As well as all the developments I discussed in the previous TTIP update, plenty has been happening recently in the hotly-contested area of investor-state dispute settlement (ISDS). The United Nations Conference on Trade and Development (UNCTAD) has published another of its informative reviews of developments in the ISDS field [.pdf]. This edition is particularly welcome since it focuses on the interaction between the EU and US in this area. Here are some of its findings:
16 [ISDS] cases have been initiated against the US to date, among those not a single one originated from an investor from a EU Member State.
EU Member States have been respondents in 117 known cases, of which almost a quarter faced by one country (the Czech Republic). Several EU countries (e.g. Austria, Denmark or Finland) have faced no known ISDS claim to date. 88 of the 117 cases are intra-EU disputes.
To date, there are few (nine) known claims in the EU-US relationship. All of them were filed by US investors, constituting about seven per cent of all ISDS claims filed by US investors.
The nine cases also represent close to eight per cent of all cases faced by EU Member States (or close to one third, if intra-EU disputes are disregarded).
All nine cases were brought against “new” EU Member States.
That shows that already the EU suffers disproportionately from ISDS cases; including an ISDS chapter is likely to open the floodgates of US companies suing across the whole European Union. One of the most interesting facts in the new report is the following:
The US-EU relationship is the largest in terms of the amount of FDI [foreign direct investment] stock held by investors from these countries in each other’s territories. 10 Investors from EU Member States hold a total of 1.6 trillion USD of FDI stock in the US, which represents 62 per cent of the total inward US FDI stock. 11 Investors from the US hold a total of 1.9 trillion USD of FDI stock in EU Member States which represents around 38 per cent of the total inward FDI stock in the EU.
That is, even without ISDS in place between the US and most of the EU (the US currently has agreements including ISDS with Bulgaria, Croatia, the Czech Republic, Estonia, Latvia, Lithuania, Poland, Romania and Slovakia), the total transatlantic investment is 3.5 trillion euros - much more than when I last looked, which suggests that it is continuing to rise rapidly. This demonstrates beyond any doubt that ISDS is simply unnecessary for the EU and US: investment is already flourishing on an unprecedented scale.
Bringing in ISDS would therefore have no benefit for Europe - but plenty of dangers. An important post by Ante Wessels over on the FFII site explores one aspect I hadn't seen before: the fact that the ISDS system is inherently biased in favour of the US:
Investor-to-state dispute settlement (ISDS), the most controversial element of the proposed trade agreement with the US, has characteristics of a rigged system. ISDS gives the US an unfair advantage, we can not expect EU companies to win ISDS cases against the US.
Here's why:
The appointment of arbitrators is not neutral. One arbitrator is appointed by each of the disputing parties. In which supreme court can parties bring their own judge? The third arbitrator, the presiding arbitrator, is appointed by agreement of the disputing parties.
The US appoints the president of the World Bank. This president
- is ex officio chairman of the International Centre for Settlement of Investment Disputes (ICSID) Administrative Council,
- proposes the ICSID secretary-general,
- appoints all three the arbitrators in appeal cases under ICSID rules.
The secretary-general of ICSID
- appoints the third arbitrator if the parties can not agree on the third one,
- will decide over conflicts of interest. (ICSID, articles 5, 10, 38, 52 and Commission, 2014b, Table 8, article x-25.10)
The ISDS system gives the US an unfair advantage. Adjudicative processes have to be free of reasonably perceived bias. This is not the case with ISDS.
The rest of the post provides compelling evidence that this bias is already visible in the results of previous years' ISDS cases, where the US always seems to win.
Against that worrying background, it becomes even more vital to respond to the European Commission's consultation on ISDS. The deadline for replying is July 6, and I'll be writing an update detailing my own response soon. In the meantime, here's what other people think about ISDS and are planning to send to the Commission - you may find them useful in framing your own.
First, a splendidly robust response from the Trade Union Congress, which states quite bluntly:
The TUC's response to this consultation will not follow the specific questions outlined, as they present ways to improve ISDS and investment protection measures in TTIP. The TUC, like the ETUC and AFL-CIO, opposes any form of ISDS in TTIP. Our response, therefore, will detail why ISDS is unnecessary in trade agreements and poses a serious threat to public services and states’ ability to legislate in line with citizens' interest and wishes.
