TJM says no to ISDS

Investor to State Dispute Mechanism (ISDS) is the provision that gives companies disproportionate rights to sue governments at private international tribunals. TJM believe this is an unnecessary, damaging and outdated provision.

The EU is currently running a consultation on the inclusion of ISDS in the Transatlantic Trade and Investment Partnership (TTIP) - a giant trade deal between the EU and US. ISDS is already included in the North American Free Trade Agreement (NAFTA); as a result, Canada has seen some of the highest numbers of cases of any country in the world. It has been challenged for a range of policy changes, including attempting to remove toxic chemicals from petrol and for measures to develop its own solar panel industry.

This provision must not be included in TTIP. Here are some reasons why:

  • Approximately 70% of global investment happens without this kind of investment protection.
  • There is no valid reason to transfer business risk to communities by making governments liable. Transferring the risk to governments causes 'policy chill' whereby governments resist passing policies in case they get sued. For example: governments thinking of introducing plain packaging to cigarettes are watching the Philip Morris cases against Uruguay and Australia carefully: the company is arguing that the legislation is a breach of their intellectual property rights, the countries could face million-dollar compensation bills.
  • There is no reason to give international investors greater rights than domestic investors: both kinds of investors can access domestic courts, only international investors can access the private tribunals associated with ISDS.
  • Businesses should protect against risk via insurance: a scheme already exists via the World Bank. This could be supported by mediation and state-to-state diplomacy where necessary.

There are many other problems with the EU's proposed text: the definitions of 'investment' and 'investor' are still too broad: this means that the lawyers at the private tribunals get to decide what is covered; the right of governments to regulate in the public interest is included in the preamble, not the text of the agreement - which means that it is not legally binding; the text explicitly allows companies to bypass domestic courts; it would also give the right to the US and the EU to decide whether or not each others' policies to deal with a financial crisis were legitimate.

Finally, there are many problems with the consultation itself: it claims to be a public consultation but requires a high level of technical expertise; it is not really a consultation on TTIP, but on the EU-Canada deal (CETA) - this is the text given as reference, we won't be able to see the TTIP text until the negotiations are finished and it does not ask whether people responding to the consultation think ISDS should be included or not, just what they think of the proposed text.

You can see the full response from TJM here - we wish to thank IISD for allowing us to draw on their analysis.

You can take action via the Friends of the Earth tool here.