TTIP Update V

Today's update is a little odd, since it's not actually about TAFTA/TTIP.  Although the second round is taking place this week, it's almost certain we'll be told nothing about the real substance of the discussions.  That's because even thought these massive trade agreements affect hundreds of millions of people, the latter are not given any opportunity to see the draft texts as they are discussed, or to have any meaningful dialogue with the negotiators.  That may have been acceptable 30 years ago, but in the age of the Internet, when it is trivial to make documents available, and easy to enter into online discussions, it's outrageous.

The same has been true for the parallel Trans-Pacific Partnership agreement (TPP) negotiations, which is doing for the Pacific what TAFTA/TTIP aims to do for the Atlantic: define the terms of not just trade, but also the health, safety and environmental regulations that govern our lives.  The almost-total secrecy of the TPP talks, which are much further along than those of TAFTA/TTIP, was shattered yesterday, when Wikileaks released a text [.pdf] of the most contentious chapter: that covering intellectual monopolies.

What makes this particularly interesting is that it shows the negotiating positions of all the nations taking part – these are the US, Canada, Australia, New Zealand, Japan, Malaysia, Vietnam, Brunei, Singapore, Chile and Peru.  That means we can see quite clearly what the US is pushing for in TPP – and what it is liking to be looking for in TAFTA/TTIP.  Of course, the dynamics in the two agreements are very different: the EU is able to stand up to the US – at least theoretically – in a way that the much smaller nations that make up most of TPP can't (even Japan is dwarfed by both US and EU).

The leaked TPP draft is from 30 August, and so represents an earlier stage of the talks.  It is so full of bracketed alternatives where the negotiators have been unable to agree on a text that it is clear a huge amount remains to be done.  The brackets also make reading the text hard: if you'd like a summary of what's in the chapter, there are good ones from KEI and the EFF.  Here I will just pull out some elements that are relevant to TAFTA/TTIP and the digital world.

As far as patents are concerned, the US wants everything to be patentable:

each Party shall make patents available for any invention, whether a product or process, in all fields of technology, provided that the invention is new, involves an inventive step, and is capable of industrial application.

That includes software patents, but also "plants and animals" and "surgical methods".  In addition, here's what the US wants:

a Party may not deny a patent solely on the basis that the product did not result in enhanced efficacy of the known product when the applicant has set forth distinguishing features establishing that the invention is new, involves an inventive step, and is capable of industrial application.

That is, it wants patents for things that don't actually doing anything more than a current invention, but are simply "new" – that is, different in some unimportant way.  This would allow so-called "ever-greening" of patents, which would dilute the value of patents even more, moving them even further from their original purpose of promoting innovation.

The copyright section is one of the most interesting in the leak, since it touches on so many areas I've discussed here in Open Enterprise in the context of ACTA.  Surprisingly, it manages to go beyond ACTA in its awfulness.  This, for example, is what the US wants:

Each Party shall provide that authors, and producers of phonograms have the right to authorize or prohibit all reproductions of their works, and phonograms, in any manner or form, permanent or temporary (including temporary storage in electronic form).

TPP would make even the transient copies of works made as they pass over the Internet, or stored in a computer's RAM, all subject to copyright.  That would mean that everyone would need to get permission from copyright holders to download or even view any copyright work.  I'm not sure how that would work in practice, but even the idea of it is chilling.  It is essentially trying to make the entire Internet a permission-based system.

As far as enforcement is concerned, there's the following (agreed) section for civil damages:

In determining the amount of damages under paragraph 2, its judicial authorities shall have the authority to consider, inter alia, any legitimate measure of value the right holder submits, which may include lost profits, the value of the infringed goods or services measured by the market price, or the suggested retail price.

Which is essentially identical with ACTA , Article 2.2:

In determining the amount of damages for infringement of intellectual property rights, its judicial authorities shall have the authority to consider, inter alia, any legitimate measure of value submitted by the right holder, which may include the lost profits, the value of the infringed good or service, measured by the market price, the suggested retail price.

This goes to show how ACTA is by no means dead, and lingers on in this residual way.  Criminal infringement is even worse:

Each Party shall provide for criminal procedures and penalties to be applied at least in cases of willful trademark counterfeiting or copyright or related rights piracy on a commercial scale.

But what is commercial scale?  Here's what the US wants:

significant willful copyright or related rights infringements that have no direct or indirect motivation of financial gain

That says people can be sent to prison for copyright infringement, even if there is no direct or indirect motivation of financial gain.  The question then becomes: what is "significant"?  Probably a smartphone with a few thousands MP3s that you've ripped from CDs...

Like ACTA, there is also criminal liability for aiding and abetting infringement, again, even if there is no financial gain:

With respect to the offenses for which this Article requires the Parties to provide for criminal procedures and penalties, Parties shall ensure that criminal liability for aiding and abetting is available under its law.

