Investor-State Dispute Settlement Mechanisms and Imperialism
KeywordsTransnational capitalist class Investor-state dispute settlement (ISDS) Global capitalism Free trade agreements Imperialism
The investor-state dispute settlement (ISDS) mechanism included in free trade agreements extends into domestic policy spaces and disciplines governments into maintaining the most favorable conditions for capitalist accumulation. Serving as a form of continuity between past imperial relations and present articulations of subjugation and control, ISDS is both linked to, and dependent upon, imperial domination in earlier epochs. The uneven development of capitalism that resulted from imperialism has provided the incentives for the geographic dispersal of both production processes and financial flows in the neoliberal era. ISDS thus serves to protect the processes associated with the transnationalization of capital through internalized, universalized interventions.
Bilateral and multilateral free-trade agreements have proliferated in recent decades, becoming increasingly qualitatively encompassing in terms of the issues over which they preside and challenging the sovereignty of governments at all levels. The investor-state dispute settlement (ISDS) mechanism included in such agreements, in particular, extends into domestic policy spaces and disciplines governments into maintaining the most favorable conditions for capitalist accumulation. Specifically, ISDS authorizes investors to bring disputes directly against governments for adopting new regulations with the potential to negatively impact future profitability or market share, including those designed to protect the environment and human health. Designating such measures as acts of indirect, or creeping, expropriation, investors are authorized to seek compensation for the deprivation of earnings that might have been realized in the absence of the measure. Circumventing national-based judicial system, disputes are arbitrated by private, ad hoc tribunals under the auspices of the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) or the United Nations Commission on International Trade Law (UNCITRAL), drawing on principles of international commercial arbitration (see Van Harten 2005; Nichols 2018). In spite of significant public opposition around the world, efforts are currently underway to establish a permanent multilateral investment court, indicating that there is a sustained commitment to the maintenance, and even expansion, of the ISDS regime (European Commission 2015).
Included for the first time in a multilateral free-trade agreement in the North American Free Trade Agreement (NAFTA) and subsequently duplicated in numerous other bilateral and multilateral agreements, ISDS was rhetorically cloaked as an effort to protect against judicial impropriety. In reality, however, it has been advanced to universalize capitalist discipline on a global scale by locking in the most favorable conditions for capital wherever it might flow (Nichols 2016). ISDS is the culmination of a series of highly organized efforts by business lobby groups to redefine the boundaries of property rights by selectively advancing the most expansive definitions of property in the US juridical context, legal principles that remain unsettled in both domestic and international law (for a discussion of these efforts, see Nichols 2016). Indeed, the development of the regime has depended on both national and transnational fractions of capital, as well as other social groups, seeing their interests as “tied to the mast of a neoliberal market-based system of global economic governance” (Gill 1997: 21–22).
Crucially, ISDS serves as a form of continuity between past imperial relations and present articulations of subjugation and control. It is both linked to, and dependent upon, imperial domination in earlier epochs since the uneven development of capitalism that resulted has provided the incentives for the geographic dispersal of both production processes and financial flows in the current era. As noted by David Harvey, “new rounds of primitive accumulation attack and erode social relations of production achieved through preceding rounds” (Harvey 2006b: 437). The current accumulation strategies have driven the demand for the ISDS regime for its ability to lock in state commitments in the face of popular contestation. While linked to past forms of imperialism, however, the argument proposed here is that current processes of subordination associated with ISDS correspond to a qualitatively different world order, whereby a dominant transnational capitalist class (TCC) seeks to articulate its interests through both national and supranational apparatuses, namely, those related to universalizing the conditions for capitalist accumulation, globally.
