Already two years down the line and the 10th round of TTIP (Transatlantic Trade and Investment Partnership) negotiations last week nevertheless had a distinct air of déjà vu about them, as they once again broke down over the Investor State Dispute Settlement (ISDS) provision of the proposed treaty.
But what is all the fuss really about? Why do so many people feel so strongly about this ISDS instrument? The BBC World Service took a deeper look at the issues at stake in a very comprehensive 25 minute radio documentary that goes some way towards answering these, and other, questions.
In short, the ISDS instrument would allow investors on one side of the Atlantic to sue a government on the other side if they believe the government in question damages their commercial interests. This is nothing new. Bilateral investment treaties have since long contained provisions similar to the disputed ISDS and proponents will argue that such agreements prevent states from resorting to force in order to get property back or protect companies against nationalisation.
What is new though is that lawyers finally caught on and discovered the power of these instruments at the turn of the millennium. Whereas more than 1500 bilateral investment treaties were in place by then, they were largely ignored and forgotten until lawyers started realising their potential. As the International Dispute Resolution Center in London attests, this very secretive arbitration business has been booming ever since.
Seen as anti-democratic and rigged in favour of investors, these secretive courts and the ISDS system have come under increasing scrutiny and criticism over the last decade. Some high profile cases have shed a negative light on these bilateral investment treaties, with various instances of health and environmental policies being challenged by investors. (Listen to the BBC broadcast for some very illustrative cases of ISDS controversies, including the tobacco industry in an Australian case and a gold mining company in El Salvador.)
The tide seems to be turning. Governments that happily used the ISDS instrument in the past to protect their investors and investments abroad, now face ISDS claims of their own. Germany, for instance, is now being sued for preventing investments in atomic energy.
Proponents of the ISDS system argue that so far governments have defeated about 40% of the cases brought against them, and present such statistics as proof of fairness of the system. It is important to remember though that only investors can put forth an ISDS claim and that dispute settlements are shrouded in secrecy even though they often have a direct impact on the public interest, especially in environmental and health matters.
To address these issues EU Trade Commission Cecilia Malmström proposes a new version of ISDS, maintaining the right for governments to regulate in the public interest and excluding health and environmental issue from the ISDS scope.
BETTER FINANCE, the European Federation of Investors and Financial Services Users, would rather see an ISDS of last resort. 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 ISDS.
BETTER FINANCE will agree to the use of ISDS when, and only when, a state-to-state dispute settlement system does not lead to adequate redress. In this case the ISDS mechanism as currently stipulated in TTIP would still need to be significantly amended to address crucial issues of transparency. ISDS would also need to be available to all parties including states and domestic investors.
A situation where investors would have the choice between different courts or jurisdictions in order for them to pick out the one most favorable to their particular case must be avoided at all cost.
As the BBC documentary illustrates, the inclusion of one or another version of ISDS in the TTIP agreement would have important implications with regards to democratic principles and the concept of sovereignty. However, investors themselves, according to some, seem to attach fairly little importance to ISDS provisions when making investment decisions. So is it all but a storm in a teacup?
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