for whom serving as arbitrators is only one source of their income. Indeed, many of those who serve as arbitrators in one ISDS case represent investors challenging governments in another. Their decisions on the merits of the case are final and not subject to judicial review in any court.

If I’m an investor (a hedge fund owner; a multinational corporation; its CEO), I would pay almost any amount of money to anyone who would take it to get that setup passed and signed.

The Sole Defendant Is the Federal Government. The Sole Remedy is Money Damages.

This is an especially tough set of restrictions, since the real defendants in these cases are likely to be state and municipal governments, as you’ll see in the examples further down. In addition, even when the defendant is the federal government, for example, when federal “country of origin” labeling (COOL) laws are challenged, the response of the government — whose representatives, it must be said, depend on big money interests to maintain themselves in office — can usually be counted on to bend to big money interests.

Congress is about to do just that by repealing COOL laws as a result of a challenge filed by Canada and Mexico before another “trade” organization, the WTO.


Under the proposed TPP, in a foreign investor case challenging one of our laws or decisions, the sole defendant would be the federal government, even if the investor’s claim is that a state or city enacted the law or took the action being challenged. The sole remedy is money damages. Others, such as the state that enacted the challenged law, may only participate at the invitation of the federal government which controls the proceeding for the defense. If a law is found to be inconsistent with an investor protection provision, it may remain in effect, but other investors could also bring claims seeking U.S. taxpayer compensation. Thus, an adverse arbitral decision under TPP may well result in repeal or amendment of the offending law. In the case of the United States, if the challenge is to a state or local decision, Congress would probably pass a law preempting the offending provision. Indeed, the mere instigation of an ISDS proceeding has resulted in other governments, including Germany and Canada, reversing specific regulatory decisions as part of compensation packages for investors.

Again, the repeal of country-of-origin laws is slated for this session of Congress and, in the name of “trade,” is almost certain to pass (links above the quote).

Some Examples

Morrison offers four examples of how ISDS provisions can result in perverse and unconstitutional outcomes.

Example 1 — Post-TPP regulation of e-cigarettes:

Concerned about the loss of customers who no longer smoke conventional cigarettes, the tobacco companies have created e-cigarettes, which are currently unregulated. If Congress decided to regulate them after enactment of the TPP, a non-U.S. investor from a TPP country that makes e-cigarettes here could ask an ISDS panel to rule that its investment-based expectations were improperly violated and thus that it is entitled to damages under the minimum standard of treatment provisions.

Example 2 — Post-TPP water rationing in California:

A similar challenge could be made by a TPP investor who owned farm land in California and objected to an intensification of mandatory water rationing for farms enacted after the TPP goes into effect, even if such rules also applied to U.S. owners of land that would be adversely affected by them.

Example 3 — Post-TPP minimum wage increases:

Or the non-U.S. TPP-owner of restaurants in Los Angeles could demand arbitration over a post TPP-enactment of an increase in the minimum wage to $15 an hour, which, he claims, violates his investment-based expectations when he decided to purchase the restaurants.

Example 4 — Post-TPP tightening of regulation for abortion clinics:

Or suppose a non-U.S. investor from a TPP nation decided to open a chain of abortion clinics in Texas and received permits for all of them. If, shortly after the TPP went into effect, Texas passed a law imposing additional health and safety requirements that significantly increased the investor’s cost of doing business, the law would be subject to challenge under the TPP.

Morrison concludes: “Instead of suing in federal or state court, raising U.S. or state constitutional law claims, the investor in each of those cases could circumvent domestic courts and demand ISDS arbitration.”

What Makes These Cases Different from Other Cases Settled by Arbitration?

Each of the cases above involve judgements of law, not facts. The facts in all of the above examples are not in dispute; what is disputed is whether one law — the municipal, state or federal regulation — is inconsistent with another law — the ISDS provision of the trade agreement.

In all such cases as these:

The relevant facts in this kind of case, including my four hypotheticals, are rarely in dispute, and the question of legality is typically resolved by a state or federal judge and then ultimately by the U.S. Supreme Court. But not under the TPP. The foreign investor can avoid the U.S. court system entirely by choosing arbitration, not just in the first instance, but at all, since the TPP excludes judicial review of the merits of decisions by these private arbitrators.

