The True Cost Of Corporate Sovereignty For The EU: €3.5bn Already Paid, €30bn Demanded – Even Before TAFTA/TTIP

from the and-guess-who-foots-the-bill? dept

While the debate about the inclusion of a corporate sovereignty chapter in TAFTA/TTIP continues to rage in the EU, the European Commission insists there’s nothing to worry about here. In a recent article published in the Frankfurter Allgemeine Zeitung (original in German), the new European Commissioner for Trade, Cecilia Malmström, wrote that EU member states have signed 1400 agreements with other nations that included corporate sovereignty provisions — implying that such investor-state dispute settlement (ISDS) elements are perfectly normal, don’t cause problems, and won’t cause problems.

But there are two flaws with this logic. First, only nine of those 1400 agreements are with the US, and on the other side were Bulgaria, Croatia, Czech Republic, Estonia, Latvia, Lithuania, Poland, Romania and Slovak Republic. In other words, all countries keen to escape from Russia’s influence after the break up of the Soviet Union, and therefore willing to sign up to more or less anything — even treaties with ISDS — that might help them do that. Most of those 1400 agreements are with small, developing nations with few investments in the EU. That naturally means there are few opportunities to bring cases under ISDS.

The other flaw with the European Commission’s implied logic that ISDS hasn’t been a problem in the past, and thus won’t be in the future, is that even that isn’t true, as an important new piece of research by Friends of Earth Europe, entitled “The Hidden Cost of EU Trade Deals” demonstrates. For the first time, it gathers together all the corporate sovereignty cases that have been brought so far against EU countries, and comes up with the following statistics:

127 known ISDS cases have been brought against 20 EU member states since 1994.

The total amount awarded to foreign investors — inclusive of known interest, arbitration fees, and other expenses and fees, as well as the only known settlement payment made by an EU member state — was publicly available for 14 out of the 127 cases (11%) and amounts to €3.5 billion.

That figure is almost certainly an underestimate: thanks to the shocking lack of transparency in ISDS cases, details about the often very large payments are not always made public, which means that we don’t have access to information about all awards made against EU nations. Moreover:

Details of the compensation sought by foreign investors was publicly available for only 62 out of the 127 cases (48%). The compensation sought for in these 62 cases amounts to almost €30 billion.

Again, that figure of €30 billion is almost certainly an underestimate of the true value of total claims against EU governments — and hence against the EU public, which ultimately foots the bill in the event of tribunals making awards to companies. What makes that €30 billion figure so disturbing is that it represents a lower bound for ISDS cases in a situation where few US companies were able to bring claims, because of their limited investment in Eastern European countries.

If there is a corporate sovereignty chapter in TAFTA/TTIP, more than 14,000 American firms that own more than 50,000 subsidiaries in EU countries will have the ability to sue the EU (pdf) — 95% of them for the first time. Moreover, they will be able to do that for all their existing investments in Europe, not just new ones, as the following section in the EU negotiating mandate makes clear (pdf):

the investment protection chapter of the Agreement should cover a broad range of investors and their investments, intellectual property rights included, whether the investment is made before or after the entry into force of the Agreement.

That clearly exposes EU member states — and their citizens — to the threat of an even greater level of claims than the €30 billion currently in play. Indeed, it is not fanciful to expect that figure at least to quadruple if ISDS is included in TTIP. That would mean claims — not necessarily successful, of course — of around €120 billion.

That’s exactly the maximum expected boost to the EU’s economy that the European Commission claims would be provided by TTIP by 2027 (pdf). In other words, even if the most optimistic forecasts for TAFTA/TTIP in EU were realized, a big chunk of that benefit could be wiped out by a wave of ISDS cases brought by US companies. Exactly the same is true with the roles reversed: much of TAFTA’s claimed benefits for the US economy are likely to be cancelled out by claims from 3,000 European firms owning more than 24,000 subsidiaries in the US that would suddenly be able to bring corporate sovereignty cases against the US government. On the basis of what is already happening, including ISDS in TAFTA/TTIP looks almost certain to nullify most of the claimed benefits of signing any treaty, and on both sides.

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Comments on “The True Cost Of Corporate Sovereignty For The EU: €3.5bn Already Paid, €30bn Demanded – Even Before TAFTA/TTIP”

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Anonymous Coward says:

so i suppose the only ones who will gain anything are the individuals doing whatever they can, including lying through their teeth, to get ISDS included. no wonder there is such a push for getting it brought in! and how the Conservative EUMPs are all for bringing it in and disputing the harm it will do! i guess they will pull out as soon as their pockets are lined!!

Anonymous Coward says:

Re: Refusing to pay?

It is between a country and a company, thus if the company isn’t paid, it wouldn’t normally result in war. Of course, I hear that Constellis Holdings offers a sufficiently large and heavily armed militia to make an invasion for hire in most countries, so I can’t rule it out either…

JoeCool (profile) says:

Re: Re: Refusing to pay?

I’ve said a number of times that things are almost so bad that a company will send mercenaries to deal with a problem instead of lawyers. It’s almost to the point of being cheaper, which is all a company needs to decide how to deal with issues. Heck, I bet quite a few companies have already done this, we just don’t know about it.

Anywho, the fact that any increased earnings will go directly to lawyers is actually the entire reason for the treaty. This is lawyers making more work for more lawyers. Gotta keep the kids fed somehow. These treaties give the next generation of lawyers work. It will be up to them to come up with a scam to make work for the generation after them.

Andyroo says:


Seriously people this is a great thing for us lowly monthly paid slaves to the system, all we need to do is create a system where we can implement a plan to start a business in America, have the American government refuse our business plan de to it intentionally having something in it that they do not lie and then profit by the billions.

All we need is to read these laws very carefully, learn how to abuse the system and get a few well trained lawyers to spend all their time helping us to profit in the billions.

I am sure after American government was forced to pay a trillion dollars in one year to all those business interests they do not like they will remove any corporate sovereignty rules.

Just as long as they only remove those laws after they have settled with those that have brought cases against the government.

Anonymous Coward says:

How To Fleece An Entire Continent

What these ISDS are really about, is the transfer of public funds into corporate hands with as little obstacles as possible. Just set up corporate tribunal (i.e. rigged court) and claim an imaginary loss and watch the money roll in from the pockets of the tax payers. Rinse and repeat over and over and over.
Institutionalized robbery on a massive scale.

And as a final insult the victims are not even allowed to know how much this constant theft actually costs them. Sure they will feel the effects; lowered pensions, higher costs and reduced quality of social services, because there will not be much left for the taxpayer after thousands of hungry corporate mouths rips into the public treasury to fill their bellies.

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