Special courts for foreign investors have no place in trade deals
The TUC has called for ISDS procedures to be excluded from the Transatlantic Trade and Investment Partnership (TTIP) – the free trade deal being negotiated between the EU and USA. I last wrote about Investor-State Dispute Settlement (ISDS) procedures on Touchstone in September, and this week George Monbiot, David Martin MEP and Nobel prize winner Joe Stiglitz have all opposed them. European governments like France, Germany, Greece and Hungary are not keen, and, further afield, the Australian and South African governments have refused to agree any more trade deals with ISDS procedures included. It looks like this is a campaign we can win.
ISDS procedures create a special status for foreign investors, and disadvantage everyone else. They have been inserted in trade agreements (and, more specifically, bilateral investment treaties) to protect foreign investments from totalitarian or failing regimes lacking the rule of law. They provide foreign investors with access to panels which can require compensation from governments which expropriate their investments. AFLCIO trade expert Celeste Drake describes them as giving
“foreign investors in the U.S. (and U.S. investors operating in foreign countries) the opportunity to skip traditional methods of complaining about laws and regulations they don’t like and sue nations directly in private arbitration tribunals made up of for-profit arbitrators rather than full-time judges.”
Trade unions in Europe and the USA oppose ISDS because multinational enterprises’ lawyers have extended the definition of ‘expropriation’ to cover almost everything that is to their employers’ financial disadvantage. Egypt has been sued by Veolia for raising the minimum wage, Germany is in court for abandoning nuclear power, and Canada has been challenged by US pharmaceutical giants for restricting the use of high price drugs. George Monbiot’s Guardian article gave even more examples.
In the UK, there are genuine concerns that ISDS would restrict the scope for a future government to redraw the boundary of procurement in the NHS, as Labour has pledged to do. Under ISDS, such a promise could become paralysingly costly, regardless of its popularity with the electorate.
We know that multinationals plan their use of ISDS provisions not just to win compensation where they have lost out, but also to threaten democratically elected governments with costly and time consuming litigation. That makes governments even more averse than they already are to the risk of taking on corporate power.
ISDS also disadvantages domestic investors, who need to use the normal courts to pursue their governments for any perceived wrongdoing. Outrageously, the European Commission has issued a so-called ISDS “fact sheet” (in fact a highly tendentious document brilliantly dissected by open source industry correspondent Glyn Moody) which suggests that US investors might have reason to consider European courts biased in hearing such claims. Trade deals already provide well-established systems of state-state dispute settlement in the worst cases.
But what should really set alarm bells ringing is the privileged position ISDS processes provide for the transnational enterprises and sovereign wealth funds which provide most foreign direct investment. There are no proposals to give consumers, environmentalists or workers the same protections. An ISDS provision in TTIP would create a completely separate justice system for corporate litigants – a sort of platinum class law court for the world’s frequent flyers.
Governments should acknowledge that free trade must be for everyone, not just for a privileged class. Investor-state dispute settlements must be ruled out now from the TTIP negotiations.