After that wonderful start, it goes on to offer cogent reasons why ISDS is simply superfluous, like this one:
The fact that the UK has not been sued through an ISDS procedure in the past is also not a credible argument for its inclusion in TTIP. This merely shows that the British governments have refrained from signing investment treaties with large capital-exporting states. It can be seen that when Canada, another country not previously subject to ISDS proceedings, signed the North American Free Trade Agreement (NAFTA) with USA and Mexico, they found themselves the subject of several ISDS cases, several of which were successful. Canadian companies also used ISDS to sue the US government successfully through ISDS provisions in NAFTA.
It also explains why ISDS is "inequitable and undemocratic:
Inequality lies at the very foundation of ISDS as it privileges foreign investors over any other economic actors - domestic investors or interest groups such as consumers or workers – by giving them the right to access special courts for pursuing claims of expropriation.
It notes that ISDS is a particular danger for the UK:
In the UK, there is a danger that if a future government were to bring parts of the National Health Service back into public ownership by overturning the Health and Social Care Act (2012), it would be prone to challenge through ISDS by American companies that have significant investment in the NHS. In addition, ISDS mechanisms could be used by US companies to litigate against tighter regulation of the UK’s growing for-profit education sector.
It's really well-worth reading the rest of the TUC response, which is in a similar vein. It's great to see, not least because it shows that trade union organisations have woken up to the very real threat that ISDS represents for their members.
Next, an equally fine response to the unnecessary and frankly rather dishonest EU ISDS consultation, this time from the Trade Justice Movement (TJM). You can read the detailed, ten-page question-by-question response [.doc] - indeed, I urge you to do so, if you can - but here's TJM's summary of its main points:
Approximately 70% of global investment happens without this kind of [ISDS] investment protection.
There is no valid reason to transfer business risk to communities by making governments liable. Transferring the risk to governments causes 'policy chill' whereby governments resist passing policies in case they get sued. For example: governments thinking of introducing plain packaging to cigarettes are watching the Philip Morris cases against Uruguay and Australia carefully: the company is arguing that the legislation is a breach of their intellectual property rights, the countries could face million-dollar compensation bills.
There is no reason to give international investors greater rights than domestic investors: both kinds of investors can access domestic courts, only international investors can access the private tribunals associated with ISDS.
Businesses should protect against risk via insurance: a scheme already exists via the World Bank. This could be supported by mediation and state-to-state diplomacy where necessary.
Finally, I need to point people to a new site that has been set up with the rather self-explanatory name "No 2 ISDS", which explains its purpose as follows:
The arguments against investor-state dispute settlement have been known for many years. Despite this, the European Commission has attempted to silently push it through in its ongoing trade negotiations with the US. It was only after sustained and substantial protests by citizens, trade unions and civil society groups that the European Commission launched a public consultation on the mechanism. However, this consultation - that was initially sold by the European Commission to the public as a way to involve citizens, trade unions and civil society - turns out to be a mere caricature.
First of all, the consultation does not ask the public whether they want investor-state dispute settlement or not in TTIP. Furthermore, ordinary citizens are overwhelmed with a highly technical and lengthy questionnaire. To make matters worse, the public are forced to exclusively stick to this electronic questionnaire that is not very user-friendly. Letters or E-Mails are not permitted. This contradicts the very essence of public consultations and makes it highly problematic from a democratic point of view.
For all of these reasons, AK EUROPA (the Brussels office of the Austrian Federal Chamber of Labour), the ÖGB Europabüro (the Brussels office of the Austrian Trade Union Federation), and Friends of the Earth Europe (the largest European environmental grassroots network), wish to offer guidance to anyone who would like to speak out against investor-state arbitration and secretive, opaque trade negotiations taking place behind closed doors.
We believe that special privileges for investors should be excluded from TTIP. We therefore also reject the Commission’s proposal to ‘improve’ the currently foreseen investor-state dispute settlement system. The only viable solution is: NO INVESTOR-STATE DISPUTE SETTLEMENT AT ALL!
It is of fundamental importance that we send a clear and strong message to the European Commission. Take part in the consultation and help us push back unjustified privileges for private investors at the expense of people and societies as a whole!
They're right, of course, and the good news is that this site (also available in French and German) helps people do that. It does so by running through the questions found on the Commission's ISDS consultation, explaining in very clear terms what the issues are, and offering sample answers to those questions.
Once you've had a glance at these, you can then provide your own answers for the EU's online form, or wait a little longer for my comments too. Either way, it is really important that as many people as possible reply to this consultation so that the European Commission cannot claim that nobody really cares about ISDS, and that it can therefore negotiate as it wishes. This is an important opportunity to make our voices heard: let's take it.