That might catch open source developers if their code is used for making unauthorised copies, for example, even if they were not for financial gain.

Moreover, the criminal penalties must be harsh:

penalties that include sentences of imprisonment as well as monetary fines sufficiently high to provide a deterrent to future acts of infringement

Another very troubling aspect is what's happening with following clause on ISP intermediary liability:

Each Party shall limit the liability of, or the availability of remedies against, internet service providers when acting as intermediaries, for infringement of copyright or related rights that take place on or through communication networks, in relation to the provision or use of their services.

Both the US and Australia oppose that protection, without which ISPs would become liable for everything that their customers do.  If that is enacted, it would mean that ISPs would have to spy on everything, otherwise they would run the risk of being held liable for infringement.  That, in its turn, would inevitably lead to massive censorship, since ISPs would naturally err on the side of caution rather than risk huge fines under TPP.

It's worth emphasising that the leak concerns an older version of the draft, and that things could have changed by now.  But that older version does show us what alternatives are being proposed, and very often the differences are minor.  What's clear, is that the US has been pushing for maximalist intellectual monopolies at every turn.  There's no reason to think that its approach during the current TAFTA/TTIP will be any different.

And there's another issue here.  We've long suspected that the intellectual monopolies chapter of TPP would be bad, and the Wikileaks document confirms this.  You can also understand why the US has been adamant that the negotiations should  be secret: now that we can see what's in at least part of it, we can work to improve its worst features.  Without the text, that's impossible.

This latest leak confirms once again why we must push to have drafts released immediately.  There is no justification for not doing so – they are not "secret", since all parties can see it.  The only ones who can't are the public, in whose name and for whose benefit they are supposedly being negotiated.  That's truly a disgrace.

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TTIP Update IV

One of the key issues during the ACTA negotiations was transparency – or rather the lack of it.  Despite a few token gestures from the European Commission initially, TAFTA/TTIP looks like it will be just as bad. Here's a rather nice trick the negotiators have just played:

Surprise!  The second round of negotiations for the massive Trans-Atlantic Free Trade Agreement (TAFTA) won’t be happening in Washington, DC in December as planned.  It will be happening in six days.  In Belgium.

…

USTR’s email yesterday invited “stakeholders” to a “briefing session” next Friday where “non-governmental organizations, consumer groups, trade unions, professional organizations, business and other civil society organizations will have the opportunity to exchange views with U.S. and EU chief negotiators.” It just happens to be taking place on the other side of the Atlantic Ocean.

This may well be the most expensive “stakeholder engagement” opportunity presented by the Obama administration for one of its sweeping “trade” deals. At current prices, the cheapest last-minute flight to “exchange views” with TAFTA negotiators in Brussels would set you back $1977. That may not be a problem for the approximately 600 corporate trade “advisors” who are already deeply involved in helping USTR craft TAFTA negotiating positions. For the rest of us, it’s a bit like getting an email invitation to your friend’s destination wedding in Cancun a week before the ceremony (psst...I don’t really want you to come).

That act of petty spitefulness is indicative of a deep and crucial asymmetry in the TAFTA/TTIP negotiations.  Whereas some of the world's largest companies are given privileged information about what is happening – not least *where* things are happening – the public, which is poorly represented anyway, finds itself cut out from that insider knowledge, and therefore lacks the ability to follow the negotiations properly, let alone give any input to them.

That's obviously disgraceful for something that is supposedly being negotiated in their name – and which is certainly being negotiated using their taxes, which pay the European Commission negotiators their not inconsiderable salaries, and the cost of their plane tickets as they jet to and fro across the Atlantic – first class, no doubt.

But there is an even deeper, more troubling asymmetry at the heart of these talks that concerns the investor-state dispute settlement (ISDS) element I've written about in my last two TTIP Updates.  That's probably the most problematic and worrying area of the whole agreement, because the core idea of ISDS is that any laws or court decisions that cause even the "expectation" of future profits of companies to be diminished in some way can potentially be litigated before a secret, supranational tribunal able to impose unlimited fines on entire nations.

The subtle implication of this is that legislative changes must tend to increase corporate profits.  So, for example, improved health and safety laws would be stymied by this, as would enhanced environmental protection where it causes a company's profits to be reduced (as is likely, since better protection usually means more costs for the polluters.)

In other words, ISDS introduces exactly the same kind of upward ratchet that copyright laws have produced for the last three hundred years.  Just as copyright laws only ever make copyright longer, broader and deeper – to the benefit of companies and disbenefit of the public -  so ISDS will put huge pressure on the EU and member states only to pass legislation that improves the outlook for corporate profitability.  The fact that these kind of moves may well cause huge social damage – greater health or environmental problems – is completely overlooked, because the framing does not allow the social costs to be taken into account, only private profits.

