Steinbrück: Nobody knows what has been negotiated

Peer Steinbrück, Member of the Bundestag, Chair of the German-U.S. Parliamentary Friendship Group, and former German Federal Minister of Finance

Moderator: Bruce Stokes, Director of Global Economic Attitudes, Global Attitudes Project, Pew Research Center, Non-Resident Fellow, German Marshall Fund of the United States

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US PEC on Cross-Border Data Flows in TTIP and other FTA

The US President Export Council discusses its proposed data flow provisions (June 19, 2014) as a means to counter the rush to privacy protection and denounces privacy measures of foreign governments as a trade barrier and digital protectionism. No further arguments are provided to back up these claims and allegations.

CHAIRMAN McNERNEY:
.. Ginni, you warmed up earlier today over breakfast, on cross-border data flows, but why don’t you give us a summary of the second letter on cross – data border flows?

MS. ROMETTY [IBM]: Okay. Well, first, I should say that the Administration has taken a number of actions already in this area. It is both cross-data flows, cross-border data flows, as well as data localization. In fact, these are a threat not only to operation globally, but also to business globally, and, frankly, it is a threat to how governments can even operate and the benefits they get. So the past two years, both Secretary Pritzker and Ambassador Froman have been very helpful in their attempts, in their efforts here, because we have seen some successful rollback of troubling policies. I think many people are well aware of the India Preferential Market Access policy that got pulled back.

And, quite clearly, since the Snowden revelations, what has happened is you see an increase now in governments who are advocating and promoting local and digital protectionism.  Just to list some of the countries, Brazil, Turkey, Russia, Indonesia, Vietnam, Nigeria, India.

They are in the forms of cross-border or the data protection or keeping data local. Honestly, they are many times often a condition to do business there.

So while privacy and security, those are often the reasons stated for this, outright stated, this is really a form of protectionism and it is really often driven by local competition, local commercial competition.

I don’t think anyone would argue that you need data. It is the lifeblood of an economy, it is for our governments, it is for our businesses, for small and medium enterprises, as well, to succeed around the world.

While privacy and security are essential, it is just really important that we believe that any local requirements for this, it will actually just create trade barriers and do nothing for privacy and security at the end of the day.
So we would advocate that we really work together to defeat any of this digital protectionism and in the short term, please continue, the Administration,to  do what  we’ve  been doing. As  these creep up, we go work on the bilaterally, but as we spoke about earlier today with Ambassador Froman, the most important thing is to intensify the focus on all the trade agreements to be sure that they actually — that there are rules there that prohibit that and protect, that we are able to move data and not have to store data locally.
I’d  just  end  on  the  point  that this  isn’t  about a technology industry issue. This is every company’s  issue.    It  is  every company,  every  industry and, frankly, all governments, as well, and their ability to both create economic prosperity and move jobs.

CHAIRMAN McNERNEY: Yes. Taken to an extreme, it would impair our ability to conduct business globally. So threading this needle between being sensitive to local sensitivities on privacy on one hand, but not allowing agreements to wrap — local in terests to wrap themselves in that cloak to, in essence, produce a protectionist environment is what I think is the point.

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A license to spy – cross-border data flows in TTIP

Here is a quote from Harry van Dorenmalen of IBM Europe:

Data flows and the Transatlantic Trade and Investment Partnership (TTIP) will be high on the agenda at the Summit. TTIP offers a unique opportunity to set the example as a 21st Century trade agreement that supports cross border data flow provisions…

The position is not new and mirrors earlier attempts of IBM Europe leadership to mock the idea of a European cloud. The “demands for a safe environment for big data” are channelled via various lobby hats, including EU branded ones. Here for instance the European Services Forum (22 May):

The ESF and CSI call upon negotiators to ensure that TTIP will allow cross border data flows and dataprocessing to occur free from discriminatory terms and trade distorting conditions such as requirements to use local network infrastructure or local servers. These commitments should be applied across all services sectors, including financial services.

Part of the common “data flow” narrative is also fearmongering about fragmentation of the internet.

Why is it critical to have a close watch and what is so outrageous about this agenda?

