Sunday

26th Feb 2017

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.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

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.

Column / Health Matters

The yin and yang of traditional Chinese medicine

Can traditional medicine help the modern European patient? Malta has signed an agreement with China that would increase the provision of traditional Chinese medicine to its citizens.

Column / Brexit Briefing

Searching for a voice and a standard bearer

As Britons come to terms with the reality of Brexit many Remainers are now listless, looking for someone to present a viable alternative to Theresa May's dominance

News in Brief

  1. Spanish court jails former IMF chief Rato
  2. Macron proposes Nordic-style economic model for France
  3. Germany posts record high budget surplus
  4. Labour ousts Ukip in Brexit homeland
  5. Dutch lower house approves EU-Ukraine treaty
  6. WTO says Russian pork ban was illegal
  7. Belgian nuclear plant made 'significant progress' on safety
  8. Report: Commission gauging EU support for Poland sanctions

Stakeholders' Highlights

  1. EURORDISJoin Rare Disease Day and Help Advocate for More Research on Rare Diseases
  2. European Healthy Lifestyle AllianceStudents Who Are Considered Fit Get Better Grades in School
  3. QS World MBA TourMeet with Leading International Business Schools in Paris on March 4th
  4. Malta EU 2017Economic Governance: Agreement Reached on Structural Reform Support Programme for Member States
  5. Socialists & DemocratsWomen Have to Work Ten Years Longer to Match Lifetime Earnings of Men
  6. Counter BalanceTrans-Adriatic Pipeline Is a Major Risk for Banks, Warns New Analysis
  7. Martens CentreEU and US Migration Policies Compared: Join the Debate on February 28th
  8. Swedish EnterprisesTechnology and Data Flows - Shaping the Society of Tomorrow
  9. UNICEFNearly 1.4 Million Children at Risk of Death as Famine Looms Across Africa and Yemen
  10. Malta EU 2017End of Roaming Fees: Council Reaches Agreement on Wholesale Caps
  11. Nordic Council of MinistersNordic Innovation House Opens in New York to Help Startups Access US Market
  12. Centre Maurits CoppietersMinorities and Migrations