That makes this proposal in South Korea particularly interesting:

Evaluation of trade agreements have been made in economic terms. But the impact of trade agreements is not limited to economic life. They have human rights dimensions in many aspects. For instance, trade agreements containing the TRIPS-plus provisions may affect the right to access to essential medicine, the right to food and more broadly the right to science and culture, which is protected by the Article 27(1) of the Universal Declaration of Human Rights. So the UN human rights bodies have tried to develop and propose human rights impact assessments (HRIA) of trade agreements (See The Future of Human RightsImpact Assessments of Trade Agreements).

The recent move of the National Assembly of South Korea to mandate the HRIA was influenced by the efforts of the UN human rights bodies. The lawmaker, Mr. Buh, proposed a bill to amend the Law on the Treaty-Making Process and Implementation of Trade Agreements (Trade Process Act), which includes an amendment making compulsory the HRIA on every trade pacts that are likely to be agreed upon with trade partners.

This is an important move, because it begins the long journey of re-balancing trade agreements around the world so that they take in account human rights and therefore, by implication, the public interest as well as corporate profit.  Although it's not clear whether the Korean initiative will succeed, it does at least raise the issue in a political context.  We now need to start similar conversations here in the EU and in the US regarding TAFTA/TTIP if that agreement is to have any claim to fairness and legitimacy.

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TTIP Update III

It's been fairly quiet on the TAFTA/TTIP front recently.  That's largely because Europe shuts down for its summer hols during August, and has only just got going again.  Unfortunately (for TAFTA/TTIP), the next round of negotiations has just been cancelled because the US administrations was busy being, er, not busy.  But as a consolation prize, we have a couple of documents from the European Commission on the subject of Investor-State Dispute Settlement (ISDS), which by a happy coincidence was the subject of my previous TTIP Update.

In fact, those two documents turns out to be pretty much the same, just re-worded slightly.  Both seek to defend the indefensible – that is, to convince people that ISDS is totally harmless, and nothing to worry our pretty heads about.  Above all, they want to reassure us that ISDS is definitely not this years' ACTA....

This comes through most clearly in the document entitled "Incorrect claims about investor-state dispute settlement" [pdf].  So let's have a look at some of the claims about the claims:

Claim: Investor-state dispute settlement subverts democracy by allowing companies to go outside national legal systems.

Response: Untrue! To get a sense of perspective on this question it is important to remember that the EU itself, as well as all but one of our Member States, Switzerland, the United States, Canada, Japan, South Korea and India - to name just a few - are all party to many agreements which provide for investor-state dispute settlement. These countries, and many more that also allow investor state dispute settlement, have healthy, vibrant democracies.

More specifically, relying on the national courts of the host country to enforce obligations in an investment agreement is not always easy.

Firstly, the investor may not want to bring an action against the host country in that country's courts because they might be biased or lack independence.

Secondly, investors might not be able to access the local courts in the host country. There are examples of cases where countries have expropriated foreign investors, not paid compensation and denied them access to local courts. In such situations, investors have nowhere to bring a claim, unless there is an investor-state dispute settlement provision in the investment agreement.

Thirdly, countries do not always incorporate the rules they sign up to in an investment agreement into their national laws. When this happens, even if investors have access to local courts, they may not be able to rely on the obligations the government has committed itself to in the agreement.

All that sounds plausible, until you remember that TTIP is an agreement between the EU and US, nobody else.  So let's look at the above "explanation" in that light:

"Firstly, the investor may not want to bring an action against the host country in that country's courts because they might be biased or lack independence. "

So the European Commission is saying that the US courts are biased or lack independence?  I do hope Karel de Gucht explains why when negotiating with his US counterparts.

"Secondly, investors might not be able to access the local courts in the host country. "

So here the European Commission is saying that investor might not be able to access local courts in the US? Sure, that happens all the time....

"Thirdly, countries do not always incorporate the rules they sign up to in an investment agreement into their national laws."

So now the Commission thinks that the US will go to the trouble of negotiating this huge treaty – and then just ignore its provisions?  Again, how plausible is that as an answer? 

And notice that none of the three points actually addresses the key issue, which is that ISDS does indeed allow companies to go outside national legal systems, and thus subvert established democratic institutions like the local courts. Basically, ISDS is inappropriate for developed nations like the EU and US.  Introducing it does one thing, and one thing only: provides foreign investors with extra rights over and above what ordinary citizens and domestic companies enjoy.

So let's look at another:

Claim: Investor-state allows companies to sue just because they might lose profits.

Response: Wrong! Companies cannot sue successfully just because their profits might be affected. They need to have a case. That means they need to prove that one or more of the investment protection standards, such as non-discrimination or protection against unlawful expropriation have not been respected. The fact that a government changes a law, which increases the costs for a given company, is not on its own, sufficient to bring a successful case in investor-state dispute settlement.

