Focusing on the arbitration currently under way between El Salvador and the mining firm Pacific Rim LLC, Perez-Rocha argues that “corporations are increasingly using investment and trade agreements — specifically, the investor-state dispute settlement provisions in them — to bring opportunistic cases in arbitral courts, circumventing decisions states deem in their best interest.”
“Investor-state dispute settlement provisions feature in many significant pacts, including the North American Free Trade Agreement, and nine U.S.-E.U. bilateral investment treaties. Foreign investors can sue over alleged violations of myriad “investor protections,” including public-interest regulations that would reduce their profits. But it doesn’t cut both ways: Governments or communities affected by foreign investors cannot bring claims. Equally troublesome, tribunal operations are often opaque.”
If new trade treaties include the same pro-business provisions, states like El Salvador and Venezuela are unlikely to sign them, according to Perez-Rocha. But poor and developing states, which Perez-Rocha casts as victims, also tend to be prone to corruption and regulatory opacity. Without adequate protections, such states will have a harder time attracting foreign capital.