Accumulation strategies linked to control over peripheral regions have been a consistent feature in the history of capitalist development. Indeed, the territorial expansion of political rule and, ultimately, the extension of capitalist relations to areas previously outside of the logic of the market have been essential to the system’s required growth and expansion. While many varieties of empire have existed historically (for a discussion, see Harvey 2006b: 436–445; Maier 2006), the territorial extension of the British Empire represented the “first empire to be driven by capitalist logic,” the accumulation strategy of which was to create value through competitive production and export capitalist relations to its colonial holdings (Wood 2003). In addition to territorially expanding its empire, however, Britain used its power to extend the conditions for capitalist accumulation through informal forms of control, including sponsoring unequal trade and investment treaties that would ultimately replace direct colonialism by the late twentieth century (Panitch and Gindin 2005: 105). The use of these practices to extend control over peripheral areas would find continuity in the economic strategies advanced by the United States when it took on the role of reconstructing the system of global capitalism in the post-World War II era that saw the end of direct colonial rule. The strategies advanced by the United States would evolve in the economic restructuring undertaken as the capitalist system was again threatened by crisis in the 1970s. Moreover, these developments would usher in a new epoch in the history of capitalist development that would require new forms of control that, while sharing certain features in common with imperial domination, respond to the imperatives of a different world order in which a transnational, rather than a nationally based, capitalist class is dominant.
Informal Empire Under Pax Americana
Emerging from World War II as the preeminent political power in the capitalist sphere, the United States began reconstructing a new world order. Among other things, this included leading the creation of a variety of supranational institutions for the purpose of establishing the conditions conducive to spreading and securing capitalist relations. Processes of informal imperialism were undertaken during this period, taking shape in the military, economic, and cultural dominance of the United States vis-à-vis the rest of the world. These processes differed in substantive ways from imperialisms of the past, however, in that the United States, rather than seeking to secure national control over other territories for the purpose of excluding capital from other states, instead forged a strategy to expand capitalist relations for the general benefit of global capitalism.
The post-World War II period of decolonization produced dozens of newly independent nations with formal sovereignty. The power relationships underpinning the imperial system, however, did not disappear with the formal end of colonialism. The economic development strategies advanced by leaders in the United States and other Western countries, in collaboration with elites in postcolonial states, locked these new states into a pattern of dependency, prioritizing large-scale infrastructure projects and Western technologies over local self-sufficiency and autonomy (McMichael 2008). The relationships forged during this period reflected a form of empire, characterized by Maier as a “particular form of state organization in which elites of differing ethnic or national units defer to and acquiesce in the political leadership of the dominant power” (Maier 2006: 33). Crucially, it involved institution building, the dissemination of cultural values, and was backed by the material political and economic power of the United States.
The most consequential institutional building during this period culminated in the 1944 establishment of the Bretton Woods system, which included the International Monetary Fund (IMF), World Bank, and the General Agreement on Tariffs and Trade (GATT). Providing the institutional foundation on which the economic development of postcolonial countries would be linked to the priorities of elites in the core capitalist countries, a primary goal of these efforts was to maintain access to resources and markets in the developing world. The overarching strategy guiding the institution building was to improve economic conditions to prevent the spread of communism and to stimulate the demand for goods and services originating in the First World. More specifically, the strategy involved supporting economic growth in postcolonial nations by providing loans and technical expertise to enable them to expand their primary exports and earn the foreign currency necessary for importing First World infrastructural technologies and commodities. Based on Keynesian macroeconomic principles that had become dominant following the Great Depression, the Bretton Woods Institutions moved funds to countries that needed purchasing power, thus “lubricating the world economy” (McMichael 2008: 59).
This model of development would begin to reverse the colonial division of labor created by the Europeans whereby colonies provided mostly primary goods to the metropole, with manufacturing moving to lower cost sites of production in the Global South. The urban bias of the project, which required importing highly subsidized food products from the First World to feed urban workers, destroyed agricultural self-sufficiency, as large agribusiness corporations drove farmers into bankruptcy. These processes would further tie the fate of newly sovereign postcolonial nations to that of the United States and former imperial powers, creating new economic dependencies. Crucially, these developments would also establish the foundation on which the next stage of (neoliberal) economic restructuring would build.
The development strategy led by the United States in this period corresponded to a world system and structure of accumulation characterized by a particular dominant mode of social relations of production, which placed historically specific requirements on the nation state (see Cox 1987: 397–398). Concretely, the liberal state of the previous epoch was transformed into a welfare state and called upon to resolve the contradictions that threatened the viability of capitalism by promoting nationally oriented economic growth through Keynesian economic principles, providing a basic social safety net for the working class and poor in order to quell social unrest. Internationally, the strategy involved incorporating newly sovereign states into a system that prioritized national development and, reflecting Keynesian ideals, stimulating demand for Western goods and services through policies designed to generate purchasing power in states and regions lacking it. Oftentimes, these policies sacrificed the autonomy and self-sufficiency of the “beneficiaries,” leading to contradictions and, ultimately, crisis, which would surface as the postwar economic boom began to come to an end.
