TTIP Update XXXVI

As I mentioned in my previous update, the TTIP negotiations are currently on hold, but that does not mean that all activity has stopped.  By an interesting coincidence, the other major EU trade agreement - that with Canada, generally known as CETA - seems to have been "concluded", although quite what that means is not yet clear.  For example, back in October 2013, the EU and Canada announced that they had "reached a political agreement on the key elements" - and yet negotiations have continued until now.  Even assuming that there are not more holdups, the process of ratification is extremely long, requiring all kinds of legal "scrubbing" and then approval by the various parts of the European Union and possibly national governments too (but again, that's not yet clear.)

In theory, we would have to wait until most of that was accomplished before we got to see the text of CETA, but as I noted last time, some public-spirited soul has leaked both the main text [.pdf] and the annexes. I've skimmed through the form, but not felt strong enough to tackle the latter.  I'm hoping that  experts will take a look at sections of interest and publish their thoughts in due course.

The first such analysis has already appeared, and it will probably be of particular interest to Open Enterprise readers.  It comes from the Canadian academic Michael Geist, and looks at a key area: copyright.  As he writes:

the starting point for copyright in CETA as reflected in 2009 leaked document [from Wikileaks] was typical of European demands in its trade agreements. It wanted Canada to extend the term of copyright to life of the author plus 70 years (Canada is currently at the international standard of life plus 50 years), adopt tough new rules for Internet provider liability, create criminal sanctions for some copyright infringement, implement new rights for broadcasters and visual artists, introduce strict digital lock rules with minimal exceptions, and beef up enforcement powers. In other words, it was looking for Canada to mirror its approach on copyright.

And yet the latest leak of the final CETA text shows that all the main European demands have been dropped.  Here's why Geist thinks that happened:

First, the domestic policy situation in both Canada and the EU surely had a significant impact as ACTA protests in Europe and consumer interest in copyright in Canada led to the elimination of the criminal provisions and the adoption of better-balanced, consumer-oriented rules.

The rejection of ACTA by the European Parliament in July 2012 was certainly a pivotal event that has had a major impact on the negotiations of subsequent agreements involving Europe.  Geist's other points - that Canada's copyright laws were compliant with international standards, that they are increasingly being seen as an alternative to the hard-line approach advocated by the EU in CETA, and that copyright was not a priority in CETA for Europe -  are doubtless true, but don't carry over to TTIP.  Importantly, the US will not be fighting any attempt by the EU to introduce stronger copyright rules in TTIP - on the contrary, we know from ACTA that in comparison, the EU is likely to be the moderating force here.

Putting those facts together, we can't therefore hope that TTIP will be as reasonable as CETA as far as copyright is concerned.  Indeed, as I noted in an earlier update, there is strong evidence that the European Commission is looking more than favourably on a "Christmas list" of demands from the copyright industries.

On a different note, the Canadian publication The Tyee has a useful analysis of some of the details revealed about investor-state dispute (ISDS) settlement in CETA.  It points out that ISDS is even more problematic than thought because of the existence of an important CETA commission, whose exact details have not been revealed:

Jan Spangenberg is an associate in Latham & Watkins' international arbitration practice group in Hamburg, Germany, which regularly represents states and investors in investment treaty arbitrations. He acknowledged the more narrow definition of "fair and equitable" treatment in CETA, but points out that the treaty includes a mechanism that could allow for a later modification of the provision by a CETA commission.

"It is unclear how this will work. As a result, significant uncertainty remains," Spangenberg said.

The commission, which does not yet exist, will have the final say in the definition of "fair and equitable" treatment. As of now, nobody can tell what it will decide.

That CETA commission would have another major impact on the implementation of ISDS:

The commission will also be in charge of the right of governments to appeal the decisions of arbitration courts. Here, the same problem arises: nobody knows who will be on that commission, when it will start and finish its work, and what it might decide. Governments will have to vote on CETA before they have the answers.

How appeals will work is especially worrisome for governments, because they are always the subject of lawsuits brought on by investors. Governments, on the contrary, can't sue investors in arbitration courts. This one-sidedness becomes more acute if appeals aren't possible at all or only in limited ways.

That there is no thorough judicial review of arbitrators' decisions worries experts like van Harten: "This is a fundamental problem and makes the adjudicative process non-judicial," he said.

This CETA commission is effectively a backdoor that will allow ISDS to be made even worse than it seems in the text of the treaty.  It's another manifestation of the lack of transparency that robs CETA and TTIP of much of their legitimacy.

In the face of that and many other worries around ISDS in CETA, the following statement from the S&D group in the European Parliament is good news:

The Commission should listen to the concerns voiced by the European Parliament and the S&D Group about the investor-state dispute settlement mechanism (ISDS) in the Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada.

It will be up to the Parliament – the democratic conscience of EU trade policy – to decide whether or not to ratify CETA.

The CETA agreement, to be initialled at the EU-Canada summit at the end of September, would be a positive agreement and would bring opportunities for growth and jobs on both sides of the Atlantic. It covers various sectors ranging from agricultural and industrial goods to services, intellectual property rights, public procurement and sustainable development.

However, some EU member states, notably Germany, have raised serious concerns regarding the controversial ISDS clause in the agreement that allows multinational companies to bring international arbitration cases against governments. The S&D Group has always opposed the inclusion of this mechanism and we expressed our opposition in letters sent to EU Trade Commissioner De Gucht as far back as 2012. A resolution adopted by the European Parliament in 2011 on EU-Canada trade relations also states the Parliament's preference for traditional state-to-state dispute settlement and the use of local judicial remedies to address investment disputes.

The ISDS mechanism, where applied, has already shown how much power corporations have wielded in the name of profit. It is time the EU followed the Australian example and scrapped ISDS in the CETA and in the EU-US Transatlantic Trade and Investment Partnership (TTIP).

CETA has already been delayed for too long. A trade deal between the EU and Canada has the potential for great economic benefits and it should not be put in jeopardy for the sake of an unnecessary investment clause.

That's significant because putting together the S&D group with the Greens and others opposed to ISDS in the European Parliament brings the total number of MEPs very close to the majority needed to reject CETA - and maybe even TTIP - when it comes to the big vote.  Of course, much could happen between now and then, and it's quite possible that the S&D group will succumb to the promise of "concessions" on ISDS from the European Commission.  But the statement does at least indicate that getting CETA and TTIP through the European Parliament is not going to be easy.

Strangely, the European Commission seems to be going out of its way to make it even harder.  Here's what it announced last week:

The European Union today took an important step towards creating a comprehensive EU investment policy, with the publication of a Regulation setting out a new set of rules to manage disputes under the EU's investment agreements with its trading partners. The rules – set out in the Regulation on financial responsibility under future investor-to-state disputes – are a necessary component of a common EU investment policy.

'This Regulation,' said EU Trade Commissioner Karel De Gucht 'represents another building block in our efforts to develop a transparent, accountable and balanced investor-to state dispute settlement mechanism as part of EU trade and investment policy. '

The rules set up the EU's internal framework for managing future investor-state disputes. They define who is best placed to defend the EU’s and Member States’ interests in the event of any challenge under investor-to-state dispute (ISDS) in EU trade agreements and the Energy Charter Treaty. The rules also establish the principles for allocating any eventual costs or compensation. Member States will defend any challenges to their own measures and the EU will defend measures taken at EU level. In all cases, there will be close cooperation and transparency within the EU and the EU institutions.

