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State of Vermont

House of Representatives

Montpelier, Vermont

Joint House Resolution

J.R.H.  24

Joint resolution urging the members of Vermont’s U.S. Congressional Delegation to assure that future trade agreements not accord foreign investors greater rights than United States investors

Offered by:  Representative Deen of Westminster

Whereas, existing United States law provides a high level of investment protection, consistent with or greater than that provided by international law, and

Whereas, a principal trade negotiating objective of the Trade Act of 2002 requires the U.S. Trade Representative to ensure that, “foreign investors are not accorded greater substantive rights with respect to investment protections than United States investors in the United States,” and

Whereas, a principal trade negotiating objective of the Trade Act of 2002 further requires the U.S. Trade Representative to “seek provisions in trade agreements . . . to ensure that they do not weaken or reduce the protections afforded in domestic environmental and labor laws as an encouragement for trade,” and

Whereas, a principal trade negotiating objective of the Trade Act of 2002 further requires the U.S. Trade Representative to “seek . . . to establish standards for expropriation and compensation for expropriation, consistent with United States legal principles and practice,” and

Whereas, a principal trade negotiating objective of the Trade Act of 2002 further requires the U.S. Trade Representative to seek to improve mechanisms to resolve investment disputes between investors and governments, including the establishment of “an appellate body or similar mechanism to provide coherence to the interpretations of investment provisions in trade agreements,” and

Whereas, the investor-state dispute resolution model was developed in earlier international trade agreements as a means to protect U.S. investment from the questionable neutrality of courts and threat of arbitrary nationalization in developing countries, and

Whereas, foreign investors are now using this investor-state dispute resolution model to bring challenges before international tribunals to reasonable state regulations in the United States on subject areas traditionally within the scope of legitimate state control, alleging such regulations amount to a compensable expropriation under NAFTA, and

Whereas, these tribunal decisions seem to demonstrate at least three contexts in which there appears to be noncompliance with the above‑mentioned provisions of the Trade Act of 2002:

1.  The scope of economic interests protected as “investments” under international investment treaties are significantly broader than the specific interests in property protected under U.S. takings law, and include the commitment of capital, the expectation of gain or profit, and the assumption of risk;

2.  U.S. Supreme Court takings jurisprudence considers property rights “as a whole,” yet investment tribunal decisions have recognized conceptual severance, in which each component of a property right – physical, functional, and temporal – is considered individually, and each may be expropriated; and

3.  U.S. Supreme Court takings jurisprudence requires a “significant” economic impact before finding that a regulatory taking has occurred, yet investment tribunals have noted that even partial or temporary deprivations of rights could constitute an expropriation, and

Whereas, these contexts represent areas in which, due to noncompliance with applicable provisions of the Trade Act of 2002, foreign investors may be enjoying greater substantive rights with respect to investment protections than U.S. investors in the United States, and

Whereas, these greater substantive rights constitute a threat to state sovereignty by calling into question whether state environmental or labor protections, or those on subjects such as gambling, will be challenged by foreign investors as an expropriation requiring compensation, and

Whereas, it is uncertain how arbitration tribunals would decide such expropriation challenges, because prior tribunal decisions do not have the same precedential value as U.S. court decisions, and

Whereas, pending agreements such as that with Panama, which is a home for subsidiaries of thousands of U.S. corporations, continue to allow investor-state suits and thereby continue to expand dramatically the universe of subsidiaries that may be able to avail themselves of remedies that do not exist for companies without subsidiaries in partner countries, and

Whereas, with the so-called “fast track” authority for Congressional approval of trade agreements scheduled to expire on June 30, 2007, it is crucial for Congress to assert the oversight necessary to assure that foreign investors are given no greater rights than U.S. investors, or that investor-state provisions are not included in future trade agreements, now therefore be it

Resolved by the Senate and House of Representatives:

That the General Assembly urges the three members of Vermont’s U.S. Congressional Delegation to consider requesting that the Government Accountability Office:

(1)  investigate the extent to which the U.S. Trade Representative has structured new trade agreements to require compliance with the above‑mentioned provisions of the trade‑negotiating objectives in the Trade Act of 2002, and

(2)  develop recommendations to Congress regarding measures that would mandate implementation of those policies and others specified in this resolution, together with recommendations for measures to enhance Congressional oversight on these issues, and be it further

Resolved:  that Vermont’s Congressional Delegation be urged to:

(1)  revise trade objectives, including those implicit in recommendations made in this resolution, so as to become mandatory for the negotiators;

(2)  terminate the ability of subsidiaries of domestic corporations to bring investor suits against the United States;

(3)  limit the definition of “investment” entitled to protection;

(4)  limit the ability of investor suits to address domestic Constitutional law issues;

(5)  exclude from vulnerability to investor suits measures relating to land use, homeland security, public morals, water policy, electricity regulation, and others recommended for exclusion by the states, cities, and towns;

(6)  establish meaningful conflict‑of‑interest standards for the selection of international arbitrators;

(7)  limit provisions on “expropriation” to direct expropriation defined in a manner that approximates U.S. takings law;

(8)  establish a process for the diplomatic review of investor claims that protects rational public measures by state and local governments; and

(9)  require judicial review of tribunal awards in a manner that explicitly allows United States courts to set aside awards that are contrary to U.S. public policy and that of the various states, and be it further

Resolved:  That the secretary of state be directed to send copies of this resolution to United States Senators Bernard Sanders and Patrick Leahy, United States Representative Peter Welch, the members of the NCSL standing committees of jurisdiction over matters of trade, environmental protection, and the judiciary, and the office of the United States Trade Representative.


____________________________              Attested to:

Gaye R. Symington

Speaker of the House


____________________________              ____________________________

Brian E. Dubie                                             Donald G. Milne

President of the Senate                                Clerk, House of Representatives



Published by:

The Vermont General Assembly
115 State Street
Montpelier, Vermont