EU investment treaties – can we have labour standards with that?
We’ve just sent in our submission to the European Commission’s public consultation on its trade policy. The consultation covers everything under the trade sun, and so does our long submission.
It’s not exactly weekend reading, so I’ll pick out one of the more juicy issues (and award a prize to anyone brave/sad enough to read the whole thing): the EU’s new investment powers under the Lisbon treaty.
EU member states currently have about 1200 bilateral investment treaties with other countries, but under Lisbon, Brussels get the power to make new Europe-wide treaties. These little known treaties typically protect foreign investors from expropriation or discriminatory treatment by host states, and have been notoriously one-sided in their favour. Now the EU has the chance to balance out these treaties, by inserting some obligations on investors, and in doing so, close the “governance gaps” that lead to so much business abuse of human rights, particularly in the developing world.
As the (endlessly quoted) UN Special Representative on Business and Human Rights, John Ruggie, puts it:
“The root cause of the business and human rights predicament today lies in the governance gaps created by globalization – between the scope and impact of economic forces and actors, and the capacity of societies to manage their adverse consequences. These governance gaps provide the permissive environment for wrongful acts by companies of all kinds without adequate sanctioning or reparation. How to narrow and ultimately bridge the gaps in relation to human rights is our fundamental challenge.”
Europe’s best chance to help meet the fundamental challenge that Ruggie spells out would be to require investors under these new investment treaties to respect fundamental international human rights and environmental norms, through having an enforcement mechanism with teeth. At the moment, we have a small land army of international voluntary guidelines, tools, initiatives, compacts and standards, but nothing with real bite.
But rather than taking this “best chance”, the Commission’s recent communication on the topic looks a lot like business as usual. The only reference to investor obligations is a non-binding one to the non-binding OECD Guidelines on Multinationals in the non-binding preamble – language that might make some of the drafters feel warm, but will have no tangible effect on anyone, anywhere.
Further, the EU will most likely seek to use “Investor-State” arbitration process to resolve disputes under these new treaties. This means that investors can by-pass the entire domestic legal system of host states, to seek to enforce their rights in an international arbitration panel, with notoriously opaque procedures, no right of appeal, decided upon by arbitrators drawn mostly from the ranks of overpaid international investment lawyers.
Positive discrimination by the South African government to combat the legacy of Apartheid? Bolivia’s reclamation of its water supply to ensure the poorest can get access? Both actual disputes would have been ruled illegal by arbitration panels if global public pressure hadn’t forced the investors to back down.
EU member states, MEPs, Commission officials still have a chance to amend this communication and there are many options in front of them. They could scrub out reference to the arbitration panels, and make investors use the courts of host states. If investors can prove that the legal system isn’t fair or doesn’t work – allow them to use the legal system of the home state, but also give those affected by human rights abuses by foreign investors the same rights. Give workers and affect communities workers the same rights to sue in host and home state courts.
If this balanced approach is too much for some in Brussels to stomach, then the new investment rules should at least demand that investors can only step foot inside arbitration hearings in Washington if they have adhered to the OECD Guidelines on Multinational Enterprises.