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. identicon
    Anonymous Coward, 7 May 2015 @ 8:57am

    Most of her promises are in fact hot air. The paper is a shameless and biased selfpromovation in most of the descriptions of what has been achieved.

    The problems are still there when a government official, a corporate lawyer and another corporate lawyer turn "judge" can wheel and deal without considering other aspects than legality and economy.

    Frankly they should put all bilateral negotiations on hold untill they are capable of:
    1. Establishing reasonable ISDS arbitration rules, since they admit the current are insufficient or even problematic in several areas
    2. Showing at leaest an internationally approved negotiation draft for their medium term goal
    3. Providing more transparency than what they are suggesting and providing assurance for other concerns than existing laws and existing economy, giving a wider wiggle room for governments to legislate without considering trade agreement impacts.

    Malmstroem should be concerned! The amount of improvements suggested, how fundamental the questions are for democracies and how fundamental a redesign they are from the current approach, is a clear sign that the negotiators themself are aware of how lackluster the current approach is.

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