Follow me @glynmoody on Twitter or identi.ca, and +glynmoody on Google+
16 [ISDS] cases have been initiated against the US to date, among those not a single one originated from an investor from a EU Member State.
EU Member States have been respondents in 117 known cases, of which almost a quarter faced by one country (the Czech Republic). Several EU countries (e.g. Austria, Denmark or Finland) have faced no known ISDS claim to date. 88 of the 117 cases are intra-EU disputes.
To date, there are few (nine) known claims in the EU-US relationship. All of them were filed by US investors, constituting about seven per cent of all ISDS claims filed by US investors.
The nine cases also represent close to eight per cent of all cases faced by EU Member States (or close to one third, if intra-EU disputes are disregarded).
All nine cases were brought against “new” EU Member States.
That shows that already the EU suffers disproportionately from ISDS cases; including an ISDS chapter is likely to open the floodgates of US companies suing across the whole European Union. One of the most interesting facts in the new report is the following:
The US-EU relationship is the largest in terms of the amount of FDI [foreign direct investment] stock held by investors from these countries in each other’s territories. 10 Investors from EU Member States hold a total of 1.6 trillion USD of FDI stock in the US, which represents 62 per cent of the total inward US FDI stock. 11 Investors from the US hold a total of 1.9 trillion USD of FDI stock in EU Member States which represents around 38 per cent of the total inward FDI stock in the EU.
That is, even without ISDS in place between the US and most of the EU (the US currently has agreements including ISDS with Bulgaria, Croatia, the Czech Republic, Estonia, Latvia, Lithuania, Poland, Romania and Slovakia), the total transatlantic investment is 3.5 trillion euros - much more than when I last looked, which suggests that it is continuing to rise rapidly. This demonstrates beyond any doubt that ISDS is simply unnecessary for the EU and US: investment is already flourishing on an unprecedented scale.
Bringing in ISDS would therefore have no benefit for Europe - but plenty of dangers. An important post by Ante Wessels over on the FFII site explores one aspect I hadn't seen before: the fact that the ISDS system is inherently biased in favour of the US:
Investor-to-state dispute settlement (ISDS), the most controversial element of the proposed trade agreement with the US, has characteristics of a rigged system. ISDS gives the US an unfair advantage, we can not expect EU companies to win ISDS cases against the US.
Here's why:
The appointment of arbitrators is not neutral. One arbitrator is appointed by each of the disputing parties. In which supreme court can parties bring their own judge? The third arbitrator, the presiding arbitrator, is appointed by agreement of the disputing parties.
The US appoints the president of the World Bank. This president
- is ex officio chairman of the International Centre for Settlement of Investment Disputes (ICSID) Administrative Council,
- proposes the ICSID secretary-general,
- appoints all three the arbitrators in appeal cases under ICSID rules.
The secretary-general of ICSID
- appoints the third arbitrator if the parties can not agree on the third one,
- will decide over conflicts of interest. (ICSID, articles 5, 10, 38, 52 and Commission, 2014b, Table 8, article x-25.10)
The ISDS system gives the US an unfair advantage. Adjudicative processes have to be free of reasonably perceived bias. This is not the case with ISDS.
The rest of the post provides compelling evidence that this bias is already visible in the results of previous years' ISDS cases, where the US always seems to win.
Against that worrying background, it becomes even more vital to respond to the European Commission's consultation on ISDS. The deadline for replying is July 6, and I'll be writing an update detailing my own response soon. In the meantime, here's what other people think about ISDS and are planning to send to the Commission - you may find them useful in framing your own.
First, a splendidly robust response from the Trade Union Congress, which states quite bluntly:
The TUC's response to this consultation will not follow the specific questions outlined, as they present ways to improve ISDS and investment protection measures in TTIP. The TUC, like the ETUC and AFL-CIO, opposes any form of ISDS in TTIP. Our response, therefore, will detail why ISDS is unnecessary in trade agreements and poses a serious threat to public services and states’ ability to legislate in line with citizens' interest and wishes.
After that wonderful start, it goes on to offer cogent reasons why ISDS is simply superfluous, like this one:
The fact that the UK has not been sued through an ISDS procedure in the past is also not a credible argument for its inclusion in TTIP. This merely shows that the British governments have refrained from signing investment treaties with large capital-exporting states. It can be seen that when Canada, another country not previously subject to ISDS proceedings, signed the North American Free Trade Agreement (NAFTA) with USA and Mexico, they found themselves the subject of several ISDS cases, several of which were successful. Canadian companies also used ISDS to sue the US government successfully through ISDS provisions in NAFTA.
