Friday

22nd Sep 2023

EU drills into corporate protection clause in US trade deal

  • Under the new rules can a tribunal order compensation - but not order the reversal of a national law (Photo: europarl.europa.eu)

The European Commission launched a 90 day public consultation on Thursday (27 March) in a bid to address "misconceptions and misrepresentations" about plans to include controversial rules on investor protection into an EU-US free trade deal.

The mechanism, known as investor state dispute settlement (ISDS), allows companies to take legal action against governments if their decisions risk undermining their investments.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

The commission paused negotiations on the ISDS chapter in the trade talks January in the wake of claims by NGOs that it could allow US companies to undercut environmental and social protection laws, and enable corporations to sue governments and claim potentially unlimited damages in "arbitration panels".

Speaking with reporters on Thursday, EU trade commissioner Karel De Gucht said that the commission was hoping to draw up "an improved system of ISDS which will address existing loopholes, prevent abuse and provide a more accountable and predictable system."

"I fully agree with the many critics who claim that ISDS until now has led to some very worrying litigation against the state," he added, in a reference to an ongoing case brought by tobacco giant Phillip Morris against the Australian government over legislation demanding the plain packaging of cigarettes.

"The only way to close these loopholes is to reopen ISDS."

The three month consultation, which includes a public debate on ISDS, will get the green light as soon as it has been translated into the bloc's 28 national languages. The Commission will then finalise a public report before deciding on its negotiating stance to take with the Americans.

But although a spokesman for the EU executive insisted that the consultation was "not a referendum", the issue already looks as though it may prove to be a red-line for governments and MEPs in the European Parliament, both of which must back a trade deal before it becomes law.

French trade minister Nicole Bricq has already stated her opposition to ISDS being included in an agreement.

Meanwhile, in a letter addressed to De Gucht published by news agency AFP on Thursday, Germany's economy minister Sigmar Gabriel insisted that ISDS should be excluded from the proposed Transatlantic Trade and Investment Partnership (TTIP), arguing that the domestic legislation in place was sufficient.

"From the perspective of the [German] federal government, the United States and Germany already have sufficient legal protection in the national courts," Gabriel wrote.

For its part, the EU executive maintains that the regime would be limited only to investor relations and could not be used to overturn national law.

"An ISDS tribunal cannot order the reversal of a national law under any circumstances," an EU official involved in the negotiations told this website. "The most it can order is compensation".

Officials also say that the 'right to regulate' of national governments would be enshrined in any agreement, which would include a strict definition on a company's right to 'fair and equitable treatment' in order to prevent investors bringing forward multiple claims across a range of countries.

For the US, keeping ISDS in the scope of the talks remains a priority.

"A comprehensive 21st century trade agreement should include appropriate protections for investors ... and that does include ISDS," the US' lead trade negotiator Dan Mullaney told reporters following the end of a week of talks in Brussels earlier this month.

Latest News

  1. Report: Tax richest 0.5%, raise €213bn for EU coffers
  2. EU aid for Africa risks violating spending rules, Oxfam says
  3. Activists push €40bn fossil subsidies into Dutch-election spotlight
  4. Europe must Trump-proof its Ukraine arms supplies
  5. Antifascism and fascism are opposites, whatever elites say
  6. MEPs back Germany's Buch to lead ECB supervisory arm
  7. Russia to blame for Azerbaijan attack, EU says
  8. Fresh dispute may delay EU-wide migration reforms

Stakeholders' Highlights

  1. International Medical Devices Regulators Forum (IMDRF)Join regulators, industry & healthcare experts at the 24th IMDRF session, September 25-26, Berlin. Register by 20 Sept to join in person or online.
  2. UNOPSUNOPS begins works under EU-funded project to repair schools in Ukraine
  3. Georgia Ministry of Foreign AffairsGeorgia effectively prevents sanctions evasion against Russia – confirm EU, UK, USA
  4. International Medical Devices Regulators Forum (IMDRF)Join regulators & industry experts at the 24th IMDRF session- Berlin September 25-26. Register early for discounted hotel rates
  5. Nordic Council of MinistersGlobal interest in the new Nordic Nutrition Recommendations – here are the speakers for the launch
  6. Nordic Council of Ministers20 June: Launch of the new Nordic Nutrition Recommendations

Stakeholders' Highlights

  1. International Sustainable Finance CentreJoin CEE Sustainable Finance Summit, 15 – 19 May 2023, high-level event for finance & business
  2. ICLEISeven actionable measures to make food procurement in Europe more sustainable
  3. World BankWorld Bank Report Highlights Role of Human Development for a Successful Green Transition in Europe
  4. Nordic Council of MinistersNordic summit to step up the fight against food loss and waste
  5. Nordic Council of MinistersThink-tank: Strengthen co-operation around tech giants’ influence in the Nordics
  6. EFBWWEFBWW calls for the EC to stop exploitation in subcontracting chains

Join EUobserver

Support quality EU news

Join us