  1. “data flows… including financial services”. Please learn more about the SWIFT scandal to get an idea why this is unacceptable.
  2. Why would European governments consider “requirements to use local network infrastructure or local servers”? Why wouldn’t Estonia like its egovernment services to be hosted in Russia?

The data flow debate relates to the recent surveillance scandals, and the post-snowden world. Having your data on European servers won’t help against criminal actions of partner countries. What it does achieve is data governance by your jurisdiction and preventing undesirable lawful access of a foreign government – as in the SWIFT scandal. There the US government dared to spy on the most toxic European data you could imagine, financial and stock market transaction data collected by the SWIFT processing agency, data mirrored on US servers. The US President B. Obama openly discussed the data flow topic with the Export Council and we hear from IBM that thankfully “Froman got it tied down in the trade agreement.”, that is TTIP.

It is hard to imagine how provisions on unrestricted cross-border data flow would benefit Europeans but it is essential to understand the harm to our data sovereignty. We got assurance from the European Commission that privacy protection would not be discussed within TTIP and some feel relieved by that. It seems ironic that the opponents of European privacy standards and collaborators of government surveillance table provisions on “free data flow” for TTIP that undermine reasonable European data sovereignty defenses. You may wonder if the European Commission negotiators are out of their mind to accept these demands in a “digital chapter” and limit (insufficient) options to defend European digital security interests.

In fact, data flow provisions are suicidal in the current situation where European leaders get no post-Snowden concessions from the US whatsoever, not even a fig leaf no-spy agreement, and the European Parliament calls to terminate the safe harbour data agreement with the US. Even for the US Export Council members it seems astonishing that Europeans negotiators are easily willing to accept these demands and to buy into the overbearing distortion to denounce these data location requirements as a trade barrier. If you understand the scope, impact and substance of the US demands you are likely to call the persons responsible names and would volunteer to eat chlorinated chicken for the rest of your life if only these provisions get taken out of that TTIP agreement.

The free data flow provisions in TTIP received broad lobby support by the US ICT industry and associations. The positions are pretty well developed, dispersed over multiple fora and hats.  What you may find outrageous upon closer look is worded low tune and reasonable, opposing views are not taken and decision makers in the Brussels bubble get vaccinated by riddiculing these views. Among the eloquent supporters of this agenda is a disgraced former German defense minister whom Commissioner Neelie Kroes once appointed to an net freedom advisory role. With fearmongering about “data separatism”, “fragmentation” of the internet, building on the old “free flow” ideals of the internet technologist community and European mainstream narratives of free cross-border exchange of goods and services the transatlantic free data flow agenda pursues a devilish assault on the privacy and freedoms of European citizens and nation states in the digital world.

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121 scholars speak out against planned ISDS provisions in TTIP

A 100.000 citizens answered the EU consultation on ISDS, among them 121 academics. Some quotes from their submission:

“The Commission’s consultation document is an extraordinary text. On the one hand, the document contains fierce (and, in our opinion, fully justified) criticism of the international investment treaty arbitration regime as it has developed over the last two decades or so in a rapidly expanding number of awards under some 2800 Bilateral Investment Treaties, NAFTA, and the Energy Charter. Both explicitly and implicitly, the document disapproves of widespread expansive interpretations of nearly every provision found in investment treaties: from Most Favored Nation to umbrella clauses, from National Treatment to Fair and Equitable Treatment, from indirect expropriation to threshold issues of corporate nationality. The document also implicitly condemns the investment arbitration community for its failure to police itself adequately in matters of ethics, independence, competence, impartiality, and conflicts of interest. By implication, the document acknowledges that the institutional design of investment arbitration has given rise to reasonable perceptions that the decision-making process is biased against some states and investors as well as various interests of the general public.

And yet, on the other hand, the Commission seems content to entrust to these same actors the vital constitutional task of weighing and balancing the right to regulate of sovereign states and the property rights of foreign investors. This task is one of the most profound roles that can be assigned to any national or international judicial body. The proposed text requires arbitrators to determine whether discriminatory measures are ‘necessary’ in light of the relative importance of the values and interests the measures seek to further; whether the impact of non-discriminatory ‘indirect expropriations’ have a ‘manifestly excessive impact’ on investors in light of the regulatory purpose of these measures; whether other non discriminatory measures amount to arbitrariness or fall short of standards of due process and transparency, and whether prudential regulations are ‘more burdensome than necessary to achieve their aim’. To entrust these decisions to the very actors who have an apparent financial interest in the current situation and moreover remain unaccountable to society at large is a contentious situation. In light of the criticism inherent in the consultation document, not to mention the fundamental concerns of many observers of the system, there seems to be consensus that the regime falls short of the standards required of an institutionally independent and accountable dispute settlement system.”

