Why Elizabeth Warren is declaring war on an obscure trade policy – Updated by Danielle Kurtzleben on February 28, 2015, 12:30 p.m. ET

Populist crusader Massachusetts Sen. Elizabeth Warren has picked her next big fight, and this one could create real problems for the Obama Administration.

The latest Elizabeth Warren cause: ISDS — the trade policy you had no idea was so important.

Her beef is with a piece of the massive Trans-Pacific Partnership trade deal that the Obama Administration is promoting. It’s called investor-state dispute settlement, and it gives a foreign corporation the power to fight a government outside of the normal judicial system.

“The name may sound mild, but don’t be fooled,” Warren wrote in a Washington Post op-ed. “Agreeing to ISDS in this enormous new treaty would tilt the playing field in the United States further in favor of big multinational corporations. Worse, it would undermine U.S. sovereignty.”

This is a big deal, not least because TPP is huge; its members account for 40 percent of the world’s economy. Add in the Transatlantic Trade and Investment Partnership being negotiated with European countries — which also has investor-state dispute settlement provisions — and you have a majority of the global economy. That means the ISDS provisions in these trade agreements could affect a sizable share of the world’s corporations.

So even though this might sound like a political fight over a complicated bit of trade policy, the implications — particularly for corporations — are big.

What is ISDS?

Investor-state dispute settlement is a provision included in many trade deals, and it allows a company to fight a foreign government through a route other than that country’s court system.

As one example, let’s say Company X is invested in a foreign country. If the laws in that country change in a way that Company X thinks violates its rights as part of a treaty — say, by banning a product Company X makes — Company X can go into an arbitration proceeding to seek damages. That proceeding is not run by the host country; rather, the case faces three arbitrators — one picked by each side and one they either agree upon or that an independent third party chooses.

ISDS was first used in 1959, in a trade agreement between Germany and Pakistan, according to the Economist. The broad idea is to protect the investor from unfair treatment by foreign countries’ court systems. Since then, it has become an incredibly common feature of trade agreements — ISDS is a feature of more than 3,000 trade agreements worldwide, and the US is party to around 50 of them, according to a White House blog post posted on Thursday.

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