Background on Opposition to Investor State Dispute Settlement in Free Trade Agreements

| August 01, 2014


Investor-state dispute settlement (ISDS) mechanisms allow foreign investors to bypass domestic courts to challenge government legislation and laws before unaccountable international arbitration tribunals.


Transatlantic Trade and Investment Partnership (EU-US)

ISDS is slated to be a key feature of the Transatlantic Trade and Investment Partnership (TTIP) currently being negotiated between the U.S. and the European Union (EU). The planned provisions are modelled on the ISDS mechanism in the Canada-EU Comprehensive Economic and Trade Agreement (CETA).

Popular back-lash including from European social democratic parties on ISDS lead to a ceasing of TTIP ISDS negotiations. A broadpublic consultation was launched by the European Commission on ISDS.1

The Trade Justice Network, a number of its member organizations, and other Canadian organizations made submissions to the consultation to ensure the connections between CETA and TTIP were reflected in the consultation.

Scott Sinclair of the Canadian Centre for Policy Alternatives made a submission to the Commission which outlines the details of the dangers of ISDS in CETA including how it could be used by US companies to circumvent any attempt to undermine ISDS in the TTIP.2

European and international union federations on CETA and TTIP ISDS provisions

Unison has released strong language on ISDS and TTIP stating “the removal of the Investor State Dispute Settlement (ISDS) mechanism. ISDS has no place in a trade deal between two trading blocs with well-established legal systems and effective existing protections for investors."3

EPSU has leaked text that show public services have not been excluded in the draft text. The release also outlines how the high number bilateral trade agreements create a maze of agreements that make it virtually impossible to undo liberalization.4 EPSU’s 2014 congress also passed a resolution called 19. Fighting for a Future for All which explicitly stated they will “oppose all attempts to include any Investor State Dispute Settlement mechanism” in TTIP.5

ETUC has stated that the EU-Canada trade agreement should not be used as a “Trojan horse” to smuggle in a controversial Investor-to-State Dispute Settlement (ISDS).

“This looks like a cynical attempt to create a fait accompli for the EU-US trade talks” said Bernadette Ségol, General Secretary of the ETUC “and to undermine opposition to ISDS."6

PSI Executive Board endorses aggressive and far-reaching programme that included strong language against “new cycle of ‘free trade’ deals, TISA, TPP and TTIP that represent a direct attack on national and local government ability to deliver quality public services."7

Shifting European Union position on ISDS

The European Commission’s new president, Jean-Claude Juncker, outlined opposition to investor-state dispute settlement provisions in his “Political Guidelines” document.8

European Union parliament has also elected an increased number of anti-ISDS members from both sides of the political spectrum.

Together, this has lead to a shift that has even been reported from the top European Commission trade negotiator. EU Trade Commissioner Karel De Gucht has admitted to the press that his previous “unanimous mandate” to negotiate ISDS into trade agreements could be shifting.

With the incoming EU Commission President Jean-Claude Junker apparently opposed to including ISDS in the agreement with the U.S., the Council changing their minds is a distinct possibility. iPolitics quoted De Gucht, the EU Trade Commissioner saying: “This will be a very interesting thing, because it’s not only CETA. We will be confronted with that problem in a number of agreements,” De Gucht said. “Parliament will have to ask itself whether they want to put in jeopardy a number of agreements and work of years and years on this. I mean, it’s a Parliament, so a Parliament can vote. And that’s what a Parliament is made for, to vote."/9

Trans-Pacific Partnership (TPP)

The International Trade Union Confederation (ITUC) delegates gave “a resounding “No” to Trans Pacific Partnership” with 90% of delegates voting for the statement that “the TPP should not go ahead and must be scrapped."10

ISDS is a major sticking point in the TPP negotiations, but is currently included in the agreement.

Concerns include the legal action through ISDS against the minimum wage in Egypt and its impact on pension schemes privatization.

There is a sense at the tables that the tide is moving against ISDS. The Japan-Australia agreement does not have ISDS, France and Germany are re-evaluating it; South Africa, Brazil and Indonesia have policy against it.

An additional stumbling-block is that there is no “conflict of interest” provision language in the current ISDS section for TPP. This means that the corruption of revolving doors between the lobbyist community, government and arbitrators directly highlighted by the Corporate Europe Observatory have been ignored for TPP.

Also of concern with ISDS in TPP are that “State-Owned Enterprises” will be captured under ISDS provisions in the investment chapter.

Recent Investor-State Challenges Against Canada

Challenge Against a Drug Patent Ruling

Eli Lilly (pharmaceuticals) claims a court decisions invalidating one of the company’s patents breach international obligations (2012).

Challenge against Quebec’s Fracking Moratorium

Lone Pine claims that the moratorium against all oil and gas exploration activities under the Saint Lawrence River, adopted June 13, 2011, is a form of indirect expropriation without compensation of the company’s potential future profits.

$130-million AbitibiBowater payout

AbitibiBowater was paid $130M to drop its $500M lawsuit against Newfoundland and Labrador after the expropriation timber, water and hydro-electric rights and assets. These were granted to Abitibi a century ago on condition the company use them in its production process.

Hibernia and Hebron Oil Field R&D

NAFTA investment panel has asked the province of Newfoundland and Labrador to remove research and development requirements on offshore oil and gas production in the Hibernia and Hebron oil fields. The wealthy oil companies were asking for $65 million in compensation for the R&D policy, which they successfully argued to be a “performance requirement” that is prohibited by NAFTA.

Footnotes:

1 Online public consultation on investment protection and investor-to-state dispute settlement (ISDS) in the Transatlantic Trade and Investment Partnership Agreement (TTIP) http://trade.ec.europa.eu/consultations/index.cfm?consul_id=179

2 Scott Sinclair submission to the European Commission’s public consultation on ISDS. http://www.tradejustice.ca/investor-state-dispute-settlement-in-the-ttip-and-ceta-submission-to-the-european-commissions-public-consultation-ccpa/

3 A UNISON briefing on TTIP https://www.unison.org.uk/upload/sharepoint/On%20line%20Catalogue/22410.pdf

4 Leaked documents TTIP reveal substantial EU commitments, public services not excluded. http://www.epsu.org/a/10558

5 Resolutions of EPSU Congress 2014 http://www.epsu.org/IMG/pdf/Resolutions_EPSU_Congress_2014_-_EN.pdf

6 Canada-EU trade deal: Trojan horse for contested ISDS? http://www.etuc.org/press/canada-eu-trade-deal-trojan-horse-contested-isds

7 PSI Executive Board endorses aggressive and far-reaching programme http://www.world-psi.org/en/psi-executive-board-endorses-aggressive-and-far-reaching-programme

8 A New Start for Europe: My Agenda for Jobs, Growth, Fairness and Democratic Change | Jean-Claude Juncker http://ec.europa.eu/about/juncker-commission/docs/pg_en.pdf

9 CETA ‘should be initialed by September 25’: EU Trade Commissioner | iPolitics: http://www.ipolitics.ca/2014/07/22/ceta-should-be-initialed-by-september-25-eu-trade-commissioner/

10 ITUC delegates give a resounding “No” to Trans Pacific Partnership http://www.world-psi.org/en/ituc-delegates-give-resounding-no-trans-pacific-partnership

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