On the right to regulate:
The approach “[f]ails to protect the ‘right to regulate’ as a general right of states alongside the many elaborate rights and protections of foreign investors, let alone as a component of the FET and Expropriation standards”. ” By its omissions, the consultation text actually confirms boldly that the right to regulate has not been affirmed and preserved, by a clear and unequivocal statement of the right, alongside the rights and protections of foreign investors.”

On protecting public funds in a sovereign debt crisis:
“In light of the social misery and hardship the sovereign debt crisis has brought, it requires little discussion to conclude that the mere thought of speculative investors in government bonds seeking damages before investment arbitration Tribunals is utterly unacceptable.”

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Encryption on the TTIP agenda

The European Commission General directorate for trade confirms that electronic encryption is among the discussed topics:

On ICT, the two sides have so far exchanged analysis on some specific topics, such as e-health, encryption, e-accessibility, enforcement and e-labelling.

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Flawed Dutch government study on ISDS

Today the Dutch government published “The Impact of Investor-State Dispute Settlement (ISDS) in the TTIP“. The Parliament had asked for this study. The study is flawed.

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Update: See also the Vrijschrift noteShortcomings in dutch government study on investor – state arbitration“, which is more elaborate and more recent.

Vrijschrift letter to Dutch Parlament (Dutch)

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A first reading reveals:

It does not mention that it is near impossible to withdraw from trade agreements. Any mistake in the ISDS procedure in a trade agreement will be as good as impossible to solve.

It does not mention ISDS lacks conventional institutional safeguards for independence: tenure, prohibitions on outside remuneration by the arbitrator and neutral appointment of arbitrators.

It does not mention that the for-profit system creates perverse incentives: accepting frivolous cases, letting cases drag on, letting the only party that can initiate cases win to stimulate more cases, pleasing the officials who can appoint arbitrators.

It does not mention that the system does not observe the separation of powers. The US appoints the president of the World Bank. This president (1) is ex officio chairman of the International Centre for Settlement of Investment Disputes (ICSID) Administrative Council, (2) proposes the ICSID secretary-general, (3) appoints all three the arbitrators in appeal cases under ICSID rules. The secretary-general of ICSID (1) appoints the third arbitrator if the parties can not agree on the third one, (2) will decide on conflicts of interest. (ICSID, articles 5, 10, 38, 52 and Commission, 2014b, Table 8, article x-25.10) In sum, the system is rigged to the advantage of the US.

It does discuss the ICSID appeal procedure, referring to various articles, but does not mention the president of the World Bank’s role noted above.

It mentions the Loewen case in which the US court took a terrible decision, mentions that the US won the ISDS case on a technicality, but does not mention that the US pressured an arbitrator – while that had been discussed in a meeting at the ministry.

The system is rigged to the advantage of the US, and the US is not shy to pressure arbitrators. The US never lost an ISDS case. We can not expect Dutch companies to win major ISDS cases against the US. The study does not mention this.

It does not mention a study that finds that claimants from the US were 91% more likely to benefit from an expansive resolution than claimants from all other states combined.

It does not mention that for-profit arbitrators will be able to review decisions of the European Court of Human Rights.

It does not mention the MFN loophole.

It does not mention that the filter mechanism creates a perverse incentive.

It does not mention investor rights trump human rights.

It does not mention that the legitimate expectations clause could function as a non obvious umbrella clause.

It does not mention that the commission’s ISDS proposals are fundamentally incompatible with Europe’s human rights system.

It does not mention that a system rigged to the advantage of the US is a serious threat to the EU’s privacy protection.

It does not observe that “binding interpretations” are not binding.

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FFII submission: ISDS: A rigged system, avoid lock-in

Update: deadline extended to 13 July, see below.