Friends of the Earth Europe pointed out:

According to the European Commission, this regulation will come into force on 17 September. This is two months ahead of the intended evaluation of the European Commission's own public consultation on the investor-state dispute settlement mechanism being proposed in the current negotiations for the Trans-Atlantic Trade and Investment Partnership (TTIP).

Commenting on publication of this regulation, Paul de Clerk, trade campaigner at Friends of the Earth Europe said: "Finalising this regulation while the public consultation on investor-state dispute settlement in TTIP is still on-going is completely unacceptable and undemocratic. This not only undermines the 150,000 European citizens and stakeholders who have participated in the public consultation, but also brings into question the credibility of the European Commission about their willingness to listen to the voices of citizens on this important issue."

That's exactly right: this is yet another slap in the face for the European public, and confirms that the so-called "consultation" on ISDS in TTIP was simply window-dressing.  The Commission didn't even have the decency to wait until after the official analysis of those 150,000 submissions, but went straight ahead and published its new ISDS rules now, when it can't possibly take into account what all those people have said.  It is an act of pure contempt for the hundreds of millions or ordinary citizens that pay their not un-generous salaries.

It shows once more that the European Commission is hell-bent on steamrollering ISDS through, both in CETA and TTIP. Since it manifestly doesn't care a hoot about the growing rejection of ISDS by the public and hundreds of civil society organisations, it looks like we will once more have to pin our hopes on the European Parliament to stop this arrogant, high-handed behaviour by doing to CETA and TTIP what it did to ACTA: rejecting them.

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TTIP Update XXXV

According to the publication "Inside US Trade", which tends to be pretty good when it comes to sourcing its information, the next round of TTIP talks won't take place until the end of  September - obviously the negotiators felt they needed a holiday after all the excitement of the last year.  But even if TTIP news is thin on the ground, there have been a couple of big stories recently with major impacts for the negotiations.

The first concerns the following news:

Philip Morris International, the world's largest tobacco company, is prepared to sue the British government should it implement a law requiring plain packaging of cigarettes, a document seen by Reuters on Tuesday showed.

Another report claims that the tobacco company will be demanding exceptionally high "damages" - £11 billion.  Unfortunately, it doesn't provide any source for that figure, so I think it needs to be treated with caution.  However, we do know that Philip Morris (PMI) is also suing Uruguay over plain packs, and in that case is demanding $2 billion.  Given the greatly differently size of their respective economies - Uruguay's GDP is around $50 billion, while the UK's is about sixty times as great - it's quite plausible that PMI would want an even more outrageous figure.

The company has used ISDS provisions in an obscure treaty between Uruguay and Switzerland to sue the former.  Unfortunately the articles about the new threat to sue the UK don't say how PMI aims to do this; as far as I am aware, there aren't any treaties where it could invoke ISDS clauses in the same way, so presumably it will just be trying to do so under UK law.  That's interesting, because it is how the company also tried to sue Norway over its own moves to discourage smoking.  Here's what happened:

PMI tried similar bully tactics against Norway when it banned the display of tobacco products in 2010. Crucially the case was tried in an Oslo District Court because the treaty through which PMI sued Norway – the European Economic Area agreement – had no ISDS. Norway made a public health defence. Norway won.

Now imagine a situation in which either CETA or TTIP (or both) had ISDS chapters.  This would then allow PMI to sue the UK (and any other EU country) directly, using secret tribunals, rather than national courts.  Not only that, ISDS would allow any of the tens of thousands of US companies with subsidiaries in Europe to do the same.  The latest threat of PMI shows that the will is there, even if the easy means to do so are currently lacking.  Let's hope this action will cause the British government to wake up to the dangers of ISDS, just as the Germany government did when the Swedish company sued Germany in 2012 for €3.7 billion using ISDS clauses in the Energy Charter Treaty.

The other news is very different.  It comes from Professor Jane Kelsey of the Faculty of Law, University of Auckland, whom I mentioned last week for her insightful analysis of the leaked financial annex of TISA.  She's put together a hugely-important new site with the slightly odd name of "TPP: No Certification".  Here's what thte certification refers to:

The US withholds the final steps that are necessary to bring a trade and investment treaty into force until the other party has changed its relevant domestic laws and regulations to meet US expectations of its obligations under the agreement. In the past, US ‘expectations’ have gone beyond what is in the actual text, and even included matters that were rejected in negotiations.

US officials can define another country’s obligations; become directly involved in drafting that country’s relevant law and regulations; demand to review and approve proposed laws before they are presented to the other country’s legislature; and delay certification until the US is satisfied the new laws meet its requirements.

There are already moves to apply a new and extended version of certification to the Trans-Pacific Partnership Agreement (TPPA).

The [US] Bipartisan Trade Priorities Act of 2014, which seeks to establish Fast Track authority for the TPPA, contains Sec. 4(a)(2):

"CONSULTATIONS PRIOR TO ENTRY INTO FORCE – Prior to exchanging notes providing for the entry into force of a trade agreement, the United States Trade Representative shall consult closely and on a timely basis with Members of Congress and committees as specified in paragraph (1), and keep them fully apprised of the measures a trading partner has taken to comply with those provisions of the agreement that are to take effect on the date that the agreement enters into force."

Although the new site's main focus is on the TransPacific Partnership agreement (TPP), that paragraph from the proposed Bipartisan Trade Priorities Act makes it clear that the certification requirement is general: "Prior to exchanging notes providing for the entry into force of a trade agreement" - that is, *any* trade agreement.  As a result, the new site's analysis applies equally to TTIP.

There is a detailed Q&A [.pdf], which is well-worth reading (not least for the appalling saga of how the US insisted on vetting the news laws that Peru had to bring in), as well as a condensed explanation of what this is likely to mean in practice:

Certification is a legally binding obligation on the US President. The President withholds formal written notification to another party to a trade agreement that the US has satisfied its domestic approval processes until the US certifies the other party has altered that party’s domestic laws and policies to satisfy US expectations of what is needed to comply with the TPPA [and also TTIP].

The US officials transmit a list of the changes to the other country’s domestic laws and policies that the US government requires before it will allow the pact to go into force. US government officials then monitor compliance, and pressure the government of the trade partner country to alter its laws and policies until they satisfy the US view of the changes required.

Even if the US Congress passed the Trans-Pacific Partnership Agreement (TPPA) [or TTIP], the pact would only go into effect in relation to each party when the US certified that party had satisfied US notions of compliance. Certification therefore provides additional leverage to the US Congress and US industry to impose its interpretation on a party’s obligations under the TPPA [and TTIP].

That last part is particularly worrying.  For example, the European Commission has been adamant that certain things like chlorine-washed chicken meat or hormone beef will not be part of TTIP.  Let's assume that is true.  We know that some of the most powerful US farming groups have said that they will not support TTIP without Europe opening its doors and plates to chlorine-washed chicken and hormone beef, among other things.  So one possibility is that the European Commission might refuse to allow either *in the agreement* as signed, but that under the influence of US lobbyists, the US government would refuse to certify TTIP unless they were added *afterwards*. 

