May 03, 2023

Senator Warren, Representative Doggett Call for Elimination of Investor-State Dispute Settlement System, Action on Behalf of Honduran Government

“We urge you to uphold your commitment and refrain from negotiating new trade agreements with ISDS, and also to address the existing ISDS mechanisms that corporations continue to exploit.”

Text of Letter (PDF)

Washington, D.C. – U.S. Senator Elizabeth Warren (D-Mass.) and Representative Lloyd Doggett (D-Texas) led more than 30 of their colleagues in sending a letter to U.S. Trade Representative Katherine Tai and Secretary of State Tony Blinken, urging them to intervene on behalf of the government and people of Honduras in a case brought against it by U.S. company Honduras Próspera under the Investor-State Dispute Settlement (ISDS) system.

“We request that you intervene—through a statement of support, amicus brief, and any other means at your disposal—in support of Honduras’ defense in the Próspera ISDS case and to ensure that such egregious cases can no longer disrupt democratic policymaking by working to eliminate ISDS liability in preexisting agreements in our hemisphere,” wrote the lawmakers.

ISDS was incorporated into trade agreements as a dispute settlement system that allows a corporation to directly sue the government of a foreign trading partner if it feels that that government’s domestic legislative or executive action violates the corporation’s rights under the trade agreement. Instead of going through domestic courts, these complaints, handled by private arbitration tribunals made up of corporate lawyers, give corporations a disproportionate advantage. Arbitrators can require governments to shell out millions or billions of dollars in damages, diverting critical funds needed for domestic programs, with no option to appeal the ruling. Workers and consumers have no such special avenue to pursue complaints and enforce labor and environmental trade commitments.

“These provisions tilt the playing field even further in favor of large corporations, incentivizing offshoring and undermining the sovereignty of the United States and other governments,” wrote the lawmakers. “Furthermore, ISDS is not needed to promote positive investment and in fact continues to harm human rights and hinder efforts to address climate change.”

Próspera was established under Honduras’ Zonas de Empleo y Desarrollo Económico law (ZEDE, or “Economic Development and Employment Zones”) by the U.S. company Honduras Próspera. ZEDEs are quasi-sovereign private governance zones where companies can operate almost independently from the Honduran government, establishing their own tax codes, court systems, and labor laws. Last year, following the Honduran government’s repeal of the ZEDE law, Honduras Próspera launched an ISDS claim under the Dominican Republic–Central America Free Trade Agreement (CAFTA-DR) seeking almost $11 billion, which amounts to nearly two-thirds of the country’s entire 2022 budget.

“This case is just the most recent example of the worrying trend of increased ISDS use in the Americas, both in the number of cases and the sky-high value of the claims,” wrote the lawmakers. “Governments throughout Latin America have paid billions of dollars in compensation to foreign companies at their taxpayers’ expense, simply for putting in place sound public policy to protect the environment and the health and economic well-being of their communities.” 

In the letter, the lawmakers urge Ambassador Tai and Secretary Blinken to investigate and pursue an effective path to removing consent to ISDS arbitration by the U.S. and our treaty partners in existing bilateral investment treaties and free trade agreements.

The letter is also signed by Senators Brian Schatz (D-Hawaii), Sherrod Brown (D-Ohio), Bernie Sanders (I-Vt.), and Sheldon Whitehouse (D-R.I.) and Representatives Susan Wild (D-Pa.), Rosa DeLauro (D-Conn.), Jamie Raskin (D-Md.), Raúl Grijalva (D-Ariz.), Greg Casar (D-Texas), Jesús “Chuy” Garcia (D-Ill.), Jamaal Bowman (D-N.Y.), Paul Tonko (D-N.Y.), Jan Schakowsky (D-Ill.), Pramila Jayapal (D-Wash.), Mark Pocan (D-Wis.), Brad Sherman (D-Calif.), Veronica Escobar (D-Texas), Nydia Velazquez (D-N.Y.), Eleanor Holmes Norton (D-D.C.), James McGovern (D-Mass.), Rashida Tlaib (D-Mich.), Cori Bush (D-Mo.), Jared Huffman (D-Calif.), Summer Lee (D-Pa.), Donald Norcross (D-N.J.), Ilhan Omar (D-Minn.), Barbara Lee (D-Calif.), Jill Tokuda (D-Hawaii), Ro Khanna (D-Calif.), Hank Johnson (D-Ga.), and Marcy Kaptur (D-Ohio).

Senator Warren has been a leading opponent of ISDS and remains committed to removing it from international trade agreements.

  • In September 2017, Senator Warren sent a letter to then-U.S. Trade Representative Ambassador Robert Lighthizer, urging him to push for the removal of  ISDS provisions as he renegotiates the terms for the North American Free Trade Agreement (NAFTA).
  • In February 2015, Senator Warren published an Op-Ed in the Washington Post expressing opposition to ISDS as part of the Trans-Pacific Partnership.