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INVESTOR-STATE DISPUTE SETTLEMENT : US BUSINESS AND CONSUMER GROUPS DISPUTE NEED FOR ISDS.

There is huge disagreement among US stakeholders over whether trade deals like the Transatlantic Trade and Investment Partnership (TTIP) should include investor-state dispute settlement (ISDS) mechanisms. The US Trade Representative's office, the lead negotiator on the TTIP, wants them in the accord. "We will seek inclusion of procedures for expeditious, fair and transparent investor-state dispute resolution," a spokesperson told Europolitics. ISDS should be "subject to appropriate safeguards and the protection of legitimate government regulatory interests," she added.

KANGAROO COURTS?

The group at the vanguard of the anti-ISDS campaign is Public Citizen, a non-governmental organisation set up in 1971 that opposes the kinds of free trade agreements that are concluded today. It claims that ISDS leads to taxpayers having to fork out hundreds of millions of dollars to compensate big corporations. According to its database of ISDS cases stemming from the numerous free trade pacts that the US has concluded since the 1990s, these payments total US$405.4 million. Examples include:

- Ethyl, a US chemical producer that successfully sued Canada over its ban on a toxic gasoline additive used to improve engine performance. This cost taxpayers US$13 million in damages and fees, plus the Canadians revoked the ban on the chemical in question.

- Corn Products International, a US high fructose corn syrup producer, successfully sued Mexico over its tax on its sweeteners, winning US$58.4 million in damages.

- ExxonMobil, the Texan-based oil and gas giant, won compensation from Canada in 2012 - the amount was not disclosed - over a Canadian law requiring it to provide financial support for research and development in Canada's poorest provinces.

Cases pending include the US metal smelter Renco Group's US$800 million lawsuit against Peru over who is liable for damages caused by toxic emissions at their metal smelting site in La Oroya. And a Texan oil magnate has filed a US$746 million complaint against Canada's state government of Ontario over its support scheme for solar and wind energy. Public Citizen alleges that the panels that hear these cases are little more than "kangaroo courts". They are adjudicated by private sector lawyers who, in between handling the disputes, are themselves bringing cases against governments on behalf of corporations, they say. US and EU courts are perfectly capable of handling such cases so ISDS panels are simply not necessary, they argue.

GOVERNMENTS WIN MOST CASES

A polar opposite perspective was conveyed by Sean Heather, executive director for international policy and anti-trust policy at the US Chamber of Commerce. He pointed out that the Obama administration, which has close ties to labour unions, reviewed how ISDS works after taking office in 2009 and concluded, in 2012, that it did not need a substantial overhaul. He contested the notion that the panels have a pro-corporate bias. Of the 390 disputes filed between 1995 and 2010 under some 2,700 bilateral investment treaties, Heather noted that governments won 40% of the cases, investors 30%, with 30% ending in a settlement. As for why the TTIP should include ISDS given the strong court systems in the EU and US, Heather argues that it is important "to establish stronger rules globally" as there is no legal framework on investment at the World Trade Organisation.

One question mark hanging over the TTIP talks is how it will affect the bilateral investment treaties that eight EU countries already have with the US: Bulgaria, Croatia, the Czech Republic, Estonia, Latvia, Lithuania, Poland, Romania and Slovakia. Since the Lisbon Treaty become law in 2009, the EU has exclusive authority to negotiate investment treaties. However, it still has to be determined whether the TTIP will supersede the earlier bilateral treaties, or whether companies will still be able file complaints against individual EU countries for perceived violations of their investment rights. As for the likely venue for these cases, the most popular forum at present is the World Bank-based International Centre for Settlement of Investment Disputes. Of course, there is nothing stopping the EU and US from creating their own forum.
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Publication:European Report
Date:Oct 28, 2013
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