Investor – State Dispute Settlement (ISDS) – based agreements create a critical and ongoing problem for US Federalism. The Tenth Amendment of the US Constitution says:

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

How can the Federal government delegate a power it does not have under the Constitution to the ISDS tribunals by signing the three agreements being negotiated, or any others with similar ISDS provisions?

 

Treaties are the law of the land, and they trump previously passed legislation. But, according to the Constitution, a Congressional – Executive Agreement is not a treaty. Indeed, it is not even mentioned in the Constitution, but is a later invention of mere law.

 

Even if it were, it would not trump the Constitution, which is the supreme law of the land. So, Federalism, as expressed in the Tenth Amendment, means that the States of the Union have a limited sphere of state sovereignty that cannot be breached by either the Federal government, or by treaties or international agreements concluded by it.

 

And that sphere of State sovereignty is precisely in the area of providing for the general welfare of the citizens of a state. If a state in the US decides, for example, that the Federal minimum wage isn’t high enough for the general welfare of its citizens, it is free, right now, to pass a minimum wage at any level exceeding the Federal minimum that it thinks is desirable.

 

By rights, multinational corporations can have nothing to say about this in any private tribunal outside of the United States and not subject to its laws. But, under the ISDS, they could sue the Federal Government for lost profits and collect damages based on legislation passed by the States.

 

This gives the States power to impose unanticipated costs on the Federal Government through policies they have the authority to legislate under the Constitution, which may, through ISDS result in financial awards made by private supranational tribunals, for which the Federal Government would be financially responsible.

 

Can the Federal Government allow that sort of arrangement to continue, or would it feel compelled to pass legislation trying to supersede state and local laws, which, in turn, would drive it into continuous conflict with States over whether or not it was appropriating governmental power reserved for them under the Constitution? Anyone for exacerbating Federal-State conflicts over the limits of Federal authority under the Constitution in order to remove political risk from the cares of multinational corporations?

 

In addition, as a simple logical extension of McCulloch vs. Maryland, it is arguably unconstitutional for a State to be in a position to cause the Federal government to incur financial penalties of indeterminate amounts imposed by a private international tribunal. The implication of the McCulloch case is that to allow the States to be in such a position relative to the Federal government would be a violation of Federal sovereignty which cannot be allowed by the Constitution.

 

But surely, if such a situation is prohibited by the Constitution, it also must be unconstitutional for the Federal government to enter into an international agreement that would place it in a position where a State could cause the federal government to incur such financial penalties. So, McCulloch vs. Maryland also provides grounds for the Supreme Court to find ISDS trade agreements unconstitutional.

 

For all the above reasons, the three pending agreements, if enacted, would very likely lead to violations of Federalism and State sovereignty, and therefore the Constitution of the United States. So, ISDS-based agreements are clearly unconstitutional trade agreements, which the United States Government has no right to conclude, on these grounds as well.

 

This line of reasoning, in addition, applies to all the ISDS-based agreements the US has already signed, as well. They are all equally unconstitutional!