Considerable controversy surrounds plans for the Trans-Pacific Partnership (TPP) which critics say will see a vast increase in legal challenges to US rules. Lori Wallach, director of Global Trade Watch, said: 'You now have specialized law firms being set up. You go to them, tell them what country you’re in, what regulation you want to go after, and they say ‘We’ll do it on contingency'.'

Expectations

Law professors are amongst those who have criticised the move. Even though President Obama has been pushing the legal innovation, the Democrats and the left tend to be concerned about the plans - whilst most Republicans and many business interests are in favour. The foreign corporations would be able to take action to challenge a wide range of US rules and court rules - at national, state and local level - if they felt that their investment 'expectations' had been undermined. 

Financial firepower

Although numerous trade agreements give rights now to foreign corporations, there is a view that challenges are rarely made because the corporations do not have sufficient wealth to sue. However, the TPP would include South America and Asia - so could cover businesses from wealthy countries such as Japan and Australia which might well have the financial firepower to bring cases. 

European TPP proposed

The TPP is mutual and would also allow an estimated 18,000 US companies to challenge the rules in the partner countries. The proposal for a European version is also provoking controversy. 

Floodgates

The TPP proposes to allow claimants to have cash compensation if participating states 'expropriate or nationalize a covered investment either directly or indirectly'. There are concerns that the definition of an 'investment' is so broad that the floodgates could be opened to challenges. Source: New York Times and Euractiv