The European Parliament postponed giving its recommendations on a planned free-trade accord with the U.S. after a political fight erupted over possible limits on legal protection for foreign investors.
The indefinite delay in the vote on a resolution, originally due to take place on Wednesday in Strasbourg, France, followed a push by some Socialist members of the European Union assembly to insert language rejecting the idea of Investor-State Dispute Settlement, or ISDS. That effort was opposed by the Christian Democrats, the EU Parliament’s biggest faction, ahead of the No. 2 Socialists.
An ISDS clause could allow foreign investors to use arbitration panels instead of domestic courts to make claims against a national government when an investment is harmed, for example through expropriation. Such a provision is controversial in some EU capitals because of the constraints it could place on European governments’ ability to regulate in the public interest.
In a statement posted on Tuesday in its press room in Strasbourg, the 28-nation Parliament said the delay in the vote on the resolution was because “more than 200 amendments and requests for split or separate votes have been tabled.” One of those amendments, No. 115, was put forward by two Socialist members and said a permanent solution for resolving disputes between investors and states should be “without the use of investor-state dispute settlement private arbitration.”
While non-binding, a resolution by the 751-seat assembly on the planned trans-Atlantic commercial pact would serve as a negotiating guide for EU Trade Commissioner Cecilia Malmstroem as she seeks to seal a deal with the U.S. The EU Parliament has the power to approve or reject, but not to amend, any final agreement.
Deliberations on ISDS may signal the speed and ambition of the targeted Trans-Atlantic Trade and Investment Partnership, or TTIP, which the EU and the U.S. began negotiating in 2013 in an effort to expand the world’s biggest economic relationship. Both sides are pushing to have much of a draft TTIP deal ready by year-end, with the main goals being to eliminate tariffs on goods, expand services markets, open public procurement and bolster regulatory cooperation.
The EU Parliament had listed a June 10 vote on the resolution on TTIP as among the main items of business this week. Instead, the assembly’s trade committee has been asked to deal with the amendments submitted to the chamber floor before a vote by the full Parliament is rescheduled.
The European Commission, the EU’s executive arm in Brussels, last year suspended talks on ISDS with the U.S. in a bid to allay concerns in Europe about the matter. The commission completed a public consultation on the merits of negotiating an ISDS clause in TTIP in January, when Malmstroem said the step faced “huge skepticism” in Europe while being “very important” to the U.S.
Seeking to restart deliberations with the U.S. on the issue, Malmstroem in recent weeks has outlined ways to protect the right to regulate, to ensure the independence of arbitration tribunals, to enable appeals against ISDS-tribunal decisions and to rule out parallel claims by investors through domestic judicial systems and ISDS.
A draft resolution drawn up by the EU Parliament’s trade committee in late May called these ideas “very welcome” while avoiding precise prescriptions that risked exposing political differences within the assembly.
Bernd Lange, a German Socialist who chairs the trade committee, said on Tuesday that he believes that arbitration panels should be used only after national judicial options are exhausted.
Daniel Caspary, a German member of the Christian Democrats, disagreed. “We prefer that disputes be resolved through the national court system, but we don’t want to make that a condition for any ISDS provision in TTIP,” said Caspary.