The benefits that will the TTIP bring in to the table for both of the signatories across the Atlantic are well documented by the Atlantic Community. Generation of a volume trade that amounts a USD$ 1.2 billion and the expansion of the already existing transatlantic trade accompanied by the removal of non-tariff barriers as well as cheaper prices for the consumers and common standards for the producers that would give a leeway for them in fierce global competition by declining production costs. However the other side of the coin points to possible pitfalls for the TTIP like a requirement for a painstaking process of harmonization of two different legal systems and possible discords regarding the inclusion and exclusion of some specific sectors in to the agreement. However one of those prospective challenges has increasingly coming to the fore and lately being discussed among the pundits as one of the most troublesome among the others. This is the point concerning the investor to state dispute settlements (ISDS)
Investor to State Dispute Settlements
The crux of the matter for the European Union is to find the right balance between enacting laws that can safeguard the public interest and provide protection for the investors which can easly shy away from investment decisions unless given ironclad guarantees for their investments by the sovereign states. However for the member states of the European Union, this is point poses the main problem. Given the sovereign nature of the states, the EU member states are concerned that the well known American companies with global clout can undermine their national sovereignty to protect their citizens vis-a-vis such giant corporations. There is a growing tide against the ISDS among the European public as well. Hence the issue of ISDS seems a politically explosive one given the public reaction it aroused in Europe.
What ISDS provides for the corporations is the right to sue governments. If the controversial clause of the ISDS is accepted the corporations will not only have the right to sue the governments for any actions that can limit their “future” profits at the national level but also at the local level. The reason why ISDS arouses such a huge public reaction is easy to understand. The ambiguous definitions like “future” profits can open the way up for limitless demands on the part of the corporations. To put things better in to perspective, one can image what would happen if a corporation tries to block a government measure for environmental protection based on the claim that it will damage its potential for future profits. Given the high level of regulations for the areas like environment, chemicals, public health and pharmaceuticals in the European Union, it is quite possible to see such conflicts with the corporations seeking to ensure their “future” profits on the face of the EU regulations.
The arbitration panels that the corporations seeking to obtain were initially designed for the investors making worthwhile investments in countries with biased court systems that tend to favor national interests over the corporate ones and the countries with a fragile framework for the rule of law. But in the case of TTIP, the signatories are the very countries that lay the foundations of strong rule of law not only in their own jurisdiction but also throughout the world. Hence the argument for weak rule of law does not apply for the case of TTIP. What is left for the corporations to propagate for the ISDS and the arbitration panels is the given record of the EU Court of Justice that favors Community law over the international agreements and the inclinations of the national courts to favor the respective sovereigns over the corporations.
If successfully concluded, TTIP is going to bring immense advantages for the transatlantic trade in the form of expending trade, declining prices, removal of non-tariff barriers and harmonization of production standards across the Atlantic. However the crunchy issues remain to be solved in the negotiations, ISDS to be the prime one among them. It touches sensitive nerves especially in the European public and seen as a potential tool to undermine already battered sovereign rights of the European nations of the EU member states.
Herdem Law Firm, Istanbul Turkey