On Tuesday, January 21, the European Commission decided it will temporarily postpone negotiations over investor-state dispute settlement, a complex subject of increasingly contentious debate within Transatlantic Trade and Investment Partnership (T-TIP) discussions. Some trade experts believe tabling the issue is a prelude to initiating a public consultation on the matter.
Launched last June, T-TIP negotiations have included provisions that permit E.U. and U.S.-based corporations to forward legal challenges directly against sovereign governments to various international tribunals. This would allow those corporations to litigate national restrictions regarding public health, environmental protection and social compliance that potentially places undue constraints on their ability to conduct business.
E.U. Trade Commissioner Karel de Gucht said the postponement of the investor-state negotiations is intended to ensure that European corporations have adequate recourse to pursue grievances while also protecting the prerogative of governments to establish their own laws independent of external interference. “I know some people in Europe have genuine concerns about this part of the EU-US deal. Governments must always be free to regulate so they can protect people and the environment. But they must also find the right balance and treat investors fairly, so they can attract investment,” said de Gucht.
Karel de Gucht also acknowledged that investor-state clauses have led to difficulties in past free trade arrangements. “International investment agreements like TTIP should ensure they do both. But some existing arrangements have caused problems in practice, allowing companies to exploit loopholes where the legal text has been vague,” he said.
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Others were not so circumspect in their appraisals of the damage investor-dispute powers could potentially create. Yannick Jadot, Green Party trade spokesperson in the European Parliament, painted a darker picture. “The investor-state dispute settlement mechanism is a massive Trojan horse, which could be used by multinational corporations to whittle away E.U. standards and regulations across a range of policies from the environment to food safety to social protection,” he said. He expressed cautious optimism regarding the postponement of negotiations, saying, “This announcement by the European Commission is an important development in the ongoing battle against the controversial EU-US trade negotiations. However, it is only a first step.”
Ilana Solomon, trade specialist for the Sierra Club, voiced concerns that investor-state provisions impinged upon state sovereignty, placing corporations on a par with them. She said, “These provisions elevate corporations to the level of nation states and allow them to sue governments over nearly any law or policy which reduces their future profits.”
Lori Wallach, director of Public Citizen’s Global Trade Watch, concurred with Solomon’s assessment. She said, “The dirty little secret about [the negotiation] is that it is not mainly about trade, but rather would target for elimination the strongest consumer, health, safety, privacy, environmental and other public interest policies on either side of the Atlantic. The starkest evidence … is the plan for it to include the infamous investor-state system that empowers individual corporations and investors to skirt domestic courts and laws and drag signatory governments to foreign tribunals.”
Investor-state resolution has been a common feature of U.S. negotiated free trade agreements since its inclusion in the North American Free Trade Agreement (NAFTA) in 1994. However, in that case, investor-dispute litigation can only begin with the imprimatur of the government sued. In other words, under the WTO rules that currently govern both the U.S. and the E.U., a corporation must first solicit permission from a sovereign nation it believed committed an injustice prior to filing suit, allowing the nation in question to ultimately decide if it will allow the dispute to be arbitrated by WTO officials.
The historical rationale for investor-dispute resolution was to protect corporations from arbitrary governmental fiat, especially in developing nations where major industries are often state run and courts lack independence. Some say this makes investor-dispute resolution irrelevant in both the E.U. and the U.S., where neither of these conditions maintain.
Many critics of investor-state resolution have endorsed halting its discussion before an independent investigation into the matter can be conducted. Johannes Kleis, a spokesperson for BEUC, a European consumer organization, said, “For months consumer organizations and other civil society groups have voiced their concerns over investor-to-state dispute settlement. Calling a halt to this part of the negotiations is the right thing to do. More is needed. The public should be consulted on other aspects of TTIP too. A deal of this magnitude should always include as broad a range of civil society as possible.”
Daniel Csaspary MEP also hailed the decision in the name of public deliberation. He said, “The announcement also provides a chance to make clear that many concerns are comprehensible but could be solved within the negotiation process. Now all interested citizens, NGOs and interest groups are called upon to take part in the consultation, and reflect how to develop and implement agreements on the necessary protection of European investments abroad. This includes, in my perspective, provisions allowing lawmakers to continue taking meaningful decisions on rules, keeping intact ordinary legal procedures, and making more transparent international dispute settlement procedures.”