The European Commissioner responsible for TTIP, Karel De Gucht, has just held a "
stocktaking" of the negotiations with his US counterpart, Michael Froman. One thing that's clear is that the talks aren't moving as fast as politicians had hoped when they announced the project. For example, nobody is talking about finishing this year, and even 2015 is looking hard.
Nonetheless, the stocktaking represents the start of the next phase, when the serious bargaining begins. That's led to more information beginning to flow about TTIP, which is good news given the almost total secrecy in which the negotiations are being conducted.
Talking of transparency, and its absence, there's a very interesting
report in the Financial Times on the subject (subscription required, but limited free access available with simple registration.) It seems that one of Washington’s "main negotiating priorities" will be - you guessed it - transparency, but only in the domain of regulations:
There is, they argue, too little transparency in the current European process, with businesses given too few opportunities to see or comment on proposed regulations.
US companies also complain that they are often shut out of the regulatory process in Europe because the EU system can depend on closed consultations with local industry groups that make it difficult for outsiders to register their concerns.Specifically, here's what the US wants:
The US has proposed that EU regulators be required to publish the proposed texts of regulations and open them to public comment. It also wants regulators to be required to consider comments and explain why they had adopted – or failed to adopt – outside suggestions when they finalise regulations.
US officials argue that there is a growing emphasis on transparency in regulation and greater public consultations are increasingly important.Well, that's certainly true, and since TTIP is by the European Commission's own admission 80% about regulations, that same logic would suggest that the proposed TTIP texts should be published for public comment. And as far as the concern that "secret" negotiating documents can't be revealed for fear that they will undermine tactical plans, that's simple to address: publish all documents once they are "tabled" - that is, revealed to the US negotiators. At that point, they are no longer secret, so publishing them can't do any harm, but allows the public to see what is being done in their name.
Aside from this deeply ironic call for "transparency" from the US negotiators, who are even more paranoid about secrecy than the EU side, there is another little tidbit about the negotiations, which comes courtesy of CETAWatch, a Canadian organisation focussed on the Canada-EU trade agreement I've
discussed before.
According to CETAWatch, CETA's investment chapter will be published by the European Commission in March, as part of its imminent public consultation on the highly-controversial
ISDS provisions. That would seem to suggest that the European Commission's forthcoming proposals for ISDS, which the EU public will have the chance to comment on, will be based on CETA. That makes sense, because we know from another leak that CETA's ISDS provisions contain many of the modifications that the Commission has said it will seek in TTIP. Unfortunately, those modifications do not, in fact, address the deep underlying problems of ISDS, as I've
discussed in another TTIP Update.
That obviously raises the question: what will the US be proposing on ISDS? Fortunately, we have another (public) document, that gives us a good idea. It's called the
US Model Bilateral Investment Treaty, and was released a couple of years ago. I won't go through it because it's hard to tell how close it will be to TTIP; moreover, the US Institute For Policy Studies has already produced a useful
analysis that points out its many deficiencies.
Significantly, it is ISDS that lies at the heart of a
column published recently in the Wall Street Journal by Ken Clarke. It isn't the first time that Clarke has defended ISDS: he did it back in November last year, when he
attacked George Monbiot for his article in the Guardian
pointing out the dangers of TAFTA/TTIP, and of ISDS in particular.
I want to explore Clarke's latest article in some detail here, because it shows us the latest arguments that are being deployed by those seeking to defend ISDS. After some misleading comments that ISDS is "not about setting standards for consumer or environmental protection" - which is true, but it does allow corporates to challenge existing and
cast a chill over future regulations in these areas - Clarke moves on to his main argument:
Investment protection of this sort is a longstanding policy of the U.K. and the rest of the European Union. Investment protection clauses are reflected in more than 1,400 bilateral investment treaties that have been concluded by EU member states. They have been included in every British investment deal, without doing the slightest damage to consumer protection or undermining our sovereignty or our legal system.
Despite the ubiquity of such clauses, no successful investment protection case has ever been brought against the British government by a foreign company. Yet bilateral investment agreements are not always honored by the countries that sign up to them. That figure of 1,400 bilateral investment treaties has been rolled out by the European Commission, too. As I've noted before, the reason these treaties have not proved problematic for either the EU - or the UK - is that they were all with relatively small nations, often emerging economies. As such, they were generally the *recipients* of EU or UK investment; the ISDS clauses were there to protect the EU and UK investors. There was no "damage" to the sovereignty of the EU or the UK legal system because there were few or zero companies able to take the UK to ISDS tribunals.
Contrast that situation with TTIP: there we are talking about giving US companies - surely the most litigious in the world - the power to sue the EU and member states (including the UK) over court cases or legislation they think causes their profits to suffer. Given the US tendency to sue first and ask questions later, this will inevitably lead to a flood of actions against EU nations. There is simply comparison with those 1400 BITs.
And when the terms are breached, it is companies—small and medium firms, as well as big businesses—that are the losers. In cases like these, access to proper legal redress is vital. Well, it's important to note that ISDS gives companies *additional* legal redress: they are already able to use the local courts. The argument that such courts may be biased simply doesn't apply to TTIP - unless Clarke wishes to suggest that the US is a banana republic. But there's something that he omits to mention here. Not only could US companies use ISDS provisions in TTIP to sue the EU or members states (or quite possibly both), but the costs for defending those actions would be borne by the tax payer. That is, this is a classic case of privatising the profits, and socialising the costs: companies get to keep any awards they win in ISDS tribunals, but it is the public that must pay when countries lose there.
But investment protection is not simply a rod for business to beat up government, as some pressure groups have recently claimed. The arbitration system is independent and cases are decided on their merits. Investors do not win them all.
According to a study by the United Nations Conference on Trade and Development, only 31% of concluded investment-protection cases have been resolved in favor of the investor.The arbitration system can hardly be called "independent" when tribunals are made up of the same lawyers that represent companies using them. There are no measures to prevent conflicts of interest. As for that figure of 31% of cases being resolved in favour of the investor, that's true, but a historical aggregate over the last 20 years. Here's what happened in 2012 according to UNCTAD's
2013 review of ISDS cases:
In 70% of the public decisions addressing the merits of the dispute, investors’ claims were accepted, at least in part. Nine public decisions rendered in 2012 awarded damages to the claimant, including the highest award in the history of ISDS (US$ 1.77 billion) in Occidental v. Ecuador, a case arising out of a unilateral termination by the State of an oil contract.That is, more recently, cases have been concluded in favour of corporates. Worryingly, there is another upward trend here:
In 2012, 58 new cases were initiated, which constitutes the highest number of known treaty-based disputes ever filed in one year and confirms that foreign investors are increasingly resorting to investor-State arbitration.Finally, Clarke wheels out the old line about improving ISDS:
Moreover, the European Commission—which is beginning a three-month public consultation on its approach to investment protection in the treaty with the U.S.—has made clear that any agreement will include safeguards to ensure that the arbitration process is transparent and that businesses cannot thwart governments' legitimate public-policy objectives.First, the "safeguards" that the European Commission has placed in CETA have major
shortcomings; and secondly, it's not at all clear whether the US will accept even those modest changes. So there is no way Clarke can claim that TTIP will include safeguards that "ensure" that "businesses cannot thwart governments' legitimate public-policy objectives" - it's quite likely there won't be. And without effective safeguards, the EU and UK would be exposed to the very real - and very grave - problems that ISDS gives rise to.
Full list of previous TTIP Updates.
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