From gunboats to treaties: Who wrote the rules of globalisation?

tags

Colonialism

Notes

opponents of ISDS frequently characterise it as a coup for big business, but struggle to explain why investors themselves so rarely speak up in its favour or why it was adopted by developing countries so readily.

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As in Europe, US elites did not trust these largely non-white, ‘uncivilised’ territories to maintain a favourable investment climate if left to their own devices. Unlike in Europe, however, the spirit of the US’s post-Civil War constitutional settlement prohibited annexing territory without granting suffrage

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the old doctrine of extraterritorial jurisdiction was rearticulated as one of universal principles. In this framing, the US was not extending its own law into these countries but bringing them up to civilised standards.

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investors were satisfied with the compensation they received.

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Congress insisted on cutting off all assistance and Sukarno, as predicted, turned to the Russians. Correcting this strategic miscalculation required a US-backed coup, followed by the US-abetted genocide of at least half-a-million Indonesians.

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newly independent states were in no mind, or position, to pay compensation for the nationalisation of these plundered assets. Instead, they began to expropriate foreign assets

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argued that international law could not have rules that could prevent a country from choosing its own economic system.

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The baton was picked up by Hermann Josef Abs, a prominent West German banker and industrialist. As a director of Deutsche Bank during the war, Abs had helped to oversee the expropriation of Europe’s Jews

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“a statement of banker’s terms sought to be elevated to the dignity of law”

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“There were four regional conferences, but the World Bank claimed it couldn’t circulate records between these conferences because that would be ‘too expensive’. So you have, for instance, an Argentine official making what could be persuasive arguments against ICSID, and Indian and Nigerian officials saying very similar things – but these three officials did not get to hear each other, so they could not form a united opposition.”

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strategic innovation of the World Bank was to leave this stage to bilateral negotiations between states, avoiding the united resistance of the capital importers.

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States that adopted ISDS in this era generally saw it as a technical innovation and a complement to interstate bargaining – not the emergence of a new, litigation- based system. Indeed, the adoption of ISDS in BITs from 1968 had practically no immediate effect: it took until 1987 for ICSID to hear its first treaty-based dispute.

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instruments to legally bind states into certain policies.

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In Poland, the US rushed to sign a BIT with reform-minded Communist general Wojciech Jaruzelski, locking in his liberalisation agenda

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US offered President Carlos Menem a BIT, which would serve domestically as a tangible sign of success, in exchange for signing up to ISDS – disavowing the Calvo doctrine once and for all, while also locking his reforms into international law.

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The sudden surge in demand for Western investment made these countries keenly aware that they were in competition with one another

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Signing a BIT was seen as a credible guarantee to foreign investors that they would not be expropriated

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belief in the investment-promoting power of the BIT was encouraged above all by the World Bank, despite the absence of evidence to support it.

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Recent empirical studies have confirmed that, as the World Bank’s early surveys suggested, ISDS has practically no impact on investor decision-making.

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A trickle of lawsuits quickly became a flood. Across the Global South, governments began to feel the bite of treaties whose enforceability they had severely underestimated.

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Paulsson noted that the emerging system was fragile, passing as it had largely under the radar of governments and their citizens.

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each backlash has fallen short of a total renunciation of ISDS

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The loudest voice in the negotiations appears not to be investors, but the community of commercial lawyers that has sprung up around the system and whose livelihood depends on its continued existence.

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