27th September 2015

EC proposes new investment dispute settlement system for TTIP

On 16 September, the European Commission delivered on its public promise to come up with a new system of dispute settlement in trade and investment deals to replace the out-dated system of ad hoc private tribunals, known under the loathed abbreviation ISDS. Investment-protection is an important part of any trade deal and ISDS, under some form, is enshrined in over 1400 trade deals, to which an EU member state is party. Also deals concluded by the Commission, on behalf of the whole EU, with third countries (South Korea, Vietnam, Canada) include such provisions. ISDS has also become one of the main points of contention in the huge TTIP deal with the US, which is under negotiation.

Some member states, the European Parliament, as well as NGOs and individual citizens (through a public consultation) have indicated that a traditional ISDS mechanism is not the right way. Critics point out that a special, obscurely regulated, private and ad hoc system is not transparent and accountable enough and could effectively discourage governments to regulate in public interest. Although the Commission tried to point out, that a new ISDS, enshrined in CETA (with Canada) or TTIP is not the same as the old one, included in many trade deals signed by individual member states which are still in place, it failed to impress the public. Therefore Commissioner Malmstroem, in charge of trade negotiations, suspended talks with the US on this matter and launched a huge public consultation at the EU level, hoping to come with a new, better system.

The proposal published on 16 September is intended to be just that. The EU proposes, that TTIP and any future EU-negotiated trade deal include an Investment Court System provision as dispute-settlement mechanism. This Investment Court System would be a public body, independent, made of 15 highly qualified judges appointed jointly by the EU, the US and a third country. Its proceedings would be public and transparent (as in the new ISDS, now practically abandoned), it would have a first-instance and an appeals chamber. It would not have a permanent seat, though. This proposal was welcomed by member states and by a majority of pro-TTIP MEPs. Some, though, mainly from the Greens/EFA group said, that although it is an improvement over the outdated ISDS, it is still a “special” justice system for large multinationals, while SMEs and individuals have to resort to “ordinary” justice systems. The US have not been consulted yet and it is not sure, if the October round will un-freeze dispute-settlement talks. In any case, the US have indicated, that investment-protection must be part of TTIP.

The new system would be included in TTIP and any future EU-negotiated agreement, although it would not a priori apply to past trade deals. The Commission would like the new proposed system to be a model for investment protection and would like it to eventually lead to a permanent international tribunal for dispute settlement, for every trade deal on the planet. This would require international negotiations and a separate international convention, which the EU would like to initiate.

TTIP talks have been stalled for a while now, with the self-imposed deadline of 2015 to reach a deal in principle unlikely to be reached. The October round of talks in Miami is expected to input some momentum, after a green light by the EP on EU level, and the approved ”fast-track” authority for the President by the Congress in the US. However, after TPP (between the US and Pacific rim countries) talks broke down recently, TTIP schedule could be its victim, too.

For more, click here, here, here and here.

Members of the American Chamber of Commerce in the Czech Republic