As the postwar economic boom began to wind down in the late 1960s and early 1970s, crisis once again threatened the stability of the capitalist system, and the gains made by labor following the Great Depression were interpreted as barriers for accumulation (Harvey 2006a). At this point, the United States again led efforts to resolve the crisis and reconstitute the conditions for accumulation, this time through neoliberal restructuring. Specifically, the restructuring included dismantling the barriers to flows of both financial and productive capital. Following the removal of such barriers, capitalists positioned to take advantage of the cost savings associated with reconfiguring supply chains across multiple jurisdictions began engaging in wage, regulatory, and fiscal arbitrage, an opportunity that existed because of the uneven development of capitalism generated by the earlier period of imperialism and the associated processes of primitive accumulation. The jurisdictional exit option introduced by liberalization enhanced the structural power of mobile capital as governments considering adopting new regulations or taxes faced the threat of capital flight. Reinforcing the shifting power dynamics of the social forces, working-class solidarity was eroded, as the geographical dispersal of the production process fragmented the working class in national contexts and exacerbated cleavages between workers in different jurisdictions.
In addition to extending production processes across jurisdictions, the 1971 abandonment of the dollar-gold standard, established as part of the Bretton Woods system, and its replacement with a system of floating currencies, provided the impetus for the creation of a variety of new lucrative financial products. Initially designed to enable firms to hedge against the risk of currency fluctuations and lock in rates through the purchase of derivatives, a growing market for speculative financial products provided another outlet for accumulation. As global financial institutions imposed requirements on countries forcing them to remove capital controls, as well as other regulations designed to stabilize currency and financial markets, opportunities were introduced to speculate against fluctuations in the value of currencies and other commodities (Stiglitz 2002). These developments similarly reflect vestiges of imperialism, as the processes that emerged from decolonization and Western-led development created the conditions in which global financial institutions gained access to domestic policymaking in postcolonial countries, enabling dominance to be exercised while formal sovereignty was maintained.
The liberalization of finance also increased the structural power of capital, providing the backdrop against which large capitalist entities diversified their holdings. The integration of financial and industrial capital rendered largely obsolete the cleavages that historically existed between these two fractions of capital. The combination of the erosion of working-class solidarity and the increase in the structural power of transnational capital provided the conditions under which capitalist accumulation was reestablished, albeit in a qualitatively different world order than that which previously existed. Specifically, the shift from a capitalist system based on flows of capital and the trade of goods between discrete nation states to one characterized by a system of globalized financial flows and the transnationalization of production and supply chains redefined the relationship between capital and territoriality.
The transition to a new regime of accumulation, however, is dependent on the outcome of class struggle (Jessop 1990: 308–9). With the cleavages between traditional fractions of capital having become less salient given firms’ diversification of activities across both sectors and states, transnational class alliances were constructed, disrupting the existing national-based class structures (Robinson 2004: 49–54). Given that the capitalist state is tasked with reproducing the conditions of production (Robinson 2004: 87), these developments transformed the state to correspond to the imperatives of the dominant social forces. The state thus ceased to serve as a national container for mediating class compromise in the ways that it did in the previous epoch. Instead, it came to function to advance the interests of an increasingly dominant transnational capitalist class (TCC), namely, universalizing the most advantageous conditions for global circuits of capital. ISDS would become one significant component of this global strategy.
The Transnational Capitalist Class and ISDS: Continuity Between Imperial Past and Present
Vigorous debates are waged over both the composition and even the existence of the TCC (see Robinson 2004). It is proposed here that the TCC consists of a class-conscious group of transnational elites, including leaders of transnational firms, as well as sympathetic political actors, scholars, and media executives, who share an interest in global, rather than national, circuits of capital. Advancing its interests through a network of national and supranational institutions that function as a “collective authority for a global ruling class,” and institutionalize class relations between capital and labor, globally (Robinson 2004: 88; 2014), the TCC articulates power differently than the nationally rooted capitalist classes of earlier periods. Moreover, while imperialist states of the past exercised direct control over peripheral populations based on accumulation strategies corresponding to the interests of national-based capitalists locked into competition with rival capitalists in other jurisdictions, the leaders of capitalist states exercise new forms of political control that are driven by a logic that is not rooted in territorial-based competition. While the United States, for example, is heavily implicated in establishing the conditions for capitalist accumulation, globally, these processes should not simply be understood as a project driven by the state on behalf of capital rooted exclusively in its territory.
