News in Brief

New European Commissioners suggest that ISDS may be shut out of the TTIP

The new President of the European Commission, Jean-Claude Juncker, said on October 22, 2014 that there is “no obligation” to include investor-state dispute settlement (ISDS) provisions in the trade and investment agreement under negotiation between the European Union and the United States, the Transatlantic Trade and Investment Partnership (TTIP).

Resistance to the dispute settlement mechanism, which has been a common feature in the bilateral investment treaties signed by EU member states in the past, has grown significantly in the EU as governments and civil society question its utility in the TTIP (and in a trade agreement with Canada, as discussed below).

In recognition of that pushback, Juncker said his “commission will not accept that the jurisdiction of courts in the EU member states be limited by special regimes for investor-to-state disputes. The rule of law and the principle of equality before the law must also apply in this context.”

Juncker’s statement does not rule out the inclusion of ISDS in the EU-US trade and investment deal, but it opens the door to doing so.

The new Trade Commissioner, Cecilia Malmström, has also taken a negative posture towards ISDS. Just before her confirmation hearing, her written comments to the European Parliament on September 26 stated that “no investor-state dispute settlement mechanism will be part of that agreement [TTIP].”

In response to many who celebrated her declaration on social media, Malmström later tweeted that “the sentence everybody is so excited about on ISDS/TTIP is not written by me in the final version of my answer to the EP.” The version of her reply resubmitted to the Parliament on September 28 (past the September 26 deadline) did not include the sentence rejecting ISDS.

Earlier this year the European Commission held public consultations on ISDS in the TTIP; 150,000 responses were submitted by the extended 13 July 2014 deadline, and results are scheduled for publication and discussion in November 2014.

Many of the replies were identical, motivated by Europe-wide campaigns against ISDS that provided ready-made replies. In a meeting of the EU Committee on International Trade on July 22, the Trade Commissioner at the time, Karel De Gucht, expressed his understanding that from a political viewpoint it would make sense to analyze the answers both quantitatively and qualitatively, taking “all the identical ones for one.” However, members of the European Parliament and CSOs argue that this would downplay critical public sentiment regarding ISDS.

Some EU governments oppose ISDS in CETA, despite recently concluded negotiations

Meanwhile, there is ongoing opposition to inclusion of ISDS in the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union. The text of that agreement was finalized in August 2014 following 5 years of negotiation. Canadian and EU dignitaries pledged their political commitment to CETA on September 26, without formally signing it.

However, opposition to the text by EU member states—again, to ISDS in particular—and other stakeholders may put CETA at risk. Critics say ISDS is unnecessary in view of existing protections of investors under domestic legal systems.

Germany’s Minister of Economy, Sigmar Gabriel, stated on September 25 that “Germany and Canada’s legal systems offer sufficient protection for corporations, making such a clause superfluous.” France’s former Minister of Trade, Nicole Bricq, has also publicly opposed ISDS. However, the former EU Trade Commissioner Karel De Gucht said reopening CETA for renegotiation would kill the agreement.

Civil society organizations in Canada and the European Union have also protested the closed-door nature of the CETA negotiations, the excessive powers it gives to investors, the further liberalization of services, the limitation of the right to regulate, the lowering of consumer standards, among other perceived problems.

Officially published on September 26, CETA will be submitted to the EU Council and to the European and Canadian Parliaments for ratification. It has been reported that the European Parliament will not be able to analyze the text before late 2015. If, against the European Commission’s wishes, it is ultimately considered that CETA is a mixed agreement, requiring ratification by the parliaments of all 28 member states, it might enter into force as late as 2017.

CETA is seen as a template for the more far-reaching Transatlantic Trade and Investment Partnership between the European Union and the United States.