Here’s why previous case law, discussed in the letter, “falls heavily on the side of unconstitutionality”:

None of these [previously discussed court] decisions resolves the constitutionality of the TPP ISDS arbitration procedures, but their collective reasoning falls heavily on the side of unconstitutionality, based on four factors that apply to the TPP tribunals: (1) they deal with questions of law, that judges normally decide, not questions of fact, that could go to juries or arbitrators; (2) the arbitrators are not federal officers, construing and applying federal law, but are private parties, none of whom has to be an American citizen; (3) the consent of the United States is general and not case specific and, where the challenge is to a state or local law, the state or locality never consents at all, but had the decision to arbitrate mandated by Congress, thereby raising federalism concerns; and (4) there is no judicial review of the merits of what the arbitrators decide, especially whether the TPP had been violated at all.

I suspect if there were significant (real, financed) challenges to these provisions, the entire basis of modern trade agreements could be ultimately overturned.

The court system is a powerful tool, as climate activists are discovering. Citizens United was a court case that worked (for the other side). I believe the unconstitutionality of these “agreements” is a significant vulnerability that could and should be profitably explored. As Morrison and Fein attest, it’s certainly a bipartisan concern.

Who is Alan Morrison?

For completeness, and because most of us aren’t followers of the major players in the world of Supreme Court lawyers, here’s what Dr. Morrison says about himself. From the letter:

Interest and Public Service Law at the George Washington University Law School, where I teach constitutional law, with a special focus on separation of powers. I have also taught at Harvard, NYU, Stanford, Hawaii and American University law schools. During my more than 45 years of legal practice, I have argued 20 cases before the Supreme Court and have been co-counsel for a party or an amicus in more than another 100. Included in those Supreme Court cases are eleven major separation of powers rulings. Because I was not part of any of the three branches of the federal government, I was free to support or oppose a law depending on my view of its constitutionality.

Not nobody; definitely somebody. We could use a few more people like Morrison and Fein to weigh in, as well as judicial commenters — paging Dahlia Lithwick and Jonathan Turley? — to contribute to the conversation. On its face, it would be a fruitful conversation to have.

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  1. Steve H.

    This clears up one matter for me, that “the sole defendant would be the federal government, even if the investor’s claim is that a state or city enacted the law or took the action being challenged.”

    The positive is that it insulates local governments from bearing the financial weight of international lawsuits. The negative is that it relies on political appointees to determine the vigor of the defense.

    So far the indications are that the foreign corporations are the sole plaintiff. Is there a method by which a local corporation, having made investment based on stated law, can sue (who?) for financial ravages from an interloper? Could an Australian company sue Singapore for lost revenue due to negative health effects of increased cigarette use, based on the same data that Philip Morris Asia is using to claim increased potential revenues from the packaging?

    1. sam s smith

      Sounds to me that a foreign company could pay lobbyist to get a state to pass a law that would result in a huge payout from the Federal government.

      1. jrd2

        I was told by someone in the electrical power generation business that the business model is often 1) buy a plant 2) lobby to make some regulatory change 3) sell your now more valuable plant.

        ISDS will certainly take take the utilization of this kind of strategy up a notch…

    2. Oregoncharles

      Yes – in fact it’s a way for local governments to practice civil resistance against the “trade” agreements. They can inflict heavy penalties on the federal government – which, under the federal system, may have no legal remedy against localities. Certainly if it tries to penalize them, there would be grounds for yet another constitutional challenge.

      It’s interesting that the provisions of these agreements are so poorly thought out. Really bad, sloppy law seems to be a feature lately, eg Obamacare.

      Frankly, writing or voting for these agreements – interesting that they aren’t treaties – approaches treason. It’s certainly a betrayal of the American people and of the Constitution, and we would be justified in using language like that in campaigns.

      Indeed, I was holding a sign reading just: “Wyden, Betrayer” at his last local town hall. The union guys wanted it.

