Foreign investors could use TPP to challenge U.S. laws, leaving American interests without access to U.S. courts

I plan to oppose the Trans-Pacific Partnership, but not because I oppose all free-trade agreements. My primary reason stems from a little-known provision called “investor-state dispute settlement,” or ISDS, that would provide foreign corporations a special right to challenge U.S. laws that hurt their bottom line.

To understand the problems caused by ISDS provisions, just look at Australia. In 2011, Australia passed a public health law banning logos on cigarette packages — which has succeeded in reducing smoking rates. Philip Morris International responded by suing Australia for billions in damages relying upon an ISDS provision in a trade agreement between Hong Kong and Australia.

The case is ongoing, but it has already cost Australian taxpayers millions in legal expenses and has had a chilling effect in other countries. New Zealand, for example, curtailed its plans to pass its own cigarette packaging law to avoid litigation.

ISDS provisions create a special forum outside our well-established court system solely for foreign investors. American businesses, labor unions or individuals that allege a violation of TPP will not have access to this legal process. Instead of a judge and jury, three corporate lawyers decide the case and their decision cannot be appealed. The arbitrators are not accountable to anyone.

Although ISDS arbitrators cannot force a government to change its laws, they can award damages in favor of a foreign investor, which has the same practical effect. As a result, many governments end up settling, and as part of the settlement, the government often agrees to change the challenged law or regulation.

The practical implication of including ISDS in TPP is potentially sweeping: ISDS could prevent the United States from reversing climate change, raising the minimum wage, protecting consumers from harmful products, or preventing another financial crisis. Each time we pass a law or regulation to improve the lives of Americans, foreign investors could have the final say.

With the number of ISDS cases from other trade agreements skyrocketing, the outlook for governments is troubling. Of the cases that have concluded involving ISDS provisions, almost 60 percent have settled or been decided in favor of the investor.

Recently, we saw a prime example of how international trade disputes can undermine U.S. consumer protection laws. In 2002, Congress passed a labeling law requiring producers of meat and chicken to provide information to consumers on where an animal was raised and slaughtered. In May 2015, the World Trade Organization (WTO) ruled that this labeling law violated international trade obligations between the United States and Canada.

Most consumers would tell you that they want to know if their beef comes from the Hawaii island, China or some other country. Even for those who do not particularly care, most would agree that Congress should have the power to require disclosing this information. According to the WTO, however, we will have to repeal this law or face steep trade sanctions. Allowing a foreign entity to effectively dictate American public policy does violence to our democratic system.

TPP will make this problem even worse by providing foreign corporations with additional authority to challenge our domestic laws in a private forum without any oversight from the American legal system. This will potentially cede our ability to pass laws to protect and improve American lives. For that reason, I oppose TPP and any trade agreement that contains ISDS.