Indeed, the state is constituted by the existing social forces and mediates the interests and demands of the various groups, with policies reflecting the balance of power among them (Poulantzas 1976; Cox 1987; Jessop 1990). The neoliberal state thus reflects the increasing dominance of transnationally oriented capitalists relative to other social groups, including capitalists whose operations are limited to the domestic market. In this way, while the United States, having emerged politically dominant from the two World Wars, has served as the “point of condensation for pressures from dominant groups to resolve problems of global capitalism” (Robinson 2004: 138), this exercise of power neither relies directly on traditional forms of domination, nor does it imply that such efforts are driven by a competitive interest in maximizing the state’s power vis-à-vis other states.
Indeed, the logic of the accumulation strategy that has emerged is transnationally oriented and thus relies on the development of supranational institutions and practices to secure the conditions of its reproduction. With barriers to capital flows eroded, transnationally oriented capitalists sought to construct hegemony, as understood by Antonio Gramsci, during this period by articulating their specific interest as in the general interest (Gramsci 1971), namely, the notion that economic growth is sacrosanct and that foreign investment is necessary for achieving it. Moreover, as capitalism reached the limits of its geographical expansion, having been spread to nearly all corners of the globe, the maintenance of accumulation came to increasingly depend on subjecting spheres to the logic of the market that was not previously commodified in a process of intensive capitalist enlargement (Robinson 2004; Harvey 2006a; Panitch and Gindin 2005). From health care and education to the environment, living organisms, and even investment risk, the increasing commodification of social relations has, in a dialectical process, amounted to what David Harvey identified as accumulation by dispossession (Harvey 2006a). Specifically, as a new range of social and political goods are subjected to the market, groups lacking sufficient economic resources are dispossessed of their access to them. These processes have, unsurprisingly, generated popular opposition sufficient, in some cases, to force the reversal of such policies. It is in light of this reality that the demand for a supranational legal and regulatory structure to instill neoliberal discipline, globally, began to be articulated by the increasingly dominant TCC.
While these processes of intensive capitalist enlargement are not rooted in territory in the same way as those associated with extensive, or geographic, enlargement, there is indeed a nexus between the two sets of processes. Previously, capitalist states, driven by competition and compelled to promote their industrial growth, undertook expansive strategies to procure raw materials and secure markets for surplus capital. The associated processes of political control, subjugation, and extraction established a particular colonial division of labor that would eventually be restructured into a decentered system of domination universalized to secure the most beneficial conditions for accumulation in the epoch to follow. The intensive enlargement of capitalist relations has thus relied upon the uneven development generated by the imperial practices of outward expansion and control of earlier periods. In this way, rather the North-South divisions of the global class structure disappearing, they still function as sites of opportunity for capitalist accumulation, albeit through different, and decentered, modes of domination.
In much the same way that the era of formal colonialism produced elites in local contexts that benefited from their relationship, however, subordinate, to the imperial power, well-positioned transnational elites in the Global South share a common interest in global circuits of capital, along with other transnationally oriented elites in other jurisdictions. Thus, to the extent that the conditions generated through the uneven development of capitalism in their “home” jurisdiction provide a basis for accumulation, their allegiance is to the shared agenda in its promotion.
As Russell, Noronha, and D’Cruz note in their study of the emergence of a TCC in the information technology sector in India, a distinction should be made between the current era and that of previous forms of imperialism. Noting that Indian capital is developing “not so much in competition with other national capitals but in conjunction with their evolution” (Russell et al. 2016: 115), such a view is in contrast to the classical theories of imperialism advanced by Lenin and Hobson, which conceived of rival national capitals, as well those associated with world-systems analyses (Wallerstein 1974; Chase-Dunn 1998). Instead, the conditions created by neoliberal restructuring should be understood as a historical rupture that witnessed the ascendance of the TCC, which emerged from historically specific processes of economic exploitation culminating in the transnationalization of production and finance (Cox 1987: 355).
