Imagine the following scenario: the US decide on a new law protecting the environment. Subsequently, a manufacturing plant owned by a European company somewhere in the US is less profitable. Under the intended Investor State Dispute Settlement (ISDS) in the Transatlantic Trade and Investment Partnership, this EU company can under certain circumstances claim compensation from the US government for lost profits. ISDS therefore could make policy changes like phasing out of nuclear energy very costly for a state.
Why would states ever willingly agree to something that limits them like that? Critics on the left claim that states are in the hands of big business – they are victims of capitalists' interests. We would like to offer a slightly grimmer analysis: rather, with this deal the EU and the US hope to set the right conditions for their own respective capital to be successful on the other's territory. Additionally, they want to attract foreign investment on their own territory. As a state/an alliance of states with a capitalist economy, both the EU and the US want this to happen. This is why with the dispute settlement mechanism, they give foreign investors from the other side of the Atlantic this new legal means. The desired outcome seems to be worth the few expected compensation claims for both the US and the EU. Lately, though, the EU's position has changed slightly and prefers a reformed ISDS mechanism. It shall be interesting to discuss the reasons for this change of mind.
To look at the effects of ISDS tool for capital, we will be presenting exemplary cases from the large number of international trade and investment agreements which already include the dispute settlement, and precisely how it changes the relation of state and capital.