EU Proposes New Corporate Sovereignty Court For TAFTA/TTIP; US Not Interested

from the CETA-still-a-backdoor-for-ISDS,-anyway dept

As we have reported, the most problematic aspect of the proposed TAFTA/TTIP trade agreement between the US and the EU has been the proposed corporate sovereignty chapter, formally known as investor-state dispute settlement (ISDS). The outcry over this was so great in Europe last year that the European Commission put negotiations of this topic on hold, while it carried out a public consultation on the matter -- presumably assuming that the extremely technical questions about this complex issue would kill off any further interest by the public. Instead, an unprecedented 150,000 submissions were received, 145,000 of which said get rid of ISDS completely. In response, the European Commission merely promised to try to address the many concerns raised with a new and "improved" version.

This was sketched out back in May, when the Commission suggested making the current secret tribunals more like a traditional court. Yesterday, Cecilia Malmström, the EU commissioner responsible for trade, and thus the TAFTA/TTIP negotiations, formally unveiled the European Commission's proposed replacement for traditional corporate sovereignty tribunals, which turns out to be almost identical to the first ideas presented back in May:

The proposal for the new court system includes major improvements such as:

a public Investment Court System composed of a first instance Tribunal and an Appeal Tribunal would be set up;

judgements would be made by publicly appointed judges with high qualifications, comparable to those required for the members of permanent international courts such as the International Court of Justice and the WTO Appellate Body;

the new Appeal Tribunal would be operating on similar principles to the WTO Appellate Body;

the ability of investors to take a case before the Tribunal would be precisely defined and limited to cases such as targeted discrimination on the base of gender, race or religion, or nationality, expropriation without compensation, or denial of justice;

governments' right to regulate would be enshrined and guaranteed in the provisions of the trade and investment agreements.
Although this addresses some of the more glaring faults with traditional corporate sovereignty, notably the lack of transparency, and the inability to appeal against tribunal rulings, it leaves untouched ISDS's biggest problem: the fact that it grants foreign investors unique rights to a completely separate legal system -- one unavailable to domestic companies or the public. For that reason, many organizations that were against old-style ISDS, are also against the new Investment Court System (ICS).

Even if the new ICS were perfect -- and it isn't -- it still wouldn't solve the problem of ISDS for EU citizens. Although Malmström said yesterday that the ICS approach was designed to be used in all future EU trade agreements as a replacement for the usual corporate sovereignty chapters, she admitted that was not an option in the Comprehensive Economic Trade Agreement (CETA) between Canada and the EU, saying: "we are not re-opening the CETA agreement." This confirms what we surmised in a recent post. But as Techdirt noted there, if CETA includes ISDS, US companies with subsidiaries in Canada, of which there are many, will be able to use Canada's trade agreement to by-pass TTIP's new ICS system completely, and sue EU nations indirectly, using ISDS with all its widely-recognized faults. Reforming TAFTA/TTIP's ISDS without reforming CETA's corporate sovereignty provisions is pretty pointless.

Even supporters of the new ICS are worried by this aspect. Bernd Lange is the MEP with responsibility for making recommendations on how the European Parliament (EP) should vote on international trade matters. Although he is relatively happy with the ICS solution, he has confirmed on Twitter that unless the ISDS chapter in CETA is re-negotiated, he will not recommend that the agreement with Canada is ratified when it comes to the main vote, expected in a few months' time. And without the support of his Socialists & Democrats group, CETA is unlikely to pass in the European Parliament, which would kill it completely.

Finally, there is the rather important question of whether the US will accept Malmström's new ICS. As we wrote last month, there's already some indication that the US is not prepared to move from ISDS tribunals to a new kind of open court system. That confirms an earlier dismissal of the idea by US Undersecretary for International Trade at the Commerce Department, Stefan Selig, back in May. Another indication of the US view can be found in a sharp rejection of the EU's ICS proposal by the US Chamber of Commerce, reported here by the Global Edition of the Handelsblatt newspaper:

"While we recognize the E.U. has a political problem relating to future investment treaties, the U.S. business community cannot in any way endorse today's E.U. proposal as a model for the Transatlantic Trade and Investment Partnership (TTIP)," according to Marjorie Chorlins, the chamber's vice president of European affairs.

"The recent European debate around investment treaties -- the obligations governments accept in them and the methods they provide for dispute settlement -- is not grounded in the facts, and the distortions in this debate cannot be allowed to trump sound policy," she said in a statement."
It will be interesting to see what the official US position is on the ICS idea, but those comments from the influential and well-connected US Chamber of Commerce suggest that the battle over whether corporate sovereignty should be included in TAFTA/TTIP, and in what form, is far from over.

Follow me @glynmoody on Twitter or identi.ca, and +glynmoody on Google+

Filed Under: corporate sovereignty, eu, ics, investment court system, isds, ttip


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  1. identicon
    Anonymous Coward, 18 Sep 2015 @ 6:28am

    Re: It will ultimately fail.

    To be honest: GMO has already been mostly subdued by the commission using a lack of opposition (also a lack of approval) in the parliament to push a few things through already, making precedence and so on... I agree that EU is giving up on some other good standards, but I don't see it as that much of a stumbling block.

    When it comes to the metric system - particularly with the new approach for definitions - many companies are already bilingual and I know for a fact that many well-educated people are crying for the shift, for convenience.

    The problem overall, as I see it, is philosofically how companies are treated and how politics should work. In US there is a very strong belief in non-interference in markets, thus the companies are basically more important than the political interventions governing them, while in EU, the political interventions are seen as protection against bad market effects and the political interventions as being somewhat more important than companies.

    ISDS is the ultimate tool for companies to use against political interests since it is so staggered in their favour and generally lacks rules to protect non-commercial interests.

    ICS would put an uncontrollable judiciary oversight in place and in US own view of history those things are generally a terrible idea to accept since it restricts the government more than company interests do (whether or not company interest are government policy or not is another question).

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