An objectionable agreement?

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Steven Powles highlights the possible threats to democracy and the rule of law posed by the Transatlantic Trade and Investment Partnership

Ever since the general election, much attention has rightly focused on the government’s intention to scrap the Human Rights Act 1998. 


But for some time now another possible threat to the rule of law and the fundamentals of democracy in this country has been quietly progressing in earnest: the Transatlantic Trade and Investment Partnership (TTIP).

TTIP is a bilateral trade agreement being negotiated, partly in secret, between the EU and the US. Designed to give far-reaching incentives to multinationals to enter into trade agreements in the two trading blocs, it has been described as the largest trade deal in history. TTIP will, for instance, harmonise health and safety laws and remove many regulations in relation to goods. And by cutting tariffs and tax, it is expected that the agreement could generate an extra £10bn per annum into the UK economy. It is unsurprising therefore that TTIP enjoys the full support of David Cameron and his government. But if it is such a good deal for Britain why has it received such profound opposition? And why are aspects of it being negotiated in such secrecy?

To some, what makes TTIP objectionable is that it may be used to protect the interests of multinationals over and above those of states and their citizens. One of the aims of TTIP is to open up Europe’s public health, education and water services to US companies which, despite guarantees to the contrary, has been said could even lead to the privatisation of the NHS “through the back door”. Moreover, aligning Europe’s food and environmental regulations with those of the US may result in some of the US’s less stringent regulations being applied – the use of GM modified ingredients, growth hormones, pesticides and so on could increase substantially.

Dispute resolution

But perhaps the most controversial aspect of TTIP is the proposed dispute resolution mechanism. Rather than resort to domestic, or even international courts, presided over by qualified, impartial and most importantly independent judges, TTIP disputes are to be resolved by something called Investor-State Dispute Settlement (ISDS).

ISDS clauses make provision for companies to sue a host country before an arbitration tribunal where government policy, a country’s laws, or even court decisions, are said to lead to unfair treatment and losses. The scope for unelected multinationals to influence the policies of democratically elected governments is obvious. By allowing foreign companies to resolve disputes outside the normal court system there is scope for corporations to wield enormous power against governments and their citizens.

Even more troubling is that arbitrators for such tribunals are drawn almost exclusively from investment law experts and lawyers from corporate firms appointed on an ad hoc basis. Such arbitrators potentially possess an inherent bias and leaning towards the commercial interests of the companies appearing before them, in that many also regularly represent investor complainants. There is no appeals process.

It is perhaps understandable why ISDS should be used in relation to trade agreements with states with underdeveloped legal systems, where there is a real risk of a coup and/or endemic corruption. That was the original basis for the creation of ISDS, to protect corporations that invested in less than stable foreign states. But for most European countries there really is no need.

Controversial uses of ISDS include the Australian case in which Phillip Morris, after losing a battle in the High Court to overturn plain packaging tobacco laws, used an ISDS clause in an agreement with Hong Kong to challenge the decision. Similarly, in Germany, Vattenfal, a Swedish energy company, used ISDS to challenge the government’s decision to phase out nuclear power plants following the Japanese Fukushima disaster. The importance of such disputes to the ordinary citizen is self-evident and far-reaching. All should be equal before the law and it is difficult to understand why corporations are able to litigate such important issues outside the normal court system.

Safeguards required

If ISDS is to remain the preferred mechanism for TTIP dispute resolution there should, at a minimum, be some built in safeguards. For starters there should be a right of appeal to either an independent domestic, or even international, court. Independent judicial oversight of the process is imperative and should, really, be unobjectionable to any party approaching this issue in good faith. The panel of potential arbitrators should be greatly expanded to include panelists who do not only have a previous background in investment or corporate law. Moreover, ISDS arbitrations should be transparent, with the possibility, where appropriate, of interested parties being able to intervene and make representations on the impact of any potential determination to the wider community and country at large. The European Parliament adopted some of these suggestions in a resolution on 8 July 2015. But whether they survive further rounds of EU/US negotiations on TTIP remains to be seen.

At a time when the international community is pushing for ever greater corporate accountability and transparency through, among other things, the United Nations Guiding Principles on Business and Human Rights, it should be business leaders themselves calling for a fairer and more open process. Failing that, the legal community should do all it can to ensure that the TTIP, and ISDS in particular is not allowed to vest ultimate power with big business. 

Contributor Steven Powles

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Steven Powles

Steven is a barrister at Doughty Street Chambers specialising in international crime and human rights. Called to the Bar in 1997, he is part of Doughty Street’s business and human rights team.