Martin Schulz’s new ISDS proposal will likely be approved by the European Parliament. But behind the new language, not much has changed, writes Cecile Toubeau.
Cecile Toubeau is a senior policy officer at Transport & Environment.
The shuttling of thousands of people to Strasbourg for European Parliament plenary meetings several times a year has long been called an expensive ‘travelling circus’. But this week, the Parliament’s grand coalition adds a new act to that show in the form of linguistic gymnastics. Words will be contorted and stretched to make the resolution on the EU-US free trade agreement (Transatlantic Trade and Investment Partnership or TTIP) mean whatever those two parties want it to – which is not the same thing.
This high-wire act in saving face will focus on the infamous investor-state dispute settlement (ISDS) clause that is planned for TTIP. ISDS 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 actions can unfairly diminish future returns on their investments.
The Parliament has been hard at work over the last six months developing a resolution on TTIP. This resolution would clearly indicate the Parliament’s position and could in theory guide the Commission in its negotiations with the US.
Led by German Socialist and Democrat group (S&D) MEP Bernd Lange, the resolution integrated the opinion of 14 parliamentary committees who voiced their opinions on a number of key issues including energy, health, environment, consumers, and data rules. The issue of ISDS has caused controversy in almost every committee and has divided political families.
The resolution should have been concluded last month in Strasbourg. However, it was delayed by the president of the Parliament, Martin Schulz, on a technicality. Or rather, possibly, a delay tactic. The story now goes that Mr Schulz proposed a new amendment earlier this week that would be an acceptable compromise between the S&D and the European People’s Party (EPP).
What is particularly interesting about this compromise is that both the EPP and S&D will call it a victory for very different reasons. But who is right?
First of all, the compromise says:
“…to ensure that foreign investors are treated in a non-discriminatory fashion … 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.”
If this new system were going to be non-discriminatory, would this allow domestic investors to sue governments too? This new system would be another step towards completely undermining the domestic legal system. In theory, for the new system to be truly non-discriminatory, all investors would be able to go to specialised courts instead of domestic courts whenever they have a conflict with a state.
The proposed system calls on the respect of the EU and member state jurisdiction, however this is very difficult. Both the EU and the member states stand to lose power due to the very nature of specialised courts, which provide interpretation of European and national laws in private tribunals. Perhaps a new system could be construed that makes it compatible with EU law, and does not undermine the principles of the Court of Justice of the European Union (CJEU). However, this will be difficult, and may not provide a system with any added value for investors.
And now for the most important caveat; that the system cannot undermine public policy objectives. Is this even possible? The proposed system is going to create a specific remedy with individual rights. Member states will lose cases; otherwise the system would be superfluous.
The circus act’s pièce de résistance is the Socialists’ conceit that this is not an ISDS system. But this daring gambit is hampered by their own compromise text, which says the new system would resolve “disputes between investors and states”. This being Brussels, they may even devise a new acronym – but the text exposes how the nature of this system has not changed.
So why are both the S&D and EPP happy with this text? The Socialists will claim that the text is a clear No to the inclusion of ISDS in TTIP, while the centre-right will confirm that the text supports the Commission’s reform proposal.
So who is right? Based on the analysis above, I would confirm that the EPP is right.