The European Commission is currently preparing to launch a multilateral mechanism to settle investor-state disputes. This comes at a time, when globalisation is at a new, dangerous crossroads.
One path leads to stronger protection of human rights and the environment, and to governments being able to reclaim policy space to address climate change, inequality and other pressing issues of our times. The other path leads to more rights for corporations to bully decision makers and make them pay up for regulation that is in the interest of the people, not just industry.
The European Commission proposal for a multilateral mechanism to settle investor-state disputes (ISDS) – publicly branded as a Multilateral Investment Court – would take us down that second path. It threatens to forever lock in the highly controversial ISDS system that only benefits corporations.
Together with other civil society groups in the Seattle to Brussels Network (S2B), Corporate Europe Observatory has developed a position paper on the proposal, which outlines some of the serious risks linked to such a ‘multilateral ISDS system':
- Locking in ISDS permanently: The European Commission proposal would create a kind of special court for corporations which would tie governments even more tightly into a legal regime where private profits trump the public interest and democracy. Once established, it would take decades to unpick such a regime.
- Undermining real reform: Meaningful steps which governments have taken to minimise the risks of investor attacks are at risk of being sidelined and delegitimised – such as the termination of investment treaties, or the adoption of model treaties with limited substantive investment protection standards or those without access to ISDS. This would close any opportunity to regain policy space for governments.
- Legitimation of slanted rules: The proposed multilateral ISDS mechanism risks re-legitimising a flawed and dangerous regime with only limited procedural fixes. But as long as its far-reaching substantive rights for foreign investors are not significantly restricted, investor attacks against legitimate public interest laws would still be able to prevent, weaken or postpone regulation and wreak havoc with public budgets.
- Even stronger bias towards investors: Like other courts, an institutionalised court for foreign investors is likely to increase its power by ruling expansively on its own jurisdiction and in favour of the claimants. Some have warned that the investor bias inherent in today’s private arbitration system could become even more intense through an investment court.
- A smoke screen for ISDS expansion: Perhaps the most concerning aspect of the proposed multilateral ISDS mechanism is that it is already being misused to legitimise, and distract from, a massive expansion of today’s foreign investor privileges. In the case of the EU-Canada CETA and the proposed EU-US TTIP, for example, the promise of a future multilateral mechanism is already used as a key argument to convince EU governments, parliamentarians and the public that special rights for foreign investors need to be included in these treaties. TTIP alone would newly empower 75,000 companies to file investor-state lawsuits against the US, the EU and its member states – for now, these companies do not have such direct access to ISDS tribunals. Even without TTIP, 81 per cent of US investors operating in the EU would be able to file claims on the basis of CETA, if they structure their investments accordingly.
At a time when all attention should be focused on averting a global climate catastrophe, on tackling social and economic inequality and on empowering the many, there is no room for agreements which would give corporations the power to sue governments pursuing such solutions.
The Seattle to Brussels Network therefore calls on
- civil society groups to engage in the debate about the proposed multilateral ISDS mechanism and unite in the fight against this new attempt to further entrench and expand the investment protection regime, and to engage in the process for a binding UN treaty on transnational corporations and other business enterprises with respect to human rights;
- legislators in the EU to not ratify CETA and other new EU trade deals with far-reaching substantive and procedural privileges for foreign investors under the false pretence these would fix the flaws of the global investment regime. To seriously reform the investment regime, existing treaties need to be terminated or re-negotiated in a way to avoid foreign investor privileges;
- the governments of EU member states to withhold any Commission mandate to negotiate a convention for a multilateral ISDS mechanism for transnational corporations, and on the European Commission to abandon this endeavour;
- EU governments to follow the example of countries like South Africa, by terminating existing investment treaties and instead improving national laws and legal systems on investment where necessary;
- EU governments and the European Commission to promote binding, enforceable public international law to strengthen human rights, environmental and climate protection and the fight against tax fraud and evasion. This includes support for the creation of a binding UN treaty on transnational corporations and other business enterprises with respect to human rights - a first step to address the grave imbalance between the highly enforceable rights for corporations and the weak international protection of human rights and the environment.