• Proposal on ISDS resumes trans-Atlantic talks on investment
  • New approach includes extra protection for small businesses

The European Union reopened talks with the U.S. about a controversial investor-protection measure after concluding an internal review of how to replace the existing system.

Talks on how to handle Investor-to-State Dispute Settlement, or ISDS, can now resume as part of negotiations on the Trans-Atlantic Trade and Investment Partnership, a free-trade agreement that both sides aim to conclude by the end of next year. Investment negotiations have been on hold since March 2014 while the EU reviewed the topic.

“Today marks the end of a long internal process in the EU to develop a modern approach on investment protection and dispute resolution for TTIP and beyond,” EU Trade Commissioner Cecilia Malmstroem said in a statement on Thursday. “This approach will allow the EU to take a global role on the path of reform, to create an international court based on public trust.”

The EU said it has now finished its proposal for replacing the current ISDS mechanism with a court-like system that includes an appeal process. The European Commission said the final plan is very similar to an initial version offered in September, while adding additional safeguards for small and medium-sized businesses.

Foreign Investors

ISDS clauses have been a lightning rod for criticism of the U.S.-EU trade talks, because of concern that foreign investors could use arbitration panels instead of domestic courts to to make claims against a national government when an investment is harmed. This has raised concerns in some EU capitals because of concerns it could limit EU nations’ ability to regulate effectively.

The U.S. has received the EU proposal and is in the process of reviewing it, a spokesman for U.S. Trade Representative Michael Froman said by e-mail.

EU nations need to do more to convince their citizens to support the trans-Atlantic trade talks, Froman said in an interview in Washington last month. He called on nations like France and Germany, where public opposition has been vocal, to “address myths before they become entrenched realities and build the necessary support.”

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