Legal principles in exchange for ISDS - a bad deal
Commissioner Cecilia Malmström's proposal on investor-state dispute settlement (ISDS) reform is an unsuccessful attempt to appease the massive criticism of investor-state arbitration, according to GUE/NGL trade policy coordinator, Helmut Scholz.
“The Trade Commissioner, as well as German Economics Minister Sigmar Gabriel, are obviously attempting to save the TTIP Free Trade Agreement between the US and the EU, which is rejected by broad sections of the population and civil society,” said the MEP after Ms Malmström's presentation to the European Parliament's Trade Committee this afternoon.
He continued: “During the public consultations, a clear majority of citizens rejected ISDS when NGOs warned that this instrument was a threat to democracy and public finances and when international legal experts and economists and even governments said they were against this kind of arbitration. It is not enough just to try to reform ISDS on chosen aspects. ISDS is a trade policy instrument belonging to the past and certain countries have had bad experiences with it. There are reasons why, for example, Australia and South Africa have decided not to conclude such agreements in future.”
On Malmström's proposals, Helmut Scholz added: “A bilateral EU-US court will not solve the problems behind ISDS. On the contrary, we must guarantee the possibility of taking more transparent and widely practicable cases before the existing state courts in accordance with the rule of law. We also need to enable political and institutional structures as well as citizens to take court action against investors or companies.”
Explaining that Commissioner Malmström is trying to perform a difficult task to preserve the principle of democratic decision-making of our member states in ISDS, Helmut Scholz commented: “We have courts in our countries that are much better qualified to make the trade-off between public interest and investor claims and compensation awards, if necessary. The framework to address these questions is defined in our constitutions, because it is mostly about conflicts that are much more complex than the depth of regulation of investment protection agreements. And it is not as if national courts would not consider international law in their decisions. The Danish Supreme Court, for instance, has suspended a new immigration law because it was not in accordance with the corresponding UN Convention, which Denmark had adhered to.”
“With her proposals, the Trade Commissioner provides no reason why we should give up some of our legal principles in order to include ISDS. What we need is a strategy to phase out existing ISDS obligations for member states. Italy has just recognised this need and decided to leave the Energy Charter. “
On the subject of setting up an international court, the GUE/NGL MEP said: “I am only willing to talk about this proposal if it is explicitly also about being able to force investors to comply with their obligations. Companies from my member state, Germany, are, according to a new study by the University of Maastricht, in fifth place in the number of transnational corporations' human rights violations, particularly in connection with the extraction of raw materials for the automotive and chemical industries. US companies are No.1 with ten times more cases. Existing UN conventions must form the legal framework for an international investment jurisdiction. The UN Charter stipulates that it takes precedence in case of contradictions in obligations from international agreements. “
The ISDS-instrument gives corporations the means to challenge governments before special tribunals, for example, when environmental or consumer protection laws reduce profit expectations. These tribunals are private arbitration tribunals, against whose decisions no revision option is provided. Ultimately ISDS may thus deter governments from pursuing policies in the public interest.