In this way, the European Commission would be able to say truthfully that it managed to keep out chlorine-washed chickens and hormone beef from TTIP's text, but that it now had "no choice" but to add it in (and maybe change the relevant EU laws), otherwise all that hard work on the agreement would be wasted, and all those supposed "benefits" lost.  And so, at the twelfth hour, chlorine chickens, hormone beef, GMOs, etc. etc. would be permitted in the EU so as to obtain final certification.

Of course, it may well not come to that.  The resistance to TTIP is growing, and it may be that the whole thing - not just ISDS - collapses as people become aware of the reality of what is being planned.  But what this valuable new site from Kelsey makes clear is that even if we manage to keep out the worst demands of the US side from the "final" text, it may not actually be final.  Assuming certification is required for TTIP as for TPP, it would give one last chance for the US to try to bully the EU into accepting its demands - and one last chance for the European Commission to capitulate.

Full list of previous TTIP Updates.

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TTIP Update XXXIV

The previous update detailed the massive rejection of ISDSin TTIP, even at the highest political levels in Europe.  That refusal to allow corporations to be placed above national law has now spread to the other major trade agreement that the European Commission is currently negotiating, the one with Canada, known as CETA.  Here's the bombshell that the German newspaper Süddeutsche Zeitung dropped over the weekend (original in German):

German EU diplomats confirmed in Brussels on Friday that the [German] federal government could not sign the agreement with Canada "as it is now negotiated." Although Germany was, in principle, ready to initial the agreement in September, the chapter on the legal protection of investors is however 'problematic' and currently not acceptable.

Now, it's important to emphasise that this is not saying that Germany will *not* sign CETA, as some have reported.  What it does indicate is that the current text is problematic.  That leaves open the possibility for modifications to be made that would make it acceptable.  But as we've noted before, Germany has already expressed its view that ISDS should not be in TTIP, and presumably feels the same way about CETA. 

Thus the new battle over CETA not only provides important hints about what will happen with TTIP, but will have a direct influence on it.  If CETA includes ISDS it will enable US companies to sue the EU through Canadian subsidiaries, thus making its presence or absence in TTIP somewhat moot.  Equally, if ISDS is dropped from CETA, it is likely to be dropped from TTIP.

That has become even more likely in the wake of this new statement by the S&D Group in the European Parliament:

Following reports in the press that the German government is reluctant to sign the EU-Canada Comprehensive Economic Trade Agreement (CETA) as it currently stands, the S&D Group calls for further efforts to conclude this agreement but invites the Commission to seriously consider withdrawing the investor-state dispute settlement clause from the final text. The inclusion of this clause seems to be the main controversial point in the CETA text for the German government.

That's significant, because the S&D Group is the second-largest in the European Parliament: TTIP will not be ratified there unless it's MEPs support it, and this is therefore a further signal that they won't support it if it includes an ISDS chapter.  The wisdom of that position was underlined just yesterday with the annoncement of the biggest award ever made by a tribunal of the kind that lie at the heart of ISDS:

In an historic arbitral award rendered on July 18, 2014, an Arbitral Tribunal sitting in The Hague under the auspices of the Permanent Court of Arbitration (PCA) held unanimously that the Russian Federation breached its international obligations under the Energy Charter Treaty (ECT) by destroying Yukos Oil Company and appropriating its assets. The Tribunal ordered the Russian Federation to pay damages in excess of USD 50 billion to our clients who were the majority shareholders of Yukos Oil Company.

Yes, you read that correctly: a tribunal of lawyers has decided that Russia ought to pay $50 billion damages (although whether it will is quite another matter.)  This is a useful reminder that there is literally no limit on the awards that these tribunals can make: the ISDS system is not just undemocratic, it is completely outside anyone's control - a recipe for disaster.

The other big TTIP news is the leak of one the key chapters, on "sanitary and phyto-sanitary measures" (SPS) - basically food safety and related areas.  Here's a summary of what it reveals:

The Institute for Agriculture and Trade Policy released the draft version of the central text of the TTIP chapter on sanitary and phyto-sanitary measures; this chapter imposes restrictions on government regulations related to food safety and animal and plant health. Among the many provisional threats to public health safeguards are:

A form of mutual recognition of the safety of imported food from Europe in the U.S. and vice versa that reduces standards to the lowest levels;

 An objective that food safety safeguards should generally be enforced in the least trade restrictive manner, rather than the manner that is most protective of public health and the environment; and

 A system of “exporter country certification” that would  sharply reduce food safety inspections at ports of entry.

That same Institute for Agriculture and Trade Policy (IATP) has also provided a detailed and illuminating analysis of what the dry text will mean in practice.  Here's the key section that describes the overall intent of the SPS chapter in TTIP:

trade agreement SPS language about food safety, animal health and plant health outlines the general terms for enabling trade while complying with “the importing Party’s appropriate level of protection.” So, for example, unless the European negotiators object to the use of Maximum Residue Level (MRL) of a specific pesticide on imported grain or a specific veterinary drug in the production of imported meat, without creating “unjustified barriers to trade” (Article 2, paragraph 2), the TTIP regards that product as having an “appropriate level of protection” to enable importation and consumption of the product. Determination of MRLs and other metrics of what is “appropriate” happens in a domestic regulatory process, in which, at least in the U.S., much of the relevant data is classified as Confidential Business Information.

This is the key change proposed by the TTIP draft: "mutual recognistion" would mean that US standards for pesticides or veterinary drugs would be regarded as acceptable in the EU, even when they are manifestly lower than those currently in place here.  As that paragraph also hints, the US regulatory process is pretty much a part of the US agricultural industry, which provides most of the data used for making regulatory decisions.

Not  only that, industry generally won't even provide the "scientific" data on which government decisions are based, since it is "Confidential Business Information."  Of course, when companies won't release data it's a clear sign that they have something to hide, as the experience with clinical trials data has shown.  When it comes to health and safety, open data is even more critical than elsewhere, but the US approach is diametrically opposed to this, with secrecy as the default.  This means that European efforts to make the regulatory process more open would be undermined by the US demand for business confidentiality for their standards, which would also apply in the EU.

In fact, the SPS chapter in the TTIP draft is even worse.  Not content with allowing food that meets US standards to be imported freely into Europe, it would stop checks being carried out on that produce as it enters the EU:

industry has long sought to replace verification of food safety management performance by port of entry inspection of products with export food facility certification, by governments or third parties, verified by audits of facilities. The terms of certification and auditing to verify SPS system equivalence are outlined in Article 12 of the draft. In Article 9, paragraph 1, industry, and particularly the Grocery Manufacturers Association, has gotten its wish to eliminate port of entry inspection and testing results as a factor in the SPS systems equivalence determination. According to the draft text, recognition of SPS systems as “equivalent” by TTIP Parties will occur “without a need for individual re-inspection [of products] or other additional guarantees.

There's an interesting consequence of removing the entry inspection:

The industry rationale for eliminating re-inspection and testing is not just to expedite more food trade more quickly. Detaching re-inspection and testing from SPS systems equivalence determination provides a layer of government verified and certified food safety management insulation from liability for exporting or importing contaminated products.

This means that the kind of food scandals we have seen recently - notably of horsemeat - would be much harder to investigate.  It would also remove incentives for US food companies to worry too much about the issue, since it would be much easier for them to escape any liability.

