TTIP Update XIX

In my last update I raised the issue of an apparently obscure facet of investment chapters - the presence of "Most Favoured Nation" clauses - that actually undermined any attempts to bring in "safeguards" against the manifest dangers of that form of supranational corporate sovereignty known as investor-state dispute settlement (ISDS).  Cynics among you probably thought this was nit-picking, but support for the idea has arrived from a rather surprising quarter:

According to Rupert Schlegelmilch, director of services, investment and procurement at DG Trade, speaking on behalf of the Commission at a public debate yesterday on investor-state dispute settlement (ISDS) and the TTIP, the EU is rethinking a “Most Favoured Nation” (MFN) article in the CETA investment chapter that new analysis suggests undermines much of the more careful language in the treaty relating to a government's ability to regulate. As written, the MFN article would let Canadian and EU investors ignore the definitions of “fair and equitable treatment” or “indirect expropriation” in CETA and take other more investor-friendly language from past agreements signed by either party.

Obviously, it's great news that the European Commission has recognised there's a problem here, and is trying to do something about it.  But this incident actually underlines a much bigger point.  The problem with MFN only emerged because the CETA chapter dealing with ISDS was leaked.  That meant that experts such as Nathalie Bernasconi-Osterwalder and Howard Mann at the International Institute for Sustainable Development were able to spot this huge loophole there [.pdf].  But that immediately raises the question: how many other serious problems are lurking in the many other chapters of CETA for which we do not have leaked versions? Would it not be better to have many experts searching for loopholes in the agreement *before* it is signed, rather than afterwards, when fixing them will be very hard, if not impossible?

Really, this comes down to applying Linus' Law -  the insight that given enough eyeballs, all bugs are shallow - to the code of international treaties.  Not to do so is wilfully to throw away the power of parallelised production, which allows better results to be produced much more quickly.  In other words, keeping texts secret is not just an insult to the public in whose name they are being negotiated, but actually leads to worse results thanks to the lack of proper scrutiny.

So, in the absence of texts that have been discussed during the latest round of the TAFTA/TTIP negotations - texts that are by definition not secret, since they have been discussed by both sides - in this update I will analyse some other documents that provide useful insights.

For example, the US Trade Representative, which is the negotiation partner for the European Commission, has released what it calls "U.S. Objectives, U.S. Benefits In the Transatlantic Trade and Investment Partnership: A Detailed View".  That in itself is interesting, and shows that it is feeling the pressure to open up.  Of course, releasing one very general document does little to address that, but it does contain one or two tidbits worth noting.

For example, in the section "Electronic commerce and information and communication technology (ICT) services" we read:

free flows of data are a critical component of the business model for service and manufacturing enterprises in the U.S. and the EU and key to their competitiveness.

But as we know, the European Parliament has come out against such "free flows", and wants to see European-style data protection for personal data when it leaves the EU.  So it will be interesting to see how that works out.

One aspect of TTIP that has not been discussed much yet concerns intellectual monopolies.  Here's what the USTR has to say on the subject:

We seek new opportunities to advance and defend the interests of U.S. creators, innovators, businesses, farmers, and workers with respect to strong protection and effective enforcement of intellectual property rights, including their ability to compete in foreign markets.

The question is: will the US try to use TAFTA/TTIP to bring in ACTA-like measures?  Since everything is being negotiated behind closed doors, we don't yet know, but I'm confident we'll soon see some leaks that gives us an insight into this crucial area.

Finally, there is the controversial area of investor-state dispute settlement (ISDS):

We recognize that trade agreements that are effectively enforced establish a set of high-standard rules and obligations that help keep markets open to U.S. exporters and investors and ensure a level playing field.  When we negotiate and implement a trade agreement, we expect our trading partners to stick by the rules and obligations they agreed to.  However, when our trading partners fall short of what they promised – whether to reduce tariffs, implement strong labor and environment provisions, or otherwise provide U.S. exporters fair and non-discriminatory treatment – we need a means to hold them accountable.  This is why we have this important objective to establish a fair and open dispute settlement mechanism.  Dispute settlement gives us a means to discuss our concerns in a timely way and to seek compensation if they are not addressed.  Dispute settlement with trading partners in T-TIP will give the American public the confidence that we not only negotiate strong, high-standard obligations, but that we also have the means to enforce them.

