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19 May 2016

Leak reveals five EU governments propose new intra-EU ISDS mechanism

Germany, France, Austria amongst nations pushing for increased investor privileges

Simon McKeagney, Editor

Despite huge public uproar over provisions for exclusive rights for foreign investors in deals like CETA and TTIP, a new leak has shown that five EU governments want to expand the system internally between EU countries. France, Germany, Austria, Finland and the Netherlands have presented a non-paper (marked April 7) to the EU Council’s Trade Policy Committee, suggesting that the controversial ISDS mechanism be enshrined in a new EU-wide agreement, once the old bilateral trade deals between EU Member States are dissolved. 

The non-paper admits that including investor rights in TTIP would become even more unjustifiable if such provisions were not also included throughout the EU: 

‘If one postulates that such provisions are not required within the EU due to the very nature of the internal market or to the level of development of EU Member States, it would then be even more difficult to argue in favour of investment chapters within the TTIP or other FTAs with developed countries.’

While the paper acknowledges that ‘investment disputes should usually be subject to Member States’ domestic courts’, it goes on to argue that the five delegations would ‘definitely support the institution of an appropriate investor-to-State mediation scheme through the proposed Agreement.’

Big Business lobby demand 

Europe’s largest business lobby group, known for its vocal support for an ambitious TTIP deal and investor rights provisions, has echoed the call for an intra-EU ISDS mechanism in an April 14 statement on it’s website, despite the proposal only becoming known by civil society groups this week. It says: 

‘BUSINESSEUROPE is in favour of reinforcing investment protection provisions in the single market and developing a Union-wide dispute settlement mechanism. At the same time, and to avoid legal gaps in the protection of investors, intra-EU BITs should remain in place until a solution is found.’ 

However campaigners working on the issue said they were “astonished” by the proposal, noting that ISDS provisions discriminate against citizens and domestic investors, and will reduce the policy space and democratic decision-making throughout the EU. They also said that “tribunal arbitrators are far less accountable and independent than domestic court judges.”

S&D leaders meet in Rome

The leak may come as a source of embarrassment to some members of the Socialists & Democrats family, such as President Hollande, who has said "no" to TTIP at this stage earlier this month. He is due to join S&D leaders on Friday 20 May in Rome*, for a private meeting to discuss CETA and TTIP.  

Many S&D leaders both at EU and national level in Germany, Austria and other countries as well as in the European Parliament, have been critical of the ISDS mechanism in both agreements, requiring Commissioner Malmström to propose some procedural changes to ISDS in late 2015. The changes, and the rebranded name (Investor Court System), led to a renegotiation of the investor protection chapter in the EU-Canadian deal CETA and has implications for the TTIP negotiations. However, investor protection, whether ISDS or ICS remains the most controversial aspect of both deals.

Commenting on the new proposals, Green trade spokesperson Ska Keller said:

"This proposal appears to be the latest straw being grasped at in the attempt to preserve the deeply unpopular investor protection provisions. Instead of dealing with the real concerns being raised about providing corporations with private, extra-judicial means to challenge democratically-decide rules and decisions, we have a proposal for an intra-EU ISDS mechanism that yet again ignores this core issue."

Green trade spokesperson Yannick Jadot added: 

"Despite uproar in Austria, Germany and France in particular about investor privileges in EU-Canada and EU-US trade deals, these governments seem to be proposing a further expansion of such discriminatory rights for foreign investors operating across borders in Europe. Just as there is no way such provisions should be included in international trade agreements, we should not be creating EU mechanisms that distort the market, undermine our judicial systems and undermine the democratic law-making process."

New studies:

CETA investment chapter and ISDS process a massive extension of investor privileges on both sides of the Atlantic: Powershift, Campact analysis.

Case studies: New EU investment proposal won’t prevent corporate attacks, Friends of the Earth

*Update: latest news on May 19 evening says the Rome S&D leaders meeting has now been cancelled.

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