  2. wbgonne

    Good point. It also makes me wonder about federalism. Is ISDS not an indirect way to negate state sovereignty? After all, what will the effect be if a city or state bans fracking and then a foreign corporation successfuly sues the federal government? Won’t the federal government then “punish” the state or municipality in some manner, or somehow inhibit the “offending” local rule? Would the federal government simply allow the local rule to remain intact, with the federal government accruing endless fines under ISDS? I doubt that.

    1. Ulysses

      We have already seen in Texas how the ISDS regime would work to enforce the principle of no higher law than corporate profits:

      The Texas Oil and Gas Association and the state’s General Land office are asking a court to toss out not only Denton’s ban on hydraulic fracturing but also the moratorium it used to stop drilling while it reworks its overall gas drilling ordinance.

      TXOGA and the land office sued Denton in November, the day after its citizens approved the ban on hydraulic fracturing. Their amended petitions filed Monday seek declaratory judgments tossing out the moratorium and the ban and an injunction preventing city officials from enforcing them.

      Both lawsuits contend that House Bill 40, passed during the recent legislative session and signed into law by Gov. Greg Abbott last month, prohibit cities from halting development of natural gas reserves, even if only for a short time.

      “Both the drilling moratorium and the hydraulic frac ban, which in effect completely prohibit the development of the Barnett Shale within the city of Denton, are unconstitutional because they are expressly preempted by HB40,” the TXOGA lawsuit states.

      Denton has not been enforcing the ban. Earlier this month, Vantage Energy began fracking at a well site it operates northwest of downtown Denton. Eight protesters supporting the ban have been arrested at the site, including a 92-year-old mother and her son on Tuesday


      Read more here:

      The new multinational ISDS regime simply amplifies a process that we’ve already seen– stripping away the sovereignty of entire nation states, the way that Big Oil has already stripped away the sovereign rights of the citizens, of Denton, TX, to protect their health and environment against massive harm.

        1. reslez

          One need not hope in order to undertake, nor succeed in order to persevere. – William I, Prince of Orange

          1. jrs

            Yes, if your of that philosophy yes. But we need to keep optimistic for the hopium addicts (whose pursuit of such has worked so well afterall …) and so on who need to believe in happy endings in order to get out of bed apparently.

    1. Demeter

      Either he’s ill, or he’s in a blackmail state….he’s been awfully quiet about a lot of things.

  3. craazyboy

    One thing I’m still confused about, and Morrison didn’t help this, is oftentimes I see people assume that it’s “foreign investors” that can use the ISDS mechanism to win disputes in the US. Morrison uses “foreign investor” in the beginning of his letter, but then gives some examples of how things may work in real life. One is a CA landowner may bill (and get paid) for damages due to water rationing. Morrison doesn’t state whether this entity is a non-US citizen, or if he is incorporated in Delaware or perhaps New Zealand.

    The part I’m confused about is can US entities, or their foreign subsidiaries, or their foreign shell companies bill the crap out of us using the ISDS mechanism?

    The other thing I wonder about is we toss around “ISDS” as a handy acronym, but the specific verbiage seems to be specific to a trade agreement. So when we peruse the published one for NAFTA and think we know how it works, there is nothing that keeps them from writing something completely different in the TPP. Then I get that annoying feeling again that we really need to read it.

    But great video. I liked the lead in part about how we are totally dependent on China now. ( my additional note: except for sugar and corn sweeteners)

    1. sufferinsuccotash

      So a company based in the U.S. could set up a “foreign” subsidiary which could then use ISDS to quash any Federal, state, or local regulations it doesn’t like. No judicial review.

      1. tegnost

        In order to qualify as an isds arbitraitor you must swear to the divine right of burger kings!

      2. Praedor

        Monsanto is considering moving its HQ to the UK. It can them use ISDS from TTIP to overrule any and all restrictions or regulations on its pesticides/herbicides in the EU OR US.

  4. sleepy

    Ok, let’s say a corporation gets a judgment for its lost, but anticipated, future profits in the amount of $20,000,000.

