The Many Flaws of International Rights Treaties

If I’m reading Ingrid’s views correctly (and she can tell me if I’m wrong), she has a bold view of rights under international law, one that goes well beyond rights for foreign investors. She would like to see an expanded system of international law that provides not just investment rights, but human rights more generally, with effective dispute settlement mechanisms available to everyone for the enforcement of these rights.

That is an ambitious agenda, one that could certainly fit within a libertarian worldview, although it is not only libertarians who might embrace it. People from across the political spectrum might wish to see international courts protect rights more than they currently do. (And, to be clear, libertarians might question whether international courts are the right way to achieve the goal of expanding individual rights).

The problem is that this theoretically broad scope for an international rights regime bears little resemblance to the current political reality. At the margins, a few people here and there do make arguments along these lines. But there is no real chance of it being put into practice. Effective rights protection is mostly confined to domestic constitutions and the occasional regional treaty. There is no prospect at the international level for extending rights to individuals who are not foreign investors any time soon.

Ingrid dismisses the role of public opinion in this regard, but these treaties cannot be adopted unless public opinion favors them. An enforceable international rights regime would be a radical departure from the status quo. The people and their representatives need to sign off on this change. (Of course, it is true that there are already many human rights treaties out there. But, as Ingrid notes, they do not have the enforcement mechanisms that give real protection to these rights.)

Putting aside this theoretical expansion, what we have, in practice, is an international regime that protects the rights of foreign investors but not the rights of others. And that is very hard to defend. It would be like having a U.S. Constitution made up exclusively of the Takings Clause (and only protecting the property rights of some people). It’s great to defend property rights, but those cannot be the only rights you protect.

Also, if Ingrid were the one drafting this hypothetical international constitution, I would have some confidence that it would promote and protect individual rights. However, the reality of an international rights treaty might be something very different. There are a lot of asserted “rights” out there, and it is not clear to me that the actual rights regime that came into being would be desirable.

Summing up, I think it is perfectly legitimate to argue for an international rights regime that protects a wide spectrum on individual rights. Ingrid and other internationalist libertarians are free to push for broad rights protections in international law. But that’s not what we have in ISDS, and nor is ISDS a bridge to a full-fledged system of rights in the future. The investor-state regime gives rights to a selected group of wealthy individuals. That’s great for them, but it is not helpful to the vast majority of people who are not covered. Practically speaking, ISDS is not a foundation on which to add more rights later; rather, it is a one-off grant of rights to the wealthy, who lobbied hard for it. Libertarians (and others) should not follow a model that protects the rights of the elite and ignores those of the masses.

Also from this issue

Lead Essay

  • Simon Lester says that the rules for international investment dispute resolution are outdated - and they’re hurting global trade. When the rules were first written, the big danger seemed to be from government expropriation, for socialist or economic nationalist reasons. This made corporations reluctant to invest in the developing world. But now, the same legal regime that once protected them is being used increasingly to win treatment for corporations that is actually too favorable, at least for corporations that are particularly adept at this type of rent seeking. Lester suggests we re-examine the rules and their consequences to improve them for an era when supply chains literally span the globe.

Response Essays

  • In a wide-ranging dissent, John K. Veroneau argues for the continued importance of investor-state dispute settlement. Economic nationalism is alive and well, he writes, and it is found today in non-tariff barriers and subsidies. Leaving disputes to be settled between states also leaves states less answerable to the private sector; this is inherently dangerous, because on many issues, states face incentives that may lead them to act in ways that do not align with the best interests of their citizens. And while “fair and equitable treatment” may be a vague standard of adjudication, it is not unprecedented, and it does not exist in a vacuum.

  • Ingrid Persson says libertarians should welcome investor-state dispute settlement because it protects property rights, with good consequences all around. The worldwide decline in outright expropriation of foreign investment capital is, she says, a direct result of previous decades’ ISDS agreements, and of the good normative work they have done. Repealing these regimes would therefore be inadvisable. Indeed, we should move in the opposite direction and protect property rights still further. This is a goal that libertarians should constantly strive for; it is highly consistent with libertarian values, and ISDS has an important ongoing role to play in the process.

  • Jason Yackee argues that the TPP and TTIP trade agreements don’t need investor-state dispute settlement and would be better off without it. Empirical evidence is mixed about whether ISDS encourages investors to invest abroad. They may or may not even know that it exists, or in what cases it can be of help. Making use of it is costly, investors lose most of their cases, and they rarely win anything like the damages they sought. Both expropriation and gunboat diplomacy are increasingly relics in the modern world, and it would be a mistake to legislate defensively against them. The costs of ISDS seem likely to rise as it is implemented more widely, but its benefits remain elusive.