27th Oct 2016

EU defends TTIP investor court after German backlash

  • The EU commission says ICS would give greater protection and transparency (Photo:

The EU Commission has defended a proposed court that would allow big firms to sue EU governments for perceived profit losses.

German magistrates criticised the idea earlier this month, declaring the so-called investor court system (ICS) unlawful.

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The commission said the German magistrates had misunderstood ICS.

"It [the ICS] does not rule on member state law or EU law, and hence the ICS in no way alters the established court system within the EU and the member states," a commission spokesperson told this website.

ICS 'not needed'

Proposed last September by the EU executive, the investor court forms a part of the EU-US free trade talks known as the Transatlantic Trade and Investment Partnership (TTIP).

The permanent court is meant to replace investor-state dispute settlement (ISDS), a system of arbitration contained in numerous trade treaties as the chosen method of solving disputes.

ISDS has seen big firms like energy giant Vattenfall demand Germany give it €4.7 billion in a case filed in 2012 after Germany announced a nuclear energy phaseout following the Fukushima disaster.

Just under 700 ISDS claims have been filed since 1995. A record 70 were filed last year alone.

The commission spokesperson said the German criticism came as a surprise.

“Germany has around 130 such treaties,” he pointed out. EU member states collectively have around 1,300 similar treaties.

The German Association of Magistrates, a Berlin-based judicial umbrella organisation, said there was “neither a legal basis nor a need for such a court" because domestic courts were good enough to settle disputes.

The Americans have also criticised the commission's proposal and want to keep the existing ISDS intact.

'Higher protection'

The EU executive maintains its court would different from ISDS because it would be transparent and give protection to EU investors abroad. 

In turn, foreign investors in the EU would receive the same treatment.

"Given that EU law and member state law provides for a higher level of protection, an investor would use domestic law and would therefore be unlikely to need to go to the ICS system," said the spokesperson.

But the commission's defence is unlikely to halt the criticism.

A mistake

German Green MEP Ska Keller said the judges in Germany had delivered a severe blow to the commission's plan.

She said the proposal would remain skewed disproportionately towards the interests of investors and outside the democratic systems already in place.

"It is now clear that it was a mistake by the European Commission to simply dismiss similar criticism from the Greens and others about this system," she said in an email.

Nine EU states have treaties involving ISDS clauses with the US.

Should the investor court or ISDS appear in the concluded TTIP pact, then all 28 EU states could be potential targets in investment disputes.

"Of the 51,495 US-owned subsidiaries currently operating in the EU, more than 47,000 would be newly empowered to launch attacks on European policies in international tribunals,"War on Want, a London-based anti-poverty charity, said in a report published Wednesday.

Negotiations on the investment chapter are due to resume in the next round of TTIP talks in Brussels on 22 February.

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