February 16, 2017

Defend democracy: draft answers for new ISDS consultation

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The European Commission has launched a consultation on an investor-to-state dispute settlement (ISDS) variant: a multilateral investment court. 1 The consultation is flawed; it is so narrow that social and environmental impacts may not show up in the consultation results.

This is irresponsible, as the system as a whole will strengthen investments vis-à-vis democracy and fundamental rights. This undermines our values, ability to reform, and ability to respond to crises, including climate change. Mankind faces an existential threat and the commission buries its head in the sand!

What to do? Stay tuned, civil society organisations are preparing position papers, example answers, and more. I will update this page as material becomes available. Below are draft FFII answers to the consultation, based on this draft position paper. In some cases the text field only appears after a yes or no to the preceding question. (Deadline 15 March 2017)

See also: S2B: ISDS at a dangerous crossroads.

1 Text fields

Question 29. Other reasons why it is important to have the same procedural rules apply. Please specify.

Without justification the proposal gives foreign investors greater procedural rights than local investors. This harms local companies. In contrast, domestic legislation and courts provide equal access to the law and democratic and supreme court scrutiny of the development of the law.

Question 31. Can you identify other possible features that you believe should be included in a new multilateral system?

Supranational investment adjudication suffers from inherent systemic issues. Specialised courts tend to interpret expansively; the supranational level lacks effective instruments to correct expansive interpretations. A multilateral investment court (MIC) would strengthen investments vis-à-vis democracy and fundamental rights. This undermines our values, ability to reform, and ability to respond to crises, including climate change.

Question 34. Please provide any additional comments that you may wish to add on how to take account of the special needs of developing countries within a multilateral reform of investment dispute settlement.

Comprehensive baseline – no EU policy changes – and multilateral investment court scenarios indicate growing social and environmental impacts. These will also harm developing countries. Eliminating impacts should have priority. The attachment includes comprehensive scenarios.

Question 37. Please provide any additional comments that you may wish to add on how to take account of the special needs of SMEs within a multilateral reform of investment dispute settlement.

Most SMEs operate locally or within the EU. Without justification an MIC gives foreign investors greater procedural rights than SMEs operating locally. Furthermore, easier access to multilateral investment dispute settlement increases social and environmental impacts. In contrast, domestic legislation and courts provide equal access to the law and democratic and supreme court scrutiny of the development of the law.

Question 39. If not, please identify what other issues relating to investment could be covered by a permanent multilateral dispute settlement mechanism.

(I may not use this field.)

Question 41. Please provide any additional comments that you may wish to add on the enforcement of awards.

Supranational adjudicators do not have to read provisions in the light of the EU Charter of fundamental rights. The enforcement of supranational awards strengthens investments vis-à-vis democracy and fundamental rights. EU courts have to be able to set aside awards against the EU and EU member states, just like a Dutch court set aside the USD 50 billion award against Russia.

Question 43. Other contributions which could be achieved by centralisation. Please specify

Centralisation legitimises, strengthens and perpetuates the growing social and environmental impacts a comprehensive baseline scenario indicates.

Question 48. Do you have any further comments on the manner in which adjudicators should be selected?

The proposal overlooks more fundamental issues. See answer to question 31 on systemic issues.

Question 50. Do you have any further comments on the qualifications of adjudicators under such a mechanism?

An instrument the parties to an MIC agreement will have is vetting the adjudicators they appoint. The EU won’t have influence on the adjudicators other parties nominate / appoint. In other parties climate change denialists may be in power. Furthermore, within the EU, and especially in trade departments, offensive interests play a major role. This would have an effect on vetting adjudicators. ISDS arbitrators, responsible for expansive interpretations, may reappear as MIC judges / “judges”.

Question 57. If you consider there would be any other impacts, please specify and explain the link with the establishment of a single Multilateral Investment Court or a Multilateral Appeal Tribunal.

The establishment of a court or tribunal is unjustifiable. Research suggests that foreign firms tend to be treated at least as well by host state governments as comparable domestic firms in the vast majority of cases. There is a political advantage, as opposed to liability, of being a foreign firm.

Question 58. If you consider there would be any other economic impacts, please specify and explain the link with the establishment of a single Multilateral Investment Court or a Multilateral Appeal Tribunal.

The establishment of a court would legitimise, strengthen and perpetuate unjustifiable discrimination against locally operating companies. This gives foreign companies an advantage. It also undermines democracies, while strengthening democracies is crucial seen the challenges mankind faces.

Question 60. If you consider there would be any environmental impacts, please specify and explain the link with the establishment of a single Multilateral Investment Court or a Multilateral Appeal Tribunal.

The establishment of an MIC or MAT would legitimise, strengthen and perpetuate the growing environmental impacts a comprehensive baseline scenario – no EU policy changes – shows. The EU commission’s one sentence baseline scenario is not comprehensive. In the light of the risks of climate change, to base a proposal on a selective one sentence baseline scenario is irresponsible. The attachment includes more comprehensive scenarios.

Question 62. If yes, please specify the social impacts and explain how they are linked to the establishment of a single Multilateral Investment Court or a Multilateral Appeal Tribunal.

The establishment of an MIC or MAT would legitimise, strengthen and perpetuate the growing social impacts a comprehensive baseline scenario shows. In the light of the need to protect fundamental rights, to base a proposal on a selective one sentence baseline scenario is irresponsible. The commission has to investigate options that lead to decreased impacts and reject options – including baseline and multilateral investment court – with continued or increased impacts.

Question 63. You may also upload a position paper to support the opinions expressed in this questionnaire.

(The answers refer to an attachment. The FFII attachment is public domain. You can copy any part or upload the paper itself.

The commission has stated that it will accept open comments as feedback on the IIA. If you consider uploading a position paper to the consultation, you may consider uploading it as feedback to the IIA as well; Inception Impact Assessment, Directorate General: Trade; date: 01/08/2016, click open.)

2 Multiple choice questions

Many of these questions legitimise the MIC. I will leave many unanswered. Remaining ones: 27:5; 40:0; 56:0; 59:yes; 61:yes

Footnotes:

1 investor-to-state – check, dispute settlement – check, outside of domestic courts – check