You've got to love the subtle suggestion that the European Union is some kind of large, fragmented banana republic where the rule of law is uncertain, and thus supranational tribunals of the kind employed by ISDS are indispensable.  Just can't trust that sneaky Euro-trash...

Meanwhile, we're starting to see some sectoral information about what various industry want from TTIP, and hidden away in the details there are some interesting angles.  For example, here is a "Proposal on US-EU Regulatory Cooperation" [.pdf] from The European Crop Protection Association (ECPA) and CropLife America (CLA).  As you might expect, most of that document falls outside the scope of this column, but there's one section that certainly touches on issues I've discussed before:

ECPA and CLA strongly support that the EU and US continue to promote (a) minimum standards of 10 years for protecting regulatory data, and (b) protection of CBI [Confidential Business Information] through Free Trade Agreements with other countries, where protection of regulatory data is sub-optimal. Protection of regulatory data from unauthorized use by competitors is essential for stimulating investment in research and development of agricultural crop protection products. This protection provides benefits to all stakeholders – from farmers to consumers – ultimately contributing to the economic development of industrialized and developing countries alike.

That "regulatory data" is essentially health and safety information.  This must be made available as open data, for the same reason that clinical data should be.  It allows it to be checked by independent researchers, and also allows it to be analysed and re-used in new ways.  Making it proprietary as the ECPA and CLA call for blocks those kind of uses.  As it becomes more widely recognised that data is a crucial resource for the future, we need a general principle that "regulatory data is always open data" to be enshrined not just in TTIP, but in all agreements.

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TTIP Update XVIII

A lot has been happening on the TTIP front recently.  That's largely because of two factors.  First, that the real negotiations have begun, which is generating a lot of activity by all those involved.  And secondly, because resistance to some or even all of TTIP is growing, and that is manifesting itself in various ways.  For example, yesterday the important resolution on NSA surveillance passed by the European Parliament included the following key recommendation:

Parliament should withhold its consent to the final Transatlantic Trade and Investment Partnership (TTIP) deal with the US unless it fully respects EU fundamental rights, stresses the resolution, adding that data protection should be ruled out of the trade talks. This consent “could be endangered as long as blanket mass surveillance activities and the interception of communications in EU institutions and diplomatic representations are not fully stopped”, notes the text.

Interestingly, the leak of a document from 2012 [.pdf] reveals that getting consent for TTIP is going to be much harder than we thought.  The confidential legal opinion says that TTIP must be regarded as a "mixed agreement".  What that means in practical terms is that all 28 EU national parliaments must approve it - it's not just the European Parliament that gets to vote here.  That makes the barrier to getting TTIP through much higher.

There's more resistance in the form of a new site dedicated to TTIP put together by the Green/EFA Group of the European Parliament:

The European Greens do not believe that TTIP represents the kind of transatlantic relationship we need. As it currently stands, TTIP threatens our democracy and risks undermining our hard-won regulation and standards in a host of sectors.

We are against the current negotiation agenda that was set by business interests and is taking place in complete secrecy. Negotiations need to be in the full view of the public and their representatives, and the deal needs to promote and enhance social, environmental, health and consumer rights, not undermine them.

Contributions to this site will continue over the coming months. The Greens hope to provide a platform for concerned stakeholders to discuss the current state of the negotiations and what they could mean for citizens and democracy on both sides of the Atlantic.

Another new site is eu-secretdeals.info, which has an interesting emphasis on publishing leaked documents for both TTIP and the Canada-EU trade agreement (CETA):

By publishing negotiating texts, that reached us from anonymous sources, and by providing critical analysis of these texts, we hope to enable parliamentarians, academics, civil society organisations, media and the public to understand what the EU, the US and Canada are trying to do during the negotiations.

