Tagged: negotiations

Zoe Williams

Investor-State Dispute Settlement in Europe

In the last few months, criticism of  TTIP’s proposed investor-state dispute settlement  (ISDS) provision has become  so mainstream that even The Economist is questioning whether it’s such a good idea. More to the point, some of the biggest players this side of the Atlantic have also come out against it, largely it would seem, mirroring public sentiment.   French officials now claim that TTIP is a no-go if ISDS is kept in, while Germany has spoken out against its inclusion in TTIP, and has gone so far as to backtrack on agreements already made, saying that they want ISDS scrapped from CETA, the EU-Canada free trade agreement (which, until recently, nobody outside of Canada seemed to care about).

The perception of the  threat that ISDS poses is connected to the different health, food and environmental standards in Europe and the US. ISDS allows investors to sue host state governments for unfair or discriminatory treatment, and critics argue that investors will use arbitration (or even the threat of it) to force Europe to lower its regulatory standards based on treaty provisions. As proof of the potential for investors to employ ISDS to attack regulatory standards, critics frequently cite the cases of Philip Morris v. Australia, in which the tobacco company is suing over the country’s decision to require plain packaging of cigarettes, and Swedish energy company Vattenfall suing Germany over Merkel’s nuclear phase-out.

A threat does exist, as investors, and more importantly, arbitration lawyers are expanding the use of investment arbitration. As this article/advertisement  written by arbitration lawyers suggest, there is money to be made by actively looking for “innovative” uses for ISDS.

However, others argue that Europe’s sudden distrust of ISDS is hypocritical. European states, or at least European investors, have been a driving force behind ISDS in the past. The first Bilateral Investment Treaty was signed by Germany (with Pakistan) in 1959, and since then,  EU member states have signed at least 1400 BITs. Between 2008-2014 alone, EU investors made up 53% of all claimants in investor-state disputes.

Of course, more interesting to critics is likely the track record of EU states as respondents in these lawsuits. So here’s a breakdown of the cases Europe has faced so far, based on my own research.

eu

 

Here we see the EU member states which have been respondents in arbitration cases. The majority are transition economies, although Spain, Germany, Belgium and the UK have also been faced lawsuits. The concentration of disputes in formerly Communist countries is not surprising, given the logic that has (up until TTIP and CETA) governed BITs. That is, these agreements have usually been signed by pairs of countries between which the investment generally flows only in one direction – most often from developed to developing countries (or at least countries perceived to have unreliable domestic courts).  In other words, when the US and the Czech Republic signed a BIT in 1991, the implicit goal was to protect US investments in the Czech Republic. On the other hand, Western European states and the US have not found it necessary to sign BITs between themselves, as both sides have been confident in the domestic courts and investment climate of the other. At least, until now.

industries

The above shows the industries most often implicated in investor-state disputes involving EU members. How does this compare to investment disputes worldwide? At the global level, electricity and other energy, as well as oil, gas and mining, are the industries that see the greatest number of disputes. Not surprising, given that these industries are often politically interesting already. Extractive industries seem to attract  a range of governance problems, while public utilities are often are privatized to the detriment of low-income consumers.   What appears to be Europe-specific here is the concentration of cases in media and health insurance (although both relate to a number connected cases in Czech Republic and Slovakia).

measures

And here we have a breakdown of the state “measures” which are triggering disputes in Europe. The top two categories are the very specific measure of canceling an agreement, permit, or license of an investor, while the second category – regulatory change – encompasses a range of measures  which effect an entire industry or even the general public.

Finally, how litigious are US companies? Of the 561 known arbitration cases listed on UNCTAD’s IIA database, 124 cases, or 22%, involve US investors.  It’s impossible to know how often US investors will use ISDS under TTIP, if the agreement ultimately includes the provision. All we can say for certain at this point is that if it is left in, a great deal more of global FDI flows will suddenly be covered by ISDS.

Note: Edited to add French dispute to graph which had previously been left off.

Mathis Lohaus

Links: Cyber Attacks, Trade Negotiations, Combat Drones

A Siemens device used to control centrifuges (via Wikimedia commons)
A Siemens device used to control centrifuges (by “Ulli1105” via Wikimedia commons)

Small anniversary: Link post #25. By the way, do you find these useful?

On cyber attacks, I would like to recommend three pieces that might not be for everyone, but are interesting to get a more technical understanding of what is going:

  • Ralph Langner has written a fascinating account of “Stuxnet”. It turns out that the U.S./Israeli (?) attack on Iranian nuclear centrifuges consisted not of one, but two separate types of computer virus, with trade-offs between effectiveness, predictability and stealth. The newer version used a less sophisticated way to damage centrifuges, but a much more sophisticated way to gain access in the first place and then spread across systems.
  • Nicholas Weaver summarizes the steps taken by U.S. intelligence agencies to access/hijack communications through the Internet’s backbone. This discussion of the NSA QUANTUM program is not too technical, but introduces a couple of phrases you might hear more often in the future. (via Bruce Schneier)
  • Jim Cowie discusses a different form of attack, in which internet traffic is redirected to get access to sensitive information. Fascinating for laypeople: Since we’re talking about milliseconds, “[t]he recipient, perhaps sitting at home in a pleasant Virginia suburb drinking his morning coffee, has no idea that someone in Minsk has the ability to watch him surf the web”. (But keep in mind that this comes form a private IT security company and is phrased to maximize PR effects.)

Two items on free trade negotiations:

First, Philip Murphy, the former U.S. Ambassador to Germany, is very confident that President Obama will manage to get approval from Congress for the Transatlantic Trade and Investment Partnership TTIP (via AICGS / Tobias Bunde).

Second, regarding the other U.S. free trade effort currently under negotiation – the Trans-Pacific Partnership TPP – you’ve probably heard that the part dealing with intellectual property rights was leaked last week. GWU PhD candidate Gabriel J. Michael has analyzed the way in which different countries proposed changes to the document (which is visible in the leaked text) and offers the following summary:

  1. The U.S. and Japan are relatively isolated in their negotiating positions.
  2. There appears to be a strong negotiating network between Singapore, Chile, Malaysia and New Zealand.
  3. Canada is up to something!

Some commentators pointed out that he might be neglecting an alternative explanation: that the U.S. and Japan are simply happy with the current document, as they have had a bigger say in creating the draft.

Irrespective of the arguments about causality, Michael’s blog post is a great example of what can be done with leaked documents and visualization! (via The Monkey Cage, where you can find more comments).

Finally, a quick follow-up on last week’s post on combat drones, again by Charli Carpenter at the Duck:

The Campaign to Stop Killer Robots secured an important victory last week when delegates of States Parties to the Convention on Certain Conventional Weapons (CCW) voted unanimously to take up the issue (…).

(…)

While this is an important and promising moment, the shape and trajectory of norm-building efforts will depend a great deal on the tenor and outcome of next May’s CCW meeting. And one thing is sure: if that meeting results in weaker norms that hoped for my human security advocates, NGOs may simply take their cause elsewhere.