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A Focus of Dispute: the ISD Clause of FTA
제 129 호    발행일 : 2011.11.28 


On November 22nd, the Grand National Party passed the ratification about the Korea- U.S. Free Trade Agreement (FTA) unilaterally. During the last several months, the political confrontation between the ruling party and the opposition party was deep. The major issue of the ratification was the investor-state dispute settlement (ISD) clause. The ISD is a regulation where if foreign investors suffer commercial losses from laws or policies of the countries which they invest into, then they can file a suit with an international arbitration organization against the countries according to international law.

 The opposition party claims that the ISD clause of the FTA violates Korean sovereignty. According to Korea Democratic Labor Party, the ISD is a poisonous clause which violates the jurisdiction of Korea as a sovereign country. They claim that if foreign investors file a suit with an international organization against Korea’s regulations, there is no way Korea can win the trial practically in regard to free trade because the U.S has powerful influence.
The Korea Democratic Labor Party gave an example about Mexico, which is a member of North American Free Trade Agreement (NAFTA). A company of the U.S. filed a suit against Mexico with an international arbitration organization because they suffered losses when Mexico regulated an incident with their laws in regard to a U.S. waste disposal company which mishandled their pollutants in Mexico. Mexico lost the trial and paid enormous compensation.

On the contrary, the National Grand Party claims that the ISD clause is not favorable to only foreign investors. According to ‘Counterarguments about poisonous clauses of the Korea-U.S. FTA’ by the Ministry of Foreign Affairs and Trade (MFAT), the U.S. won just several trials when they sued Canada and Mexico through ISD clauses. MFAT said the opposition party ignored the purpose of the clause which is solving problems fairly by a third party.

 The opposition party said some countries which signed the FTA with the U.S., including Austria, didn’t adopt the ISD clause, and Korea didn’t discuss the clause in the FTA negotiations with Europe. However, the ruling party said the ISD clause is not only in the Korea-U.S FTA but also in many agreements regarding investments as a generalized international clause. They claimed that the clause is a measure for protecting Korea’s foreign investment funds and Korea needs the ISD clause at this point because investment in the U.S is increasing nowadays.

 As the political confrontation between the ruling party and the opposition party has become deeper, the Grand National Party passed the bill unilaterally and tke Korea Democratic Labor Party is now pressuring the ruling party to annul the ratification.
 
 

 
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