Wednesday, January 4, 2012

South Korea's National Assembly sees problems with FTA's investor-state dispute resolution rules

Janet Eaton writes,
Finally the investor state dispute [ISD] mechanism is being scrutized and challenged  by governments entering into Free Trade Agreements with the US.

[Investor state dispute mechanisms are those clauses in trade treaties that allow investors to initiate suits directly against foreign governments, rather than petition their own nation to negotiate disagreements. Suits are heard before international trade boards, rather than in open courts of law. Investor state claims threaten the ability of democratically-elected government to write laws and regulation with an eye to protecting labor rights, the environment, or public health. NAFTA's Chapter 11 is an example.]

On Dec. 30 the National Assembly of South Korea adopted a resolution calling for a renegotiation of the KORUS FTA, including the abandonment, postponement, or modification of provisions on the ISD system, which emerged as the chief issue during the National Assembly's debate over the KORUS FTA.

Just a few months earlier Julia Gillard's Australian government rejected Investor-State arbitration provision in trade agreements after an Australian Productivity Commission could find no compelling economic rationale for the inclusion of investor- state arbitration mechanisms in its trade and investment agreements. In fact it concluded that there were few clear benefits, and several worrying risks, associated with such provisions.

Janet adds that the accountability and impartiality of the arbitrators are also at issue. This article by Jung Eun-joo on Korea's recent rejection of investor state dispute mechanism focuses on an early trade arbitration decision, in which the  presiding judge came under much US pressure to rule in that country's favor. 

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