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06 May 2015
Commission scrambles to hold on to ISDS, as never-ending “consultation process” set to continue.
For a year and a half now the Commission has been undertaking a consultative process on the question of the Investor State Dispute Settlement (ISDS). When they first launched a public consultation in March 2014, it was clear that the aim was to dampen the growing unrest in Europe over the clause, as more people became aware of what it could mean for democracy. Instead, the ongoing uncertainty has added fuel to the fire. Since 97% of respondents rejected the inclusion of ISDS in the EU-US deal when the results were released in January this year, a panicking Commission has spent every hour trying to come up with magic language to save ISDS.
Hopes that Commissioner Malmström would finally wrap up the consultation-pantomime this week by formally consulting the European Parliament with legal language that would address concerns and set the EU’s policy on ISDS for the foreseeable future, have once again come up short, with yet another communications-drive in the form of a document entitled Investment in TTIP and Beyond- the path for reform presented to MEPs in the International Trade Committee on Wednesday.
Of course, if the Commission were really interested in taking into account the broad rejection of ISDS from their own consultations, Malmström could have simply rejected ISDS outright long ago, and focus on the many other issues that dog the EU-US trade deal. Instead, she’s jumping through hoops to try and save a mechanism nobody needs and nobody wants (with the exception of a host of business-lobbies).
A new proposal? Not exactly.
It’s not a coincidence that only days prior to the release of the new Malmström path for reform text, Germany’s Socialist & Democrat Vice-Chancellor, Sigmar Gabriel released his own paper, laying out the road for reform of ISDS. He is desperate to win back support, with ISDS-opposition dominating the debate in Germany.
Both proposals build on tweaks already suggested for ISDS, such as more transparency rules, improved language on the right to regulate, a possible appeals mechanism, and specifying the relationship between domestic and international forums where investors can seek redress. Many of those ideas are already in the EU-Canada trade deal, and so present nothing particularly new. But as Ska Keller pointed out to Commissioner Malmström in March, the proposals have never addressed the fundamental question that goes to the core of the issue; they only talk about what sort of ISDS we want, and never about whether we want to keep it at all. Today she repeated that criticism:
“Cosmetically changing the mechanism but keeping the same prerogatives for corporations would be little more than a PR stunt, ignoring the core of the problem. The proposal changes nothing about the fact that investors get an extra judicial system that will only deal with their rights, not their obligations."
So who will buy the “new” pro-ISDS magic language? Sigmar Gabriel’s political family also holds the cards at European level. The S&D group, the second largest in the European Parliament, has expressed severe reservations on ISDS over the last year. Many S&D MEPs outright rejected the need for it in TTIP. Almost half of the parliament’s opinion-giving committee’s rejected ISDS in the last number of months- with many S&D MEPs joining the critical voices from across the political spectrum. Yet the effort now seems to be to find some form of pro-ISDS language that can be supported by S&D parliamentarians.
Lipstick on a pig
To date, Malmström has yet to find that magic language. It will be almost impossible to do so when the debate is a principled one. No matter what way you phrase it, ISDS has become too toxic an issue to be supported by many. The Greens/EFA trade spokesperson, Yannick Jadot said today:
“Commissioner Malmström is attempting to soften the most perverse aspects of ISDS but fails to address the question of why any such mechanism is needed at all in an agreement between the EU and the US, Canada or anyone else. Instead of heeding the clear and consistent opposition to enabling multinational corporations to take democratic laws and governments to court, the Commission is trying to put lipstick on the ISDS pig."
Moving toward a (vague) new permanent court
The most apparent shift in the Commission’s position is the move toward some form of permanent international arbitration court in the future. This is important mostly because it is finally an admittance that that public’s fears about ISDS are indeed justified, or as Malmström stated in a blog this week, “it is not fit for purpose in the 21st century.”
But big questions remain as to whether a new court would actually replace ISDS. Not only was Malmström unclear on this point, she continues to maintain that the reopening the CETA and Singapore deals (both containing ISDS) is off the table. In that sense, TTIP is likely to result in a tweaked-ISDS in the short term too, regardless of whether or not the EU eventually develops a policy to create an international arbitration court down the road.
Even then, such plans for a long-term court are, to date, vague and without schedule. More worryingly they have shifted the debate away from the fundamental question of whether we need ISDS or not. This question is dodged by the creation of a smokescreen of new ideas to make ISDS more palatable. An appellate body, with tenured judges has been floated as part of this tweaked-ISDS for TTIP, and as a bridge to move us toward a permanent court. Perhaps this could be positive development if it was multilateralised and hosted under the UN for instance, where a balance of rights and responsibilities for investors could be made binding. But the present proposal remains limited to the confines of pro-ISDS reforms within the EU-US deal.
In the absence of legal texts, we won’t know exactly what the Commission wants exactly from a future court. The fear is that such a proposal has been floated as a means to push for the inclusion of ISDS now, with the hope that a permanent court will be a solution for other deals in the future. Separate to that issue- the question on whether we need ISDS or not at all, goes unanswered.