We are committed to a more transparent and democratic EU and international trade policy. And we invite all interested NGOs, academics and progressive political actors to contribute to this site with their insights and analysis of the leaked investment texts and investor-state dispute settlement generally.

As that suggests, the investor-state dispute settlement (ISDS) element of TTIP (and CETA) remains problematic.  In fact, the main organisation that monitors this area - UNCTAD, the United Nations Conference on Trade and Development - published an important analysis [.pdf] of just how serious those problems were back in June 2013 (I've only just come across it, thanks to this excellent Swedish post rebutting the European Commission's attempts to justify ISDS that I wrote about my previous update.)

Here are the main issues with ISDS, as perceived by UNCTAD:

Legitimacy and transparency

Probably the main concern here, that ISDS will undermine measures in the public interest.

Arbitral decisions: problems of consistency and erroneous decisions

As UNCTAD points out, the decisions of the ISDS tribunals are often inconsistent, which makes them a nightmare to plan for and deal with - and hardly suitable for a treaty like TTIP.

Arbitrators: Concerns about party appointments and undue incentives

The members of ISDS tribunals may not be impartial, making their judgments even more problematic.

Cost- and time-intensity of arbitrations

ISDS cases typically cost around $8 million, which makes them punitively expensive. 

Those are the "old" problems, well-known for some time.  But new ways of abusing the ISDS system are cropping up all the time.  For example, an important new report from Corporate Europe Observatory (CEO) exposes how ISDS in existing treaties are being used in an attempt to extract huge sums from European nations worst-hit by the financial crisis:

For a long time, European countries were left unscathed by the rising global wave of investor-state disputes which had tended to target developing countries. In the wake of the global financial crisis, however, corporations and investment lawyers have turned their eyes to potential pickings in Europe. An investment regime, concocted in secretive European board rooms, and that gives corporations powerful rights to sue governments, has finally come home to roost.

Here's how it works:

Profiting from Crisis looks closely at how corporate investors have responded to the measures taken by Spain, Greece and Cyprus to protect their economies in the wake of the European debt crisis. In Greece, Poštová Bank from Slovakia bought Greek debt after the bond value had already been downgraded, and was then offered a very generous debt restructuring package, yet sought to extract an even better deal by suing Greece using the Bilateral Investment Treaty (BIT) between Slovakia and Greece. In Cyprus, a Greek-listed private equity-style investor, Marfin Investment Group, which was involved in a series of questionable lending practices, is seeking €823 million in compensation for their lost investments after Cyprus had to nationalise the Laiki Bank as part of an EU debt restructuring agreement. In Spain, 22 companies (at the time of writing), mainly private equity funds, have sued at international tribunals for cuts in subsidies for renewable energy. While the cuts in subsidies have been rightly criticised by environmentalists, only large foreign investors have the ability to sue, and it is egregious that if they win it will be the already suffering Spanish public who will have to pay to enrich private equity funds.

This is a great demonstration of how ISDS clauses can be misused.  These debt restructuring measures were brought in at the behest of the European Commission: the countries had no choice in the matter if they wanted EU support.  The austerity measures they formed part of have pushed large numbers of people into poverty, and yet the investors who have bought up debt cheaply are now trying to extract large sums from cash-strapped governments.  If the investors win, that money will come out of the public budget, and will inevitably mean further cuts in health services, education etc.

These ISDS cases have arisen purely from existing intra-EU treaties: imagine how things will be when US companies can join in.  And if you think only a few multi-national companies are involved, think again. As CEO says:

A total of 75,000 cross-registered companies with subsidiaries in both the EU and the US could launch investor-state attacks under the proposed transatlantic agreement. Europe’s experience of corporate speculators profiting from crisis should be a salutary warning that corporations’ rights need to be curtailed and peoples’ rights put first.

