TTIP: investor-state dispute settlement (ISDS) may be illegal under EU law

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Posted Dec 13 2015 by Dave Darby of Lowimpact.org
stop-ttip

ISDS is a legal instrument within international trade treaties that allows corporations to sue elected governments if they introduce legislation that can be shown to be detrimental to the profits of corporations active in their country. So, for example, Egypt has been sued for introducing a minimum wage, Australia and Uruguay for introducing plain packaging for cigarettes, Germany for phasing out nuclear power. See here for more on this.

TTIP is a huge trade deal between the US and the EU that will transfer power from democratic institutions to the corporate sector. This seems to be all the rage these days, and it’s a shame that it’s not reported more in the, er, corporate press. Oh yes, that’ll be the reason. However, we have the internet now – who needs the corporate press any more? TTIP isn’t a done deal – we can still fight it. More on TTIP here.

Now I don’t know how this is going to pan out, but environmental law group Client Earth have produced a report showing that any ISDS provision within a trade treaty with the EU may actually contravene EU law, and can be successfully challenged through the courts.

Here’s an exerpt from the executive summary:

This study finds that including investor-state dispute settlement (ISDS) mechanisms in EU trade agreements may not be compatible with EU law, including the new ‘Investment Court System’ proposed by the Commission on September 16 2015. ISDS mechanisms would set up an arbitration system outside of, but binding on, the EU judicial system. Such mechanisms would introduce an additional judicial relief within the EU legal order that is independent of the EU courts. It would, in effect, be a system that would enable foreign investors to sideline the EU courts and resort to claims that are not available to domestic investors. EU law, and settled case-law of the European Court of Justice (ECJ), suggest that such a system of external judicial control may be incompatible with the EU legal order because it would (1) undermine the autonomy of the EU legal order and the powers of the EU courts in particular and (2) negatively affect the completion of the internal market, and more specifically the EU competition rules.

And from the concluding remarks:

This study has found that there are doubts whether an international agreement containing ISDS is legal under EU law. ISDS may be found incompatible with the EU Treaties because it would (1) undermine the autonomy of the EU legal order and the powers of the EU Courts in particular and (2) negatively affect the completion of the internal market, and more specifically the EU’s system of undistorted competition. Since legal doubts exist, and the importance attached by the Commission, the European Parliament and the European Economic and Social Committee to respect the powers of the EU courts, it is essential for the EU to verify whether ISDS is compatible with EU law.

Their suggested course of action is for the EU to ask the European Court of Justice whether an international agreement involving the EU, like TTIP, is legally compatible with EU treaties. It’s a power that the EU has, and it’s been used 24 times before to clarify the legality of international agreements involving the EU. We’ll keep you up to date with any developments.

Here’s the full report