ISDS mechanism should be 'consigned to the annals of history'

Europe's citizens have spoken on TTIP, but the commission doesn't want to listen, argues Cecile Toubeau.

By Cecile Toubeau

16 Jan 2015

This week the European commission has shown Europe's citizens a clear lack of respect.

Their views on the EU-US trade talks – a serious matter concerning democracy and national sovereignty – have been disregarded and it appears clear that while the commission is negotiating the transatlantic trade and investment partnership (TTIP), it will do so with blinkers on.

TTIP continues to attract widespread international criticism by threatening to give additional 'investment' rights to multinational corporations.

Alarm bells are ringing over the investor-state dispute settlement (ISDS) as it allows foreign firms to bypass domestic courts and sue governments (hence citizens, through taxes) directly in private trade tribunals if they feel that a government's action can unfairly diminish future returns on their investments.

ISDS cases have trebled over the last decade.

"It appears clear that while the commission is negotiating the transatlantic trade and investment partnership (TTIP), it will do so with blinkers on"

Due to mounting public and political pressure the commission launched a public consultation last year. A record number of European citizens - around 150,000 participated in the public consultation and the initial findings were published earlier this week.

They leave no room for any conclusion other than excluding ISDS from TTIP and any other trade agreements.

Initial calculations suggest that less than three per cent of respondents actually supported reforming ISDS. The majority, around 97 per cent opposed ISDS altogether and will effectively be disregarded by the commission on technical grounds.

The commission will focus on the responses of just the three per cent – those that feed into the commission's agenda of 'reforming' ISDS. However, as the recently published report 'Trading Away Democracy' found, one cannot reform the un-reformable.

That report concluded that the commission reform agenda, clearly laid out in the Canada-EU comprehensive trade and economic agreement (CETA), will not prevent abuse by investors and arbitrators, and that the proposed tweaks fall short of providing protection to governments and the public.

CETA, in fact, makes Canada, the EU, and its member states even more vulnerable to being sued by corporations over public interest policies.

A key reform on the agenda is the ability of arbitrators to decide if a case is frivolous or unfounded. This is a conflict of interest since the same arbitrators' incomes depends on cases moving forward. They therefore have a vested financial interest in ensuring that corporations' claims do indeed seem legitimate.

"ISDS cannot be reformed and, like many archaic trade practices of the 18th century, should be consigned to the annals of history"

Allowing arbitrators to decide whether a case is frivolous is like allowing a car salesman to determine whether you need a car. To date, not one case has ever been dismissed as frivolous, even though some existing treaties allow for it.

The commission will also try to tackle arbitrator independence by proposing a code of conduct. However, this does nothing to address the fact that these private commercial arbitrators have no fixed salaries – to put a cap on their eagerness to approve new cases.

It also does not address the inherent conflict of interest whereby 'arbitrators' can also work as attorneys or lobbyists for multinational corporations on the side.

Most national courts have a system of reviewing court decisions; investment tribunals do not allow this. The reformed ISDS could include an appeal clause; however, this type of nebulous language around appeal systems has been discussed and included in other investment treaties for the last 10 years and has had no effect.

Over the coming months the commission has promised to undertake a further round of consultation, meeting with all relevant stakeholders from the European parliament, business and civil society.

Perhaps through these meetings the commission will come to understand that ISDS cannot be reformed and, like many archaic trade practices of the 18th century, should be consigned to the annals of history.


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