TTIP: Alternative ISDS No Real Alternative, NGOs Warn

Just days before the restart of negotiations for the Transatlantic Trade and Investment Partnership (TTIP) on 22 February in Brussels, a large coalition of non-governmental organisations led by the Corporate Europe Observatory (CEO) published a critical report on new proposals for the highly debated investor-state dispute settlement (ISDS) mechanisms. The activists called the Investment Court System (ICS) prepared by EU Commissioner Malmstroem as an alternative a mere “ISDS zombie.”

Malmstroem’s ICS proposal did not address most of the problems of the extra-judicial redress mechanisms for foreign investors, the study explains in a detailed comparison of ISDS and ICS. Instead, “it arguably grants investors even more rights than many existing investment treaties, which have already led to hundreds of investor-state lawsuits around the world,” the study states.

A specific provision (section 2, article 3.4) of the proposed new system would allow for complaints when investors feel their “legitimate expectations” have been violated by regulatory acts of states. But “explicit protections of investors’ legitimate expectations are generally not part of existing treaties,” CEO and its partners warn.

The EU was also proposing an umbrella clause (section 2, article 7) which would open the mechanism explicitly to all private contracts of a state and all its entities, thereby allowing for complaints for example against cities or municipalities, they said.

Such an umbrella clause was rejected for the still-pending EU agreement with Canada, the NGOs point out. They warn that the few procedural improvements (selection of the arbiters and the appeal mechanism) were outweighed by the risks of the up to $50 billion US dollar damage claims against states.

Instead of adding to the private arbitration possibilities in new agreements, CEO and the other NGOs call for an abolishment of the extra-judicial system. Opposition to an ICS is not voiced by the activists only, but is more and more joined by law experts, for example most notably by the German Association of Judges.

Nevertheless, ISDS is expected to be back on the agenda of negotiators next week after the EU Commission’s DG Trade after Malmstroem had taken it off the agenda while the public consultation in the EU was ongoing.

US Secretary of State John Kerry meanwhile last week felt compelled to defended the TTIP negotiations against criticism in Europe: “Nothing in TTIP … nothing requires Europe to reduce or undo important regulations or weaken existing standards,” Kerry said in a speech at the Munich Security Conference. He called the trade agreement “a showcase the dynamism of our form of democracy, of our marketplace, of free markets.” A finalisation during the current US administration remains questionable despite such high-level calls.

 

Image Credits: European Commission