RCEP includes the controversial Investor-State Dispute Settlement mechanism (ISDS), which is facing increasing public criticism and scrutiny worldwide. The report, The Hidden Costs of RCEP and Corporate Trade Deals in Asia, presents information about ISDS cases filed against states party to the RCEP negotiations. It attempts to provide a comprehensive overview of all known cases in RCEP countries.
ISDS is a one-way mechanism that empowers foreign investors to sue the state at international arbitration tribunals; it cannot be used by states. Foreign investors can circumvent domestic court systems and claim financial compensation from host governments in secret business-friendly international tribunals, if they deem their investments (including their potential future profits) are adversely affected by the introduction of regulatory and/or policy changes in the host state. These private tribunals are comprised of three for profit arbitrators, who issue their decisions behind closed doors. Arbitrators often have serious conflicts of interest, as many have financial incentives to rule in favour of the investor and keep the system alive. Arbitrators also often switch sides and go on to work as counsels, representing and defending the companies filing investment treaty cases.
Negotiating new treaties that include ISDS runs counter to the decision by some governments in the region to reform or terminate these agreements in order to protect their right to regulate. Among RCEP countries, India, Indonesia and Australia have undergone review processes of the international investment framework. In the case of India and Indonesia, the outcomes of the reviews have led to the termination of several treaties as well as the development of new model bilateral investment treaties (BITs) that highly restrict the rights of investors. This report highlights the current and potential costs of ISDS to countries negotiating the RCEP agreement.