Eight months since the effectuation of the Korea-U.S. Free Trade Agreement, rival parties are locking horns over some of its contentious clauses and whether the pact can or should be renegotiated.
The three major presidential candidates each hold a different position on the economically and diplomatically crucial deal that lifts market barriers for the two countries’ goods and services.
The ruling Saenuri Party’s Park Geun-hye believes the FTA should no longer be politically debated, while the main opposition Democratic United Party’s Moon Jae-in contends that the pact’s “poison pill” clauses must be re-negotiated. Taking the middle ground, independent Ahn Cheol-soo argues that discussion to revise relevant clauses is possible if any problems arise.
At the center of the debate is the Investor-State Dispute Settlement, which enables investors to initiate dispute settlement proceedings against counterpart governments under international law.
The case, when filed, is arbitrated usually through the three-person tribunal at the World Bank’s International Centre for Settlement of Investment Disputes or the U.N. Commission on International Trade Law.
Most of the some 2,500 trade treaties worldwide include the ISD (or ISDS) provisions, and the number of filed cases is on a constant rise, from 325 in 2008 to 450 in 2011, leading to growing debate worldwide over their validity.
Of the 86 bilateral investment treaties signed by Korea, 82 of them contain ISD provisions. Korea has been filed through the ISD once so far, by Colt Industries Operating Corporation of the U.S. in 1984, and the case was settled in 1990.
The ISD clause in the FTA effectively makes the process compulsory with more closely specified areas of application.
The opposition parties and civic groups claim the ISD clause should be removed completely, along with nine other clauses. They say that the ISD system will work in favor of the internationally influential United States, and that it would infringe upon Korea’s judicial sovereignty. They also claim that it will confine the government when making public health or environment protection legislation.
They cite the case of Australia, which has rejected the ISD clause in its FTA with the U.S. and later said it would leave out the provision in their future bilateral or multilateral trade agreements. They claim the judiciaries in Korea and the U.S. are advanced enough to settle any disputes and that it could prompt a chilling effect on regulation, with the ambiguous scope of a government’s indirect expropriation possibly leading to arbitrary interpretation.
Advocates, on the other hand, counter that the ISD is not only to protect American investors but also Koreans, and that the near-ubiquitous system has proven effective in stabilizing investment by adjusting the benefits of investors and states.
They contend that the ISD clause in the long run will have a positive impact on Korea’s policymaking process to become more transparent, reasonable and consistent. They also point out that Korea’s investment in the U.S. has surpassed that of the U.S. into Korea since 2006, with the gap reaching $8.5 billion in June 2011.
In addition, the relevant annex to the FTA with Washington is the most “adequately constructed” one in the history of Korea’s investment-related treaties, they say.
Taking a more conciliatory approach, the Seoul government instead opened a service and investment committee meeting with its Washington counterpart in June and decided to discuss ways to make adjustments to the ISD clause.
The ISD issue reared its head again this week as the six-month waiting period for Lone Star Funds of the U.S. ended this Thursday, allowing the private equity fund to enter the settlement process based on the investment treaty between Korea and Belgium.
Lone Star had filed for the ISD on May 22 demanding trillions of won worth in compensation from the Korean government, citing “unlawful” interference.
The final report released by the government-civic task force on ISD advised against re-negotiating the ISDS altogether, instead recommending tweaking the clause such as by changing the single-trial system into a multiple-trial system for better transparency, and revising domestic laws to protect Korean companies from reverse discrimination.
The report is to be approved by the government and submitted to the National Assembly before the discussion begins with the United States.
By Lee Joo-hee (jhl@heraldcorp.com)
The three major presidential candidates each hold a different position on the economically and diplomatically crucial deal that lifts market barriers for the two countries’ goods and services.
The ruling Saenuri Party’s Park Geun-hye believes the FTA should no longer be politically debated, while the main opposition Democratic United Party’s Moon Jae-in contends that the pact’s “poison pill” clauses must be re-negotiated. Taking the middle ground, independent Ahn Cheol-soo argues that discussion to revise relevant clauses is possible if any problems arise.
At the center of the debate is the Investor-State Dispute Settlement, which enables investors to initiate dispute settlement proceedings against counterpart governments under international law.
 |
| Opposition lawmakers protest after the ruling Saenuri Party passed the Korea-U.S. FTA bill through the National Assembly on Nov. 22, 2011. (Park Hyun-koo/The Korea Herald) |
The case, when filed, is arbitrated usually through the three-person tribunal at the World Bank’s International Centre for Settlement of Investment Disputes or the U.N. Commission on International Trade Law.
Most of the some 2,500 trade treaties worldwide include the ISD (or ISDS) provisions, and the number of filed cases is on a constant rise, from 325 in 2008 to 450 in 2011, leading to growing debate worldwide over their validity.
Of the 86 bilateral investment treaties signed by Korea, 82 of them contain ISD provisions. Korea has been filed through the ISD once so far, by Colt Industries Operating Corporation of the U.S. in 1984, and the case was settled in 1990.
The ISD clause in the FTA effectively makes the process compulsory with more closely specified areas of application.
The opposition parties and civic groups claim the ISD clause should be removed completely, along with nine other clauses. They say that the ISD system will work in favor of the internationally influential United States, and that it would infringe upon Korea’s judicial sovereignty. They also claim that it will confine the government when making public health or environment protection legislation.
They cite the case of Australia, which has rejected the ISD clause in its FTA with the U.S. and later said it would leave out the provision in their future bilateral or multilateral trade agreements. They claim the judiciaries in Korea and the U.S. are advanced enough to settle any disputes and that it could prompt a chilling effect on regulation, with the ambiguous scope of a government’s indirect expropriation possibly leading to arbitrary interpretation.
Advocates, on the other hand, counter that the ISD is not only to protect American investors but also Koreans, and that the near-ubiquitous system has proven effective in stabilizing investment by adjusting the benefits of investors and states.
They contend that the ISD clause in the long run will have a positive impact on Korea’s policymaking process to become more transparent, reasonable and consistent. They also point out that Korea’s investment in the U.S. has surpassed that of the U.S. into Korea since 2006, with the gap reaching $8.5 billion in June 2011.
In addition, the relevant annex to the FTA with Washington is the most “adequately constructed” one in the history of Korea’s investment-related treaties, they say.
Taking a more conciliatory approach, the Seoul government instead opened a service and investment committee meeting with its Washington counterpart in June and decided to discuss ways to make adjustments to the ISD clause.
The ISD issue reared its head again this week as the six-month waiting period for Lone Star Funds of the U.S. ended this Thursday, allowing the private equity fund to enter the settlement process based on the investment treaty between Korea and Belgium.
Lone Star had filed for the ISD on May 22 demanding trillions of won worth in compensation from the Korean government, citing “unlawful” interference.
The final report released by the government-civic task force on ISD advised against re-negotiating the ISDS altogether, instead recommending tweaking the clause such as by changing the single-trial system into a multiple-trial system for better transparency, and revising domestic laws to protect Korean companies from reverse discrimination.
The report is to be approved by the government and submitted to the National Assembly before the discussion begins with the United States.
By Lee Joo-hee (jhl@heraldcorp.com)
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