    What is the mechanism for collecting this sum? A money judgment from a regular court is a piece of paper signed by a judge saying that “you win”. It doesn’t mean you get any money. It just means that you have the right to try to collect, and collecting on that judgment is frequently the tricky part.

    So an individual takes the judgment back to the court or to the sheriff and asks for various writs and legal process that authorizes the seizure of assets.

    With the TPP, the corporation gets its $20,000,000 judgment. At that point to collect on that judgment the corporation would turn to the local court system for the seizure of any assets.

    Since the US government is the defendant, and assets of the United States are exempt from seizure, where is the effective remedy for the corporation? Beyond that, given the constitutional concerns as expressed in this article, could a domestic court refuse enforcement based on those?

    I am aware of the federal Arbitration Act which allows for a federal court to fully acknowledge and execute an arbitrator’s judgment, but given the sovereignty issues involved when the defendant is the United States, I’m doubtful whether that Act would apply here.

    But like the article states, the US representative at the TPP dispute table is likely in the pockets of the corporations so the entire matter is probably moot.

    Perhaps though at some point a particular regulation or statute that is widely acknowledged as beneficial by the public is gutted, and at that point Congress may make noise about pulling the plug on enforcement of the TPP decision. I suspect that sort of opposition would come from the Tea Party side of the aisle rather than the “left”.

    1. sam s smith

      US Government assests in foreign lands would be up for grabs to settle a judgement would they not?

    2. tegnost

      as to later on congress will fix it, it’s easier to let the horse out of the barn than it is to get him back in, see patriot act (must pass it to read it) tuned into freedom fries, and very likely to still include many noxious elements, fixed indeed depending on who’s interests are truly served. More like oops, is that in there oh well nothing we can do about it now

  5. sleepy

    I forgot about the not too long ago seizure of Argentine assets–or at least the threat of seizure–over the dispute of the write down of Argentine debt. That probably has some bearing here.

  6. Doug Terpstra

    At least one (former) constitutional law professor disagrees with Dr Alan Morrison. Although Dr Morrison’s resume is by far the most impressive, there is no contest, because the other is emperor.

    “I was a constitutional law professor, which means unlike the current president I actually respect the Constitution.”  – Barack Obama 2007

    Another lie among so many. That abdication of national sovereignty is an impeachable offense, among so many, it hardly matters; the US Constitution is dead.

    1. sleepy

      Hey, let’s not forget that Ted Cruz also went to Harvard Law School, was on law review, and taught constitutional law.

      Harvard is really churning out the best and brightest.

  7. phred

    Thanks for the excellent post GP. It raises an important point and an immediate path forward to challenging ISDS. The question I have is this… If we take a current case of an abusive ISDS decision (e.g., COOL), who has standing to bring a complaint to an Article III court to make a constitutional challenge?

    It seems to me we need to challenge this system now, in parallel with whatever the USTR is scheming in his super-secret trade deals. Did Morrison or Fein offer any suggestions on how to pursue such a course?

  8. TedWa

    Everyone seems concerned about how the laws will affect the US. How about small countries around the world that have resources TBTF corporations want? For example. Monsanto can sue any country in the world for banning the use of GMO’s as they haven’t been proven harmful in any of Monsanto backed or owned studies. Or, precious metal mining and indigenous people. They could wipe them out if their land has something they need. The Amazon rain forest stands in the way of profits. No smaller to medium size and larger country could stand to up in court to corporate raiders of the lowest order – and a rigged court at that. Just look at how Germany, Australia and Canada are paying for violating NAFTA rules on lost profits. Do we really think the US is immune from secret courts run by corporations? This thing is awesome evil from an awesomely evil administration.

  9. TedWa

    Lets try to be more concerned about how ISDS will affect countries around the world that can’t afford to fight them in a rigged court system. Goodbye Amazon rain forest, goodbye indigenous peoples, goodbye organic foods, and on and on….

    1. phred

      I am concerned about ISDS everywhere and am open to any suggestions to how to end this abusive arbitration that circumvents democratic governance. My hope is that if we can stop it here, we can stop it everywhere.

