TTIP Update XLI

In my last update, I noted that the highly-contested investor-state dispute settlement (ISDS) chapter remains the centre of attention, with rumours swirling around that the President-elect of the new European Commission, Jean-Claude Juncker, would pull a rabbit out of his hat by announcing that ISDS would be dropped. That didn't happen, and it seems that once more, the UK is to blame.

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In my last update, I noted that the controversial investor-state dispute settlement (ISDS) chapter remains the centre of attention, with rumours swirling around that the President-elect of the new European Commission, Jean-Claude Juncker, would pull a rabbit out of his hat by announcing that ISDS would be dropped. That didn't happen, and it seems that once more, the UK is to blame.

A group of 14 EU nations - including the UK, Spain, Ireland and Denmark - sent a pointed letter to the incoming trade commissioner, Cecilia Malmström, and thus indirectly to Juncker, on the subject of TTIP and ISDS. Here's the key part [.pdf]:

One of the issues that has attracted criticism is investment protection. The Commission is currently analysing the results of a public consultation on this issue and we look forward to the Commission's response. The consultation was an important step in ensuring that we strike a correct balance to ensure that governments retain their full freedom to regulate, but not in a way that discriminates unfairly against foreign firms. It is important that the outcome of this consultation runs its course and we carefully consider the views expressed by our stakeholders before reaching firm decisions on the way forward. The Council mandata is clear in its inclusion of investor protection in the TTIP regotations; we need to work together on how best to do so.

That one paragraph includes a number of very interesting points. First, there's the strange insistence on the importance of the public consultation on ISDS. We know that the overwhelming majority of submissions were against ISDS, so it's odd to see the UK government and its allies place such great emphasis here. This suggests to me that we are about to witness a stitch-up - for example, we might see 149,000 of the 150,000 submissions counted as just *1* or something similarly outrageous. The outgoing trade commissioner, Karel De Gucht, has already hinted some trick along these lines might be adopted.

Then of course we have the line about ensuring "the correct balance" between governments' right to regulate and investors' rights to make profits. As I've written before, there should be no balance here, because clearly the sovereignty of governments is paramount: to suggest otherwise amounts to a silent coup against democracy. But even more ridiculous is the letter's insistence that TTIP must ensure that foreign firms are not discriminated against. That's downright laugable, because ISDS would give foreign firms extra rights that local firms *don't* have: foreign investors could use national courts and ISDS tribunals, whereas local companies could only use the former. So it's the national companies who will actually be discriminated against under ISDS: foreign ones will gain huge new powers.

Even more outrageously, right at the start, the UK and its mates assert:

The Transatlantic Trade and Investment Partnership (TTIP) will add over €100bn to EU GDP and has the potential to transform not just our own economies, but also the global economy.

As readers of this blog will recall, that €100bn figure is the *maximum* likely benefit, in the best of all possible worlds; here it is being put down as a certainty, no ifs or buts. That's downright dishonest, and shows how desperate the pro-TTIP camp has become: it knows that the supposed arguments in favour of the agreement are so weak that it is forced to claim the most extreme outcomes as certainties. And yet, as readers will also know, that best-case €100bn figure is in 2027, and represents a footling 0.05% average GDP boost each year until then - statistically, that's indistinguishable from zero given the huge number of uncertainties in the econometric model used. So the letter from the UK and friends is based on the flimsiest of reasoning, and is really quite a disgraceful piece of bullying.

Unfortunately, it seems to have had the desired effect. Here's how Juncker responded in his speech to the European Parliament:

I took note of the intense debates around investor-state dispute settlement (ISDS) in the Transatlantic Trade and Investment Partnership (TTIP) negotiations. Let me once again state my position clearly, that I had set out on 15 July in front of this House and that you will find in my Political Guidelines: My Commission will not accept that the jurisdiction of courts in the EU Member States be limited by special regimes for investor-to-state disputes. The rule of law and the principle of equality before the law must also apply in this context.

The negotiating mandate foresees a number of conditions that have to be respected by such a regime as well as an assessment of its relationship with domestic courts. There is thus no obligation in this regard: the mandate leaves it open and serves as a guide.

I had thought my commitment on this point was very clear but I am happy to clarify and reiterate it here today as a number of you have asked me do so: In the agreement that my Commission will eventually submit to this House for approval there will be nothing that limits for the parties the access to national courts or that will allow secret courts to have the final say in disputes between investors and States.

I have asked Frans Timmermans, in his role as First Vice-President in charge of the Rule of Law and the Charter of Fundamental Rights, to advise me on the matter. There will be no investor-to-state dispute clause in TTIP if Frans does not agree with it too[emphasis in original]

Again, there are lots of interesting details here. First, the statement "My Commission will not accept that the jurisdiction of courts in the EU Member States be limited by special regimes for investor-to-state disputes." That's clever, becauses it is trivially satisfied by ISDS actions. They do not "limit" jurisidiction in any way - national courts are untouched. But what ISDS does provide is a *parallel* system that foreign investors can use to have a "second go" at suing governments. So ISDS is in addition to, not instead of, national courts. Similarly, ISDS has no effect on the "The rule of law and the principle of equality before the law".

This issue comes up yet again in the sentence: "there will be nothing that limits for the parties the access to national courts or that will allow secret courts to have the final say in disputes between investors and States. " But secret courts won't have the final say, they will just be a factor that may well cause governments to change their policies. The rule of law will still be there, but it will be irrelevant when large sums of money are involved (and remember that they can be very large: the Russian government has been ordered to pay no less than $50 billion by an ISDS tribunal...)

So far the, Juncker has artfully managed to say nothing of any substance whatsoever. But his passing shot is more significant:

I have asked Frans Timmermans, in his role as First Vice-President in charge of the Rule of Law and the Charter of Fundamental Rights, to advise me on the matter. There will be no investor-to-state dispute clause in TTIP if Frans does not agree with it too. 

That's a classic passing of the hot potato to someone else, a delaying tactic to avoid making a decision now. But it is a very clear insult to Malmström, who has effectively been told that she does not have the final say here. The big question is: what exactly does Timmermans think of ISDS, and would he actually veto the chapter after months or years of negotiations?

In any case, the rumours continue to swirl that ISDS will come out before then. Here's a report from last week on euractiv.com:

The European Commission may have changed its view over including investment arbitration in the EU-US trade agreement TTIP, a move that would be a wish-come-true for Economic Affairs Minister Sigmar Gabriel and others, who fear the measure could lead to companies influencing government policy. EurActiv Germany reports.

The European Commission is considering omitting much-disputed plans for an arbitration procedure, a safety net for investors, from the Transatlantic Trade and Investment Partnership (TTIP) currently under negotiation. An internal document from DG Trade addressed to EU Trade Commissioner Cecilia Malmström, revealed plans to strike the passage from the negotiating mandate.

As I've said before, I'll believe that when I see it - the UK will doubtless be working furiously behind the scenes to prevent ISDS coming out. But there's certainly no question that ISDS is endangered, and that there is still a very real possibility it will be dropped. Stay tuned....

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