At the end of March, in response to growing public concerns, the European Commission launched a public consultation over its plan to enshrine far-reaching rights for foreign investors in the EU-US trade deal currently being negotiated.
Together with our partners in the Seattle to Brussels Network, Corporate Europe Observatory has criticised the consultation as a mock exercise aimed at selling the Commission's pro-industry agenda, rather than an honest attempt to have a much-needed open debate on the issue. We have also published a more detailed critique of the the Commission’s ‘reform’ agenda for the investor-state arbitration system, which we consider a thindly disguised PR move intended to salvage an increasingly contested legal regime.
Today, we have submitted our input to the official consultation. Here's what we told the Commission:
"First of all, we would like to express our frustration and anger with this consultation which we see as a mock process leading to a pre-determined outcome: the Commission’s own agenda. The consultation does not ask the essential questions of whether and why to include investor-state arbitration in TTIP, whether and why to privilege foreign investors over all other actors in society and whether and why to transfer to for-profit arbitrators the power to review all decisions of governments, legislators and courts. Instead, the consultation is framed in a narrow way and limited to the Commission’s proposals for minor reforms of investor-state dispute settlement and clarifications of the substantive investor rights.
In the context of the growing concerns about investor-state arbitration across the EU and a rising number of investor-state attacks against EU countries, including countries in severe economic crisis, this consultation process really is a slap in the face of the people in Europe.
Corporate Europe Observatory is fundamentally opposed to both the far-reaching private property rights within international investment agreements as well as investor-to-state arbitration, for the following reasons:
- they empower investors to claim (and sometimes receive) multi-billion euros in financial compensation for perfectly legitimate and much needed policies to protect public health, the environment and other public interests, because these policies have the alleged indirect effect of lowering profits;
- they have developed into a powerful weapon for business to fight legislation by putting litigious heat on governments, with the resultant chilling effect having arguably become the main purpose of the system.
While the European Commission seems to at least partly acknowledge these problems in its consultation document, its approach does not address their roots, which we see in the systemic flaws of the international investment regime:
- it grants special rights to foreign investors, rights that no one else in a society has. Only foreign investors can sue (or threaten to sue) states directly in private international tribunals that regularly impose large compensation sums on governments; and only they are being granted greater, and arguably excessive, private property rights than are enshrined in national constitutions or EU law;
- it surrenders the interpretation of these rights, the judgement over whether policies are right or wrong and the order of large compensation sums to be paid from public budgets to for-profit arbitrators with a vested interest in this privatised judicial system.
As these flaws are systemic, they cannot be overcome within the existing international investment regime. What we need instead is to break with a system that has enshrined ever increasing rights and privileges for corporations without corresponding responsibilities, for example, by establishing control mechanisms to halt abuse by transnational corporations.
We therefore reject the Commission’s approach to investment protection and investor-state arbitration as a basis for EU trade and investment negotiations with the US, but also with all other countries and regions (including Canada, China, Japan, the ASEAN countries, India, Myanmar, Morocco, Tunesia, Egypt and Jordan)."
To the technical questions 1-11 about the Commission's 'reform' agenda we responded:
"We do not want to comment on the Commission’s limited reform proposals. They do not relate to the essential question which should have been asked in this consultation: whether and why investor-state arbitration is needed in TTIP. And they do not address the most fundamental flaws of the system (namely arbitrator power and excessive private property rights for investors), which we see as the root causes of an increasing number of investor-state attacks on perfectly legitimate and much needed policies to protect the public interest. See our response to question 13 (the arguments outlined above) for more details.
However, we do share several of the more detailed points of criticism of the limited reform agenda as they have been put forward by previous commentators, including the assessment that many of the Commission’s statements around its reform agenda are misleading to the public. See, for example:
Seattle to Brussels Network (2014): Investment in CETA. A response to a lobby document by DG Trade.
Corporate Europe Observatory (2014): Still not loving ISDS. 10 reasons to oppose investors’ super rights in EU trade deals.