European Parliament committee signals opposition to ISDS

Bernd Lange (S&D), Chairman of the EP's trade committee. [Bernd Lange/Flickr]

The European Parliament’s trade committee has signalled its opposition to an investor-state dispute settlement (ISDS) clause in the Transatlantic Trade and Investment Partnership (TTIP).

ISDS is controversial because it allows corporations to sue governments in international arbitration tribunals, bypassing national courts.

“A state-to-state dispute settlement system and the use of national courts are the most appropriate tools to address investment disputes,” according to a working document prepared by  Bernd Lange, a German Socialist and the committee chairman.

The paper will feed into a draft report  of MEPs’ recommendations to the European Commission.  It is subject to change, but points to the committee’s possible position on the EU-US trade deal. Lange is the lead MEP on the report. 

The Socialist and Democrats are not all opposed to ISDS, although group president Gianni Pittella has called for it to be ditched. The S&D will prove influential on the final decision, as it is the second largest group in the Parliament, and its MEPs are not as entrenched in their support or opposition as the other groups.

Lange’s report should contribute to the “fresh start” in the negotiations, now that the new Juncker Commission is in place, and after the midterm elections in the US, the draft said.

If ISDS provisions were included in TTIP, “further reforms to the current model are critical” to avoid problems that have hit existing free trade agreements, the document said.

“Investors abroad have to be treated in a non-discriminatory fashion and should have a fair opportunity […] to achieve redress of grievances. This can be attained in TTIP without the inclusion of ISDS provisions,” according to the draft.  

The full European Parliament will eventually vote on the TTIP. A majority of MEPs will have to back the free trade agreement for it to come into force.  

Lange has called for ISDS to be dropped from TTIP. Opponents argue that the clause has a chilling effect on regulation and will whittle away standards and regulations across a range of policies from the environment to food safety to social protection.

The US is keen for ISDS to be included in the final deal. But in January 2014, the Commission took it off the negotiating table after public criticism.

It set up an online ISDS consultation, which, from March to July,  attracted about 150,000 replies. That is thought to be the highest number of responses to any Commission consultation.

Read>> Commission swamped by 150,000 replies to TTIP consultation

Consultation analysis expected

At the time, the executive said it would analyse the replies before explaining the next steps it would take.  

The Commission is expected to publish the results of the consultation this week, according to Friends of the Earth Europe.

88% of the participants told the EU executive they did not want ISDS included in the final pact, it said, citing a leaked document.

The consultation was built around twelve issues, including the scope of the investment protection provisions, transparency in ISDS, multiple claims and relationship to domestic courts, ensuring consistency of rulings and the appeal mechanism,  and reducing the risk of frivolous cases.

The last question in the 44 page questionnaire asked respondents if they thought ISDS should be included.

Friends of the Earth Europe and other campaigners created easy to use online tools “to open up the process to the European public.  But they are now concerned the executive will ignore the majority of the submissions (97%) because they were too similar.  

“The complexity of the questions asked and the technical knowledge necessary to answer them represented a significant barrier for citizens to voice their concerns about ISDS,”  Friends of the Earth Europe said. “It appears that the European Commission is attempting to downplay the overwhelming opposition to ISDS that their consultation found.”  

In June 2013, EU heads of state and government mandated the Commission to start negotiating a free trade agreement with the US, giving guidelines concerning what the negotiations should include.

The guidelines stated that the EU should seek to include provisions on investment protection and investor-to-state dispute settlement (ISDS) in the proposed agreement.

Read>>Special report: TTIP and the Arbitration Clause

Negotiations for an agreement – the Transatlantic Trade and Investment Partnership (TTIP) – started in July 2013.

The EU executive consulted the public on its possible approach to investment protection and ISDS in the TTIP, asking whether the EU’s proposed approach for TTIP achieves the right balance between protecting investors and safeguarding the EU's right and ability to regulate in the public interest.

This consultation was extended over the summer on account of the high interest and the Commission intends to publish a report in early 2015.

  • Week of 12 January: Expected publication of Commission analysis of ISDS consultation.

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