If you want to confuse people, take a simple concept and make it seem complicated.  That is exactly what opponents of “ISDS” are doing.

ISDS, or the so-called Investor State Dispute Settlement mechanism, provides guarantees in treaty language that the protections enjoyed under the 5th Amendment to the U.S. Constitution to U.S. property owners (domestic or foreign) are extended to overseas investment.    


That Amendment provides for “just compensation” when private property is “taken.”   It does not allow the property owner to reverse the action that resulted in the taking.  It does not allow an investor to demand that a law or regulation be changed or amended.

Any foreigner investing in the United States automatically enjoys that protection, as well as other Constitutional protections on due process and equal treatment.  These protections would not allow a foreign supplier of a “gasoline additive” to demand that a law or regulation be reversed if that substance is banned for some reason.  If the supplier did not build a plant in the United States, he could not claim that the loss of the market and demand compensation.  ISDS protects investments, not sales.    

If the foreign investor did invest in a U.S. facility, his rights to compensation would be no greater under ISDS than a U.S. investor facing the same problem.  In fact, his rights and remedies would be far less under ISDS than our domestic legal system. In the rare case where a claim of regulatory “taking” might be honored, it would be limited to the actual loss excluding any return on the investment from other products that could be produced by the plant. 

U.S. investors going overseas enjoy no such rights and no guarantee of a neutral forum unless a trade or investment agreement includes a mechanism to provide compensation from a government that expropriates or seizes an investment.  ISDS effectively guarantees U.S. investors overseas the very same rights that the U.S. Constitution gives to foreign investors who come here:  an objective forum, administered under transparent rules that have long been a part of the U.S. legal system. 

U.S. investors overseas are important for the U.S. economy because that investment allows U.S. companies to reach new foreign consumers. Perhaps surprising to some is the fact – that the Bureau of Economic Analysis finds year after year – is that about 90 percent of the sales made by U.S. investors overseas (the foreign subsidiaries of U.S. investors) are for overseas customers and are not shipped back to the United States. Those foreign sales and that U.S. investment overseas is a magnet for U.S. exports and supports higher paying U.S. jobs and high levels of U.S.-based research and development and capital investment.   

Not only does ISDS support jobs here at home, it helps to spread American values around the world.

Holwill is vice president for of Public Policy at Amway Corporation.