The European Parliament demanded limits on legal protection for foreign investors in any free-trade agreement with the U.S., highlighting the political sensitivity of an issue that could scuttle a trans-Atlantic deal.
The European Union assembly said provisions on Investor-State Dispute Settlement, or ISDS, in any EU-U.S. commercial pact must ensure that foreign investors have no greater rights than do domestic investors.
In a resolution approved on Wednesday in Strasbourg, France, the 28-nation Parliament also called for an arbitration system where “the jurisdiction of courts of the EU and of the member states is respected, and where private interests cannot undermine public policy objectives.”
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, becoming a lightning rod in the process for skeptics of an EU-U.S. trade agreement in general.
The EU Parliament is weighing into the negotiations on a trans-Atlantic pact two years after they began, seeking to shape the outcome. The 751-seat assembly has the power to approve or reject, but not to amend, any final agreement.
“We’re putting up a fight to see to it that this is a good agreement,” Bernd Lange, head of the EU Parliament’s trade committee, said last month when the ISDS issue was so divisive that the assembly unexpectedly postponed its vote on the resolution. “If it is, we’ll say ‘yes.’ If it isn’t, we’ll say ‘no.’ ”
Deliberations on ISDS may signal the speed and ambition -- or even the fate -- of the planned Trans-Atlantic Trade and Investment Partnership, or TTIP, which the EU and U.S. began negotiating in mid-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 European Commission, the EU’s executive arm, 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 EU Trade Commissioner Cecilia 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 the past several months 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.