European Left united to reform international arbitration tribunals

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Le Monde | 25 February 2015

Freely translated by Anoosha Boralessa in April 2015. Not reviewed nor revised by or any other organization or person.

European left united to reform international arbitration tribunals

Author: Maxime Vaudano

Symbols of a liberal vision of international trade, international arbitral tribunals (ISDS) have been in place since the 1960s. They protect businesses against “arbitrary” decisions of host states that compromise a state’s right to regulate. However the European Left has waited till 21 February 2015 to take a common position on ISDS. ISDS has become a burning issue as it is being questioned whether the future transatlantic treaty between Europe and the US (TAFTA/TTIP) should provide for it.

Forty leaders of the European Socialist Party met on Saturday at the Madrid Summit to refine their economic doctrine and to find a common policy on jihadist terrorism. At their meeting they took the opportunity to finally take a position on ISDS which has been vilified by Social Democratic members of parliament and tacitly defended by leftist heads of states.

“Our family has finally succeeded in reaching a consensus in this struggle” congratulated a European source at the conclusion of this summit.

ISDS in summary

A number of international investment agreements provide for ISDS. They establish arbitral tribunals that are meant to protect businesses that are victims of abuse of rights by their host states. In practice, several decisions have reached out to challenge environmental, social or sanitary legislation of states going against the interests of certain businesses. Thus Germany has been attacked for having decided to phase out nuclear energy; likewise, Australia has been attacked for its anti-tobacco policy.

From the beginning of January, France and Germany have joined Sweden, the Netherlands, Denmark and Luxembourg, at the front line, to improve the provision for arbitration, standard but increasingly controversial, in trade agreements. However last October, some of these states defended a position that was far more inflexible.

Rather than abandoning completely the TTIP/TAFTA negotiations (and its little cousin CETA, an agreement between Canada and the EU) which is what a good part of civil society are calling for, the European Left wants to thoroughly reforms to this arbitral mechanism to limits its abuses.

“We hope to tighten vague legal definitions that allow too much room for arbitral interpretation, to limit potential conflict of interests, to penalize businesses that file abusive claims and to put the establishment of an appeals mechanism on the table”, explained a European source.

“To summarize: to reform it so much that it would no longer be ISDS.” One decodes the French direction.

France also hopes to work on establishing a permanent international court of arbitration that would be governed by stricter rules than those that govern current arbitral tribunals which are set up and rendered functus ex officio for each case.

After several months of silence, Matthias Feki, the French Minister of State for Foreign Trade, since the beginning of the year, counts on his alliance with the German Minister of Economy Sigmar Gabriel to resume the initiative on this dossier. Both now hope to convince the European Commission to reconsider their proposals in order to apply them in trade agreements negotiated in the future.

Matthias Feki repeatedly warns: “Failure to do so will result in these agreements being rejected by members of parliament who do not accept ISDS as it is.”

But the most important obstacle could come from European member states with conservative leaders (Spain, the United Kingdom and Ireland) which remain strongly attached to a ISDS that fiercely protects businesses. Let us not forget the United States that considers that ISDS is satisfactory as it currently operates and hopes to retain it, as it is, in the future transatlantic treaty.

By Spring, one should know a bit more about the game of failures that currently being played out between Brussels, Paris, Berlin and Washington: the European Commission should therefore present its new propositions on ISDS, with a view to reconciling both the sceptics and the promoters of investment arbitration.

source: Le Monde