“Myth Busters” TTIP Toolkit
“Myth Busters” TTIP Toolkit: Investor State Dispute Settlement (ISDS) Edition
AmCham Sweden supports the Transatlantic Trade and Investment Partnership (TTIP) free trade agreement that is currently being negotiated between the United States and EU.
While the U.S. and the EU already enjoy the world’s largest commercial relationship, TTIP would strengthen and enable even greater economic opportunities. A successfully negotiated agreement would advance trade and investment liberalization and address regulatory and other non-tariff barriers, thereby promoting greater growth and supporting more jobs.
To protect the interests of investors on both sides of the Atlantic Ocean, Investor State Dispute Settlement (ISDS) has been proposed. To provide transparency, clear up misunderstandings and explain how ISDS benefits the public and businesses within TTIP, the facts have been gathered and presented here.
The Myths: What ISDS isn’t
ISDS is NOT new:
European countries began adding ISDS clauses to investor arrangements in the late 1960s. Globally, over 3,000 bilateral trade and investment treaties include ISDS, covering 180 countries; about half of all treaties with ISDS are European (1,400). Germany currently leads the world in investment treaties with ISDS clauses (136). The United States has 40 investment treaties in force with ISDS (nine with EU member-states).
ISDS cases are NOT frequent:
Worldwide, investors bring ISDS cases between 40 and 60 times a year. Put in perspective, given the 3,000 investment agreements in place and the volume of investment flows globally, this is a very small number. And United States and EU numbers are much smaller. In the past three decades, 17 cases have been filed against the U.S. In more than 50 years, only 53 cases have been brought against EU member states. Moreover, 23 of the 24 ISDS cases brought against EU member states in 2013 were brought by EU nationals. Only three cases have ever been brought against France or Germany. The U.S., France and Germany have never lost an ISDS case.
ISDS is NOT being negotiated in secret:
In 2009, the United States ran a public, multi-year review of its model investment treaty in consultation with Congress, labor groups, business, civil society, and state and local governments, and developed new ISDS provisions. The new model text provides greater transparency and, importantly, protections for governments’ right to regulate on behalf of the public. The U.S. model bilateral investment treaty (BIT) – including ISDS provisions – is publicly available online. In 2014, the European Commission held public consultations on ISDS with civil society, stakeholders and legislators.
ISDS does NOT undermine democracy:
On the contrary, ISDS strengthens our democracies by guaranteeing that investors enjoy the same high standard rule of law abroad that they have at home. ISDS preserves non-discrimination and due process – cornerstone principles. Moreover, TTIP will have to be approved by the elected representatives of both the European and American publics – the ultimate democratic test. As such, it will also serve as a model for democratic standards in future agreements the United States and EU will negotiate with other regions or countries.
ISDS does NOT reduce our ability to regulate in the public interest:
The United States model BIT safeguards the government’s ability to regulate and protect the public by setting out clear treaty obligations. Countries are not required to change laws or amend their practices as a result of an ISDS ruling. TTIP is an opportunity to lead the world in concluding a world-class investment agreement that continues to strike the right balance of protections for consumers and investors.
ISDS is NOT just about big business:
In fact, small businesses are in some ways more vulnerable to discrimination and unfair treatment in foreign investment climates than large companies, and could also avail themselves of ISDS.
ISDS is NOT conducted in secret tribunals:
United States investment agreements concluded since the early 2000s have sought the maximum transparency in ISDS. More recently, governments have worked through international organizations like the UN Commission on International Trade Law (UNCITRAL) to create provisions that guarantee the transparency of proceedings.
The Facts: What ISDS Is
ISDS protects Americans and Europeans
ISDS reflects basic human rights and universal values, enshrined in both European and American legal systems, such as due process, transparency, and non-discrimination. If TTIP is to be the gold standard for future trade agreements, high standards for investment protection are just as important as high labor, environmental, and safety protections.
ISDS enhances transparency:
Both the United States and EU support clearer legal rules and safeguards for ISDS proceedings. The U.S. proposal for ISDS calls for arbitration hearings to be open to the public, key documents to be publicly available, and tribunals to accept submissions from civil society and other interested stakeholders.
ISDS reduces frivolous lawsuits:
The United States has worked to establish an ISDS system that seeks to deter frivolous claims and allows for their rapid dismissal. The U.S. approach limits “parallel claims” by investors in both domestic courts and international arbitration. It also limits “forum shopping” by allowing host countries to object to claims brought by shell companies that have no real business activity in the other country.
ISDS matters for a rule-based international trading system:
Both the United States and Europe include ISDS in trade agreements, including those with members states of the Organisation for Economic Co-operation and Development (OECD). Other developed and developing countries do as well (for example, the Australia-Korea Free Trade Agreement). TTIP is an opportunity for the U.S. and the EU to show leadership in the right balance of interests in an investment agreement, by including an ISDS clause that reinforces domestic protections rather than replacing them.
ISDS helps economic development:
Investment agreements protect investor’s rights. Including ISDS in agreements encourages more trade and investment. When investors know their resources are protected, they are more likely to invest - creating domestic economic opportunity, including jobs and improved standards of living. And making sure these protections are enforced strengthens market-based democratic institutions and fights corruption. If we promote the use of these tools in agreements with third countries, we must support them between the United States and EU as well.