In the Trump era, the world of investment disputes seemed headed for a three-way split. Under pressure from the right, the US pushed post-Nafta Canada cases into national courts (see The Global Lawyer column, fDi March 2020). Under pressure from the left, the EU forced new treaty partners to accept a standing investment court in lieu of arbitration. Only Asia and its Pacific neighbours (minus the US) clearly embraced state-investor arbitration, by salvaging the Trans-Pacific Partnership (TPP).

Now, on the cusp of a new decade and a US restoration, the lines look more blurred. On closer examination, they were never all that distinct.

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So, where does the new leader of the free world, Joe Biden, stand?

“I oppose the ability of private corporations to attack labour, health, and environmental policies through the [investor-state dispute settlement (ISDS)] process,” Mr Biden told the United Steel Workers during the campaign, “and I oppose the inclusion of such provisions in future trade agreements”.

Some pundits took this as a flat-out repudiation of ISDS. But Mr Biden’s statement leaves plenty of wiggle room to support new treaties that duly respect the state’s right to regulate. In practice, he will surely take the pandemic as an excuse to prioritise health and the economy over trade talks.

No first-term president is apt to openly spend political capital on free trade, especially given that the US and its industrial Midwest still rest on a knife’s edge. Behind closed doors, Mr Biden may be expected to manoeuvre the US back in the direction of a rules-based global order and TPP-style multilateralism.

Patrick Pearsall of Allen & Overy, who helped to negotiate the TPP as the investment arbitration chief for the Obama State Department, predicts that global disputes will remain fractured in form, while converging in substance.

Procedurally, investment diplomats have never been further from consensus. Last year’s EU–Japan pact had to omit dispute resolution because Japan vetoed an investment court and the EU vetoed arbitration. An impasse between ISDS skeptics (like Indonesia, Malaysia and New Zealand), and arbitral supporters (like China, Japan and South Korea) had long stalled the China-led Regional Comprehensive Economic Partnership. In mid-November, China finally prevailed on 14 of its neighbours to form the Regional Comprehensive Economic Partnership, only by agreeing to kick the can of dispute resolution two years down the road. And Canada has been forced to accept one model with the EU, a second with the US, and a third with Asia.

But in substance, the outlines of a reformist consensus is perceptible — with treaty standards that affirm the right to regulate, stronger ethical guardrails, and court-like levels of transparency. The TPP represents the renewed state of the art. It affirms that states can’t be sued for aiming to fairly advance a legitimate public goal, or for merely upsetting an investor’s expectations. It features public hearings and pleadings, a tighter code to tame arbitral conflicts of interest, and an interpretive commission that gives states the power to rein in runaway arbitrators.

In spirit the TPP isn’t all that far from the EU Investment Court, which contemplates a standing court administered by arbitral institutions and enforced under arbitral treaties. Meanwhile, in Uncitral talks, the US has been surprisingly open to the EU idea of an appeal mechanism.

With populists already plotting their comeback, the dominant force in international economic diplomacy this decade is likely to be inertia. The burden is now on the cosmopolites to maintain power and create the conditions needed for forward progress.

This article first appeared in the December/January print edition of fDi Intelligence. View a digital edition of the magazine here.