17th Oct 2021

Socialist plan on investor-state court backfires

The centre-left S&D group in the European Parliament has been left red-faced after attempts to get its own way on a key vote on the EU-US free trade pact backfired.

The origins of Wednesday's (10 June) sudden decision to call off the parliament's debate and vote on TTIP, the trade pact, began late last month when the Socialists - surprising everyone - appeared to vote in favour of allowing big companies to sue national governments in special courts.

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The Socialists themselves thought they had found a neat compromise on what is one of the most controversial issues in the EU-US trade deal.

They backed a half-way house solution: an international court system - something originally suggested by EU trade commissioner Cecilia Malmstrom

But then they panicked when they saw pro-industry group BusinessEurope had endorsed the trade committee's outcome.

This led Bernd Lange, a German socialist who is steering the resolution, to introduce a late amendment to ensure investor state settlement private arbitration (ISDS) would not make it into the final text.

The Socialists hoped their amendment would get passed in Wednesday’s plenary session but the centre-right EPP group, according to sources, alerted EP president Martin Schulz, who called off the vote.

“This clarification is necessary and therefore we tabled this amendment to make it crystal clear and understandable for everybody, also for lobbying groups,” said Lange on Wednesday, trying to explain the amendment manouverings.

The socialists argue that ISDS is private arbitration between two lawyers and a third arbitrator, whereas an international court, as proposed in the compromise, would have independent judges.

“So we thought, OK, this means that private arbitration as we know it in other ISDS systems is dead,” said one parliament source close to the issue.

German centre-right MEP Daniel Caspary, for his part, says the socialist position makes no sense.

“Welcoming Malmstrom’s proposal and on the other hand totally rejecting ISDS, I think is not logically possible," he said.

The S&D group itself is also sharply divided on the issue. Some agree on the compromise, while others oppose it.

The official line was that there were too many differences between the groups to have the resolution go to a vote.

“By failing to adopt a strong text on this dossier, the European Parliament would weaken its power on one of its key, hard-fought prerogatives,” said Schulz.

The resolution has now been sent back to the INTA, or international trade committee, for further talks. But the fight against the investor court system will now likely be even more difficult.

The centre-right’s negotiator on the file, Germany’s Godelieve Quisthoudt-Rowohl, said ISDS is still alive. But the deputy noted that the whole process stood out for being disorganised.

“I am a physicist and I studied physics and one of my favorite theories is chaos theory and now I get to observe it in a completely different environment,” she said.

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