7th February 2016

US support for reformed ISDS in TTIP far from certain

Last Fall, Trade Commissioner Malmstroem responded to growing criticism of the EU public and proposed a radically changed vision of an investor-state dispute settlement (ISDS) for TTIP and all future (and eventually even past) EU trade deals. The basis of the proposal is that ad hoc private tribunals would be transformed into a permanent, publicly-appointed body with an appeals mechanism. This proposal is supposed to be the one that would turn the EU public back in favor of TTIP. However, problems are expected when the EU negotiating team tables the proposal in the 12th round of TTIP talks later in February.

Since the proposal was published, US reactions have been rather lukewarm. According to the American business community and to US Trade Representative Froman, it is not self-evident why an investment court should have an appeals mechanism. Since cases against the US are rare and even rarer are cases where the investor wins, Froman asks why the corporations should have a second chance to bite. Also, the US business community seems to be wary of a publicly-appointed permanent panel of judges. They worry that in such cases, the judges would be automatically biased against the corporation. A panel appointed ad hoc by both parties seems to be a better, more neutral way for them. The US propose a modernized version of “classic” ISDS – such as the one in the recently-sealed TPP, or else in EU trade deals with Canada or Singapore (although the deal with Canada is expected to be changed in favor of a permanent arbitration panel). Also, the reformed ISDS is expected to go into trouble in the US Congress anyway.

In any case, the road ahead for TTIP will be difficult. The EC used its reformed ISDS as the main PR selling point for TTIP. If a compromise is reached, it will inevitable be seen as a loss for the EU. But since the US reception of the reformed ISDS has been rather lukewarm, a compromise is the most likely outcome. Also, a German association of judges issued an opinion last week stating that ISDS even in its reformed version would be illegal, in their opinion.

For more, click here.


Read also an article by the World Economic Forum Why we can't make a good case for or against the TPP.

Members of the American Chamber of Commerce in the Czech Republic