Of course, the European Commission's response to all these major issues is to say that we shouldn't worry, because it will all be sorted out in TTIP.  But as a previous Update showed, its attempts to do that in CETA don't inspire confidence.  That was based on some excellent work by the Seattle to Brussels Network; but I've recently discovered another, completely independent analysis of the same documents, this time from the International Institute for Sustainable Development [.pdf].  It's extremely thorough, and its conclusions are unequivocal:

In the end, and whatever the reason for the disconnect, we conclude that the actual draft legal texts in the public domain show that the European Commission’s assertions [about improving ISDS in CETA] are in most respects incorrect when compared to the draft legal text. The technical legal analysis is set out on each specific point below. In effect, the analysis indicates that the standards by which the European Commission itself seeks to demonstrate the success of the drafting actually show that the drafting has failed to meet its stated objectives, in fact, sometimes with the exact opposite result.

Here, though, I want to concentrate on one particular aspect that concerns "Most-Favoured Nation (MFN)", which could extremely serious ramifications if it is included in TTIP.  The situation for CETA is as follows:

Article X.8 of the November 2013 draft [of CETA] contains the MFN provision. In essence, it requires, for present analytical purposes, a European state to treat a foreign investor from Canada no less favourably than it treats an investor from any third state. The problem arises from the legal reality that such treatment has been defined in investment arbitrations as including the rights of other investors under investment treaties with the host state. So, if an EU member state that has a Canadian investor also has a treaty with an African, Latin American or any other state, the investor from Canada can import the provisions of that treaty if they are more favourable than the provisions of the CETA.

The impact of this is straightforward. The European Commission statement notes the need to “bring very significant clarifications” in order to give arbitrators “strict and detailed guidance when these provisions are invoked by an investor.” Now, we have already seen from the preceding analysis that this objective has not been met in the November 2013 draft text. But let us suppose, for the sake of understanding the current issue, that it had been met. The MFN provision would in any event undo this.

Arbitrators now routinely allow investors to essentially cherry-pick provisions from other investment treaties that are more favourable to it. To continue our example of a Canadian investor, let’s assume it makes a claim against an EU member state for expropriation under CETA. The exceptions and carve-outs would apply to it. However, if the same state has an old treaty with any other state, the investor can argue that the expropriation provision from that treaty, without the exceptions or carve-outs included in the CETA, should apply to its claim as a result of the CETA’s MFN provision. The benefits to the states of the more careful drafting are thus, quite simply, lost.

So, in the case of CETA, all of the European Commission's much-vaunted "improvements" to ISDS are completely nullified by the presence of this MFN clause.  We don't know if a similar MFN section will be in TTIP, but if it is, and it is as badly-worded as in CETA, it will have a similarly disastrous effect.  When the European Commission releases its ISDS consultation document (soon?) it must make absolutely clear what its position on MFN is.

However,  maybe it won't matter.  An article published todayin the German newspaper Die Zeit claims that the German government wants ISDS out of TTIP.  Obviously, that needs to be confirmed, but if it's true, it's hard to see how the European Commission will be able to push an agreement through if it contains ISDS.

Never a dull moment in the world of TTIP....

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TTIP Update XVII

In a previous update a couple of months ago, I discussed a low-key meeting that took place between  the European Commission and some of the biggest companies in the world (mostly from the US), which essentially revealed that the Commission was, after all, intending to bring back some of ACTA's worst ideas.  Things just became rather more worrying on this front as the result of the following announcement in the US:

This morning, President Obama nominated Robert Holleyman as deputy U.S. trade representative. If confirmed by the U.S. Senate, Holleyman will help lead the effort to pass the controversial Trans-Pacific Partnership trade deal.

Notably, Holleyman is a former lobbyist who led efforts to pass the Stop Online Piracy Act legislation, better known as SOPA, when he was leader of the Business Software Alliance. The SOPA debate (along with its sister legislation, PROTECT-IP, in the Senate) brought a spotlight on industry efforts to undermine Internet freedom through what many considered to be draconian intellectual property policy.