Finally, many in Europe will doubtless be worried by this aspect of the leadked SPS chapter:

“Prominent coverage of animal welfare” refers to “best endeavor” (we will try), not binding (“shall”) measures to prevent trade in livestock products from animals that have been abused. For example, Article 11, paragraph 1, states “The Parties recognize that animals are sentient beings. They undertake to respect trade conditions for live animals and animal products that are aimed to protect their welfare.” So, while this aspirational language is perhaps new in a trade agreement, it is designed to be unenforceable. There will be no requirements that Parties mandate compliance with animal welfare laws as a condition of being able to trade in animal agriculture products.

That means the opportunity to use TTIP to export Europe's higher animal protection laws to the US in order to mitigate some of the worst horrors of that country's "mega-farms" is being lost.  As a result, European farmers will be at big economic disadvantage compared to their US rivals, since they will be required to spend more money taking better care of their animals. 

This is likely to lead to European farms losing market share, as cheaper US food enters the EU, with no indication that it was produced in inhumane conditions, or that it contains pesticide levels that were previously unacceptable in the EU.  In the face of this unfair competition, the agricultural industry will inevitably push for EU standards for food safety and animal welfare to be lowered to those of the US in order to "level the playing field."  Moreover, whenever the US lowers them yet further - as it is currently doing for chickens - this will have a knock-on effect of pushing EU standards down too.  TTIP not only leads to a race to the bottom on food and health standards, it leads to that bottom being excavated to new depths.

As this indicates, the leak of the SPS chapter is extremely important, because it reveals in detail for the first time just how our food standards will decline, and that the repeated assurances from the European Commission that they will not, are worthless.  It's probably safe to assume that the same will prove to be true of the chapter dealing with intellectual monopolies like copyright and patents, which is likely to turn out to be ACTA 2.0.

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TTIP Update XXXIII

My last two updates concentrated on ISDS, and on the European Commission's consultation, such as it was.  Flawed though it may have been, it did at least give people a rare - no, unique - opportunity to express their views on this aspect of TTIP. And express it they did: although we have no official figures, I'm consistently hearing that well over 100,000 submissions were made.  That's an astonishing number for such an apparently obscure aspect of a trade agreement, and a clear reflection of how strongly people feel about this. 

That's surely not something the European Commission ever expected when they announced the consultation, and means that it can have no doubt about the public's views on this matter.  And yet, with typical contempt for democracy, Karel De Gucht, the commissioner handling the TTIP negotiations, called this massive demonstration of citizen engagement an "attack" (original in German.)

Nor is it just the public that is expressing itself forcefully on ISDS.  Criticism of the idea has come from just about every quarter.  Here's what happened on the No2ISDS site that I wrote about:

Friends of the Earth Europe, AK Europa and ÖGB Europabüro, set up an online platform to allow citizens to voice their concerns about ISDS. The website www.no2isds.eu has collected over 23,000 contributions from people across Europe and the US who fundamentally oppose the harmful investor-state arbitration system. Combined with initiatives from groups including 38degrees and SumofUs, this has contributed to a record number of over 100,000 contributions to the Commission's public consultation.

European Trade unionists are against ISDS:

In a letter to European Trade Commissioner Karel de Gucht, Bernadette Ségol the General Secretary of the European Trade Union Confederation (ETUC) says trade unionists are “particularly concerned at statements from DG Trade implying that the consultation is about a reform of the ISDS system and is not open to a decisive rejection.”

The letter tells De Gucht very clearly “the ETUC is fundamentally opposed to the inclusion of ISDS in the Transatlantic Trade and Investment Partnership.”

In its formal response to the consultation the ETUC points out that “ISDS establishes a system of judicial protection which is only available for foreign investors. By definition, this additional system awards benefits to foreign companies which are not given to domestic companies. This discriminates against domestic companies. ISDS destabilises the domestic judicial system because public measures can be subject to two diverging legal assessments.”

It also calls for ISDS in the EU-Canada Trade Agreement to be frozen at least until it is resolved in TTIP.

So are health organisations [.pdf]:

Health Action International (HAI) Europe, the Common s Net work, Knowledge Ecology International (KEI) Europe, Health GAP (Global Access Project), Salud por Derecho, the International Society of Dr ug Bulletins (ISDB), the Medicines in Europe Forum (MiEF) and Universities Allied for Essential Medicines (UAEM) welcome the opportunity to submit a response to this consultation . We believe, however, that this consultation, which aims to improve ISDS, is asking the wrong questions. ISDS cannot be improved. The real question is whether ISDS should be included in TTIP at all. The answer, very simply, is no.

As are leading members of the European Commission's own TTIP advisory group:

Following the end of the public consultation on investor-state dispute settlement (ISDS) in the EU-US free trade negotiations (known as TTIP), the European Environmental Bureau, the European Public Health Alliance (EPHA) and Transport & Environment call on the European Commission to exclude ISDS from TTIP and to publish all contributions.

The EEB, EPHA and T&E are members of the EU’s TTIP advisory group representing civil society.

One of the most devastating analyses I have seen comes from over 100 leading academics:

In our view, the logical implication of the Commission’s stance [that ISDS is flawed and needs fixing] is to raise the key question that is not asked in the consultation document: why consider including investor-state arbitration in the TTIP at all? The rationale for bilateral investment treaties was traditionally linked to views about the potential impact on foreign investment of uncertainty caused by weak legal and judicial systems in host countries. While such a vision of failed statehood should in itself be examined further, it suffices to point out, in the context of the relationship between the US and the EU, that it is difficult to argue realistically that investors have cause to worry about domestic legal systems on either side of the Atlantic. Above all, with FDI [foreign direct investment] stocks of over €1,5 trillion either way, it is implausible to claim that investors in fact have been deterred. It is true, as the Commission points out, that nine Member States already have BITs in place with the US. It may also be true that, for these nine Member States, the new arrangement might be a better alternative than ‘doing nothing.’ That, however, hardly seems enough reason to impose on the other two thirds of Member States a Treaty that profoundly challenges their judicial, legal and regulatory systems. The consultation document comes up with one additional argument: that the rights each party grants to its own citizens and companies ‘are not always guaranteed to foreigners and foreign investors.’ The claim is unsubstantiated. Even if it is accepted, there is no obvious reason why the incorporation in TTIP of a simple norm of non discriminatory legal protection and equal access to domestic courts could not address the problem perfectly adequately.

You might predict criticism from many of these groups, especially those associated with green and left-wing groups, as here:

During Tuesday's plenary session [of the European Parliament] GUE/NGL deputy Helmut Scholz addressed De Gucht, saying, "You carried out a public consultation on the inclusion of an investor state dispute settlement (ISDS) clause which received over 115,000 responses.

"Citizens don't want ISDS; neither in TTIP nor in the agreement with Canada," the German deputy argued.

What you probably would not expect is that some of the most senior European politicians are also clearly turning against ISDS.  Here, for example, is the MEP David Martin, whom some may remember as the rapporteur (Parliamentary expert) who helped kill ACTA:

The Socialists were proud to be at the birth of TTIP, and we do not want to be its assassins, and I want to tell the Commission clearly now, though, that if we have to be, we will be. And that's why we want the Commission to listen carefully to our concerns.

