Secret Trade Courts: are the scales TTIPing?

Should MEPs allow corporations to take legal action against governments which pass laws that cause them to lose profits?

fuzzyhead feature by Dan Booth

MEPs passed a package of recommendations on TTIP, a trade agreement between the EU and the US, on 28 May.

Anti-TTIP campaigners saw the vote as a major blow, because it preserved a controversial provision which could allow corporations to sue governments in special courts. But the fight is far from over.

Investor-State Dispute Settlement (ISDS) is one of the thorniest parts of the entire agreement, and would allow corporations to take legal action against governments which pass laws that cause them to lose profits.

In practice, critics argue, this could mean that fossil fuels companies could sue governments that legislate for clean air. Tobacco companies could get litigious if a country passes laws to help people quit smoking. Agrochemicals companies could throw the book at governments that block chemicals they consider dangerous.

In its ugliest form, ISDS could allow cases such as these to be tried in secret tribunals outside national courts. Unsurprisingly, TTIP’s opponents take issue with agreements interfering with such trifling matters as the founding principles of modern justice. UN lawyer Alfred de Zayas told The Guardian that ISDS “constitutes an attempt to escape the jurisdiction of national courts and bypass the obligation of all states to ensure that all legal cases are tried before independent tribunals that are public, transparent, accountable and appealable”.fuzzyhead feature by Dan Booth

There is precedent for these cases. Tobacco giant Philip Morris is suing Uruguay’s government over its legislation on cigarette packet warnings. The legal basis? Uruguay’s free trade agreement with Switzerland. French multinational Veolia also sued the Egyptian government under ISDS for raising the minimum wage.

ISDS won’t be pushed through in this form without a fight. Even Cecilia Malmström, the European Trade Commissioner herself, believes it needs reform. “My assessment of the traditional ISDS system has been clear – it is not fit for purpose in the 21st century,” she wrote in an official blog post.

“I want the rule of law, not the rule of lawyers. I want to ensure fair treatment for EU investors abroad, but not at the expense of governments’ right to regulate. Our new approach ensures that a state can never be forced to change legislation, only to pay fair compensation in cases where the investor is deemed to have been treated unfairly (suffered discrimination or expropriation, for example).”

Malmström proposes tribunals which would operate more like traditional courts, with a “clear code of conduct for arbitrators” and “guaranteed access to an appeal system”. Small comfort to critics? Perhaps. At least it shows that Brussels bureaucrats to some extent understand and share popular concerns.

Malmström points out that the EU’s free trade agreement with Canada, CETA, says governments “preserve the right to regulate within their territories and… preserve their flexibility to achieve legitimate policy objectives, such as public health, safety, environment, public morals and the promotion and protection of cultural diversity”. Many in Brussels think such provisions eliminate most anti-TTIP arguments with one fell swoop. The name of the game is finding the loopholes to ensure that critiques remain relevant.

Where next?

The wholesale abandonment of TTIP by the EU and the US seems unlikely. TTIP is a trade agreement: it removes barriers to trade between countries. Free trade is a cornerstone of neoliberalism, the economic ideology dominating much of western politics. Many politicians aren’t driving TTIP because they’re being lobbied. They are driving it because it’s what they believe.

The EU is the world’s largest transparent free market. That means the process of harmonising standards – which TTIP critics fear could erode EU food safety legislation, for instance – is woven deeply into the bloc’s fabric. To these people, attacking TTIP is attacking the principle of free trade. And a lot of people in high places are really, really keen on free trade. Besides, backing out now would be too much egg on the shirts of Brussels’ serried ranks.

Mooted agreements are not inevitable. Following a period of intense campaigning in 2012, the EU rejected ACTA – an anti-piracy and anti-counterfeit agreement – with a majority of 478 to 39. Difficulties other than popular resistance can also stick a spanner in the works: parties to the World Trade Organization’s Doha Round, which like TTIP aims to lower trade barriers, have been at loggerheads since 2001. However, the EU is already part of a thick web of trade agreements, many of which already include ISDS. Where TTIP differs is the magnitude.

More optimistic are the prospects for getting changes on single issues. There is a strong chance that the most ominous aspects of ISDS, such as secret arbitration, will not make it into the deal.

Dedicated, organised campaigners keeping a hawk-like eye on developments mean there is a groundswell of detailed argument against the pitfalls. Website www.nottip.co.uk lists dozens of organisations which have come out as anti-TTIP, ranging from political parties to publications via anti-fracking and farming groups. They offer detailed arguments about TTIP’s feared impacts on the financial industry, the NHS, food safety standards, worker rights, and many other things.

In Britain, the government is well aware of the concern that US healthcare corporations could use TTIP to prevent reversals in NHS privatisation. Malmström wrote in a letter to Westminster that: “Member States do not have to open public health services to competition from private providers, nor do they have to outsource services to private providers. Member States are free to change their policies and bring back outsourced services back into the public sector whenever they choose to do so, in a manner respecting property rights (which in any event are protected under UK law). It makes no difference whether a Member State already allows some services to be outsourced to private providers, or not.”

As negotiations progress, the debate becomes a game of chess in which politicians propose placating amendments and activists find new legal angles to demonstrate that their concerns remain relevant.

The game changes daily. On Thursday 4 June, the Socialists and Democrats ducked out of a compromise to reassert their anti-ISDS position – a major hurdle for the arbitration clause, according to European news portal Euractiv.

The European Parliament’s recommendations on the TTIP talks go to plenary vote on Wednesday 10 June. The next round of talks is slated for July, with a draft text due in December.

Until then, keep your eye on the ball.

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