EU – US trade agreement will give a boost to expropriation trolls

Tomorrow EU trade commissioner Karel de Gucht will travel to Washington to discuss the possibilities to start negotiations on an EU – US trade agreement. The industry already dreams of setting a gold standard in areas such as intellectual property protection – just like they tried with ACTA. But that is not all. An EU – US trade agreement will also give a boost to expropriation trolls, the more evil kid brothers of patent and copyright trolls. Expropriation trolls abuse arbitration tribunals to attack legislative reforms and demand high damages.

Investor – state arbitration

The Interim Report to Leaders from the Co-Chairs EU-U.S. High Level Working Group on Jobs and Growth, 19 June 2012, (pdf) writes about a possible investment chapter: “The aim would be to negotiate investment liberalisation and protection provisions on the basis of the highest levels of liberalisation and protection that both sides have negotiated to date.”

The High Level Working Group refers to investor – state arbitration, which gives multinational companies the right to directly sue states in international tribunals. Adding investor – state arbitration to an EU – US agreement is not necessary, but detrimental.

Not necessary: Both the EU and US have excellent laws providing protection against expropriation. Both the EU and US have good court systems and highly respected high courts. We are not banana republics. There is no need for protection against expropriation in a trade agreement between the EU and US.

Detrimental: Arbitration tribunals are placed above the high courts. There is almost no possibility for appeal. In recent years, arbitration tribunals increasingly stretched the concept of expropriation. Multinationals claim that reforms of legislation that could reduce their profits are expropriation and demand high damages. Arbitration tribunals award such damages. Basically, investor – state arbitration is hijacked by a captive incrowd.

Public Citizen’s Lori Wallach wrote a two part overview (part I, part II) of investor – state arbitration in the TPP agreement, which is also an excellent general overview. See also the FFII press release on the EU – Canada trade agreement.

Assault on democracy

Faced with the negative consequences of investor – state arbitration, Australia decided not to sign treaties containing such clauses any more. The High Level Working Group disregards recent developments, its advice is flawed and dangerous.

Patent and copyright trolls are legal entities that use bogus law suits to extort money. They use flaws in legislation, legislation that can still be repaired. Expropriation trolls use arbitration tribunals to attack legislative reforms and protect old business models. With investor – state arbitration we undermine democracy and risk making trolling perpetual.

Yesterday: The era of monolithic trade agreements is over?
Tomorrow: A new ACTA?

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