This is the chairman of the European Parliament's influential international trade (INTA) committee, which will give the main advice on whether or not to ratify TTIP:

German Socialist Bernd Lange, who said procedural rules would stop [right-wing MEP] Le Pen grandstanding or using sessions for publicity, also warned that an investor-state dispute settlement mechanism should be dropped from TTIP. If it wasn't, he said, the Parliament’s next resolution on TTIP could be negative.

Finally, and perhaps most strikingly, this is what Jean-Claude Juncker, the President-elect of the European Commission, writing in his "Political Guidelines for the next European Commission" [.pdf], published earlier this week:

As Commission President, I will also be very clear that I will not sacrifice Europe's safety, health, social and data protection standards or our cultural diversity on the altar of free trade. Notably, the safety of the food we eat and the protection of Europeans' personal data will be non-negotiable for me as Commission President. Nor will I accept that the jurisdiction of courts in the EU Member States is limited by special regimes for investor disputes. The rule of law and the principle of equality before the law must also apply in this context.

The plenary session of the European Parliament at which some of these comments were made included a rather lack-lustre speech by De Gucht on TTIP, which was met with a silent protest against TTIP from some MEPs.  Rather less silent was a protest by activists during the TTIP stakeholder meeting for this latest round of negotiations:




Here in the UK, resistance to ISDS is centred around concerns that it could lock in the current rounds of NHS privatisation.  This has become enough of a problem that the EU's chief negotiator, Ignacio Garcia Bercero, has written a letter [.pdf] to one of the UK supporters of TTIP, John Healey, trying to assuage those fears.  War on Want's John Hilary has put together a Twitter or identi.ca, and +glynmoody on Google+

TTIP Update XXXII

The most important news of the last few days is undoubtedly that the European Commission's consultation on ISDS in TTIP has been extended by a week until 13 July - for full details on how to reply, see previous update.  Other than than, what is striking is how TTIP is moving into the mainstream, with developments across the entire political and economic spectrum.

For example, over 100 organisations from 17 EU member states have expressed support for organising an European Citizens' Initiative (ECI) on TTIP:

Organisations from all across Europe are currently gearing up for a European Citizens’ Initiative (ECI) with the aim of repealing the European Union’s negotiating mandate for the Transatlantic Trade Investor Partnership (TTIP) and not concluding the Comprehensive Economic and Trade Agreement (CETA). The registration of the ECI is planned for July. The collection of signatures is due to start in September 2014.

It is highly significant to see CETA here as well as TTIP - a recognition of the fact that allowing CETA to be ratified with an ISDS chapter would effectively allow US companies to sue Europe using Canadian subsidiaries as a proxy.  Here's what an ECI is and does:

An ECI can request a legislative act from the European Commission and force a hearing at the European Parliament. For an ECI to be successful, at least one million signatures must be collected. At the same time, country-specific quorums must be achieved in at least seven EU member states. In Germany, for example, the quorum will be 72,000 signatures. France has to collect 55,500 signatures and the United Kingdom and Italy need 54,750 signatures. Estonia, Malta, Luxembourg and Cyprus have to collect 4,5000 signatures. The level of the quorum depends on each country’s number of deputies in the European Parliament. The most notorious ECI so far is “right2water”. It led to the exclusion of the liberalisation of water supply from the scope of the EU directive on concessions.

Clearly, achieving those numbers will require considerable effort, but the success of the right2water ECI shows that it can be done.  Moreover, resistance to TTIP is growing rapidly, and brings together groups from the most diverse areas, so the pool of support is probably even larger than that for water as a basic right.

At the other end of the political spectrum, the person likely to be the next President of the European Commission, Jean-Claude Juncker, was quizzed today by the Greens in the European Parliament, who are deciding whether or not to support him.  Here's what he said when asked about the inclusion of ISDS in TTIP:

Juncker replied that he does not understand why great democracies do not have confidence in their own judicial systems, and that he personally does not see the benefits of ”private courts”, which does not need to justify their decisions. ”I believe in the rule of law, and the application of the rule of law”, Juncker concluded.

TTIP has assumed such importance in the European Union, that Juncker had earlier made it one of just five priorities that he promises to set himself.  Here's what he wrote [.pdf]:

under my presidency, the Commission will neg otiate a reasonable and balanced trade agreement with the United States of America. It is anachronistic that, in the 21st century, Europeans and Americans still impose customs duties on each other’s products. These should be swiftly and fully abolished. I also believe that we can go a significant step further in recognisin g each other’s product standards or working towards t ransatlantic standards. However, as Commission President, I will also be very clear tha t I will not sacrifice Europe’s safety, health, social and data protection standards on the altar of free trade. Notably, the safety of the food we eat and the protection of Europeans' personal data will be non-negotiable for me as Commission President.

Talking of sacrificing standards, the US Senate Finance Committee on trade enforcement  has held some interesting hearings in which representatives of US agricultural industries made it clear that the European Commission's statements that food standards would not be lowered were simply "not an acceptable position". The TTIP site put together by the European  Greens has a good explanation of what is likely to happen if the Commission caves on this:

allowing US lobby groups like the National Chicken Council to challenge EU regulations as part of TTIP, could result in sub-quality produce entering the EU market; an inferior, but cheaper, product to buy. This in turn risks undermining EU producers who could be priced out of the market. The knock on effect of this alone will be the downward pressure on regulations, as EU farmers will call for changes to allow them to compete with these cheaper US imports. Hence, the inferior product will reign. Our regulators and the Commission should be doing all in their power to resist such moves by industry.

That's true for all sectors: if cheaper, lower-quality US products are allowed into the EU, European manufacturers will be unable to compete, and so will either go bankrupt or - more likely - lobby hard for EU standards to be lowered in order to create a "level playing field."  The net result will be an inevitable race to the bottom.

Despite swearing blind that it won't, the European Commission may well capitulate on this - after all, that's what happens in tough negotiations.  You state you absolutely won't compromise, but what you really mean is you are going to extract a high price for your capitulation.  The problem is that we already know of two areas where the European Commission is pushing hard for things that the US is also swearing blind that it won't do - which also means that it will extract a high price for doing so, like lowering EU health and safety standards.

One concerns energy.  Here's what the EU Greens' blog post has to say about a recent leak here (also includes the full document):

The Washington Post has leaked a non-paper by the European Union regarding the Energy and Raw Materials chapter of TTIP. The letter, dated May 27 2014, details efforts by the Commission to secure commitments from the US to export natural gas and crude oil to Europe, the latter of which has not been available for export since it was banned by Congress in 1975.

Such a move has alarmed environmentalists on both sides of the Atlantic, who fear that such an deal as part of TTIP will lock both sides into increased use of fossil fuels, driving up harmful production methods such as fracking in the US, and making it more difficult for both regions to curb their greenhouse gas emissions.

Here's why the US will extract a high price for agreeing to this:

US Senator Edward J. Markey (D-Mass.) released a statement on Tuesday criticising the move saying that “attempting to use a transatlantic trade agreement to scuttle established U.S. law prohibiting the export of America’s oil would be a titanic mistake for our consumers, national security, and energy policy. The Middle East is in turmoil. Gas prices are sky high in the middle of driving season. And we still import millions of barrels of oil a day. Exporting our crude oil is not the answer for anyone but oil companies."

