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Home » Democracy & Governance, EU-US Relations, International, Policy, TTIP, Uncategorized

TTIP: For the Rule of Law or Rule of Corporate Interests?

Submitted by on 20 Apr 2015 – 14:57

Borislav Tsekov, President of the Institute of Modern Politics argues that the ISDS mechanism in the Transatlantic Trade and Investment Partnership (TTIP) will privilege corporate interests over those of citizens.

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TTIP is definitely not just an economic issue. This free trade agreement goes far beyond the economic sphere and affects the very functioning of the modern constitutional state and the ability of governments to implement policies in the public interest.

A key element of TTIP is the proposed mechanism for resolving disputes between foreign investors and states through supranational tribunals known as Investor-State Dispute Settlement (ISDS). To understand the dangers created by the possible introduction of this mechanism through TTIP I will briefly outline its legal characteristics.

ISDS is not identical to International Commercial Arbitration (ICA), which is an established instrument of international trade law used in commercial disputes between businesses, and stems from the dispositive principle in civil proceedings. In ICA by mutual consent, disputes between the parties to the contract may be settled in courts of arbitration, which operate under the terms and conditions of international norms and relevant national legislation.

In contrast, ISDS is an instrument of public international law, which provides a legal mechanism under international agreement for a foreign investor to make a claim before a supranational tribunal against the State in which the investment is made.

Removing disputes between foreign investors and national authorities from the national judicial system was first applied in an agreement to promote investment between Germany and Pakistan in 1959. Nowadays disputes are settled within the framework of bilateral agreements on protection of investments, multilateral agreements such as NAFTA and CAFTA and the European Energy Charter. The ISDS procedures provided for in these agreements are applied by supranational tribunals such as the International Centre for Settlement of Investment Disputes at the World Bank (ICSID), London Court of International Arbitration, International Chamber of Commerce, UNCITRAL and the Hong Kong International Arbitration Center.

According to UNCTAD, at the end of 2012 the total number of cases involving ISDS amounted to 518 and the number of countries using the procedures increased to 95. Of 244 completed cases, about 42% were resolved in favour of the state, 31% in favour of the investor, and about 27% were resolved with reconciliation and mutual concessions between the parties. Arguments traditionally used to justify ISDS state that they prevent foreign investment being endangered by inefficient judicial authorities at national level who could be influenced by political interest or corruption.

The comparative table below identifies a number of key differences between proceedings before tribunals in ISDS and those by national judicial authorities.

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The comparison shows that even in the context of ineffective judicial systems at national level, guarantees for transparency, integrity and due process are better protected in judiciaries at national level than in private supranational tribunals.

ISDS privileges foreign investors over local businesses which are not afforded the same rights, and in this sense can be seen as discriminatory. ISDS tribunals open the door to the circumvention of the sovereign will of citizens and their elected representatives. Private corporate interests are placed in a position of dominance, violating the fundamental principles of constitutional democracy.

The dangerous effect of ISDS on public policy is self-evident. ISDS ultimately results in the replacement of democracy with corporatocracy, and subordinates the state to corporate interests.

 

Borislav Tsekov is President of the Board of Governors of the Institute of Modern Politics, a Sofia based policy think tank. He is also President of the World Jurist Association and a lawyer. 

@BorislavTsekov