ISDS: we won’t be fooled by a rebranding
Yesterday, Brussels was full of rumours that the European Commission had finally found a way to respond to the massive backlash generated by its proposal for a special court for US investors: a simple rebranding should do the trick.
Currently known as Investor-State Dispute Settlement, or ISDS, this mechanism establishes special rights for foreign investors in trade deals. With ISDS, foreign corporations that believe they have been treated wrongly can sue governments for monetary compensation in special tribunals in which rulings are made by privately appointed arbitrators, in complete secrecy. While an ISDS ruling cannot directly force a government to change a law or a regulation, it has had a proven ‘regulatory chill’ effect in some of the countries in which it currently exists, the threat of possible litigation preventing national authorities from introducing measures, for example plain cigarette packaging.
ISDS tribunals have long been included in agreements negotiated by EU member states, including the UK, but as investment policy became a competence of the EU in 2009 it is now up to the European Commission to decide whether this model should be transposed into EU trade deals. Sadly it decided to do so, first in agreements with Canada and Singapore which have been recently concluded but not yet ratified, as well as in a trade deal with the US which is currently being negotiated: the infamous TTIP, or the Transatlantic Trade and Investment Partnership.
Labour MEPs are against giving any kind of special rights to foreign investors. It is deeply unfair to consider giving US businesses a route to redress their grievances that would not be available to EU businesses. Besides, our normal courts work just fine, just as US courts do: there is no justification whatsoever to include ISDS in TTIP or in any other trade deal with countries that have mature legal systems. ISDS is dangerous, as it would distort the balance of power between those who act for the public interest and those who pursue private interests. For all of these reasons, we have made the fight against ISDS one of our priorities in relation to EU trade and investment policy and negotiations.
This led Labour MEPs to take an important stand in a key vote on 8 July 2015. In a text setting out the European Parliament’s position on the TTIP negotiations, we were presented with a weak compromise amendment calling for ISDS to be replaced by a “new system”, only loosely defined as being more transparent and democratic. We voted against this compromise, because it did not explicitly reject having a separate justice system for US investors. In fact, it endorsed having such a separate system.
Proponents of the compromise tried to rein us in, arguing that this call from the European Parliament would mean the end for ISDS. We argued back that it would simply require the Commission to do one thing, and one thing only: to drop the name ISDS and to replace it by something else.
It looks like our suspicions were well-founded. Informed sources have revealed this week that the Commission had its ISDS proposal ready even before the Parliament voted, and that it only changed one element of its proposal as a result of this vote: the name. The new special arbitral tribunal for foreign investors in trade deals would now be known as Investment Court System, or ICS. ISDS is dead, long live ICS!
This rumour will have to be confirmed when the Commission publishes its proposals in September. But it is worth at this stage warning the Commission: we won’t be fooled by a rebranding. We are against any privileged access to justice, whatever it may be called.