  10. Larry B.

    How is this any different than corporations forcing people into binding arbitration? This is just binding arbitration on a larger scale. Even though binding arbitration is supposed to be under the jurisdiction of the courts, as a practical matter about all the courts will do if you try to appeal a judgement reached by arbitration is to say “What part of ‘binding’ don’t you understand”? The courts have shown very little willingness to do anything about the binding arbitration being forced on consumers, why would they care about this?

    1. Gaius Publius


      Read the section titled “What Makes These Cases Different from Other Cases Settled by Arbitration?” I think you’ll find the answer there.


  11. Linda Filkins

    The (euphemistically titled) U.S. justice system has always treated the very rich much differently that the rest of us.The punishments handed out to them (on the rare occasions that they are) tend to be in the form of fines and other property confiscation rather than imprisonment. No one should be confused about the real intentions of ISDS , it is to usurp the existing authority of national governments and create a globalist supranational government of the very rich.

    1. Keenan

      Euphemistically titled ? Not at all. For the members of the club it is indeed the U.S. “Just Us” system.

  12. Gaius Publius

    From a commenter at DWT:

    At 7:57 AM, Clifford Johnson said…

    Very good article. Note well that classifying a trade agreement as an executive agreement rather than as a Treaty avoids a 60% Senate ratification vote, but not the jurisdiction of federal courts. See B. ALTMAN & CO. v. U. S., 224 U.S. 583, 601 (1912), re a the Tariff Act of 1987:

    ”While it may be true that this commercial agreement, made under authority of the Tariff Act of 1897, Sec. 3, was not a treaty possessing the dignity of one requiring ratification by the Senate of the United States, it was an international compact, negotiated between the representatives of two sovereign nations and made in the name and on behalf of the contracting countries, and dealing with important commercial relations between the two countries, and was proclaimed by the President. If not technically a treaty requiring ratification, nevertheless, it was a compact authorized by the Congress of the United States, negotiated and proclaimed under the authority of its President. We think such a compact is a treaty under the Circuit Court of Appeals Act, and, where its construction is directly involved, as it is here, there is a right of review by direct appeal to this court.”


    1. Steve H.

      Not sure if this means its ‘construction’ can be challenged and thus it needs to be revealed to the court before execution, or if it only applies to ISDS judgements can be challenged after its a done deal…

  13. subgenius

    I was under the impression that the plea bargaining system also violates article 3, but then I am a foreigner,,,

    1. Nathanael

      No… the plea bargaining system simply consists of a crime (it’s public corruption) *every single time the prosecutor offers a plea bargain*. But since nobody prosecutes the prosecutors…

  14. Joe Firestone (LetsGetitDone)

    Under the proposed TPP, in a foreign investor case challenging one of our laws or decisions, the sole defendant would be the federal government, even if the investor’s claim is that a state or city enacted the law or took the action being challenged. The sole remedy is money damages. Others, such as the state that enacted the challenged law, may only participate at the invitation of the federal government which controls the proceeding for the defense. If a law is found to be inconsistent with an investor protection provision, it may remain in effect, but other investors could also bring claims seeking U.S. taxpayer compensation. Thus, an adverse arbitral decision under TPP may well result in repeal or amendment of the offending law. In the case of the United States, if the challenge is to a state or local decision, Congress would probably pass a law preempting the offending provision. Indeed, the mere instigation of an ISDS proceeding has resulted in other governments, including Germany and Canada, reversing specific regulatory decisions as part of compensation packages for investors.

    What if the offending provision is in an area of policy reserved by the Constitution to the individual States? That doesn’t just “raise Federalism questions.” It means that the Federal Government would be violating the Constitution if it passed a “law preempting the offending provision.”

    On the other hand, if it does nothing, then State and local governments can cause the US Government to incur continuing and in some cases very substantial bills (some in the billions of dollars) to the winning multinationals.

    With the passage of time, that would flood the international market with dollars which would then come back to the United States in the form of asset purchases. At some point the resulting concentration of wealth would complete the transition to feudal plutocracy we’ve been seeing over the past 40 years.

