10 reasons why the latest ISDS compromise is a bad deal.

10 reasons why the latest ISDS compromise is a bad deal

02 Jul 2015, by Owen Tudor in International

Yesterday the Socialists & Democrats Group in the European Parliament voted 56-34 to endorse a compromise amendment to the Parliament’s draft resolution on the Transatlantic Trade and Investment Partnership (TTIP, the EU-US trade deal), covering the controversial issue of Investor-State Dispute Settlement (ISDS).

The compromise was opposed by UK Labour MEPs, and has dismayed Green and Left MEPs too. It’s not clear how many socialist MEPs will actually vote against the compromise if it is put to the Parliamentary vote next Wednesday (Labour MEPs are likely to vote against, and trade unions in other countries are likely to be pressing the French, German, Italian and Spanish socialist MEPs too.) Right-wing anti-Europeans like UKIP will probably also oppose it.

But with the backing of the Conservatives in the ECR group, centre-right MEPs from the European People’s Party and Liberal Democrats in the ALDE group, the compromise is likely to be adopted. We’ll be urging Labour, Green and UKIP MEPs to stand firm, and calling on Conservatives and the single Liberal Democrat to represent the people who elected them rather than the big businesses who will be rubbing their hands with greed.

The proponents of the compromise in the S&D group are arguing that it rules out the sort of full-blooded ISDS that led to over 140,000 critical submissions to the European Commission consultation, over 2.25 million signatures on a European Citizens’ Initiative, and opposition from trade unions, consumer groups and environmentalists.

But it leaves intact the idea that foreign investors should get a privileged route to massive compensation payments when democratically-elected governments do something that could be argued in court affects the profits of a multinational enterprise.

The compromise amendment reads:

“to ensure that foreign investors are treated in a non-discriminatory fashion while benefitting from no greater rights than domestic investors, and to replace the ISDS-system with a new system for resolving disputes between investors and states which is subject to democratic principles and scrutiny where potential cases are treated in a transparent manner by publicly appointed, independent professional judges in public hearings and which includes an appellate mechanism, where consistency of judicial decisions is ensured, the jurisdiction of courts of the EU and of the Member States is respected and where private interests cannot undermine public policy objectives;”

Here are ten reasons why the compromise amendment is a bad deal:

1. Although this proposal addresses some of the drawbacks of ISDS, it really isn’t an alternative to ISDS, but just a softer version, or ISDS-lite. It still provides for individual foreign investors to challenge state decisions directly, with all the problems that entails such as ‘regulatory chill’ (when Philip Morris sued the Australian Government over plain paper packaging – a case still not concluded – the New Zealand Government shelved its plain paper packaging proposals.)

2. Leaving any form of privileged investor protection in TTIP would mean that the threat to a publicly-run National Health Service remains. Corporate lawyers will still be licking their lips over the possibility of suing any government brave enough to return privatised parts of the NHS to public hands. And that applies to education, water, railways and any other privatised or part-privatised public services.

3. The compromise would provide foreign investors with compensation arrangements not available to other potential litigants (eg workers, consumers, environmentalists). It would be like restricting access to the European Court of Justice, which also oversees trans-national conflicts, to just one class of litigants, foreign investors.

4. The imbalance of access to justice which is so offensive in ISDS would remain – workers would still get what they have in the EU-Canada deal (called CETA): the possibility of a strongly worded, expert report. As ever, if that’s good enough for workers why should investors get more?

5. The costs involved in taking cases under this arrangement will mean it is only really available to big companies – so small firms will be excluded, which has led to opposition from Austrian and German small firms’ organisations.

6. The case for privileging investors like this still has not been made. How much extra investment is likely to arise? How much has been lost as a result of not having ISDS in EU-US arrangements?

7. Some of the changes proposed sound good (eg “private interests cannot undermine public policy objectives;”) but how can they be guaranteed? In practice, the courts will decide how far these principles are effected (they always do) and we can’t guarantee, once set up, that courts will do as we wish. Corporate lawyers will get creative!

8. There are still many reforms to ISDS that have been proposed which are not included in this proposal, eg that costs should be borne by the unsuccessful litigant, that litigants should demonstrate they are upholding the law before suing governments (so there will be many cases brought by disreputable companies), that amicus curiae/third party briefs will be permitted etc.

9. The move throws away the Parliament’s negotiating position with the European Commission far too early. The TTIP negotiations have years to run, and opposition to ISDS will continue to build. Rather than accept a compromise investor protection system at this stage, the Parliament should hold off until popular opposition to ISDS has made all special deals for foreign investors unacceptable.

10. Finally, the compromise amendment means that the Parliament only has the option to vote for ISDS-lite (as set out in the current draft of the Parliament’s resolution) or ISDS-liter as in the compromise, rather than the original amendment put down by MEPs like Labour’s Jude Kirton-Darling which called for excluding ISDS from TTIP altogether.

The lengths that European Parliament politicians have gone to, responding to public concern, demonstrates how effective and influential the campaign against ISDS has become. No one in the European Parliament is now defending the sort of ISDS that has been included in the already concluded EU trade deals with Canada, Singapore and so on.

Unions and other campaigners will be demanding those trade deals have to be scrapped or completely rewritten, and we will be building popular opposition to special rights for foreign investors, whether they’re called ISDS or not. We’ve come a long way, and losing this skirmish doesn’t mean we can’t win this trade war.

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