TPP Financial Services Chapter Opens Door To Broader ISDS Claims

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Updated: The Trans-Pacific Partnership (TPP) chapter on financial services gives private firms in that sector broader grounds to sue member governments than previous U.S. free trade agreements by incorporating obligations for parties to accord a "minimum standard of treatment" to financial services investments and subjecting that commitment to investor-state dispute settlement (ISDS).

November 10, 2015 | Inside U.S. Trade

Previous U.S. free trade agreements have allowed financial services firms to bring certain limited ISDS claims, but not for a breach of the minimum standard of treatment (MST). In the Korea-U.S. FTA, for example, a financial services firm may bring an ISDS challenge against a government for violating the obligations of the investment chapter on expropriation and compensation, transfers, denial of benefits, and special formalities and information requirements.

This development on the one hand is likely to appease U.S. companies who had pushed to broaden the scope of financial services-related claims that can be brought under ISDS. On the other hand, it does not go quite has far as some of them may have hoped.

As far back as two years ago, business representatives had been urging the Office of the U.S. Trade Representative to allow businesses in all sectors to bring all types of claims -- including alleged breaches of the MST, national treatment and most-favored nation treatment. This is the approach taken by the most recent U.S. bilateral investment treaties (BITs), such as the U.S.-Rwanda BIT reached in 2008 and the U.S.-Uruguay BIT in 2004.

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