News articles have covered the increasingly interesting move some countries are making to exclude investor-state dispute resolution from the Trans-Pacific Partnership Agreement.  None has been more conspicuous than New Zealand:

The future of the Trans-Pacific Partnership (TPP) has been thrown into doubt once again after the new government of New Zealand lobbied for the removal of a controversial investor protection mechanism.

The remaining 11 members of the TPP met in Japan this week, with the New Zealand Prime Minister Jacinda Ardern saying her government would “to do our utmost to amend the investor-state dispute settlement (ISDS) provisions of TPP”.

Presumably complicating things even further, New Zealand and Australia have signed a side letter, essentially agreeing that investors from either Australia or New Zealand would not be able to use the ISDS to pursue claims against their respective countries.  This has consequently raised the prospect of additional bilateral letters being signed between New Zealand and the other TPP signatory countries.

All of this raises a number of questions.  Besides the potentially differentiated levels commitment (are, for example, the side letters legally binding, and more important, enforceable, and if so, how?  See also Simon Lester’s note that they are described somewhat differently by each country), it is unclear whether and how this limited move will undermine the treaty-making process.  News reports have been largely negative, though I’m more sanguine.  At worse, it means that would-be foreign investors will have to satisfy themselves with recourse to New Zealand’s domestic court systems—and trust in the country’s rule of law.  But this hardly seems burdensome given New Zealand’s sterling reputation.  If anything, it is New Zealand’s local investors who might lose the most when operating in less mature legal systems.

Secondly, and closely related, the question arises as to whether in fact New Zealand will seek to multilateralize its side-letter carve out through changes in the text of the TPP.  I could be convinced otherwise, but I’m not sure exactly what New Zealand wins, net-net, with an opt out from ISDS when, say, negotiating with Vietnam or Peru.  And by multilateralizing the opt-out, they make bargaining more complicated by forcing other countries to abandon investor state commitments even where New Zealand is not involved.  Thus unless the country’s leadership is seeking to tank the entire process—which is, I guess, always a possibility—I’m not certain what a rewrite of the treaty writ-large gets the government.

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