UNI Europa poses some of the tough questions to trade expert Dr Gabriel Siles-Brügge, Lecturer in Politics based at the University of Manchester, ahead of the plenary vote on TTIP in the European Parliament.
Although the negotiations have taken longer than planned, it is as though there is a sense of urgency surrounding completing the trade agreement. Do you agree, and if so, why do you think this is so?
Given the immense controversy that surrounds the negotiations of the trade agreement between the EU and the US (TTIP), it is not altogether surprising that negotiators are keen to press on. Delays not only embolden the opposition, and may result in a potential TTIP agreement being ‘diluted’, but also mean that TTIP’s supporters in the business community may eventually lose interest in the talks (as indeed happened during the Doha Round of multilateral trade talks).
You have followed the TTIP discussions closely, not only in Brussels, but around Europe and the US, what is your take on the report written by the European Parliament’s Trade Committee (INTA), and the new compromise amendment on investor-state-dispute settlement, ISDS, proposed by Schultz? Are you surprised?
Having followed the political debate surrounding the recent INTA resolution, it is clear that the key fault-line was within the group of socialists and democrats (S&D group) in the European Parliament, with some of its members more concerned than others over the potential inclusion of ISDS provisions in TTIP. There are some suggestions, moreover, that the S&D agreed to a compromise amendment with the conservative EPPs in an earlier session of INTA (with softer language on ISDS than Bernd Lange’s earlier draft report) in exchange for a call in the resolution for TTIP to include enforceable labour standards in its sustainability chapter. The new compromise amendment (approved by a vote of 56 to 34 MEPs) seems to reflect these tensions within the S&D group: the concerns of several members over ISDS have been weighed up against a simultaneous interest in participating ‘constructively’ in the TTIP discussions and shaping them in an ostensibly more centre-left vein.
Is it, as some claim, an ISDS light?
Two things should be stressed at this point. First, the EP resolution is legally non-binding (although of course it carries much political significance as the EP has to give its assent to the final TTIP text). Second, the amendment is the length of a short paragraph and there are therefore considerable ambiguities as to its meaning in practice. That being said, it is notable that the text of the amendment does not reject the principle of foreign investor arbitration itself. It merely notes that this should be ‘subject to democratic principles and scrutiny’ through ‘public hearings’ where ‘publicly appointed, independent judges’ make decisions that ‘respect’ EU and Member State courts and which ‘cannot undermine public policy objectives’. It also mentions the need to include an appellate mechanism (whereby a ruling can be appealed, which is not currently the case).
So, in short, the answer is broadly yes. The compromise sounds very much in tune with the European Commission’s proposals to reform ISDS by moving towards a permanent roster of arbitrators; including an appellate mechanism; clarifying the relationship to domestic courts (so that foreign investors have to choose whether to take their case to domestic courts or arbitration tribunals) and enshrining the ‘right to regulate’ in the investment protection text. These reforms (and the amendment which seems to implicitly support them) only tinker with the investment protection regime. Indeed investors will still likely be able to choose the proceeding they feel is most likely to give them the desired result: domestic court or arbitration tribunal. While the inclusion of an appellate mechanism and a permanent roster would represent modest improvements, on the whole the proposed changes do not appear to change the fundamental nature of a system where only investors can bring suits against states: their interests are ultimately privileged over public policy considerations.
UNI Europa initiated that research on the position of collective agreements and ISDS was clarified. The answer from Prof. Dr. Markus Krajewski was that autonomous agreements could not be subject to ISDS, but tripartite agreements and generalised erga omnes agreements could. In your view, does the compromise agreement change this?
The new amendment does not appear to change the fundamental principle that a foreign investor can bring a claim against a state, including potentially one based on tripartite agreements that are perceived to infringe their rights as investors.
We have been reaching out to pro-TTIP/ISDS voices (via facebook and twitter) for good reasons why an ISDS is needed, but no one has answered. What do you hear the reasons are, and are they plausible?
As far as I understand the case being made for ISDS in TTIP this rests on three broad sets of arguments.
First of all, advocates will argue that EU-US investment flows can be boosted by providing investors with greater legal security, as there are both EU and US jurisdictions where courts are either slow/unreliable in upholding investor rights or indeed outright discriminate against foreign investors. On this, my argument would be that there is very little evidence that the inclusion of ISDS boosts investment between OECD states with developed legal systems (indeed, EU-US investment flows are already very substantial). Moreover, from a public policy perspective, why would you include a provision which systematically discriminates in favour of foreign investors when there is no systematic discrimination against such investors in either the EU or the US?
The second argument that is often heard is that including ISDS in TTIP is necessary to set a precedent, and to ensure that such provisions can be included in a future investment agreement with China (such as the EU is currently negotiating). But China has gone from merely being a capital importing to a capital exporting country and is thus quite keen on such provisions in its bilateral investment treaties (BITs).
A third, and related argument, is that TTIP provides an opportunity to reform the flawed system of BITs (which some supporters admit had their problems) and replace it with a new, improved system that protects investors while fully recognising the ‘right to regulate’ of states. Such an argument is made particularly forcefully with respect to the EU’s Member States that currently have ‘old-style’ BITs with the US. Moreover, there are currently (vague) proposals on the table to multilateralise the system of investor protection in TTIP by setting up a permanent investment court (on the base of the Commission’s proposed arbitrator roster). The problem here is threefold. For one, as I noted above in response to q. 3, a reformed ISDS does not alter the fundamental nature of the system, which privileges foreign investors over other considerations. Secondly, not only would TTIP not replace existing EU Member State BITs with the US (these would have to be terminated separately, with various ‘sunset clauses’ applying) but it would leave in place a whole network of EU BITs with third parties that would still be very difficult to reform. Finally, talk of a permanent, multilateral investment court is extremely premature at this stage as that would require the agreement of many other states, a number of which have started to voice fairly critical views of investor arbitration.
Is TTIP ever going to happen?
That’s the million dollar (or euro) question. At this stage I think it’s too early to tell what will happen. But TTIP will certainly take far longer to negotiate than its initiators had intended. The key questions are whether: a) business loses interest because the negotiations drag out or the agreement is substantially ‘watered down’ from its perspective; b) the opposition from civil society is appeased by compromises on such issues as ISDS or GMOs.
For many more angles and insightful criticisms on TTiP, read Gabriel’s upcoming book available this autumn: TTIP: The Truth about the Transatlantic Trade and Investment Partnership (Polity Press) (co-authored with Ferdi De Ville). Available here
Eleanor Quinn, Director - Communications, UNI Europa
Phone: +32 2 234 56 71