ISDS – Investor State Dispute Settlement Explained – Flanagan MEP

by Luke Ming Flanagan MEP

It’s become a hot topic, this ISDS. It is in fact the reason that the ‘grand coalition’ in the European Parliament is in disarray on the whole TTIP debate at the moment.

This week in the European Parliament, in what was a transparently political move by the President Mr Schultz, (the EPP/S&D ‘grand coalition’ – of which Mr Schultz is a member and which dominates the parliament – wasn’t certain that they had the numbers to ensure that the current proposals breezed through), the debate and subsequent vote that were to take place on Wednesday were postponed.

The EPP (of which the four Fine Gael MEPs are staunch members) are totally behind TTIP, including the ISDS clause. The S&D (Socialists & Democrats) group however is split, and with good reason. They are asking the question that we in the GUE/NGL group have been asking since day one – why is there any such ISDS clause needed in a Trade deal between the EU and USA?

TTIP, by the way, is the proposed Transatlantic Trade and Investment Partnership – it’s about a lot more than trade and the only ‘partnership’ involved is between the corporate giants, but that’s another matter…

ISDS NEATLY WRAPPED
In a nutshell, what ISDS in TTIP would do is this; it would introduce a new layer of law above and beyond all existing law in either the EU or the USA, including the Supreme Court in every country, even the European Court of Justice itself and the US Supreme Court.

Staffed by corporate lawyers, it would apply only to multinationals, could not be availed of by local businesses or investors.

ATM FOR CORPORATES
But here’s what I find most interesting:
• The EU and the USA claim to have the most advanced legal systems in the world, even in the history of the world;
• ALL the multinationals and likely investors who are currently in either or both jurisdictions are investing and operating under those systems;
• There is absolutely no proof offered anywhere that having an ISDS clause in TTIP will increase investment (Brazil has no such clause in its trade agreements and there is no shortage of foreign investment there).

So why then do we need ISDS? Wherever it currently exists it is used almost exclusively by the investors/corporates to sue nation/states and boy, do they take advantage of it! What kind of mind-set then would an investor need if he/she says – ‘I’m not going to invest in either the EU or the USA unless I have an ISDS clause’?

PROOF OF THE PUDDING…
In April 2013 the London School of Economics produced a report titled ‘Costs and Benefits of an EU-USA Investment Protection Treaty’ on this proposed ISDS TTIP clause for the Department for Business Innovation and Skills in the UK.

In their conclusions they noted the following:

(1) There is little reason to think that an EU-US investment chapter will provide the UK with significant economic benefits.
(2) There is little reason to think that an EU-US investment chapter will provide the UK with significant political benefits.
(3) There is some reason to expect an EU-US investment chapter will impose meaningful economic costs on the UK.
(4) There is some reason to expect an EU-US investment chapter to impose meaningful political costs on the UK.
In sum, an EU-US investment chapter is likely to provide the UK with few or no benefits. On the other hand, with more than a quarter of a trillion dollars in US FDI stock, the UK exposes itself to a significant measure of costs.

TURKEYS AND CHRISTMAS OR VULTURES AND FUNDS?
Given all the above, given that forewarned is forearmed, you would expect that those who are charged with protecting the public interest in these negotiations – the various national governments especially – would be telling those kinds of ‘investors’ where to go, rejecting any such ISDS clause.

You would be wrong.

The following is taken from a leaked letter to Trade Commissioner Cecilia Malmstrom dated Oct 21st 2014:

‘The Council mandate is clear in its inclusion of investor protection mechanisms in the TTIP negotiations; we need to work together on how best to do so.
We are confident that you can achieve that goal and also secure our objectives across the whole of the mandate the Council has provided.’

Richard Bruton, Ireland’s Minister for Jobs, Enterprise & Innovation, was one of 14 signatories of that letter. Turkeys voting for Christmas comes to mind but then you wonder – whose interests are they REALLY protecting???

THE ENDGAME
Know this, and know it beyond any doubt – where either trade or investment is concerned there is no reason, absolutely no reason, why we should have yet another layer of legislation above and beyond any legislation that currently exists in either the EU or the USA. Whatever people may think of TTIP (and I have my own opinion, on this current deal especially), we – the people – do NOT need an ISDS clause in any way, shape or form. Neither does any genuine investor.