The Controversial 'I' in TTIP: are European Courts not Good Enough for American Multinationals?

The timing of our discussion could not have been better; just the previous evening, the European Commission had released a report presenting the results of a public consultation on this matter. The report showed that there is wide public opposition in Europe, with 97% of the 150,000 responses critical of the planned provisions regarding the inclusion of investment protection in TTIP.

Dr Calamita kicked off the debate with an enumeration of the most controversial challenges posed by investor-to-state arbitration. Firstly, he emphasised the point that increased liability by states when it comes to dealing with claims brought under an investment treaty does not imply that there should not be any provision for investment protection but rather that states have already proved to be fully competent in managing these disputes. A second argument followed the question of whether investment treaties increase the level of investment between states - a frequent theme in this debate. The UK Government's Commission on Economic Growth has reported that increased levels of investment would merely be a by-product of the trade liberalisation aspect of the TTIP. Thirdly, American experts are often apprehensive about the quality of justice in certain European states - an issue that, when mentioned, keeps Eastern European students on the edge of their seats. However, Dr. Calamita argued that this should not be a strong reason for including ISDS in an investment chapter between the European Union and the United States. Apart from the fact that both the US and Canada already have separate investment treaties with Eastern European Member States, arbitration within domestic courts can be followed up with the European Union's own courts as well as the European Court of Human Rights. Finally, the TTIP has the potential to set global standards - what would third countries' expectations be if the EU and the US were to agree on exceptional provisions?

"If states include ISDS, claims will be made, and claims are likely to sometimes be lost. It's in the nature of these treaties to place limitations on the states' exercise of sovereign power and to remove the resolution of disputes from the states' judicial system.

"If states include ISDS, claims will be made, and claims are likely to sometimes be lost. It's in the nature of these treaties to place limitations on the states' exercise of sovereign power and to remove the resolution of disputes from the states' judicial system.

The counterargument was then laid out by Peter Chase, who spent 30 years in the US diplomatic service, and who spoke to us from the perspective of an investment treaty negotiator. Tapping directly into the issues that we study and work on here at the Global Governance Institute, the discussion was shifted towards the importance of building and strengthening the international rule of law:

"That's how you create global governance. That's how you make sure that it's not just the strong countries beating up on the weak countries, the guys with the big armies. You look for how do you create a system of international law that all countries play on. And that is the purpose of international investment agreements […] If you're going to look at ISDS in TTIP, you have to look at what governments are trying to do when they sign investment treaties with each other. Because that's what we're trying to do: Global governance is creating a network of treaties, a network of international law that protects our citizens, our environment, our health and even our investors."

"That's how you create global governance. That's how you make sure that it's not just the strong countries beating up on the weak countries, the guys with the big armies. You look for how do you create a system of international law that all countries play on. And that is the purpose of international investment agreements […] If you're going to look at ISDS in TTIP, you have to look at what governments are trying to do when they sign investment treaties with each other. Because that's what we're trying to do: Global governance is creating a network of treaties, a network of international law that protects our citizens, our environment, our health and even our investors."

Finally, Dr. Jan Kleinheisterkamp from LSE helped us conceptualise the debate and move away from the perhaps dichotomous question of whether or not ISDS should be included in the TTIP by prompting us to consider the implications of what we value most in our European societies.

"The rule of law is not an object in itself or a purpose in itself. Rule of law is just the means for making sure that we have a better society, a better functioning government, and better functioning countries. It's not about the strong beating up the smaller ones, the question is: Do we want to allow companies to beat up all our governments, whatever country they are? […] Governments are there to make sure that the interests of all citizens are balanced and can coexist. This is ultimately what we do through a process called democracy which I think is at least as powerful a concept as the rule of law."

"The rule of law is not an object in itself or a purpose in itself. Rule of law is just the means for making sure that we have a better society, a better functioning government, and better functioning countries. It's not about the strong beating up the smaller ones, the question is: Do we want to allow companies to beat up all our governments, whatever country they are? […] Governments are there to make sure that the interests of all citizens are balanced and can coexist. This is ultimately what we do through a process called democracy which I think is at least as powerful a concept as the rule of law."

The balance therefore between public and private interests must be safeguarded, and while this has so far been achieved through a continuous dialogue between government and administrative courts, our policy makers need to carefully weigh what we are giving up for the sake of a binding treaty.

Although our speakers disagreed on several important points, what was evident by the end of the evening was that the right to regulate is as important as adhering to the constitutional principles of our countries. The question then remains: who decides what 'fair treatment' actually means? Finally, going back to the recent public hearing organised by the European Commission, it is clear that there is a lot of scope for work on reaching a consensus on the exact provisions to be included for investment protection. The audience of this talk will surely be following with interest the public debate on ISDS in the near future.