The United States and the European Union are currently negotiating a comprehensive, high standard trade agreement. Launched in 2013, the Transatlantic Trade and Investment Partnership (TTIP) seeks to unlock economic growth by further opening the US and EU markets, addressing regulatory barriers that result in significant costs to companies operating or seeking to operate on both sides of the Atlantic, and strengthening rules-based investment. Equally important, TTIP will hopefully serve as a template for future trade agreements and elevate global standards.
While the negotiations are still in their infancy, one issue that has become quite politicized during these negotiations is Investor-State Dispute Settlement (ISDS). When countries devote a significant amount of time to locking in high standard rules for investment, it is critical that there are mechanisms in place to make sure these rules are enforced. An important component of investor protections is therefore to ensure that foreign investors are protected against discrimination, arbitrary treatment, and expropriation and that they can have their claims – should any arise – heard before a neutral tribunal.
Critics are pitting investor-state protections against the right of countries to regulate in the public interest. However, investor state dispute settlement has been a fundamental component of international trade agreements for more than half a century. There are more than 3,000 agreements that include investor provisions globally. EU Member States are party to at least 1400 of such agreements. Despite the ubiquitous nature of these agreements, and little to no evidence that these agreements have curtailed a country’s ability to regulate, much ado is currently being made about whether they should be included in TTIP.
The US and EU represent the world’s largest investment relationship; that alone should be a strong enough reason to ensure high standard investor protections. The United States and the EU are also currently seeking to secure robust investor protections in other markets. For example, both countries are negotiating investment treaties with China. Thus, how investor protections and ISDS are dealt with in TTIP will have significant consequences for how these parallel negotiations play out in China and other third country markets.
In March of this year, the European Commission announced a “pause” in the investment negotiations in order to launch a public consultation process on investment and ISDS in TTIP. These comments are due on July 7. Now is a critical time to communicate the value of strong and effective investor state provisions. We urge companies and associations to make sure their voices are heard in this process.