The intervention of these international tribunals, sited in a neutral venue, comprising independent specialists in international law, often retired judges, and appointed by the parties, is better than the alternatives.
Certainly, they're much better than litigation in the courts of the home state. It provides a consistent system of justice across member states. If such disputes are left to domestic legal systems, investors are left to deal with the vagaries of local courts, which can be interminably slow, unpredictable, biased or even corrupt.
Chilling indeed would be to contemplate a New Zealand company trying to enforce its rights, say in a Mexican or Malaysian court.
And investor-state procedure is a big step up from its predecessor, which was for an investor to petition its own government to intervene through diplomatic channels or bring a claim in the International Court of Justice. These options tend to politicise a dispute. They often took place behind closed doors. Being a small nation, with corresponding diplomatic clout and resources, diplomacy is not always our best weapon.
By contrast, the TPP's procedures go further than most investment treaties in providing specifically for transparency as far as possible, so that citizens can observe the process, attend the hearings and know the reasons for outcomes. It resolves international disputes in accordance with natural justice and with a history of jurisprudence to draw on. It promotes the rule of law consistently and transparently across the jurisdictions of all the TPP partners.
While states aren't able to prevent claims manifestly lacking in legal merit, the TPP provides for a truncated procedure to deal with such claims.
"Generally speaking," Simon Foote, an Auckland-based arbitration expert, explains, "the investor protections in the TPP are narrowly drafted, meaning that it would require egregious conduct on the part of a state for an investor to have a meritorious claim."
Protections for investors, for example, an obligation not to expropriate without compensation, have been part of international law for decades, Mr Foote notes. "They are fundamental and beneficial to investors prepared to invest outside their own backyard. And what ISDS provisions do is provide a workable means to enforce these fundamental protections."
Mr Foote also points out that this is not an insurance scheme to protect investors against all changes to the law. The Government's right to regulate on matters concerning public health, safety and the environment are not subject to ISDS. And the TPP does not apply to measures required to fulfil the Government's Treaty of Waitangi obligations and permits measures favourable to Maori as exceptions to the obligations otherwise owed to investors. Notably, states have the right to deny claims relating to tobacco-control regulation.
Investor-state dispute settlement is therefore not something to be afraid of. It's part of being a trading nation in a globalised world. Access to markets comes with obligations. ISDS is to be celebrated, for it means our corporates won't be ending up in foreign courts, and nor will our country's trading partners end up in ours. This is how arbitration works best. There isn't a better alternative.
• Deborah Hart is the executive director of the Arbitrators' and Mediators' Institute of New Zealand.
