EU Tries To Put Lipstick On The Corporate Sovereignty Pig

from the not-forgetting-the-elephant-in-the-room dept

As Techdirt readers know, corporate sovereignty provisions in both TAFTA/TTIP and, increasingly, TPP, are emerging as one of the biggest stumbling blocks to public acceptance of these deals. The revolt against "investor-state dispute settlement" (ISDS), as corporate sovereignty is more officially known, began earlier for TTIP. Indeed, it was already so strong at the beginning of 2014 that the European Commission had to pull out corporate sovereignty completely from the negotiations, while it held a public consultation on the subject.

The hope was evidently that only lobbyists would bother answering the rather opaque and biased questions that were posed, but that's not how things worked out. An unprecedented 150,000 responses were received, the vast majority of which called for ISDS to be dropped. Despite that clear rejection, the European Commission signalled it would carry on anyway, but promising a "new and improved" version of ISDS.

The difficulty of addressing its flaws is evident from the fact that it is only this week that the EU's Trade Commissioner, Cecilia Malmström, was finally able to unveil a proposal that may prove the last chance for corporate sovereignty in TTIP. Even she is forced to admit that she has "concerns" about ISDS:

I have heard many concerns about dispute settlement between investors and states (ISDS) and the rules included in many of the existing agreements. To a large extent, I share these concerns, especially when it comes to the sometimes unclear definitions that leave too much room for interpretation and possible abuse, and the lack of transparency. I therefore made it one of my priorities to thoroughly modernise the traditional form of ISDS.
The full paper -- which is "without prejudice to the final position of the European Commission on the matters described within" -- runs to 12 pages, and has five basic elements (pdf). These are: a right for governments to regulate; improving the establishment and functioning of arbitral tribunals in order to increase legitimacy of the ISDS system; an appellate mechanism; addressing the relationship between ISDS and domestic courts; and moving towards a multilateral system. Malmström's own summary of the proposal is as follows:
I want to ensure fair treatment for EU investors abroad, but not at the expense of governments' right to regulate. Our new approach ensures that a state can never be forced to change legislation, only to pay fair compensation in cases where the investor is deemed to have been treated unfairly (suffered discrimination or expropriation, for example).

Our new approach also makes arbitral tribunals operate more like traditional courts, with a clear code of conduct for arbitrators. It furthermore guarantees access to an appeal system. And, as a medium term goal, it sets out to work towards the establishment of a permanent multilateral investment court.
Already, there are several analyses of why these don't address the many and deep problems of corporate sovereignty chapters. For example, there's a detailed consideration by Gus Van Harten, entitled "A parade of reforms: the European Commission’s latest proposal for ISDS", where he concludes:
the most recent proposal (a) reflects a move away from essentially fake reforms to something potentially more meaningful but (b) is insufficient to satisfy the minimum criteria of independence, fairness, openness, subsidiarity, and balance, and (c) is not reliable until it is backed by clear language and a negotiating red line for any agreement providing for ISDS.
The analysis by the Seattle to Brussels Network, a large group of development, environment, human rights, women and farmers organisations, trade unions, social movements and research institutes, is, as you might expect, rather more scathing:
The Seattle to Brussels Network is of the opinion that the Commission's proposals do not contribute to any meaningful reform of the ISDS system. They 1) ignore the outcome of the Commission’s own public consultation on the issue; 2) do very little to address the fundamental problems of the ISDS system; 3) would dramatically expand the reach of ISDS, increasing the likelihood of claims against European governments; 4) are misleading in suggesting that the ISDS system was already meaningfully reformed in the recently concluded EU-Canada trade agreement (Comprehensive Economic and Trade Agreement, CETA) and would be significantly further improved in TTIP; and 5) ignore the elephant in the room: that there is no need for ISDS.
That last point is really crucial. According to the European Commission's own figures, even without corporate sovereignty rights, the total US investment in the EU in 2013 was €1.65 trillion; from the EU into the US it was €1.69 trillion. ISDS is an irremediably flawed solution to a problem that doesn't exist.

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Filed Under: cecilia malmstrom, corporate sovereignty, eu, eu commission, isds

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  1. icon
    That One Guy (profile), 7 May 2015 @ 2:19am

    and 5) ignore the elephant in the room: that there is no need for ISDS.

    That fact really needs to be brought front-and-center every time someone defends corporate soverignty provisions and clauses. If such an extreme measure is going to be added, the supporting evidence for it had better be good enough to justify it, and yet what's the best the EU Trade Commissioner can offer?

    "We'll I think I've got some ideas to take a terrible idea and make it a little bit less terrible."

    No. If you're going to add something that gives corporations more power than the governments of countries when it comes to determining laws, you need to have a very compelling case for doing so, and so far nothing I have seen in defense of such clauses comes anywhere close to providing adequate justification(probably because they have no real reason other than, 'The nice people who have/will pay us a lot of money want us to add the clauses in').

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