FFII submission to European Commission consultation on investor-to-state dispute settlement (ISDS):

This submission concludes that investor-to-state dispute settlement lacks conventional institutional safeguards for independence and has characteristics of a rigged system. The appointment of arbitrators is not neutral and gives the US an unfair advantage. The US never lost an ISDS case, we can not expect European companies to win major ISDS cases against the US, all the more as the US is not shy to exert pressure on arbitrators. We can expect that US companies will win ISDS cases against the EU and member states. This leads to four considerations.

First, ISDS arbitrators will be able to review all decisions of governments, legislators and courts, including the European Court of Human Rights, and they can award unlimited damages. The European Commission aims to add ISDS to trade agreements from which it is near impossible to withdraw. Given that ISDS lacks conventional institutional safeguards for independence, does not observe the separation of powers, has characteristics of a rigged system and gives the US an unfair advantage, the transfer vast powers to arbitrators without possibility of withdrawal would be imprudent. At the very least, to protect its future, the EU has to avoid a lock-in, should not deviate from standing European practice of stand-alone investment agreements. The EU should not add ISDS to trade agreements.

Second, the EU aims to create a global standard. Presently a minority of foreign investments is covered by ISDS, after ISDS agreements between the major capital exporting countries a large majority of global foreign investments would be covered by ISDS. Wide coverage of global foreign investments and impossibility to withdraw would create a near global lock-in. Given that the commission’s reforms fail on many counts, a near global lock-in would give arbitrators unprecedented and unchecked powers. This would burden democracies, local companies, tax payers, human rights and the rule of law.

Third, quintessentially, states need a margin of appreciation. States which are constantly battered by threats and legal challenges can not function properly, can not take decisive action. The US protect themselves through a system rigged to their advantage. It is an existential threat to the EU not to be able to take decisive action, especially since the US can. Raison d’état necessitates to avoid this situation.

Fourth, foundationally, an essential aspect of liberalism is constitutional liberalism – the separation of powers, the creation of strong institutions. Sovereign decisional power accompanied by strong institutions can provide fairness. ISDS undermines the institutions. ISDS undermines the EU’s vital interests and values, it has to be rejected. In doing so, the EU would give direction to the debate and create room to strengthen alternatives.

This conclusion is based on our note “ISDS: A rigged system, avoid lock-in”, which we add as an attachment, also available at http://acta.ffii.org/?p=2118

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The attachment “ISDS: A rigged system, avoid lock-in”: html, pdf

Background:

ISDS gives foreign investors, usually multinationals, the right to circumvent domestic courts and challenge decisions of states for international investment tribunals if decisions may lead to lower profits than expected. Multinationals can challenge reform of copyright and patent law, challenge privacy measures, challenge environmental and health policies. The cases are decided by for-profit arbitrators, they can overturn decisions of our supreme courts and our human rights court. For an introduction see Nobel laureate Joseph Stiglitz or Vrijschrift.

The European Digital Rights initiative (EDRi) has published a tool and an answering guide for the European Commission’s consultation on ISDS. See here for more answering guides.

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Investor-to-state dispute settlement is a rigged system

Investor-to-state dispute settlement (ISDS), the most controversial element of the proposed trade agreement with the US, has characteristics of a rigged system. ISDS gives the US an unfair advantage, we can not expect EU companies to win ISDS cases against the US.

Trade agreements including ISDS would lock-in the EU, as it is practically impossible to withdraw from trade agreements.

ISDS is controversial. Investment agreements with ISDS give foreign investors, usually multinationals, the right to circumvent domestic courts and challenge decisions of states for international investment tribunals if decisions may lead to lower profits than expected. These ISDS tribunals can review all decisions of the state, all decisions of governments, legislators and courts, including supreme courts and human rights courts. For-profit arbitrators decide the ISDS cases and can award unlimited damages.

Multinationals can challenge reform of copyright and patent law, challenge privacy measures, challenge environmental and health policies. For an introduction see Stiglitz (2013) or Vrijschrift (2014). For intellectual property rights and human rights see FFII (2014).

