The TPP has a provision many will love to hate: ISDS. What is it, and why does it matter?

[Commentary] One sticking point AS Congress considers the Trans-Pacific Partnership (TPP) will be the agreement’s chapter on investor-state dispute settlement (ISDS). Under these rules, foreign investors can legally challenge host state regulations outside that country’s courts. While the United States has never lost a case, U.S. corporations have won many of their complaints against foreign governments. The system is unusual in international law. Most international courts only allow disputes between states.

ISDS, in contrast, creates one-way rights: Corporations can sue governments, but not vice versa. As TPP moves toward Congress, both sides will attempt to revive the ISDS issue. The White House will attempt to argue that new provisions (like a code of conduct for ISDS arbitrators) make enough of a difference to assuage critics’ concerns. TPP opponents, on the other hand, will have to argue why this deal is singularly problematic when there are already 3,200-plus treaties around the globe that already contain similar investor rights. Investors have numerous moves at their disposal because of creeping multilateralism. Nationality shopping, relief shopping, forum shopping, enforcement shopping: Investors can “shop until they drop,” and nations must pay the bill.

[Tucker is Gates Scholar at Cambridge University]