The Multilateral Investment Court - the plot that just keeps running

Posted on April 03, 2017
Money Scales

By Matt Grady, Policy and Advocacy Advisor, Traidcraft

Few people like repeats on TV. If you add in spinoffs, prequels and rip offs, then it’s easy to feel like the same things are coming back over and over again.

One plot that keeps on returning is the continued promotion of trade provisions that allow private investors to sue democratically elected governments for policies that investors don’t like, bypassing domestic legal systems. This Investor State Dispute Settlement mechanism, known as ISDS, faced so much opposition that for a while it was quietly dropped from the schedules. Unfortunately, despite 97% of 150,000 respondents to a European Commission inquiry raising concerns, ISDS returned to the negotiating agenda and was included in the recently concluded CETA agreement with Canada rebranded as the Investment Court System (ICS).

Now with the Commission and Canada proposing to go further and establish a multilateral investment court (MIC), ISDS might have another new name but the script for this particular franchise reboot is largely unchanged. It continues to provide provisions for private companies to sue governments and restrict their ability to regulate in the public interest. Similar dispute mechanisms have already been included in other agreements with damaging consequences. The “judges” presiding over these tribunals are under no obligation to consider domestic law and frequently apply expansive interpretations of treaty clauses. The largest award to date, US$50 billion, was awarded in 2014 and there are 65 known claims above $1bn. The German government are currently being sued for their decision to cease nuclear power generation in the interests of public safety. The Tanzanian government have estimated that it will cost them at least $8 million just to defend a claim from Standard Chartered Bank.

The same plot lines crop up again and again as companies sue governments all over the world often simply for meeting their obligations to protect things like water sources or worker rights.

The proposed MIC poses a clear threat to developing countries which, with limited influence over its formation, are faced with the prospect of opening themselves up to unknown future claims if they wish to be seen as investor friendly. The MIC proposal would effectively become an international standard and normalise exceptional investor privileges. The creation of a second tier of legal privilege creates worrying inequalities as only foreign investors can raise claims, giving them an unfair advantage over domestic investors.

Although the proposed MIC addresses some of the concerns with ISDS it does nothing to address the dangers of allowing private companies to sue governments in secret tribunals. The proposed MIC does not put an end to ISDS. Quite the opposite. It would empower thousands of companies to circumvent national legal systems and sue governments in parallel tribunals if laws and regulations undercut their ability to make profits. It could curtail desirable policymaking to protect people and the planet. And it threatens to lock states forever into the injustices of the ISDS regime.

It’s too early to tell how the UK will respond to the proposed court but the government has been blind to the dangers of including tribunal mechanisms in many of its existing treaties. As the UK prepares to withdraw from the EU it has an opportunity to review its approach to ensure its policies match up to its commitment to the SDGs, Paris Climate Agreement and promotion of human rights.

If this were simply a bad TV show or a repeat you didn’t want to see you could just switch off. But with so much at stake, switching off is not an option. If secretive tribunals, granting privileges to private investors, are to be avoided it will take a concerted effort by voters, civil society groups and responsible businesses everywhere.