Perverse incentives

The ISDS system lacks conventional institutional safeguards for independence: tenure, prohibitions on outside remuneration by the arbitrator and neutral appointment of arbitrators. The for-profit arbitrators are paid at least 3000 dollar a day. This creates perverse incentives: accepting frivolous cases, let cases drag on, let the only party that can initiate cases win to stimulate more cases, pleasing the official that can appoint arbitrators.

No neutral appointment of for-profit arbitrators

The appointment of arbitrators is not neutral. One arbitrator is appointed by each of the disputing parties. In which supreme court can parties bring their own judge? The third arbitrator, the presiding arbitrator, is appointed by agreement of the disputing parties.

The US appoints the president of the World Bank. This president
– is ex officio chairman of the International Centre for Settlement of Investment Disputes (ICSID) Administrative Council,
– proposes the ICSID secretary-general,
– appoints all three the arbitrators in appeal cases under ICSID rules.

The secretary-general of ICSID
– appoints the third arbitrator if the parties can not agree on the third one,
– will decide over conflicts of interest. (ICSID, articles 5, 10, 38, 52 and Commission, 2014b, Table 8, article x-25.10)

The ISDS system gives the US an unfair advantage. Adjudicative processes have to be free of reasonably perceived bias. This is not the case with ISDS.

Statistically significant evidence

There may be more than a reasonably perceived bias, a study suggests there may be actual bias. The study “examines trends in legal interpretation instead of case outcomes and finds statistically significant evidence that arbitrators favour: (1) the position of claimants over respondent states and (2) the position of claimants from major Western capital-exporting states over claimants from other states.”

The study finds that claimants from the US were 91% more likely to benefit from an expansive resolution than claimants from all other states combined. Claimants from Western European former colonial powers were 75% more likely to benefit from an expansive resolution than claimants from all other states combined, other than the US.

The study concludes: “These tendencies, especially in combination, give tentative cause for concern and provide a basis for further study and reflection on the system’s design, not least because the use of investment treaty arbitration appears to be a relatively recent phenomenon.” (Van Harten, 2012)

These are sensitive issues. Expansive interpretations put pressure on the public interest. Furthermore, if ISDS amounts to a neo-colonialist instrument, that would not be compatible with the EU treaties.

The US never lost an ISDS case

The US never lost a known ISDS case. The US could have lost the Loewen ISDS case, as the domestic court took a terrible decision. The US won the Loewen ISDS case on a technicality.

After the Loewen ISDS case one of the tribunal members publicly conceded having met with officials of the US Department of Justice (DoJ) prior to accepting his appointment. The DoJ put pressure on him. (Kleinheisterkamp, 2014)

The ISDS system gives the US an unfair advantage. The US is not shy to exert pressure on arbitrators.

We can now draw six conclusions:
– ISDS gives the US an unfair advantage,
– we can not expect EU companies to win ISDS cases against the US,
– ISDS is not free of reasonably perceived bias,
– ISDS has characteristics of a rigged system,
– expansive interpretations put pressure on the public interest,
– ISDS may not be compatible with the EU treaties.

Locking in failed reforms

The EU commission’s reform proposals, presented in its consultation (Commission, 2014a), do not solve the problems noted above: lack of conventional institutional safeguards for independence: no tenure, no prohibitions on outside remuneration by the arbitrator and no neutral appointment of arbitrators; for-profit arbitrators; perverse incentives; the ISDS system gives the US an unfair advantage; reasonably perceived bias.

ISDS agreements concluded by EU member states are stand-alone investment agreements from which it is possible to withdraw. The EU considers adding ISDS to its trade agreements. This would create a lock-in, as it is almost impossible to withdraw from trade agreements.

The EU aims to create a global standard. Presently a minority of foreign investment is covered by ISDS, after ISDS agreements between the major capital exporting countries a large majority of global foreign investment would be covered by ISDS.

Failed reforms, impossibility to withdraw and wide coverage of global foreign investment would create a global lock-in, an uncontrollable situation with unprecedented and unchecked power for for-profit arbitrators, which will burden democracies, local investors, tax payers, human rights and the rule of law.

We can now draw three more conclusions:
– to avoid lock-in, the EU should not deviate from standing European practice of stand-alone investment agreements, the EU should not add ISDS to trade agreements,
– the EU commission’s reform failed,
– the EU’s ambition to create a global standard is unrealistic and dangerous.