This secret move is particularly blameworthy, because it goes against the European Commission's own research that analysed the environmental impact of TTIP [.pdf]:

[TTIP] is estimated to lead to a total global increase of 4 and 11 thousand metric tons under the two different experiments respectively [less ambitious and ambitious]. CO2- emissions are expected to increase in the EU and US by around 3 and 4 thousand metric tons, respectively. On the other hand, emissions are expected to decrease somewhat across some other countries. Looking at the percentage increase, the estimated changes are shown to be very small, being 0.02 per cent in the
less ambitious case and 0.07 per cent in the ambitious case. Depending on future changes in the coverage of emissions trading in the EU (increased and more binding coverage), and possibilities for future introduction of such a scheme in the US, the net effect would then be even smaller than
reported here.

As that makes clear, the modelling takes no account of the possibility that the US will export oil and gas directly to the EU - something that is likely to increase emissions drastically, especially if it slows down the move to renewables.

The other leak concerns financial services, analysed here by Corporate Europe Observatory:

If the EU has its way, a final agreement between the EU and the US to establish a free trade and investment agreement the Transatlantic Trade and Investment Partnership (TTIP) will weaken regulation and raise obstacles to much needed reform of the financial sector. That is the conclusion after the leak of an EU proposal for so-called “regulatory cooperation” on financial regulation.1 tabled by the EU in March 2014. Regulatory cooperation is a continuous process of ironing out disagreements and differences between the two Parties to ensure agreement on what constitutes legitimate regulation – which in this case, would serve the interests of the financial industry. In the document, the EU suggests a number of mechanisms that will both scale back existing regulation, and prevent future regulation that might contradict the interests of financial corporations from both sides of the Atlantic. The leak follows news that EU negotiators have increased political pressure on the US to accept negotiations on “financial regulatory cooperation", which the US negotiators have so far refused.

This shows that the US is likely to demand extremely painful concessions from the EU if it were to contemplate accepting the Commission's proposal.  The end-result would be a lose-lose situation: losses for US consumers thanks to weakened oversight of the financial industry, and losses for EU consumers thanks to weakened health and safety.   And for those who like to claim that such compromises can't possibly be made, it's worth bearing in mind that if they aren't, there will be almost nothing major in TTIP, and only a tiny fraction of the already small gains that are predicted to flow will be realised.  In other words, the EU and US have painted themselves into a corner, where the only way out is to make extremely broad and bad concessions in a desperate attempt to justify their earlier exaggerated promises.

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TTIP Update XXXI

In my last update, I focussed once more on the Investor-State Dispute Settlement element of TTIP, this time in the light of the European Commission's consultation on the subject, which closes this week, on 6 July.  Alongside that column, I also wrote a similar post over on Techdirt, which contains yet more information about ISDS and the consultation.

Specifically, in that last piece I called the Commission's consultation a "sham".  That's because it does not ask what people think about including ISDS in TTIP; it simply offers some minor tweaks to the basic ISDS idea, and asks for feedback on those.   Moreover, the 12 main questions are couched in such technical language that most non-experts will be put off from expressing their views (the thirteenth is the only general one that allows you to express your views more freely.)  Essentially, the consultation is designed for show, with the conclusion already foregone.

However, that reckons without the determined efforts of civil society organisations who have been putting together some great resources to help ordinary citizens navigate through the conceptual minefields, and to have their say.  I mentioned one of these last week.  "No 2 ISDS" allows you to enter your name and email and to use pre-written answers supplied by the site.  At the time of writing, around 10,000 people have done that.  Although the answers are very good, I would urge you to write your own, since it is likely that the European Commission will try to dismiss identical answers.  However, if you really don't have time for a more personal response, this is certainly better than nothing.

The EDRi organisation does not write your response for you, but it does make it very easy to formulate them.  It has produced an Answering guide [.pdf], which you can download and read offline (there's also an online version - see below.)  This not only explains what each question means, but lists a number of points you might like to consider in your answer.  This makes it very easy to pick out the one you care most about, and to put it into your own words so that the Commission cannot claim it is a cut-and-paste job. 

As well as illuminating the often opaque questions, EDRi has addressed another major flaw in the EU consultation: the fact that you must submit your answers using the online form, and that you only have 90 minutes to do so.  Both of those are absurd, and suggest that the Commission is going out of its way to make it hard for ordinary citizens to respond - lobbyists, of course, are adept at accommodating anything, so it's no barrier for them.  Helpfully, EDRi has provided an online system that not only gives you each question with its explanation and talking points, but also a box to draft your own response:

You can use this form to draft your answer(s) to the questions raised by the Commission.

It is possible to save your answers. In that way, if you accidentally close your browser session or if you want to continue at a more convenient moment, you do not have to start over. By the way, your answers will be saved locally, in your browser, and will not be transmitted to us or to a third party. The answers are purely for your own reference.

Each answer is limited to 4,000 characters by the Commission, therefore we have also restricted the length of the comment areas.

Once you are finished, go to the Commission online consultation form, just click here.

With all these tools and background documents at your disposal, I therefore strongly urge you to make a submission to the European Commission on the inclusion of ISDS in TTIP.  Since the Commission has shown precious little inclination to allow us any other opportunity to express our views about this important trade agreement, even though it will touch on many aspects of lives, we should take this rare opportunity to make our views known as clearly as possible.  As usual, I included below what I have submitted.

Question 1 : Scope of the substantive investment protection provisions

In your explanation, you write that the key question here is: "What type of investments and investors should be protected?"  The answer to this is simple: no type of investments or investors should receive additional protection under TTIP.  The key word here is "additional":  I am not saying that investment and investors should not receive protection at all, just that it is unnecessary to give them extra privileges. 

There is simply no justification to give already-powerful companies even more power and privileges.  The legal systems in the EU and US have evolved and been refined over many years; they already offer companies huge advantages not available to members of the public.  That is because companies have resources that they can use to fight and exploit even the strongest legal system.  This has been seen time and again when skilful lawyers have managed to limit or eliminate fines imposed on corporate offenders.  Similarly, investors are already accorded a wide range of preferential treatment, often to the detriment of local companies. 

If TTIP is going to alter the balance of power here, it should arguably do so by diminishing the power and privileges of investors and companies, not by increasing them.  I therefore believe that the objective and approach taken in relation to the scope of the substantive investment protection provisions in TTIP is fundamentally misguided, wrong and inequitable.  The solution is to drop investment from TTIP completely, and to allow the national legal systems to do their job.

Question 2 : Non-discriminatory treatment for investors

As my answer to Question 1 indicates, I believe that foreign investors already have privileges not accorded to local companies.  This is patently unfair for European companies, and should be rectified by removing all and any such discriminatory features of TTIP, which means removing this chapter completely.  This is doubly advisable given the fact that the European Commission has admitted that there is a massive loophole in the Most Favoured Nation article of CETA which would have undermined any so-called "safeguards" in this area.

The fact that the European Commission experts overlooked this important flaw, and that it was only spotted thanks to a leaked copy of CETA emphasises why the absurd refusal to allow the public to see any draft documents is not just anti-democratic and lacking in transparency, but counter-productive too.  Adopting an open approach to negotiation would allow external experts to spot this kind of mistake before it is too late.  Who knows what blunders are currently lurking in the secret TTIP proposals?

