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TTIP in trouble

Posted on June 12, 2015 by Tom Healy

Last week an unprecedented even took place in the European Parliament. Following months of complex negotiation between the European Commission – on behalf of European Union Member States – and the United States of America  a resolution to the Parliament to be discussed and voted upon last Wednesday was postponed and the matter was referred back to the Trade Committee. This concerns the Transatlantic Trade and Investment Partnership (TTIP) a brief summary of which is provided at the very end of this blog. If you have followed the international debate about TTIP you probably belong to one of four groups:

  1. TTIP is a hugely positive opportunity for Ireland and a game-changer for Europe to get us out of stagnation and pull the economy forward;
  2. TTIP is a corporates’ charter with potentially devastating implications for the environment, workers rights and citizens’ well being
  3. TTIP has many excellent parts but many very bad parts, too, like ISDS (Investor-State Dispute Settlement) which need to be got rid of or radically modified before you endorse the final TTIP package.
  4. You are not sure at all what to make of it

Take your pick!

The vote was postponed for a few months pending further discussions among parliamentarians. A large number of amendments had been submitted by parliamentarians. It was a long-drawn out, complex and contested process involving a mix of political blocks in the parliament as well as specific national interests with an interest in emerging agreement. It is not entirely clear why the vote did not go ahead. Some commentators believe that it was a case of calling off a vote because it looked increasingly likely that the Parliament would vote it down. It should be noted that while the Parliament has no rights to modify TTIP – that is a matter for the European Commission and heads of government – it can veto it. The purpose of the proposed amendments was to indicate clearly what the Parliament wanted to see agreed before it might endorse a final proposal. That seems reasonable. However, the postponement of the vote along with the recent failure by President Obama to FastTrack TTIP through the US senate means that the agreement could be years away in terms of final agreement and ratification. It should not be forgotten that every European Member State including Ireland and the UK has to ratify TTIP – something that might even feature as an election or manifesto issue prior to the formation of new governments in EU member states in the coming years. TTIP. Much will depend on the final outcome of the negotiations and the matter could even become a ‘redline’ issue for some prospective parties and governments or, indeed, a bargaining point in a much larger collection of issues to be considered at Member State level.

A key sticking point for critics of TTIP is ISDS. Some form of dispute resolution process involving Governments and investors is regarded by its advocates as an essential component of a comprehensive agreement on trade and investment – however this process may be conducted (whether through national courts or through some supra-national tribunal be it ‘public’, ‘private’ or ‘semi-private’. The jury is still out on ISDS.

In the recent past there have been some notorious cases involving ISDS. Vattenfall, a  Swedish energy corporation took a lawsuit against Germany  for €3.7 billion in compensation for lost profits relating to  nuclear power plants following the decision by the German Government to phase out nuclear energy after the Fukushima disaster.  Lone Pine Resources sued, under ISDS provisions in the North American Free Trade Agreement encompassing Canada, the USA and Mexico, the Canadian government over its moratorium on fracking in Québec. Curiously the use of ISDS has never happened in the Republic of Ireland where, perhaps, a consistently benign treatment of multinational companies by public authorities along with an emphatically generous interpretation of private property provisions in the Irish constitution makes ISDS an unnecessary safeguard to assure foreign investors.  How essential is ISDS to a global EU-US agreement? A study by LSE economists  commissioned by the UK Government concluded that:

…. existing evidence suggests that the presence of an EU-US investment chapter is highly unlikely to encourage investment above and beyond what would otherwise take place. US investors have generally not taken much notice of investment treaties in the past when deciding where, and how much, to invest abroad – even when dealing with far more questionable jurisdictions than the UK.

A number of problems arise with ISDS in general and TTIP related discussions about ISDS in particular. In general many non-governmental organisations are very unhappy with a process that:

-          Gives a special place to well endowed corporations to take governments to arbitration under binding agreements (where is the same level of protection for citizens, communities and workers?)

-          In its recent incarnations has operated outside national and EU laws and mechanisms thus raising questions about the sovereignty and mandate of existing legal institutions.

The latter point is not far fetched. Prior to joining the EU the Romanian government contracted a bilateral ISDS agreement with Sweden. Romania offered tax breaks as part of an investment incentive scheme which fell foul of EU state aid rules during the negotiations leading up to its membership of the EU in 2005. Romania was taken to task by a private tribunal, in 2013, for violating the ISDS agreement in question. Note that the ‘investment incentive’ schemes were not specifically part of the ISDS agreement between Sweden and Romania. Rather, when conditions changed in the lead up to Romania’s accession to the EU it was found to be subsequently in breach of EU rules and these incentives were revoked in 2009. However, compensation was paid by Romania to the Swedish investors and this, now, has been contested by the European Commission. Romania is caught between having to compensate investors on the one hand and, on the other, being opened to new fines because the European Commission is not at all happy with the grant of effective ‘state aid’ to the investors. The matter is on-going. It therefore is entirely unsurprising that one of the leading trade lawyers on the EU side of the TTIP negotiations – Mr Colin Brown – speaking at the Joint Oireachtas Committee on European Affairs on 11 June 2015 acknowledged that European Directives could be drawn into ISDS type contestations.

A final word about public services – some have argued that education and health services are exempt from TTIP. Defining public services as an ‘exercise of governmental authority’ in the General Agreement on Trade in Services (GATS) exempt from competition rules  does not seem to apply here. The fact is that health and education services are already spread between public and private providers – often on a competitive basis. The risk is that TTIP could lock in existing arrangements and leave States and public service providers open to legal challenge via private tribunals. The protections in GATS and the EU-Canada trade agreement (CETA) to ‘services supplied in the exercise of governmental authority’ do not apply to UK National Health Services because of the competitive coexistence of public and private providers in the NHS (at least in England) as well as the private funding and commercial activities of NHS Foundation Trusts in Britain.

The time left before the European Parliament considers TTIP again should be used to investigate every aspect of the deal including related matters such as the Trade In Services Agreement (TISA) and CETA.

  • A number of key points need to be taken up by civil society organisations and reflected in political debate over coming months. These could be shaped around matters questions such as the following
  • Should ISDS be removed or reformed and relabelled under some other acronym?
  • public services need to be clearly and definitively excluded from the scope of trade agreements.
  • Employment protection, collective agreements, consumer and public health protection, financial market regulation as well as data protection need to be safeguarded.
  • Documents and communications relating to trade negotiations, including TISA which were leaked last year, should be made more public
  • Public scrutiny and assessment of the negotiation texts is needed involving national parliaments, civil society organisations and others.

Ultimately, TTIP if it is brought to fruition will not be a gamechanger for Europe. The challenge remains, to rebuilt Europe on a different economic and social model to the grotesque one that we recognise today and which does not do justice to the social ideals and vision of the early pioneers in the immediate post-war period.  A generalised intensification of trade does not necessarily address the primary challenges of climate change, growing imbalances and inequalities as well as a gulf between citizens, Governments and large corporations.

What is TTIP?

The Transatlantic Trade and Investment Partnership refers to talks or negotiations that have been taking place over the last year involving the United States of America and the European Union. The aim is agree on a ‘comprehensive trade and investment’ package covering a large part of the world’s population and economic activity – from Alaska to Romania (and of course the island of Ireland in between!). The Agreement is aimed at:

  • Reducing regulatory (rather than tariff) barriers to trade and investment
  • Harmonising rules in relation to trade in goods and services
  • Otherwise creating a common commercial environment

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