EC Entrenches Dangerous ISDS System – Global Super Court For Corporations To Subvert Democracy

19th March 2017 / EU

The Investor-state dispute settlement (ISDS) or investment court system (ICS) has a number of iterations. It is a system through which individual companies can sue countries for alleged discriminatory practices. One small example is where the tobacco company Philip Morris sued Uruguay after having enacted strict laws aimed at promoting public health. ISDS is found in international investment agreements, such as the Energy Charter Treaty, TTP, CETA, TTIP and the like.

Corporate Europe Observatory (CEO) whose primary role is to expose the power of corporate lobbying in the EU, have highlighted in a recent report how the European Commission, faced with all sorts of existential problems such as Brexit, a banking crisis and a raft of threatening elections and referendums continue to push through laws the heavily benefit corporations to the cost of public and civil interests.

A new European Commission proposal is set to entrench the dangerous investor-state dispute settlement (ISDS) system, which foreign investors can use to subvert democratic decision-making. CEO opposes this attempt to establish a global super court for corporations.

The European Commission is currently preparing to launch a multilateral mechanism to settle investor-state disputes. This comes at a time, when globalisation is at a new, dangerous crossroads.

One path leads to stronger protection of human rights and the environment, and to governments being able to reclaim policy space to address climate change, inequality and other pressing issues of our times. The other path leads to more rights for corporations to bully decision makers and make them pay up for regulation that is in the interest of the people, not just industry.

The European Commission proposal for a multilateral mechanism to settle investor-state disputes (ISDS) – publicly branded as a Multilateral Investment Court – would take us down that second path. It threatens to forever lock in the highly controversial ISDS system that only benefits corporations.

Together with other civil society groups in the Seattle to Brussels Network (S2B), Corporate Europe Observatory has developed a position paper on the proposal, which outlines some of the serious risks linked to such a ‘multilateral ISDS system’:

Locking in ISDS permanently: The European Commission proposal would create a kind of special court for corporations which would tie governments even more tightly into a legal regime where private profits trump the public interest and democracy. Once established, it would take decades to unpick such a regime.
Undermining real reform: Meaningful steps which governments have taken to minimise the risks of investor attacks are at risk of being sidelined and delegitimised – such as the termination of investment treaties, or the adoption of model treaties with limited substantive investment protection standards or those without access to ISDS. This would close any opportunity to regain policy space for governments.
Legitimation of slanted rules: The proposed multilateral ISDS mechanism risks re-legitimising a flawed and dangerous regime with only limited procedural fixes. But as long as its far-reaching substantive rights for foreign investors are not significantly restricted, investor attacks against legitimate public interest laws would still be able to prevent, weaken or postpone regulation and wreak havoc with public budgets.
Even stronger bias towards investors: Like other courts, an institutionalised court for foreign investors is likely to increase its power by ruling expansively on its own jurisdiction and in favour of the claimants. Some have warned that the investor bias inherent in today’s private arbitration system could become even more intense through an investment court.
A smoke screen for ISDS expansion: Perhaps the most concerning aspect of the proposed multilateral ISDS mechanism is that it is already being misused to legitimise, and distract from, a massive expansion of today’s foreign investor privileges. In the case of the EU-Canada CETA and the proposed EU-US TTIP, for example, the promise of a future multilateral mechanism is already used as a key argument to convince EU governments, parliamentarians and the public that special rights for foreign investors need to be included in these treaties. TTIP alone would newly empower 75,000 companies to file investor-state lawsuits against the US, the EU and its member states – for now, these companies do not have such direct access to ISDS tribunals. Even without TTIP, 81 per cent of US investors operating in the EU would be able to file claims on the basis of CETA, if they structure their investments accordingly.

At a time when all attention should be focused on averting a global climate catastrophe, on tackling social and economic inequality and on empowering the many, there is no room for agreements which would give corporations the power to sue governments pursuing such solutions.

Read the full report, position paper and consultation paper HERE