On Wednesday (July 9), the European Parliament made a decision on the highly debated investor-state dispute settlement (ISDS) mechanism which is part of the Transatlantic Trade and Investment Partnership (TTIP), the giant trade deal between the EU and USA still being negotiated.
Yesterday members of the European Parliament voted with 436 votes against 241 in favour of adopting a common position on TTIP. The resolution also gives the green light for a new version of the ISDS.
Arbitration courts that allow foreign investors to sue national governments over losses are common in some trade deals. One of the most contentious topics of the resolution, the ISDS even led to splitting party groups. In an official EU consultation in 2014, 97% of the 150,000 EU citizens surveyed, rejected the ISDS and 2.3 million people signed a petition to halt the negotiations. The new mechanism called for by the parliament would be "subject to democratic principles and scrutiny" and cases would be dealt with by "publicly appointed, independent professional judges [in] public hearings". However, some believe that the ISDS would give corporations too much power over governments.
Pressure from numerous MEPs as well as NGOs led to the text proposing to “replace the ISDS system with a new system for resolving disputes between investors and states”. As this explicitly rejects the older version of the scheme, consensus in the Parliament was reached. Still, some activist and consumer groups called the vote, and especially the ISDS decision “extremely disappointing” (Corporate Europe Observatory).
While numerous rapporteurs seemed to support the outcome – Bernd Lange for instance stated that “It is (…) our democratic duty to shape the rules governing globalisation in order to make it work for the benefit of the people" –the parliament's groups on the left of the political spectrum were angered by the result. Yannick Jadot from the Greens/European Free Alliance criticised Schulz for "[twisting] the meaning of parliament's rules of procedure to fit his political goals".
The Center for International Environmental Law (CIEL) stated that “the resolution fails to address the threat to public health and environmental laws in the EU posed by TTIP, and it ignores a growing chorus of voices that have raised concerns about this risk.”
Further discussions on the TTIP will take place on Wednesday next week in Brussels.
BETTER FINANCE believes that local court systems in most countries offer adequate redress systems in case the rights of local and foreign investors under TTIP are abused. However, an alternative dispute settlement system can be used in some exceptional cases: a. local judicial systems do not comply with basic procedural rules of law; or b. access to such local judicial system is denied to investors.
We could imagine that a state-to-state dispute settlement system could straighten out any (legal) barriers to investors via specific provisions that allow investors whose rights under TTIP are abused to request their home state to initiate a claim towards another state in order to settle the investment barrier. Only in the case that such a state-to-state settlement doesn’t lead to adequate redress, could BETTER FINANCE agree to ISDS, albeit in a significantly amended form.
Articles on the topic: POLITICO, Euractiv, Parliament Magazine