After a lengthy final period of negotiation in Atlanta, it has been announced that the TPP, the world’s largest mega-regional trade and investment deal, has been agreed. The investment chapter is not yet available but is briefly summarised on USTR’s website here. As anticipated, the TPP includes substantive investment protections found in many investment agreements, and the suggestion from available information is that the formulation of those provisions replicates much of what is found in the US Model BIT 2012. For example, (and in contrast to other recently negotiated free trade agreements such as the CETA and EU-Singapore FTA), investors are granted a minimum standard of treatment in accordance with customary international law. This does not come as much of a surprise – as reported in our earlier blog post here, the leaked investment chapter of the TPP contained many of the features of the US Model BIT 2012, although some differences too.
Interestingly, despite the backlash against investor-state arbitration, the TPP’s investment chapter also continues to include international arbitration of investment disputes. Many of the oft-repeated criticisms of the ISDS system would appear to be answered to some degree by the ISDS provisions of the TPP which include:
- additional requirements to support neutrality and transparency in the procedure;
- opportunity for amicus curiae (or “friend of the court”) submissions;
- non-party interventions;
- binding joint interpretations by the TPP Parties;
- safeguards to undermine abusive or frivolous claims; and
- a review procedure for interim awards.
The extent and precise formulation of these requirements is yet to be seen but on a general level, many of these features are not new and are found in existing investor-state dispute resolution systems. For example, the NAFTA Commission composed of the trade ministers of each NAFTA party can issue binding “interpretations” of NAFTA provisions, pursuant to Article 1131(2), which sets out the governing law for a Chapter 11 arbitration, and the ICSID Rules (subject to which many investor-state disputes under investment agreements and free trade agreements are resolved), provide scope for amicus curiae submissions under certain circumstances (see Rule 37 of the ICSID Rules).
It is also reported that the TPP will include a binding code of conduct which would govern the arbitrators on investor-state tribunals. This is something on which it would appear the US and the EU are aligned, as a code of conduct has been advocated by the EU in the context of the TTIP (see our blog posts here and here). However, if the final text of the investment chapter does not provide scope for development in the future of another mechanism for resolution of investor-state disputes to replace arbitration, this would strike a blow for the EU’s proposal for the establishment of a permanent investment court for resolution of investor-state disputes under the TTIP and beyond (see our recent blog post here). The USTR has consistently taken the position that, with sufficient checks and balances, arbitration remains a suitable method for resolution of investor-state disputes and the TPP’s investment chapter appears to reflect this view.
Next steps for the TPP
To formalize the outcomes of the agreement, negotiators will continue technical work to prepare a complete text for public release, including the legal review, translation, and drafting and verification of the text. Comment on further developments will be found on our TPP hub page here.
To discuss the TPP’s investment chapter, please contact Larry Shore, Partner, Christian Leathley, Partner, Don Robertson, Partner, Hannah Ambrose, Professional Support Consultant, or your usual Herbert Smith Freehills contact.