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News / 20 January 2015

Broad opposition to the controversial investor-to-state-dispute settlement (ISDS) mechanism

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Almost 150,000 organisations and individuals who participated in a public consultation on the Transatlantic Trade and Investment Partnership (TTIP) of the European Commission, made a strong statement. According to EU's own reporting, 97% does not want the controversial investor-to-state-dispute settlement (ISDS)-mechanism to be part of the trade deal. Worldwide, more than 3000 international investment agreements with ISDS exist,  of which the Netherlands has more than 90s - predominantly with developing countries. Many of these countries have suffered damage caused by ISDS. This has started to set off the alarm bells in Europe and should definetely also have consequences for the already existing agreements.

What was the public consultation about?

The EU Commission held an online public consultation on investment protection in the proposed trade deal between the EU and US, which ran from March to July 2014. On January 13 this year, the Commission presented its first preliminary analysis of this consultation. Most of the participants were opposed to TTIP in general, or were concerned about ISDS and investment protection in TTIP. Besides out of concern about the protection of the right to regulate in the public interest, or the functioning of arbitral tribunals, most submitters rejected ISDS for general principle reasons .

 

What is TTIP, what is the problem with ISDS?

The first negotiations for TTIP started in July 2013. Proponents argue that the trade agreement will boost economic growth for both the USA and the EU, but opponents argue otherwise. Burghard Ilge, programme officer at Both ENDS, explains why ISDS in TTIP is a bad idea: “With ISDS, a foreign investor can sue national governments if it expects a loss of profits because of  national regulations, even if they are taken in the public interest (like environmental protection). This would happen in private, arbitral tribunals, instead of via the standard system. Countries could be at risk of more and very expensive claims. ISDS can undermine countries’ ability to follow through with efforts to protect the environment and social policies.”.


What has all this got to do with Both ENDS?

Burghard: “Both ENDS fundamentally opposes both the far-reaching private property rights in international investment agreements, as well as investor-to-state arbitration. In our contribution to the EU consultation we said that these concerns can not - as suggested by the Commission - be mitigated by only changing certain technical aspects in the proposed draft text on ISDS. Still, Both ENDS is happy that the consultation has shown that ISDS is broadly recognised as a flawed system, and that there are concerns about ISDS in general. TTIP has helped to put the discussion about bilateral investment treaties (BITs) on the agenda, so we do hope that – with time – ISDS can be eliminated. Countries like South Africa and Indonesia already took the lead by recently terminating  their Bilateral Investment Treaties with the Netherlands ”


What will be the next steps?

The Commission will probably not yet decide on the inclusion of ISDS in TTIP until the final phase of the negotiations. Burghard: “At the moment it is not yet clear what the EU Commission will do exactly with the input they got in the consultation process. Until then, we will have to wait and see. However, one thing is clear: the discussion about ISDS in TTIP has led to an important debate in Europe that has been overdue. It is now key that the ‘lessons learned’ will also be applied to ISDS agreements in general. The  clear message of the TTIP consultation cannot be ignored by the Dutch government. As a result, the Netherlands will also have to reconsider their bilateral investment treaties and we expect a first reaction soon."

 

The (closed) EU consultation.

Report European Commission results public consultation

 

 

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