Business Whines That Even EU's Mild, Unsatisfactory Reform Of Corporate Sovereignty Goes Too Far
from the preserving-privileges dept
Last month Techdirt wrote about the attempt by the European Commission to deflect the growing EU resistance to the inclusion of a corporate sovereignty chapter in TAFTA/TTIP by turning it into a more formal Investment Court System (ICS). We pointed out some major problems with the proposal, and noted that the US Chamber of Commerce had already rejected the idea out of hand. We now have a response from BusinessEurope, one of the main lobbying organizations in the EU with 40 members in 34 countries. As Politico.eu reports, BusinessEurope is not impressed, and the reasons it gives are highly revealing.
[Luisa Santos, director for international relations at BusinessEurope] said that the provision [in the proposed ICS] that requires investors bringing an arbitration case to pay for all the expenses related to the case if they lose will scare off small businesses. Moreover, the mechanism for appeals will likely be used extensively, leading to long and costly trials.
On the matter of costs, a document put together by the European Commission on arbitration costs (pdf) includes the fact that:
Research by the OECD indicates that the average legal and arbitration costs for a claimant are around $8 million.
That average figure means that very few small businesses could contemplate bringing an investor-state dispute settlement (ISDS) case under the current system, so the move to ICS is unlikely to make any difference here. As for the criticism that the appeals process will be "used extensively", governments are only going to take on even more costs if they think that the rulings of the ICS are unfair or the awards disproportionate, and that is precisely why the appeal system is there -- to allow unfair and exaggerated awards to be challenged.
Santos also contended that the provision on countries appointing the judges would discriminate against the business community.
Leaving aside whether that is actually the case or not -- and why should it be? -- the comment overlooks a far more profound unfairness at the heart of both ISDS and ICS. This is the fact that only companies can bring cases, never the nations, which means that a country can never win a case: the best it can hope for is not to lose. That is a very real discrimination against the public, which always foots the bill when companies are successful in their claims against states, but never gets to enjoy corresponding awards against companies, because none is ever made.
Finally, Politico.eu reports the following concern:
[Santos] slammed Malmström's plan to tighten the rules for cases of "indirect expropriation," in which a business claims compensation for an indirect lowering of investment values, such as through new environment or health regulations. Although the commissioner wants to avoid the abuse of such claims, the new EU rules are so strict that "in reality it won't be possible for any investor to be compensated," Santos said.
To its credit, the European Commission has published its proposed text for TAFTA/TTIP's investment chapter (pdf) in full. Here's the key passage limiting claims for indirect expropriation:
For greater certainty, except in the rare circumstance when the impact of a measure or series of measures is so severe in light of its purpose that it appears manifestly excessive, non-discriminatory measures of a Party that are designed and applied to protect legitimate public welfare objectives, such as the protection of public health, safety, environment or public morals, social or consumer protection or promotion and protection of cultural diversity do not constitute indirect expropriations.
As that makes clear, the intent is to prevent claims against measures that promote public welfare objectives -- and even then, exceptions can be made. So BusinessEurope's comments seem to mean that it thinks investors should still have the right to bring claims against all measures that are designed to promote public health, or to protect the environment -- in other words, precisely those kinds of legal actions that make corporate sovereignty provisions such a threat to society.
BusinessEurope's rejection of the ICS idea, which involves some very mild tweaks to the investor-state dispute process, demonstrates neatly that what it really wants is the old ISDS system, with all its egregious flaws, and its tilted playing-field that gives deep-pocketed corporations a powerful tool for intimidating sovereign governments, and interfering with democracy itself.