This Wednesday, Cecilia Malmstrom, the European Commissioner for trade, unveiled a proposal for a new system for resolving disputes between investors and states under TTIP and other EU trade and investment negotiations: the Investment Court System.
This new system is expected to replace the existing Investor State Dispute Settlement (ISDS) mechanism that is currently hampering the EU-US talks on a Transatlantic Trade and Investment Partnership (TTIP). The ISDS instrument would have allowed investors on one side of the Atlantic to sue a government on the other side through private courts if they believed the government in question had damaged their commercial interests.
Both versions of the ISDS proposed by the European Commission prompted fears that businesses would crush legislators’ power since only investors could have put forth an ISDS claim and dispute settlements were shrouded in secrecy even though they often had a direct impact on the public interest, especially in environmental and health matters.
To tackle the increasing criticism ISDS came under over the last negotiating months, the European Commission took in “substantial input received from the European Parliament, Member States, national parliaments and stakeholders through the public consultation held on ISDS”. The new proposal includes a public Investment Court System composed of a first instance Tribunal and an Appeal Tribunal, led by publicly appointed judges, before which investors would only be allowed to take cases under strict conditions such as “targeted discrimination, expropriation without compensation, or denial of justice”.
Cecilia Malmstrom insisted that “national rights to legislate will be fully respected and enshrined in black and white”, with parallel proceedings being prevented since investors seeking to obtain redress within ICS would first have to withdraw from any domestic proceeding already started. Companies would thus be obliged to choose between using domestic law and the new ICS in order to prevent “forum shopping”.
However, the European Parliament remains divided. TTIP’s rapporteur MEP Bernd Langestressed that this new proposal might be the “only way forward in trade policy and the last nail in the coffin for ISDS”. The EPP, the shadow rapporteur’s political group,highlighted the proposal’s efforts to address the worries of EU citizens. Support came also from ECR and ALDE shadow rapporteurs, praising the Commission’s will to opt for a more transparent, comprehensive and balanced TTIP deal. However, the Greens did not withhold their criticism of “some form of private court for corporations” trying to forcethrough their interests. Campaign groups also expressed their disappointment, pointing out that the new system proposed merely has a new name, whereas “corporate super rights are still at the heart” of the proposal.
This new proposal is up for discussion in the Council and the European Parliament and will be used later to further negotiations.
As advocated before, BETTER FINANCE would rather see an ICS of last resort, which is not yet the case. In the case of investor abuse, BETTER FINANCE believes local court systems are best placed to provide adequate redress. Even when investors are denied access to the local judicial system, a state-to-state dispute settlement system that can address the investment barrier would be much preferable to ICS. BETTER FINANCE would agree to the use of ICS when, and only when, a state-to-state dispute settlement system does not lead to adequate redress.
However, this new proposal still gives companies an (albeit more limited) choice between different courts or jurisdictions allowing them to pick out the one most favourable to their particular case.Transparent rules and the prevalence public interest demand the ICS to be significantly amended yet again.
More in the media:
- "ISDS: The most toxic acronym in Europe" - Politico
- "TTIP: EU Commission unveils replacement for controversial ISDS" - The Parliament Magazine