Stay tuned! Digital groups are preparing an answering guide for the commission’s ISDS consultation.

References

Commission, 2014a, Consultation website, http://trade.ec.europa.eu/consultations/index.cfm?consul_id=179

Commission, 2014b, Public consultation on modalities for investment protection and ISDS in TTIP, http://trade.ec.europa.eu/doclib/html/152280.htm

FFII, 2104, ISDS threatens privacy and reform of copyright and patent law, http://acta.ffii.org/?p=2109

ICSID, Convention on the settlement of investment disputes between states and nationals of other states, https://icsid.worldbank.org/ICSID/StaticFiles/basicdoc/partA.htm

Kleinheisterkamp, J., 2014, Is there a Need for Investor-State Arbitration in the Transatlantic Trade and Investment Partnership (TTIP)?, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2410188

Stiglitz, J. E., 2013, South Africa Breaks Out,
http://www.project-syndicate.org/commentary/on-the-dangers-of-bilateral-investment-agreements-by-joseph-e–stiglitz

Van Harten, Gus, 2012, “Arbitrator Behaviour in Asymmetrical Adjudication: An Empirical Study of Investment Treaty Arbitration.” Osgoode Hall Law Journal 50.1 (2012) : 211-268.
http://digitalcommons.osgoode.yorku.ca/ohlj/vol50/iss1/6

Vrijschrift, 2014, Investment tribunals above supreme courts, https://www.vrijschrift.org/serendipity/index.php?/archives/154-Investment-tribunals-above-supreme-courts.html

See also

CEO, 2014, Still not loving ISDS: 10 reasons to oppose investors’ super-rights in EU trade deals, http://corporateeurope.org/international-trade/2014/04/still-not-loving-isds-10-reasons-oppose-investors-super-rights-eu-trade

Secret deals
http://eu-secretdeals.info/news/

CEO and TNI, 2012, Profiting from injustice – How law firms, arbitrators and financiers are fuelling an investment arbitration boom,
http://corporateeurope.org/publications/profiting-from-injustice

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ISDS threatens privacy and reform of copyright and patent law

On 3 December 2013, the Dutch Parliament requested the government to investigate the potential social and environmental risks and the consequences of investor-to-state dispute settlement (ISDS) and the consequences of ISDS for the Netherlands and the financial risks for the Dutch government.

On 17 April 2014 companies and civil society organisations met at the Ministry of Foreign Affairs to discuss the ongoing “ISDS – TTIP study”. The ministry invited participants to send in further comments. The Foundation for a Free Information Infrastructure (FFII) submitted the note “ISDS threatens privacy and reform of copyright and patent law”.

Download this note:
http://people.ffii.org/~ante/ISDS/FFII_NL_ISDS-threatens-privacy.pdf

Below the summary of this note.

Summary

This note concludes that the EU commission’s timid reform proposals would create an ISDS system that is wide open for abuse and fundamentally incompatible with Europe’s human rights system. Given ISDS’s inherent design flaws which threaten democracy and human rights and can only be solved by abolishing the system, there are imperative reasons for the EU to exclude ISDS from its trade and investment agreements. In doing so, the EU would give direction to the debate and create room to strengthen alternatives. As a next step states should withdraw from ISDS agreements, mutual withdrawal is preferable. As the birthplace of democracy Europe has to take its responsibility.

ISDS gives multinationals the right to sue states before special tribunals if changes in law may lead to lower profits than expected. Multinationals can challenge reform of copyright and patent law, challenge environmental and health policies. For an introduction see Stiglitz (2013) or Vrijschrift (2014).

This note is divided into three sections. The first section analyses the system’s design flaws. It argues that ISDS has four inherent design flaws which can only be solved by abolishing the system: ISDS gives companies equal standing to states, unequal standing creates pressure on human rights, ISDS places specialised investment panels above general supreme courts, and the system lacks a legislative feedback loop.