It is in this context that ISDS should be understood. While the effects of imperialist practices of past eras are imprinted in the modes of domination articulated in the current epoch, the regime serves the historically specific disciplinary requirements advanced by the TCC, namely, those associated with the dominant social relations of production characterized by the decentering of production and finance. As one component in a diverse, decentered network of institutional apparatuses, ISDS thus represents the establishment of a supranational legal regime that both sanctions and articulates the social relations of production at the global level (Hall 1978; Nichols 2018: 246). In this way, it exists as a coercive form of political authority, the strategy of which is to manage and protect the processes associated with the transnationalization of capital through internalized, universalized interventions (Robinson 2004: 139; Panitch and Gindin 2005: 104). Functioning similarly to modes of discipline that established and protected the dominant social relations of production in earlier epochs, it serves to institutionalize neoliberal ideology, globally, and insulate such policies from social contestation and political reversal. In this way, ISDS should not be understood as an extension, or deepening, of empire but rather as a coercive disciplining mechanism for an “imperial machine defined by a whole series of new characteristics, such as the unbounded terrain of its activities” (Hardt and Negri 2000).
Expanding Property Rights Under ISDS: Accumulation by Dispossession
In the wake of hundreds of disputes brought under ISDS challenging environmental and other regulations (see Public Citizen 2018) since the adoption of NAFTA and other agreements that include such provisions, debates have been reinvigorated over the appropriate distribution of costs between the public and the private associated with governmental measures. Efforts to shift the costs away from private actors at significant expense to the public have taken shape in concerted political maneuvers to expand the boundaries of property rights beyond the standards previously established by US domestic courts, which have served as the juridical foundation for the arbitration of ISDS disputes at the international level (Nichols 2018). Conservative legal theories advanced, first, by Wesley Hohfeld (1919) at the early part of the twentieth century and later by Joseph Sax (1964, 1971), Frank Michelman (1967), and Richard Epstein (1985) have provided the conceptual framework used to justify the broadening of property rights and ultimately investor rights, under ISDS. Viewing the government as in competition with owners of private property over public use, these legal scholars sought to replace the patchwork of juridical tests with a single test that would standardize and marketize the private-public allocation of costs generated by regulatory measures (Coase 1960; Michelman 1967).
These ideas have been used to legitimize the notion that property need not be of a physical nature but rather should be conceptualized as a set of rights corresponding to an abstract form of economic value, represented as a bundle of sticks, the diminution of which amounts to an act of expropriation if a given act impacts the value beyond some theoretical threshold (Nichols 2018). Business groups advocating for ISDS have echoed these legal principles and selectively cited US domestic court rulings that reflect the most expansive conceptualization of property rights and, ultimately, expropriation. The jurisprudence remains far from settled, however, and protracted political struggles have been unfolding around the definition of property rights as it pertains to findings of expropriation under ISDS.
Lying at the heart of the ongoing struggles around property rights in the context of ISDS is the interpretation of a few key provisions. First, ISDS provisions, such as those that exist in the NAFTA, provide a highly ambiguous definition of the term investment, the defining of which is necessary for determining what exactly is being protected under the regime – and what is not. For example, Article 1139 of the NAFTA seems to conflate the term investment with property, thus providing an opening for arbitrators to find a violation of property rights in any case of state interference with the anticipated benefits associated with a broadly defined investment, including those of both a tangible and intangible nature. It must only be demonstrated that an investor has put assets at risk and that they are somehow bound up with the fortunes of another country for something to be categorized as a protected property right, or investment, under ISDS (Posner, Interview 2011). Included in this category would be anything from registering a patent to making a series of decisions with the expectation that a given set of risks would be rewarded, opening up the door to disputes beyond those associated with control over physical property to intangible, and even speculative, assets, such as portfolio investment, future earnings, and market share. Regulations are inherently adopted in response to new information or conditions and generally generate some cost to private property. For this reason, the authority to adopt such measures has historically been protected under the state’s police powers. Enclosing the regulatory environment and treating any interference with it as a violation of property rights that requires public money be used to compensate private investors thus represent the socialization of the normal business risks required of investing.