As that notes, he was formerly head of BSA; that means that he is no friend of open source.  Coupled with the European Commission's admission that it wants to bring in "Christmas list" of new demands in the area of intellectual monopolies, makes TTIP alll-the-more dangerous for both free software and online freedom.

Alongside that bad news, we've also had some good news in the shape of two significant leaks of relevant documents.  One concerns the Canada-EU trade agreement (CETA), which I discussed recently.  The German Pirate Party has obtained a copy of part of this agreement (.pdf), dating from December last year - quite recent, then.  Interestingly, even here there are sections that have still not been finalised. The leaked section concerns intellectual monopolies; a good early analysis of it has been made by Ante Wessels of FFII.  In particular, he compares its measures to those found in ACTA:

The damages in CETA do not contain the much criticized retail price damages, which were part of ACTA, the Anti-Counterfeiting Trade Agreement, and are part of the EU – Singapore trade agreement proposal.

The injunctions do not contain “inaudita altera parte”, the much dreaded possibility to decide on injunctions without the infringer present.

So far so good. But, I do not see what was footnote 2 in ACTA, and is footnote 33 in the EU – Singapore agreement, the right to exclude patents from the scope of the civil enforcement section.

All the strong enforcement measures (damages, injunctions, provisional measures) will be available for software patent trolls.

The strong enforcement measures further create problems for access to knowledge and taking part in culture, for remix artists, and for inventors involved in sequential invention – like software developers.

Bad news, in other words.  And because agreements tend to build on one another - as I mentioned last year - it's very likely some of this language will re-appear in TTIP. 

The other leak is the European Commission's draft proposal on trade in services, investment and e-commerce for the TTIP negotiations [.pdf], obtained by the German newspaper Die Zeit.  Although it dates from July last year, it still offers some useful insight into the Commission's general thinking as regards TTIP.  That's also true of its latest official document, entitled "EU US Trade Agreement – The Facts" [.pdf]  This is very similar to the text that I discussed in October last year, headed "Incorrect claims about investor-state dispute settlement".  It takes the same form: statements allegedly made about TTIP, and their rebuttal.  For example:

TTIP will enable foreign firms to undermine EU laws. FALSE

An existing law cannot be undermined by a trade agreement. An existing ban on fracking or chlorine - washed chicken cannot be questioned, for example.

Although that's true, the European Commission omits to mention that  foreign firms will be able to undermine *future* laws by threatening to sue the EU or national governments if they are brought it.  This chilling effect is not merely theoretical: it has been happening for years in Canada, where NAFTA's ISDS chapter has allowed US companies to undermine proposed legislation in just this way.  If TTIP includes ISDS, it seems certain US companies will do the same here in Europe.  And remember that the great thing about such threats is that they can work even when it is not at all clear that the company would win in the ISDS tribunals: the mere possibility of such expensive actions is usually enough to "persuade" governments to back down.  That's the real danger here.

Moreover, from a true statement, the European Commission rather naughtily segues into an untrue one:

What the agreement does provide for – and this is in the EU's interest - is a ban on discrimination. That means that what applies to domestic firms must also apply to foreign firms.

What the Commission elides here is the fact that US companies will actually have *more* rights than EU companies in Europe, because EU companies are not able to sue there for any claimed "indirect expropriation of future profits", as US companies can using ISDS.  So introducing ISDS in TTIP will actually put EU companies at a disadvantage in their home markets.

TTIP will lead to privatisation in areas such as health care, water and education. FALSE

The TTIP Agreement has nothing to do with privatisation – only governments can decide that. No free trade agreement obliges the EU's Member States to liberalise or privatise the water industry or other public services, such as public health systems public transport or the education system.

Again, this misses the point - wilfully, perhaps.  The problem with TTIP is not that it will force nations to privatise services, but that once they are privatised, and provided by a US company, it will effectively be impossible to re-nationalise them.  That's because under ISDS that would amount to an "expropriation" of future profits, which would mean that the US companies concerned could sue the governments for those "lost" monies.  That would make re-nationalisation punitively expensive, and ensure that it rarely happened.

