Investor-state dispute settlement (ISDS) is one of the greatest threats to the re-regulation of finance. ISDS empowers the very firms that financial regulation seeks to govern. These firms can bypass host country domestic courts and directly challenge domestic policies in a parallel system of justice.
Financial and non-financial firms have increasingly used ISDS provisions in trade agreements to challenge financial regulations and emergency financial stability measures.
As of end of 2014, 7% of all ICSID cases concerned the financial sector.
Most well-known cases include:
• Investors vs. Argentina: When the country froze its utility rates and devaluated its currency in response to its 2001-2002 financial crisis, it was hit by over 40 lawsuits from investors, including Suez, Vivendi (France) and Anglian Water (UK). By January 2014, Argentina had been ordered to pay a total of US$980 million (various BITs invoked).
• Poštová Banka (Slovakia) & Istrokapital (Cyprus) vs. Greece: the Slovak bank and its Cypriot investor are currently suing Greece on account of the restructuring of the country’s sovereign debt, after having bought Greek government bonds at a knockdown value (Greece-Slovakia & Cyprus-Greece BITs invoked).
• Saluka (Netherlands) vs. Czech Republic: the Dutch investment corporation filed an ISDS dispute against the Czech government for not bailing out a private bank, in which the company had a stake, in the same way that the government bailed out banks in which the government had a major stake. The bailouts came in response to a widespread bank debt crisis. The investor was awarded US$236 million (Czech Republic-Netherlands BIT invoked).