Investor-state dispute settlement – also known under the even less transparent acronym ISDS – is one of the most harmful features of modern trade agreements. Under this mechanism foreign companies can use private tribunals to sue governments if they deem their profits or investment potentials are affected by new laws or changes in policy. The companies can seek compensation which may mount to millions of Euros.
In other words, companies are given powers to contest – and potentially reverse – government decisions.
The system is designed specifically for foreign investors – domestic investors have no access to the international private tribunals. Domestic investors rely only on existing judicial processes if they are unhappy about regulatory changes, just like the rest of us.
The system operates outside existing court systems. The tribunals are biased in favour of investors, with corporate lawyers often acting as the judges and parties. And they are only open to corporations to make claims over their investments (including their expected profits). This makes ISDS a clear violation of the right to access to justice and the rule of law.
Not only does the system allow companies to circumvent established judicial processes, it also allows them to challenge and overturn previous legal judgements. Public outcry is growing over the (mis-)use of the ISDS mechanism, and in particular its detrimental impact on democracy and policies that are made for the public interest.
ISDS quickly became one of the most controversial elements of the TTIP negotiations. After severe criticism from civil society, MEPs and even some business associations, in 2015 the European Commission paused the talks on the investment chapter to hold a public consultation, in which 97% of the respondents voiced their opposition to ISDS.
However, the European Commission chose to ignore the overwhelming criticism when relaunching the chapter, with an only marginally altered proposal called the Investment Court System (ICS). The ICS is a mere re-branding exercise with minimal improvements compared to the 'old' ISDS system; all the main flaws are still present. The ICS in TTIP and CETA would:
Many of the cases launched under the ISDS system would still be possible with the ICS. Friends of the Earth Europe therefore rejects the inclusion of the ICS in any EU trade agreement, and continues to call for TTIP and CETA to be scrapped altogether.
Experience of settled ISDS cases tells us that this system does negatively impact regulatory standards. Two emblematic cases illustrate this threat very well:
Friends of the Earth Europe is campaigning to stop the unfair ISDS system and opposes any trade agreement that includes it. We believe such a mechanism threatens democratic institutions and seriously risks deterring governments from introducing regulations that protect people and the environment.
The mere threat of multi-million Euro claims by large companies is likely to be too big a risk for governments with limited public budgets.
Friends of the Earth Europe alongside many other civil society organisations is calling on the European Commission, the European Parliament and EU member states to reject any future trade deals which include this harmful system, starting with the Transatlantic Trade and investment Partnership (TTIP) and the EU-Canada Comprehensive Economic and Trade Agreement (CETA).