Further, the section notes that the inherent design flaws are aggravated by non-inherent design flaws: the tribunals are not courts, the arbitrators are not judges, there is no tenure, there is a lack of openness and there is a strong perverse incentive. It concludes that the 2013 UNCTAD investment report shows that these flaws can be solved but that this would require a complete overhaul of the current regime through the coordinated action of a large number of states, an overhaul which is not foreseeable. The section also notes that ISDS is vulnerable to outside pressure. An argument for inclusion of ISDS in TTIP is that if ISDS is not in TTIP, China may object to having ISDS in its trade agreement with the EU. But the vulnerability to outside pressure defeats the sense of including it in trade agreements. The section raises the question whether China will be able to pressure arbitrators.

The second section discusses the EU commission’s reform proposals, which it presents in its consultation. The commission reforms both substantive investment protection provisions and procedural (ISDS) rules. Regarding substantive investment protection provisions, it concludes that the commission’s proposal contains a very broad definition of investment. Contrary to commission statements, the known Most Favoured Nation loophole still exists. Companies will not only be able to use the substantive investment protection provisions in TTIP, but they can cherry-pick from any other investment agreement the EU or EU member state signed. The text creates supreme investors rights which trump human rights. There is no general exception that safeguards the right to regulate. Specific limitations to safeguard the right to regulate are limited and do not solve the kind of uncertainty the EU is trying to avoid.

ISDS tribunals would apply these substantive investment protection provisions. The section concludes that the commission fails to identify the ISDS system’s inherent design flaws, noted in the first section. Non-inherent design flaws could be solved but this would require a complete overhaul of the current regime through the coordinated action of a large number of states. The commission limits itself to some minor adjustments: better transparency, limitation to post establishment and avoidance of multiple parallel proceedings. The commission can not solve the inherent design flaws and additionally does not solve these issues: ISDS tribunals are not courts, the arbitrators are not judges, there is no tenure, the strong perverse incentive, frivolous claims, the growing number of ISDS claims, lack of independence and impartiality of arbitrators, arbitrary decisions and the vulnerability of the system to outside pressure. The section concludes that the commission’s timid reform proposals would create a system that is wide open for abuse.

The third section argues that the commission’s ISDS proposals are fundamentally incompatible with Europe’s human rights system. It concludes that ISDS threatens our privacy and reform of copyright and patent law. It further argues that ISDS creates a higher chance on compromising the stability and integrity of the financial system. The filter mechanism proposed by the commission has a very limited scope, is dependent on other parties, doesn’t help against the chilling effect of threats and even creates a perverse incentive. This section also argues there is a lack of necessity for ISDS.

More:
http://people.ffii.org/~ante/ISDS/FFII_NL_ISDS-threatens-privacy.pdf

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Irresponsible EU parliament vote on ISDS tomorrow

Tomorrow the EU parliament will vote on investor-to-state dispute settlement (ISDS). The parliament will vote on a regulation regarding “International agreements: framework for managing financial responsibility linked to investor-state dispute settlement tribunals”. See the procedure file.

The regulation is a deal between council and parliament, it establishes rules for managing the financial consequences of investor-to-state dispute settlement (ISDS). Who will have to pay, the EU or the member state, if the EU loses an ISDS case? The regulation is a preparatory step to the inclusion of ISDS in EU trade agreements.

Today the international trade committee voted in favour of the regulation, tomorrow plenary will vote. We can expect the regulation to be adopted.

In my opinion, the vote is irresponsible.

When is the member state responsible? When the Member State acts in a manner inconsistent with that required by Union law, for example when it fails to transpose a directive adopted by the Union, that Member State should consequently bear financial responsibility.

Sounds clear and reasonable. But then, say a country is in a financial crisis. Member state, commission, council and IMF come together. A plan to save the financial system is made. Who then takes the decision? The threat of ISDS claims will loom over the decision.

ISDS adds extra complexity to solving a financial crisis. This heightens the chance on a financial system collapse.

The commission added a carve-out for financial crises? Yes, in true commission style: a dysfunctional one, dependent on the other party.

Now take a look at the procedure file again. Four committees decided not to give an opinion: Development, Legal Affairs, Budgets, Economic and Monetary Affairs.

Even Economic and Monetary Affairs wasn’t interested. They just left it to international trade committee.

ISDS threatens democracy, human rights and the stability of the financial system.

In my opinion the parliament should refer the regulation back to the committees and await the consultation.

On the positive side: if the parliament votes tomorrow, we will know on whom not to vote in the elections.

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