Brussels, 01/06/2015 (Agence Europe) - In an opinion adopted on Wednesday 27 May, the European Economic and Social Committee (EESC) states that it is against including an investor-state dispute settlement (ISDS) mechanism in the future transatlantic trade and investment partnership agreement (TTIP) between the EU and US, and in the comprehensive economic trade agreement (CETA) between the EU and Canada, as it believes this mechanism could derail the two agreements. Furthermore, the EESC backs the establishment of an international court to rule on international investment disputes.
“This is not an opinion against investor protection but an opinion that opposes ISDS, which is not a form of dispute settlement acceptable to a large majority of civil society”, says Sandy Boyle (Group II Workers, UK), who compiled the EESC opinion on investment protection and the ISDS in trade agreements with third countries. “Opacity, lack of clear rules of arbitration, the lack of right of appeal, and discrimination against domestic investors who cannot use the system, have undermined the credibility of this system”, states Boyle.
After a careful assessment of the investment arrangements in the CETA and the free trade agreement with Singapore, the EESC believes that the improvements brought in the current ISDS system fall well short of what is required to appease public fears. The EESC is thus concerned to note that the ISDS model included in the CETA is currently the basis for negotiations in the EU-Japan free trade agreement.
The EESC has analysed in detail the four priority areas for ISDS reform identified by the European Commission following the spring 2014 consultation on investment protection (the protection of the right of states to settle disputes, the supervision and functioning of courts to avoid conflicts of interest, the appeal mechanism, and the relationship between ISDS arbitration and national judicial systems) and underlines the need for alternative protection in order to reconcile the legitimate demands of investors and the concerns of civil society at large.
In order to guarantee a democratic, just, transparent and fair system, the EESC advocates the creation of an international investment court, which it sees as a “foremost priority”. Noting that the need for investment protection varies according to the country, the EESC believes that, in countries functioning with mature legal systems free from corruption, investment disputes should be dealt with by mediation, national courts and state to state settlement of differences.
The EESC opinion was adopted by 199 votes in favour, 55 votes against and 30 abstentions, after a stormy debate in plenary and a counter-opinion presented by the employers group which was rejected by 73% of the vote.
In an amended draft of recommendations on the TTIP negotiations, which was adopted on 28 May and will be put to the vote of the European Parliament in plenary on 10 June, the Parliament's international trade committee recommends including the very controversial ISDS mechanism - provided that this is reformed on the basis of the suggestions of European Commissioner for Trade Cecilia Malmström (see EUROPE 11323). (Emmanuel Hagry)