In June 2014, Michel Barnier predicted at the Peterson Institute that the EU and U.S. will find common ground on ISDS in 2015. During the Q&A session, Mr. Barnier said:
[ISDS] is causing some polemic in Europe, but I think it’s important that within our system, we have the mechanism for conflict resolution but a balance has to be struck between the protection of investors and the ability of the authorities to regulate. So I can say that what I think is that 2015 will be the year of truce for the TTIP.
Specific proposals for reform have now been written down. The concept paper subtitled Enhancing the right to regulate and moving from current ad hoc arbitration towards an Investment Court gives good idea of the EU's position. On her blog, Comissioner for trade Cecilia Malmström wrote:
We need a robust and serious reform of investment dispute resolution, because it's an important part of global investment policy. Europe is the biggest investor and recipient of foreign investments in the world. It only makes sense that we lead the way to reform, and set out our vision for better rules on a global scale.
Ms. Malmström also cited OECD research in her speech at the European Parliament, saying: "It is not multinationals that use investor-to-state dispute settlement the most. Research from the OECD has shown that only 8% of cases are brought by large multinationals."
The Economist wrote briefly about these developments last week:
European politicians ... are disinclined to let foreign profit-seekers challenge national regulations on public health, food safety, environmental standards and the like before private tribunals manned by corporate lawyers.
... The controversy led the commission to suspend talks with America on investor protection last year. Now it has come up with a proposal that could lead to their resumption. On May 5th Cecilia Malmström, Europe’s trade commissioner, revealed rules that she thinks will encourage and protect foreign investment without infringing the right of governments to pursue their public-policy priorities. TTIP and other free-trade deals, she suggests, should state explicitly that investment-protection rules cannot be used to undermine states’ right to regulate, merely to ensure fair repayment if investors are treated arbitrarily. ISDS arbitration systems should become more like conventional courts, with greater public access, permanent arbitrators as well qualified as judges, and an appeals procedure. The European Union would also work to establish an international investment court to replace bilateral schemes.
Here is Gary Hufbauer with a clear explanation of what ISDS is, and with a couple of proposals for improvement of settlement processes at the end of the video:
Finally, here is Adam Posen on the usefulness of protecting investments from expropriation:
Imagine a company invests in a place like Venezuela during the time of Chavez ... They send in workers, resources, know-how, and then they get nationalized. They should have some right of appeal. In most countries we trade with, the civil courts are good enough to deal with that. The Germans, for instance, can be trusted on these issues. But in a Russia or Venezuela, the question is, Can you put in some protections for the countries?
Is ISDS reform "enough"?
The suggestions for reforms we see include:
- Make public how arbitration decisions are reached.
- Find a mechanism to determine an appropriate "level of generosity" of rewards (so that they are not too generous).
- Address the selection process of arbitrators.
- Clarify the distinctions between legitimate regulation (especially in the area of public health) and the 'reduction of the value of the investment'.
Other than these points, one could also ask whether trade deals currently include adequate protections for workers. When blatant abudes of workers occur, why not allow injured employees to also use some kind of expedited mechanism?
If local courts or are too slow, can we find ways to speed up redress also when it comes to poor treatment of workers? Richard Trumka, for example, is dissatisfied with the different set of tools available to labor groups ("all provisions for enforcing labor rights in TPP require action by member governments").
(Let me also coclude this post by linking to a few vocal critic. Here is Jeffrey Sachs saying that ISDS is a "danger". Here is a recent letter to Majority Leader McConnell, Minority Leader Reid, Speaker Boehner, and Minority Leader Pelosi, signed by Joseph Stiglitz and others. A short collection of points and links in the current post obviously will not be balanced, but my sense is that many opponents of ISDS have had a solid presense in the media recently. Their voices and opinions are audible and just one or two mouse clicks away, so I won't include additional links here.)