The legal ambiguity of the term “expropriation” and “measures tantamount to nationalization or expropriation,” combined with the fact that they remain mostly undefined in the treaty text, means their definitions have been evolving “in the absence of a doctrinal basis” (Holbein and Ranieri 2008: 25). The stakes over the interpretation of this controversial legal concept are high, as the question of when a measure should be categorized as a non-compensable government regulation, protected under the state’s police powers, hinges on such a determination. In particular, the notion of an act being “tantamount to expropriation” remains one of the most controversial and ill-defined aspects of ISDS provisions, with debates unfolding over whether it implies a higher standard of treatment for investors that requires compensation for any act of the state that generates private costs beyond some point.
No party may directly or indirectly nationalize or expropriate an investment of an investor of another Part in its territory or take a measure tantamount to nationalization or expropriation of an investment (‘expropriation’) except: a) for a public purpose; b) on a non-discriminatory basis; c) in accordance with due process of law and Article 1105(1); and d) on payment of compensation in accordance with paragraphs 2 through 6. (North American Free Trade Agreement, Chapter 11, Article 1114)
A third set of issues is related to the invocation of three related ISDS obligations alongside Article 1110 on expropriation, the combination of which has the effect of expanding investors’ rights. Under NAFTA, for example, Articles 1102, 1103, and 1105 on National Treatment, Most Favored Nation, and Minimum Standard of Treatment, respectively, were adopted to prevent discrimination based on nationality and to ensure that some ambiguously defined minimum standard of treatment be afforded to foreign investors (NAFTA 1993). Significant debate has unfolded, however, over the question of whether governments are required under customary international law to provide a standard of protection that is higher than that which is guaranteed to domestic-based companies and investors (OECD Working Papers on International Investment 2004). Adding to these debates, more recent ISDS provisions have included a “fair and equitable treatment” (FET) standard, which has been interpreted by some to require an even higher level of protection than that which exists under customary international law, as it authorizes disputes to be brought if investors find that their “legitimate expectations” have been violated with respect to the future use of their investment (Brown 2013). A frequent litigation strategy has emerged to use the FET standard in conjunction with the expropriation provisions in order to challenge what investors view as overly intrusive government acts. These provisions thus serve as a locus of struggle around the expansion of property rights and, ultimately, investors’ rights in host countries.
Finally, the circuitous logic of the ISDS provisions complicates the general exceptions included to ostensibly empower governments to regulate for the public good. For example, while NAFTA Article 1114(1) holds that provisions must not be construed in such a way that parties would be prevented from taking actions required to ensure investments are undertaken in an environmentally sensitive manner, it goes on to state that measures must otherwise be consistent with the chapter’s requirements (North American Free Trade Agreement, 32 I.L.M. 1993). The uncertainty over whether regulatory measures are protected under the state’s police powers means that any measure has the potential to trigger the compensation requirement if other provisions are violated, including those related to investors’ expectations, the degree of economic impact, and other such considerations.
Given the juridical ambiguity of ISDS requirements, the assessment of the appropriate balance between the private and public costs associated with regulatory measures has fallen to tribunal arbitrators, who are tasked with evaluating the merits of a given dispute in light of the evolving, and generally inconsistent, jurisprudence. Specifically, they are tasked with adjudicating the threshold between a legally permissible regulatory measure that merely represents a diminution of value and does not give rise to expropriation and an act that constitutes a property rights violation and, therefore, expropriation. In arbitrating such disputes, tribunals apply one of two legal litmus tests, or a combination of the two, to determine whether the state named in the dispute must provide compensation to the affected investors for the costs associated with the measure. One test focuses on the purpose of the law or regulatory measure, implicitly acknowledging the right of policymakers to regulate for the public good, as long as the measure is nondiscriminatory and not of a protectionist nature. A second test focuses exclusively on the economic effects of the measure on the dispute-bringing investor. To the extent that arbitrators strictly apply the second test, eschewing the first test’s evaluation of the measure’s purpose, the government named in the dispute will be required to compensate in nearly all cases if the investor is impacted beyond some theoretical threshold.