Question 3 : Fair and equitable treatment

Never was an approach more of a misnomer.  As the European Commission itself is forced to concede, the lack of definition of "fair and equitable treatment" has led to such a wide range of interpretation by the secretive arbitral tribunals that the concept is clearly not fit for purpose.  It is so vague as to be useless, and guarantees that it will be challenged and gamed by lawyers (many of whom will also be sitting on those same arbitral tribunals, in a clear conflict of interest.)  This element cannot be salvaged, as the Commission's own unsuccessful attempts to do so demonstrate: its "closed" list is not properly closed, and therefore useless in terms of limiting the damage that this concept can cause.

Once again, the only solution is to remove the entire investment chapter from TTIP and allow national courts to adjudicate on what is "fair and equitable", as they have always done, and done well thanks to the far better established body of law on both sides of the Atlantic. That contrasts with the arbitrary and capricious judgments handed down from lawyers who have a vested interest in making "fair and equitable treatment" mean whatever they want.

Question 4 : Expropriation

This is a perfect example of why ISDS is outdated and no longer required.  The original impetus behind expropriation clauses in ISDS was to prevent rogue governments from seizing factories and other materials - a physical expropriation.  Today, expropriation has reached the absurd heights of companies making claims against governments for "indirect expropriation of future profits".  Trying to close all the loopholes in this idea is like trying to stop a sponge from leaking: it is neither possible nor sensible.  Again, the only rational solution is to drop this and all other elements of investment protection. The European Commission's foolish attempt to "clarify the provisions on expropriation" simply legitimises an idea that should never have been taken seriously.  Enshrining it in TTIP in this way would be a gross error, and lead to yet more clever legal gymnastics, and yet more abuse.

Question 5 : Ensuring the right to regulate and investment protection

This question - and the thinking that lies behind - is not just misguided, but utterly pernicious.  It sets up a false equivalence between the "right to regulate" and the "right to investment protection."  There is no balance to be achieved here, because the former must clearly take precedence in any sovereign state.  The investment protection flows from the equitable laws of that sovereign state, and instituting a parallel system "guaranteeing" such protection is a fundamental attack on sovereignty - and democracy.

The idea of a "list of horizontal exceptions" confirms that the European Commission is actually placing investment protection above national sovereignty: the former are the rule, and the latter are only permitted as exceptions.  This is not just folly, it is a dereliction of the executive power vested in the Commission.

Question 6 : Transparency in ISDS

The European Commission is to be congratulated for recognising that "Transparency is essential
to ensure the legitim acy and accountability of the system."  But as far as ISDS is concerned, the Commission seems to be trying to use a false syllogism:

"Transparency is essential for legitimacy and accountability;

ISDS lacks transparency;

Adding transparency to ISDS will make it legitimate and transparent."

Of course that is nonsense: making a system that undermines national sovereignty and democracy more transparent does not suddenly render it legitimate.  It simply means we can observe our national sovereignty and democracy being eroded in greater detail.  Clearly the European Commission is trying to use this issue as a (transparent) fig-leaf to cover up the fact that ISDS has no place in functioning democracies.

In terms of "additional suggestions", since the Commission perspicaciously notes that "transparency is essential to ensure the legitimacy and accountability of the system", it should try applying that insight to the TTIP negotiations too, where the lack of transparency inevitably means that there is little or no legitimacy or accountability. 

Question 7 : Multiple claims and relationship to domestic courts

It is simply absurd that the European Commission recognises that investors can bring their disputes before domestic courts, and yet seeks to subvert national legal systems and sovereignty by allowing them to use secret, biased tribunals instead.  The Commission's own analysis here makes it abundantly clear that investors must not be allowed to circumvent the law in this way.  That means ISDS must not be included in TTIP in any form.

Question 8: Arbitrator ethics, conduct and qualifications

Again, the question answers itself: instead of trying to correct a manifestly rotten, biased and unethical system with some future weak and vague code of conduct, the solution is to use what has had just such a code of conduct for centuries: the legal system.  If something you don't need is broken, you don't try to fix it, you just throw it away.  We should do the same with the fundamentally broken and unfixable ISDS system.

Question 9: Reducing the risk of frivolous and unfounded cases

This is pointless because it begs the question what exactly "frivolous" means.  Whatever the definition, lawyers will always challenge it, leading to yet more litigation and expense for the public purse.  The only solution is to drop all ISDS from TTIP.

Question 10: Allowing claims to proceed (filter)

Again, this simply legitimise attacks on national sovereignty by even discussing this issue.  The only way to preserve that is to reject ISDS in all its forms.

Question 11: Guidance by the Parties (the EU and US) on the interpretation of the agreement

This is pointless and redundant.  Pointless because lawyers will always argue, whatever the "guidance"; and redundant because both the EU and US already have well-functioning legal system where this is handled as a matter of course.  Placing ISDS tribunals above those systems is just folly.

Question 12: Appellate Mechanism and consistency of rulings

This would compound the folly of ISDS tribunals by adding yet another unaccountable layer on top.  That would be great news for the lawyers, but bad news for the public that would have to fund even more expensive fights to defend national sovereignty.  Moreover, instituting such a system would bolster the parallel legal system that is only available to deep-pocketed investors, not the general public - hardly how an equitable justice system is supposed to operate.

Question 13: What is your overall assessment of the proposed approach on substantive standards of protection and ISDS as a basis for investment negotiations between the EU and US? / Do you see other ways for the EU to improve the investment system? Are there any other issues related to the topics covered by the questionnaire that you would like to address?

The European Commission's approach to investment protection is fundamentally misguided.  ISDS is simply not needed.  Both the EU and US have extremely well-functioning legal systems that provide sufficient protection for investors.  That is clearly demonstrated by the following facts, taken from the Commission's own Web site (http://ec.europa.eu/trade/policy/countries-and-regions/countries/united-states/):

"Total US investment in the EU is three times higher than in all of Asia.

EU investment in the US is around eight times the amount of EU investment in India and China together."

The Commission's own figures show that in 2012, the foreign direct investment from the US in Europe was 1.5 trillion euros, while Europe's in the US was 1.6 trillion euros.  If over 3 trillion euros has been invested without ISDS, there is clearly no problem to solve here.

Moreover, any company that feels for whatever reason that it needs better protection than the EU and US courts are able to offer is at liberty to take out insurance to provide it, for example from the World Bank.  ISDS is a classic attempt to socialise risk while privatising profit, and it is totally bizarre that the European Commission would wish to impose this burden on European citizens in this way, since ISDS costs are ultimately an expense borne by the taxpayer, who gain nothing in return.

Worse than that, the risks of ISDS are huge.  We are already seeing billion-dollar awards being made by ISDS tribunals, while the number of cases against EU countries is shooting up.  Claims that ISDS is totally standard in investment agreements wilfully misses the point that these are with developing countries that are relatively weak, not with the world's most powerful and litigious nation.  Given that there are over 50,000 US subsidiaries in Europe, the potential for ISDS awards totalling billions - possibly trillions one day - of euros is obvious.  To enter into an agreement with this hanging over the European economy and citizens would be totally irresponsible.

