By Guest author

On 25 July the Dutch government published a study “The Impact of Investor-State Dispute Settlement (ISDS) in the TTIP“, requested by the Dutch Parliament. The study is flawed.

A first reading reveals the following problems:

It does not mention that it is nearly impossible to withdraw from trade agreements. Any mistake in the ISDS procedure in a trade agreement will be as good as impossible to solve.

It does not mention that ISDS lacks conventional institutional safeguards for independence: tenure, prohibitions on outside remuneration by the arbitrator, and neutral appointment of arbitrators.

It does not mention that the for-profit system creates perverse incentives: accepting frivolous cases, letting cases drag on, letting the only party that can initiate cases win to stimulate more cases, pleasing the officials who can appoint arbitrators.

It does not mention that the system does not observe the separation of powers. The US appoints the president of the World Bank. This president is ex officio chairman of the International Centre for Settlement of Investment Disputes (ICSID) Administrative Council, and proposes the ICSID secretary-general, and appoints all three the arbitrators in appeal cases under ICSID rules. The secretary-general of ICSID appoints the third arbitrator if the parties can not agree on the third one, and will decide on conflicts of interest. In sum, the system is unbalanced to the advantage of the US.

It does discuss the ICSID appeal procedure, referring to various articles, but does not mention the president of the World Bank’s role noted above.

It mentions the Loewen case in which the US court took a terrible decision, mentions that the US won the ISDS case on a technicality, but does not mention that the US pressured an arbitrator – despite the fact that this had been discussed in a meeting at the ministry.

The US is not shy to pressure arbitrators. The US never lost an ISDS case. We can not expect Dutch companies to win major ISDS cases against the US. The study does not mention this.

It does not mention a study that finds that claimants from the US were 91% more likely to benefit from an expansive resolution than claimants from all other states combined.

It does not mention that for-profit arbitrators will be able to review decisions of the European Court of Human Rights.

It does not mention the Most Favoured Nation (MFN) loophole. Companies will not only be able to use the substantive investment protection provisions in TTIP, but they can cherry-pick from any other investment agreement the EU or EU member state ratified.

It does not mention investor rights trump human rights. The commission’s reference text does mention privacy and health, but does not refer to them as human rights, but only as an exception to investment and trade rules, limited by investment and trade rules.

It does not mention that the legitimate expectations clause could function as a non obvious umbrella clause. An umbrella clause creates competence for ISDS tribunals to review contractual obligations (like a contract between a state and an investor).

It does not mention that the commission’s ISDS proposals are fundamentally incompatible with Europe’s human rights system. Arbitrators will be able to review all decisions of the EU and its member states, including decisions of the European Court of Human Rights. This ensures compliance with investors’ rights, but threatens human rights.

It does not mention that a system rigged to the advantage of the US is a serious threat to the EU’s privacy protection. The ideas about privacy differ widely between the US and the EU. The EU regards the protection of personal data in the US as insufficient. If the EU would take strong measures to protect the privacy of its citizens, for instance through by suspension of data flows to the US, companies could use ISDS.

It does not observe that “binding interpretations” are not binding; there is no possibility to enforce this interpretation.

Flawed Dutch government study on ISDS (25.06.2014)
http://acta.ffii.org/?p=2168

The Impact of Investor-State Dispute Settlement (ISDS) in the TTIP (24.06.2014)
http://www.rijksoverheid.nl/documenten-en-publicaties/rapporten/2014/06/24/the-impact-of-investor-state-dispute-settlement-isds-in-the-ttip.html

ISDS: A rigged system, avoid lock-in (25.06.2014)
http://people.ffii.org/~ante/ISDS/draft-isds.html

(Contribution by Ante Wessels, EDRi member Vrijschrift, The Netherlands)