Although it's strictly speaking true that companies cannot sue *just* because they might lose profits, in practice that's pretty much what happens, because the so-called "investment protection standards" are so vague and easy to invoke.  Here's a good explanation from Public Citizen:

Investors and corporations can demand taxpayer compensation for policies that they allege as violating special “rights” granted to foreign investors by NAFTA-style FTAs. These “rights” are phrased in vague, broad language. Tribunals have increasingly interpreted these foreign investor “rights” to be far more expansive than those afforded to domestic firms, such as the “right” to a regulatory framework that conforms to a corporation’s “expectations.” This “right” has been interpreted to mean that governments should make no changes to regulatory policies once a foreign investment has been established.

Claim: Investor-state dispute settlement cases take place behind closed doors

Response: Many existing agreements do indeed provide, by default, that investment disputes are heard behind closed doors. The EU does not believe that is appropriate. We have championed transparency in international dispute settlement in general and in investor-state dispute settlement in particular. In future EU agreements, all submissions will be public, all hearings will be open, all decisions of the tribunal shall be public and interested parties will be able to make their views known.

So the response here is more along the lines of "well, yes, that's true, but we'd really like to change it."  Unfortunately, that overlooks the fact that it can't do that unilaterally: it needs to get the US to agree, and the current administration has shown itself a bigger enemy of transparency than any predecessor.  Bottom line: it's not going to happen.

Claim: Investor-state dispute settlement undermines public choices (e.g. Vattenfall challenging the German moratorium on nuclear power, Philip Morris challenging Australia’s plain packaging regime for cigarettes)

Response: It is important to note that only well-founded cases have a chance of being successful. The fact that a policy has been challenged does not mean that the challenge will be successful. The EU will negotiate in such a way so as to ensure that legislation reflecting legitimate public choices e.g. on the environment, cannot be undermined through investor-state dispute settlement.

Well, see comment above: the EU can negotiate until it's blue in the face, but if the US refuses to go along with the plan, then the situation remains the same.  And here's what currently happening: a wide range of health, safety and environmental regulations are being challenged through the ISDS mechanism:

foreign corporations have launched investor-state challenges against a wide array of consumer health and safety policies, environmental and land-use laws, government procurement decisions, regulatory permits, financial regulations and other public interest polices that they allege as undermining “expected future profits.”

Claim: Investor-state dispute settlement is biased in favour of investors – they can threaten to bring expensive cases against governments and so scare them away from policies that the investors do not like.

Response: There is little real world evidence that this is the case. UN statistics on investor state dispute settlement cases show that a majority of cases are decided in favour of the government (Of all the cases concluded by 2012, 42% found in favour of the State, 31% in favour of the investor and 27% were settled).

This is an absolutely key issue.  ISDS actions threaten to become the global version of patent trolls: by merely threatening to sue they can cause cautious governments to change their plans.  Notice how the European Commission quotes the figures for "all the cases concluded by 2012".  That conveniently bundles together all the early cases where tribunals did, indeed, tend to find for the State more often.  But unfortunately for the European Commission's argument, that's no longer the case.  Here's what the UN statistics have to say about 2012:

In 70% of the public decisions addressing the merits of the dispute, investors’ claims were accepted, at least in part.

Next:

Claim: Investor-state dispute settlement cases are decided by a small clique of lawyers, with considerable conflicts of interest, who seek to cream off public money.

Response: Like in any area of national or international law the number of true specialist lawyers in the field is not large. Some of these lawyers do combine roles as arbitrators in some disputes and advocates in others. This crossing over may create the risk of conflicts of interest.

In other words, this is also true, but we would like to change it (see above).

Finally, we have:

Claim: Investors should not be allowed to challenge governments directly in international law. Only governments should be able to act against each other, via state-to-state dispute settlement.

Response: It is investors who actually suffer the financial losses. Governments (including the EU) need to pursue the general interest, and that means that they have neither the time nor the resources to follow-up each individual alleged breach of the agreement.

The fact that governments (including the EU) have neither the time nor resources to deal with each alleged breach is precisely why ISDS is so pernicious: it forces governments (or the EU) to spend huge amounts of time and money dealing with claims made under it.  The fact that tribunals are finding increasingly often in favour of companies means that more cases will be brought, because the odds of succeeding are going up, especially if speculative funding is available.

And here's another reason why that growth in ISDS trolling is likely to happen: last year saw the largest award made by an ISDS tribunal – a cool $1.77 billion in damages.  And remember, that's money that the government concerned has to pay.  If ISDS is included in TAFTA/TTIP, the people who will end up footing the not inconsiderable bills will be you and me.

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