To "improve the investment" system, the national courts should be allowed to do their job, which they have generally done extremely well in the EU and US.  Placing an ISDS tribunal above them will not only undermine investment law, but have huge knock-on effects in other areas.  Of course, ISDS judgments cannot overturn EU law directly, but the chilling effects observed in Canada, for example, where environmental laws were simply dropped when lawyers threatened to invoke NAFTA's ISDS chapter if they went ahead, should be warning enough.

The stated aim of the TTIP is to provide a boost to the EU economy, and create jobs for citizens.  In fact, as the European Commission's own CEPR research shows, even the most ambitious forecast is that TTIP would produce a cumulative 0.5% GDP boost over ten years - in other words, barely 0.05% extra GDP per year.  Therefore taking on open-ended risks through ISDS - something not factored into the already-low growth forecasts - is clearly not something that should even be contemplated.  Instead, risks need to be minimised in order to protect what few benefits might flow from TTIP - not least because the "ambitious" scenario is predicated on a massive deregulation that looks increasingly unrealistic for many sectors.

Finally, a quick comment on transparency.  Although I naturally welcome this opportunity to express my views on ISDS, it is unacceptable that this was a concession that had to be wrung from the European Commission: the people of Europe have a right to express their views on this extremely important project, and fobbing us off with a self-evidently risible claim that we will have our opportunity once the text is agreed is little short of insulting.  At that point, no changes can be made, not even by the European Parliament, which is simply presented with a yes or no choice.

Fortunately, the example of ACTA shows us that MEPs are willing to stand up for their constituents when presented with an anti-democratic agreement, negotiated in secret, that offers benefits only for multinational corporations at the expense of the European public.  I would therefore urge the European Commission to reflect long and hard on that as they read through the submissions to this consultation, and decide how best to respect the wishes of the people who pay their salaries.

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TTIP Update XXX

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.

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TTIP Update XXIX

In my last update, I introduced the secretive Trade In Services Agreement (TISA), currently being negotiated in parallel with both TTIP and sibling the Trans-Pacific Partnership agreement.  With rather nice timing, WikiLeaks has just released one of the key chapters from TISA, concerning financial services.  Since the text itself is pretty dry, WikiLeaks has asked one of the world's top experts on these trade agreements, Professor Jane Kelsey of the Faculty of Law, University of Auckland, New Zealand, to provide a detailed guide to what it all means.  I strongly recommend reading her analysis, since it really explains what all those innocuous-sounding phrases really mean.  Here is her summary of what the new leak tells us:

The secrecy of negotiating documents exceeds even the Trans-Pacific Partnership Agreement (TPPA) and runs counter to moves in the WTO towards greater openness.

The TISA is being promoted by the same governments that installed the failed model of financial (de)regulation in the WTO and which has been blamed for helping to fuel the Global Financial Crisis (GFC).

The same states shut down moves by other WTO Members to critically debate these rules following the GFC with a view to reform.

They want to expand and deepen the existing regime through TISA, bypassing the stalled Doha round at the WTO and creating a new template for future free trade agreements and ultimately for the WTO.

TISA is designed for and in close consultation with the global finance industry, whose greed and recklessness has been blamed for successive crises and who continue to capture rulemaking in global institutions.

A sample of provisions from this leaked text show that governments signing on to TISA will: be expected to lock in and extend their current levels of financial deregulation and liberalisation; lose the right to require data to be held onshore; face pressure to authorise potentially toxic insurance products; and risk a legal challenge if they adopt measures to prevent or respond to another crisis.

Although financial services are not currently part of TTIP, largely because the US government is unwilling to water down its standards, expect something very similar to the leaked TISA chapter to turn up in TTIP once the haggling begins.

Although not exactly a leak, because obtained through the US Freedom of Information Act, the publication of a letter from the US Chief Negotiator Dan Mullaney to EU Chief Negotiator Ignacio Garcia-Bercero is rather ironic, since it contains details of the efforts that the US will be making to keep TTIP as secret as possible.  It's in reply to a letter from the EU to the US outlining the measures in place there - although unfortunately we don't have this. 

The letter is easily summarised: the only people who will be granted access to TTIP documents are US government officials and "persons outside the US government who participate in its internal consultation process and who have a need to review or be advised of the information in these documents" - industry lobbyists, in other words.  No surprise there, given the US government's refusal to allow any relaxation of secrecy by the European Commission.  But the following section is something we didn't know before:

The United States will hold the TTIP documents in confidence for five years after entry into force of the TTIP Agreement, or if no agreement enters into force, for five years after the last round of negotiations.

So not only is the US doing everything in its power to stop the public seeing the negotiating documents while TTIP is being discussed, but it aims to keep them under lock and key for another five years after TTIP is agreed - or fails.  That really shows an extraordinary contempt for the US people who are not even allowed to see what their officials are doing for many years after its too late to do anything about it anyway.

Finally, a quick note about what the pro-TTIP camp have been up to recently.  Things aren't going to well for them, of course: resistance throughout Europe is growing by the day, as more people - and media - wake up to the deep problems of TTIP, not least ISDS.  Because of this pushback, momentum has been lost, and the negotiations aren't moving forward as fast as had been expected at the beginning.  In an attempt to get things going again, the Business Europe organisation has put together a Q&A page on TTIP.  Sadly, it contains the same old misleading claims, like this one:

For the EU, independent studies point out to an additional GDP growth of 0.5%, translating into EUR 120 billions annually. This compares to a GDP growth of 0.1% in the EU-28 and of 0.4% in the Eurozone in 2013.

Except, of course, as readers of this blog will know, that is comparing two completely different kinds of growth: the predicted cumulative extra GDP growth after *ten years* of TTIP (0.5%), with the *annual* growth in the EU-28 (0.1%).  A more honest way of putting that would be that the most optimistic forecast from the European Commission's research is that at best TTIP would add on average just 0.05% extra GDP growth per year.  The fact that Business Europe has to resort to this kind of obfuscation shows how weak the case for TTIP really is.

More interesting is a recent speech from Anthony L. Gardner, the US Ambassador to the European Union.  Here's the problem he's noticed:

Despite the benefits that would flow from a deal, the media coverage – especially in social media in certain EU member states – has started to turn negative.

Well, maybe the real problem is that there are *no* overall economic benefits, as the European Commission's own econometric models definitively prove.  But choosing to ignore that rather important fact, here's what Gardner says needs to be done:

I think our strategy has to change: I intend to take the debate to the critics, rather than accept speaking engagements only from the usual business federations where we preach to the converted. I intend to meet with representatives of civil society that have an open mind – including from labor, environmental and consumer groups; and I intend to focus in particular on rallying small and medium sized businesses because they struggle to spend the resources to deal with the bureaucratic red tape that we hope to reduce.

And here's how he intends to do that:

I believe this public diplomacy has to be centered on stories, not statistics: simple language that ordinary people can understand.

That's a wonderful admission that the facts about TTIP simply don't stand up to scrutiny, as I've shown in multiple previous updates.  Instead, what Gardner will offer is "stories", and "simple language that ordinary people can understand".  Isn't that consideration for the public's sadly-limited ability to understand complicated things like numbers just touching?  Thank you Mr Ambassador, you're a gent....

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