    1. craazyboy

      It’s obvious to me that we need a parallel currency to head off this eventuality. TPP awards can be paid by the USG in “FU Bucks”‘. I suggest orange in color with a picture of Obama, and bio-degradable would be nice. They would not be declared legal tender, but anyone is free to take them in exchange for their stuff, if they want.

      But you can’t pay your corporate income tax with them – not even if Wall Street creates a FU Bucks Exchange where non tax paying corporations can sell their FU Bucks to corporations unable to reduce their tax liability to zero. We’ll need to pass a Constitutional Amendment to make it difficult for future Congresses to mess around with that protection of the citizenry.

      1. Antifa

        Since the need for this second fiat currency arises out of binding arbitration, this biodegradable currency should have binding that bundles it in million-sized packets for conveniently handling the huge payoffs involved, and be called “arbitrary bucks.” Paper which you may use as money when it’s convenient to your position to do so.

  15. steelhead23

    Why speak in hypotheticals on the role of ISDS systems in undermining sovereignty and democracy. Here’s an excerpt from “Foreign Policy in Focus” regarding NAFTA.

    Mexico has lost at least five disputes under Chapter 11, totaling more than $200 million in penalties, and many more cases may result from the privatization of mining concessions in the country. According to the Mexican Ministry of Economy, today there are 857 mining projects planned or in operation — of which two thirds are destructive gold and silver operations, which can badly pollute soil and drinking water. Any future legislation to halt or curb any of these projects could incur a claim under NAFTA rules, since the great majority of foreign mining companies in Mexico are of U.S. or Canadian origin.

    Indeed, as the Institute for Policy Studies noted in the report “Mining for Profits in International Tribunals,” extractive industries are increasingly using investment protection rules under free trade or bilateral investment agreements to sue governments when public resistance, environmental assessments, or legal decisions interfere with destructive mega-projects. More than half of these ISDS cases, under NAFTA and other agreements, have been filed against Latin American countries. (Mexico itself has so far avoided this fate, since its government is notoriously permissive about issuing operating permits to extractive industries, but the rules don’t make finding the political will to resist them any likelier.)

    The government of Canada, meanwhile, has lost or settled five NAFTA Chapter 11 cases, totaling over $157 million in compensation paid to foreign companies. Billions of dollars remain in dispute.

    The punchline preceding this was, “forever more, policymakers will have to think twice about passing any law to protect the public from corporate excesses.” So, when protesters lie down in front of bulldozers to stop a mining company from ripping up their land and their way of life – and the government sides with the mining company and beats or shoots the protesters, we now know why. NAFTA and TPP aren’t just bad public policy, they are in fact a quiet coups, disenfranchising the people and surrendering state sovereignty.

  16. Cat Burgular

    Phred hit it on the nose: who will have standing to sue on the Article III constitutional issues?

    Cattle ranchers might be the ones.

    US ranchers had long sought a Country-Of-Origin meat labeling law, and finally got it back in 00’s after the BSE outbreak in Canada. Even then, there was a lot of political maneuvering by meat packers to keep it from being passed. Some anti-COOL Big Ag organizations (like the NCBA) lost cred with ranchers that they never regained, others, like the Oregon Cattlemen’s Association, broke out and supported COOL, and a new organization, RCalf, was started. On the ranch I worked on, everyone from fence builders to the ranchers were closely watching which way each organization came down on the issue — my boss joined RCalf and quit paying NCBA. People haven’t forgotten.

    Just imagine a Cowboy versus WTO lawsuit. While ranchers are a very conservative group, they feel pretty strongly about the constitution, and will probably get support from Locavore people. Ranchers also have money and lawyers, and some good organizational support. I would point out that cow prices are currently near an all-time high, and if they come down after passage of COOL repeal (HR 2393), there are going to plenty of people who follow the market closely that are going to be really angry. There won’t be a shortage of people ready to bring suit.

    1. Nathanael

      “Phred hit it on the nose: who will have standing to sue on the Article III constitutional issues?”

      State governments. And they are allowed to go DIRECTLY to the Supreme Court.

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