It also explains why ISDS is "inequitable and undemocratic:
Inequality lies at the very foundation of ISDS as it privileges foreign investors over any other economic actors - domestic investors or interest groups such as consumers or workers – by giving them the right to access special courts for pursuing claims of expropriation.
It notes that ISDS is a particular danger for the UK:
In the UK, there is a danger that if a future government were to bring parts of the National Health Service back into public ownership by overturning the Health and Social Care Act (2012), it would be prone to challenge through ISDS by American companies that have significant investment in the NHS. In addition, ISDS mechanisms could be used by US companies to litigate against tighter regulation of the UK’s growing for-profit education sector.
It's really well-worth reading the rest of the TUC response, which is in a similar vein. It's great to see, not least because it shows that trade union organisations have woken up to the very real threat that ISDS represents for their members.
Next, an equally fine response to the unnecessary and frankly rather dishonest EU ISDS consultation, this time from the Trade Justice Movement (TJM). You can read the detailed, ten-page question-by-question response [.doc] - indeed, I urge you to do so, if you can - but here's TJM's summary of its main points:
Approximately 70% of global investment happens without this kind of [ISDS] investment protection.
There is no valid reason to transfer business risk to communities by making governments liable. Transferring the risk to governments causes 'policy chill' whereby governments resist passing policies in case they get sued. For example: governments thinking of introducing plain packaging to cigarettes are watching the Philip Morris cases against Uruguay and Australia carefully: the company is arguing that the legislation is a breach of their intellectual property rights, the countries could face million-dollar compensation bills.
There is no reason to give international investors greater rights than domestic investors: both kinds of investors can access domestic courts, only international investors can access the private tribunals associated with ISDS.
Businesses should protect against risk via insurance: a scheme already exists via the World Bank. This could be supported by mediation and state-to-state diplomacy where necessary.
Finally, I need to point people to a new site that has been set up with the rather self-explanatory name "No 2 ISDS", which explains its purpose as follows:
The arguments against investor-state dispute settlement have been known for many years. Despite this, the European Commission has attempted to silently push it through in its ongoing trade negotiations with the US. It was only after sustained and substantial protests by citizens, trade unions and civil society groups that the European Commission launched a public consultation on the mechanism. However, this consultation - that was initially sold by the European Commission to the public as a way to involve citizens, trade unions and civil society - turns out to be a mere caricature.
First of all, the consultation does not ask the public whether they want investor-state dispute settlement or not in TTIP. Furthermore, ordinary citizens are overwhelmed with a highly technical and lengthy questionnaire. To make matters worse, the public are forced to exclusively stick to this electronic questionnaire that is not very user-friendly. Letters or E-Mails are not permitted. This contradicts the very essence of public consultations and makes it highly problematic from a democratic point of view.
For all of these reasons, AK EUROPA (the Brussels office of the Austrian Federal Chamber of Labour), the ÖGB Europabüro (the Brussels office of the Austrian Trade Union Federation), and Friends of the Earth Europe (the largest European environmental grassroots network), wish to offer guidance to anyone who would like to speak out against investor-state arbitration and secretive, opaque trade negotiations taking place behind closed doors.
We believe that special privileges for investors should be excluded from TTIP. We therefore also reject the Commission’s proposal to ‘improve’ the currently foreseen investor-state dispute settlement system. The only viable solution is: NO INVESTOR-STATE DISPUTE SETTLEMENT AT ALL!
It is of fundamental importance that we send a clear and strong message to the European Commission. Take part in the consultation and help us push back unjustified privileges for private investors at the expense of people and societies as a whole!
They're right, of course, and the good news is that this site (also available in French and German) helps people do that. It does so by running through the questions found on the Commission's ISDS consultation, explaining in very clear terms what the issues are, and offering sample answers to those questions.
Once you've had a glance at these, you can then provide your own answers for the EU's online form, or wait a little longer for my comments too. Either way, it is really important that as many people as possible reply to this consultation so that the European Commission cannot claim that nobody really cares about ISDS, and that it can therefore negotiate as it wishes. This is an important opportunity to make our voices heard: let's take it.
Follow me @glynmoody on Twitter or identi.ca, and +glynmoody on Google+
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