[A2k] FT: Transatlantic trade talks hit German snag (Germany seeks exclusion of the investor-state dispute settlement mechanism)

Thiru Balasubramaniam thiru at keionline.org
Sat Mar 15 01:05:07 PDT 2014


http://www.ft.com/intl/cms/s/0/cc5c4860-ab9d-11e3-90af-00144feab7de.html

March 14, 2014 9:00 pm
Transatlantic trade talks hit German snag

By Shawn Donnan in Brussels and Stefan Wagstyl in Berlin

Germany has introduced a stumbling block to landmark EU-US trade
negotiations<http://www.ft.com/intl/cms/s/0/a538be0a-9ee9-11e3-8663-00144feab7de.html?siteedition=uk>
by
insisting that any pact must exclude a contentious dispute settlement
provision.


The "investor-state dispute settlement" mechanism, or ISDS, would allow
private investors to sue governments if they felt local laws threatened
their investments. Public opposition to its
inclusion<http://www.ft.com/intl/cms/s/0/32c526ac-a84d-11e3-8ce1-00144feab7de.html>
has
grown in both Europe and the US since the launch last year of negotiations
over a transatlantic trade area.


Earlier this year, the European Commission suspended negotiations over the
ISDS clause to allow for a 90-day public consultation exercise, expected to
be launched within days.


That move was intended to help defuse some of the opposition and explain
why an arbitration mechanism was needed. But opposition to ISDS has only
grown since then.


Now, in the biggest blow yet to those seeking its inclusion in the deal,
Berlin has decided that it will push for the exclusion of the ISDS
provisions in the deal.


A spokesman for the economy ministry in Berlin said on Friday that the
government had relayed its position to officials in Brussels, where
negotiators have ended a week of talks over the proposed Transatlantic
Trade and Investment Partnership (TTIP).


Earlier in the week, Brigitte Zypries, a junior economy minister, told the
German parliament that Berlin was determined to exclude arbitration rights
from the TTIP deal.


"From the perspective of the [German] federal government, US investors in
the EU have sufficient legal protection in the national courts," she told
parliament.


The German position pits Berlin against the commission, the US and business
groups. All of them argue that the transatlantic deal is an opportunity to
update arbitration rights that already feature in existing bilateral
investment treaties and are often open to abuse.


Such ISDS provisions have been a feature of investment treaties
<http://www.ft.com/intl/cms/s/0/bde80c72-9fb0-11e3-b6c7-00144feab7de.html>since
the late 1950s, when the first was included in a bilateral agreement
between Germany and Pakistan. But their use by companies as an avenue to
seek compensation for government decisions has grown in recent years.


In some cases, they have been used to combat perceived gross injustices
against specific investors.
Repsol<http://markets.ft.com/tearsheets/performance.asp?s=es:REP>,
the Spanish oil company, was able to seek compensation from Argentina under
an investment treaty after its local operations were seized by the
government in Buenos Aires.


They have also been used to challenge broader government policy or
regulatory decisions, however. Vattenfall, the Swedish energy company, is
currently seeking compensation from Germany for Berlin's decision to phase
out nuclear power following the Fukushima disaster in Japan. In another
well-publicised case, Philip Morris
International<http://markets.ft.com/tearsheets/performance.asp?s=us:PM>
is
seeking compensation from Australia for lost income because of the
introduction there of plain-packaging laws for tobacco products.


The German position may still be open to some negotiation - particularly if
both the EU and the US agree to allow arbitration only in extreme cases.
Berlin's final stand may also depend on the European consultation process.


But Berlin's move is a sign of the complicated political context the
transatlantic deal faces in Europe.


Nicole Bricq, France's trade minister, has raised concerns before over the
ISDS provision. Germany has until now backed its inclusion in the new pact.
But Berlin has also been confronted with growing public scepticism in
recent months over the transatlantic deal as a whole, and the ISDS
provision in particular.


At a press conference to mark the close of the fourth round of

negotiations on Friday, Dan Mullaney, the leading US negotiator, declined
to comment on the German decision.


Ignacio Garcia Bercero, the EU's chief negotiator, also refused to comment
on it. But he pointed out that the EU's original mandate to negotiate
specifically included an ISDS provision and had been approved by member
states, including Germany.


"We are working on the basis of the mandate that has been given to us,"
said Mr Garcia Bercero.


The provision is opposed by consumer groups and environmentalists on both
sides of the Atlantic. They argue that the very threat of litigation could
challenge everything from food safety standards to a ban on fracking now in
place in France. They also argue that the court systems in both the US and
EU are mature enough not to be a concern to foreign investors.


Business groups argue, however, that including proper safeguards for
investors in a new pact is crucial to help encourage the flow of investment
across the Atlantic.


"If you want to attract investors, you need to have all of the positive
signals on your side," said Hendrik Bourgeois, vice-president of European
affairs for GE, the US industrial group, and chairman of the American
Chamber of Commerce to the EU.


Business groups and trade negotiators on both sides also argue that
including the provision is vital as a precedent for other deals. Both the
EU and the US have launched investment discussions with China, and the EU
is expected to begin talks on an investment treaty with Myanmar next week.
Including investor protection provisions in those deals would be more
difficult if they were excluded from the EU-US agreement, negotiators and
lobbyists say.


The US conducted public consultations on the subject in 2009, leading to
the agreement with Congress of a model investment treaty that includes
robust investor-protection provisions.


The European Commission hopes its consultations will do the same. But some
now fear that the EU's consultations may feed the opposition.


"It is important to us that this [EU] public consultation is not a
referendum on ISDS. It is important that [ISDS] is included in the
agreement," said Luisa Santos, director of the international relations
department of the BusinessEurope lobby group. "Excluding it is not the
answer."



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