Trade negotiators: take the fifth
The latest twist in the continuing attempt by the European Commission to justify the inclusion of an Investor-State Dispute Settlement (ISDS) mechanism in the Transatlantic Trade and Investment Partnership (TTIP) – see previous blogs here, here and here – is the faintly ludicrous claim that US law would provide no other avenue for European investors to take legal action to protect themselves against the expropriation of their assets. There is a grain of truth in this latest desperate ploy, because it is a principle of US law that trade agreements are not in themselves enforceable in US courts.
But you might wonder why European investors have, historically, been so willing to invest in the USA at such huge risk of expropriation, if the Commission’s argument held true? Partly, of course, the answer is the common sense one against such expropriation: if the US did set about willy-nilly expropriation of EU assets, that might make it rather less likely that any European investor would be willing to take the risk ever again, leading to the main source of inward investment in the US drying up overnight.
There is, however, another reason, which probably does even more than common sense to calm investors down. Despite trade agreements not being enforceable in the courts, the expropriation of assets is actually prohibited by one of the most famous – and oldest – amendments to the US Constitution.
The Fifth Amendment to the US Constitution, adopted in 1791 as part of the Bill of Rights, is most famous because it provides US citizens with the right not to be forced into incriminating themselves (“taking the fifth”) – a right made famous during the McCarthyite witch-hunts of the 1950s. But the end of the amendment also contains the following phrase: “nor shall private property be taken for public use, without just compensation.” And anyone can use the US courts to enforce that provision of the constitution.
So yet another argument for ISDS falls the first test of whether it has any practical point. Surely some time they’ll just give up and take ISDS out of TTIP? Well, probably not just yet – so the pressure will be kept up.