Efforts to build a more effective trading regime between Europe and the
USA can reasonably be called positive, both for growth and the ease of
doing business. Currently, however, negotiations include proposals which
threaten to distort the way governments regulate companies and which
might cost the taxpayer dearly.
The sticking point for many is the inclusion in the TTIP negotiations of the contentious Investor to State Dispute Settlement (ISDS) provision.
ISDS gives international investors the right to bring a case for damages against the local government if they (the investors) feel government policy has harmed their interests. A supposed independent international tribunal hears such claims. In other words, under ISDS, multinational corporations have the right effectively to sue a sovereign state, demanding the state (that is, the taxpayer) compensates them for enacting domestic policy if it reduces profitability below that which was expected.
There are clear potential conflicts of interest. The responsibility of the corporate sector is to maximise profits, while the responsibility of government is to promote competition which might reduce corporate profits; also governments must promote the public good – which is likely in some instances to affect corporate profits, for example in controlling pollution or enforcing health and safety legislation. Establishing a means by which disagreements might be resolved is, therefore, of some importance. However, to this end, the ISDS is not an efficient means – it is apparently skewed.
ISDS arguably weakens the rule of law, forces the public to subsidise the risk of multi-national investment abroad, and effectively encourages outsourcing.
Read more: Europe faces weapons of legal destruction in USA trade talks
The sticking point for many is the inclusion in the TTIP negotiations of the contentious Investor to State Dispute Settlement (ISDS) provision.
ISDS gives international investors the right to bring a case for damages against the local government if they (the investors) feel government policy has harmed their interests. A supposed independent international tribunal hears such claims. In other words, under ISDS, multinational corporations have the right effectively to sue a sovereign state, demanding the state (that is, the taxpayer) compensates them for enacting domestic policy if it reduces profitability below that which was expected.
There are clear potential conflicts of interest. The responsibility of the corporate sector is to maximise profits, while the responsibility of government is to promote competition which might reduce corporate profits; also governments must promote the public good – which is likely in some instances to affect corporate profits, for example in controlling pollution or enforcing health and safety legislation. Establishing a means by which disagreements might be resolved is, therefore, of some importance. However, to this end, the ISDS is not an efficient means – it is apparently skewed.
ISDS arguably weakens the rule of law, forces the public to subsidise the risk of multi-national investment abroad, and effectively encourages outsourcing.
Read more: Europe faces weapons of legal destruction in USA trade talks