As Marx identified, property relations represent the legal expression of production relations (Marx 1894). Given that states use law to direct and sanction the relations of production and exploitation through the construction of rights around private property (Poulantzas 1978: 322, 324), juridical ideology lies at the heart of class struggle (Edelmann 1973: 22–23). The struggles around ISDS should thus be understood as class based, with the regime functioning to extend capitalist relations into new realms, subjecting social, environmental, and economic protections to the logic of the market, and dispossessing social groups of the ability to translate popular demands into public policy. Codifying and articulating the social relations of production at the supranational level, the regime thus locks in market discipline and establishes a “worldwide institutional grid that offers transnational capital multiple exit options within putatively suboptimal regulatory environments (Brenner et al. 2014: 129).
The pattern established by arbitrators in their choice of litmus tests is thus highly revealing for what it signals about the nature of the class struggle playing out around property rights in the context of the ISDS regime. An analysis of the NAFTA disputes arbitrated thus far (for a survey of disputes, see Nichols 2018) suggests that tribunal arbitrators have selectively drawn from a diverse range of opinions issued from US courts, overwhelmingly applying a litmus test that interprets expropriation as broadly as possible, thus eroding the distinction between non-compensable regulations and state acts defined as expropriation. Consequently, any governmental act adversely impacting private assets beyond some threshold is likely to be categorized as expropriation in the face of an ISDS dispute. Crucially, the evidence also suggests that, by conflating the terms property and investment, they are establishing new categories of intangible property that include highly speculative assets and market share.
These developments provide an example of the establishment of a “commodity fiction” (Polanyi 1957), a narrative that has been used to advance a myth of the existence of a new set of property rights where none formerly existed. By treating the maintenance of a business-friendly regulatory environment as a legal obligation, ISDS confirms marketization as the sole means for apportioning the costs generated by a given measure between the public and the private. Moreover, it establishes a new set of property rights where they had not previously existed, delinking political, social, and economic resources from their “real historical existence or processes of production” (May 2000: 22–23).
Conclusion: ISDS and Contemporary Global Capitalism
The direction in which ISDS jurisprudence has been developing has dramatic consequences for what it reveals about the dominant accumulation strategy in the neoliberal era of global capitalism and the form of domination that has emerged to secure the conditions for its reproduction. As Stuart Hall noted, the particular articulation of the social relations of production depends on the current stage of capitalist accumulation (Hall 1978: 186–194). ISDS was developed in a historically specific context characterized by the culmination of neoliberal restructuring that had been pursued in response to the capitalist crisis of the 1970s and had led to the rapid decentralization and, ultimately, transnationalization of production and finance. It is in this context that the regime came to sanction and articulate the social relations of production at the supranational level in order to secure the most beneficial conditions for capital wherever it may flow. Universalizing neoliberal policies and insulating them from popular debate and decision-making, ISDS serves as the “political-juridical counterpart to disciplinary neoliberalism” (Gill and Cutler 2014: 5). It does so, specifically, by intensifying the scope of market discipline, subjecting the costs associated with the regulatory environment to the market and socializing them to the public.
Given the relationship between the juridical-political and economic spheres, these developments have strong implications for what they signal about the relationship between the global and the national, particularly as it pertains to the commodification of social relations underpinning the expansion of capitalism (Gill 1998; Robinson 2004; Nichols 2018). Given the exhaustion of the geographic expansion of capitalism as an accumulation strategy following the incorporation of nearly every corner of the globe into the logic of capitalism, ISDS should be understood as a mechanism to secure and safeguard the conditions for intensive enlargement as the commodification of social life is deepened. Rather than intervene directly in formally sovereign jurisdictions as imperial powers did in the past, an increasingly dominant TCC has developed a coercive tool by way of ISDS that serves to universalize neoliberal ideology and redistribute power from other social groups, transnationally. As noted by Robinson, global capitalism “requires an apparatus of direct coercion to open up zones that may fall under renegade control, to impose order, and to repress rebellion when it threatens the stability of the system” (Robinson 2004: 137).
As barriers to the flow of capital were largely abolished in the latter part of the twentieth century, the uneven development of capitalism resulting from centuries of imperialism has provided the conditions under which new strategies of accumulation were developed. New dominant social modes of production emerged with the deterritorialization of production and finance, creating the impetus for alternative forms of domination and control that would universalize neoliberal discipline and secure the conditions for accumulation in the face of opposition that might emerge in response. ISDS has therefore provided one such tool, enabling coercion to be exercised by the TCC, while formal sovereignty is maintained, one of many such qualitative differences between the current epoch of global capitalism and earlier periods of imperialism.
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