TTIP will restrict the rights of internet users. FALSE

Both the EU and the US have efficient regulations for protecting intellectual property rights, even though their respective regulations achieve their goals in different ways. The TTIP aims to simplify trade between the EU and the US without weakening these regulations. The TTIP will not be "ACTA throug h the back door" and it will not call into question the European Parliament's rejection of the trade agreement on combatting piracy of labels and products (ACTA).

As I noted above: the European Commission has already said to corporates that ACTA by the back door is precisely what it hopes to achieve here; the appointment of one of the main SOPA supporters as a key US negotiator guarantees that this will be high on the agenda.

The TTIP is undemocratic and elected politicians have no influence over it. FALSE

Both the EU's national parliaments as well as MEPs in the European P arliament have considerable influence on the TTIP negotiations. The European Commission is negotiating the trade agreement in the name of, and with a mandate from, the EU's Member States. The EU's negotiators meet weekly with representatives of the dem ocratically elected governments of the Member States in order to brief them 'live' before, during and after negotiating rounds and to take into consideration their positions. The European Parliament is also regularly informed of the state of the negotiati ons so that the positions and interests of the democratically elected parliamentarians can also be taken into consideration in the negotiations. Finally, it will be the EU Member States and the European Parliament which will have the last word on the TTIP and so it is obvious their interests will be taken into consideration.

This is nonsense.  Here's the reality:

USTR demands for hyper-secrecy in the Trans Atlantic Trade and Investment Partnership (TTIP) continue to be a major block to continuing negotiations. The current issue under discussion is access to US proposals by EU member states — which are of course themselves sovereign countries. The member states are demanding access to the text of proposals that would constrain their domestic law making, as they ave had in all other EU trade agreements (e.g. the recent EU-Canada FTA). But Inside US Trade (2/28/2014) reports that USTR Froman has offered only that “he might be able to allow the European Commission to share the U.S. negotiating documents it receives if they were accessible only in a secure reading room.”

As that makes clear, even the "representatives of the democratically elected governments of the Member States" don't have access to all the relevant documents: they are currently being offered peeks in a "secure reading room" - how insulting is that? For MEPs, it's even worse:

There is no word yet on whether EU Members of Parliament will obtain access to consolidated TTIP text after each negotiation round, as was provided in at the end of the negotiation of the of the Anti-Counterfeiting Trade Agreement (ACTA). Increased access to ACTA text for EU (but not US) legislative staff followed a March 2010 Resolution of the EU Parliament lambasting the Commission for its intense secrecy, including accusations of violations of the Lisbon Treaty governing EU affairs.

If MEPs can't even see the text, they are certainly not informed.  There's no way that they can exert "considerable influence" as the Commission claims if they don't know what's in the negotiating texts.  And that "last word" is literally that: a single, "yes" or "no" vote, where MEPs will be under tremendous pressure to accept the horrors - things like ISDS - for the sake of some much-needed growth.  Talking of which:

Why bother? The Transatlantic trade and Investment Partnership could have a similar effect to a package of economic stimulus measures. It could boost growth by 0.5% of GDP or some €120 bn, equivalent to €500 for every EU household because savings for companies also mean cheaper products, higher quality and more choice for consumers.

Yet again, the European Commission fails to note that the extra 0.5% GDP growth is compared to what would be obtained without TTIP *in 2027*, after 10 years of the agreement.  That means that even under the most favourable circumstances - something else it also fails to note - TTIP will increase GDP by just 0.05% each year on average.  It makes no sense to talk about the cumulative GDP effect: it might as well say that TTIP will produce 50% GDP growth - but without mentioning that would only be in 2117.  The only meaningful measure is the extra GDP growth that TTIP will produce *each year*, and that figure is 0.05%. 

Claiming that TTIP "could boost growth by 0.5% of GDP" without explaining that this is the  cumulative, not annual, figure is a serious misrepresentation of what its own projections suggest might happen in the best-case scenario - and certainly not a "fact" about the EU-US trade negotiations.

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TTIP Update XVI

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.

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