Without a body that can invoke broad sanctions, countries can play chicken with each other. Regimes can simply decide to seize company assets, and hope the offending parties don't cause enough of a real ruckus.
Of course this lowers investor confidence long-term. But governments that do that are rarely interested in this. They're more interested in lining their own pockets with personal wealth.
These sort of trade frameworks build a mutually-assured-destruction setup, so that any BS can get swiftly acted upon by a "neutral" party. And at the end of the day, it allows for stronger rule of law, which is better for most parties. The ones that end up the worst off are the kleptocrats.
Airliners can buy insurance for plane crashes. But most of them would rather planes just not crash.
Sure, ISDS can help a country build more trust, and lower the cost of foreign investments, but it's not a panacea.
Plus, countries would still play chicken with each other. If China decides to seize Apple's plants, what should the US do, declare war? Should France and EU terminate all foreign deals with Egypt due to it not wanting to pay for the Veolia ISDS decision?
There's less debate and uncertainty about the legitimacy of the retaliation, and its better understood than the advanced kremlinology required to decipher some other things.
Not many things are panacea, but things like the WTO have been pretty useful at avoiding trade wars IMO.
> Regimes can simply decide to seize company assets
And they can ignore the provisions in a treaty they sign, too. If a country is willing to start seizing assets and taking the usual penalties in business for doing so, the TPP isn't going to mean much.
Treaties are only as powerful as their ability to be enforced (whether that's militarily, politically, or economically). Have a look at the state of the 19th C treaties between the USA and various Indian nations for a crystal-clear example of this.
And it does it with a far lower cost to sovereignty.
This misunderstands what incentives are at play for politicians with low accountability in developing countries. The cost of corruption is borne by these investors and domestic consumers, but the benefit of it is entirely concentrated in the political class. Therefore the opposite incentive exists, and the system becomes more resistant to any changes towards more inclusive institutions.
>sovereignty.
Meaningless buzzword. If a nation no longer favours the basket of benefits and obligations, it is entirely free to leave.
while this is true there are already mechanisms built to counter this uncertainty, i.e. you can get insurance for operating in "dangerous" countries.