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Frackers May Benefit From U.S.-EU Trade Accord: Opponents

The U.S. and European Union’s drive to give more legal security to international investors may open the way for hydraulic fracturing for oil and gas in Europe, environmental organizations said today.

The groups, which include the Sierra Club and self-styled “radical” think tank the Transnational Institute, oppose the inclusion of an “investor-state dispute settlement” clause in a free-trade agreement being negotiated next week. The measure would allow greater scope to arbitration panels to punish governments for jeopardizing projects or profits by changing rules once companies have begun investing.

“Some form of it will make it in -- exactly what form, I don’t know,” Iain MacVay, a partner at King & Spalding in London who is advising industry groups about the negotiations, said in a phone interview today. “Investment is a big part of international economic relations and you need investor-protection provisions to make sure that governments don’t try to discriminate or treat capriciously investors.”

The issue hinges on what’s included in the final draft of the proposed Trans-Atlantic Trade and Investment Partnership, an accord to remove barriers from agriculture to manufacturing and services and create a free trade area with about $33 trillion in potential annual economic output. U.S. companies already investing in European shale projects include Chevron Corp.

‘Far-Reaching Rights’

Mounting opposition from green groups has stalled efforts by the U.K. government to introduce fracking and led France to ban the technique and cancel exploration licenses held by companies including Total SA, the country’s biggest explorer.

U.S. companies and foreign corporations with a subsidiary in the U.S. that invest in Europe “could use these far-reaching investor rights to seek compensation for future bans or other regulation on fracking,” according to “No Fracking Way,” a report released today by the environmental groups that include Friends of the Earth Europe.

Forums such as the International Centre for Settlement of Investment Disputes, created by the World Bank 47 years ago, already exist to resolve such quarrels, according to the report. More than one in three cases at that panel related to oil, mining or gas in early 2013, it said.

Marcus Pepperell, spokesman for Brussels-based industry group Shale Gas Europe, and Anne Eisenhower, a spokeswoman at the United States Trade Representative in Washington, weren’t immediately able to comment on the report.

The fourth round of talks for the trade treaty runs March 10-14.

To contact the reporters on this story: Todd White in Madrid at twhite2@bloomberg.net; Nick Leiber in Madrid at nleiber@bloomberg.net

To contact the editor responsible for this story: Timothy Coulter at tcoulter@bloomberg.net

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