Category Archives: TPP

The U.S is sceptical of the European Commission’s ISDS proposal

?????????????????????????????????????????????????????????????????????????????In mid-September, the European Commission presented its proposal on dispute resolution in the TTIP, as we have previously discussed on this blog. In our previous post, we find it promising that the Commission’s proposal is built on existing practices but we also note that the proposal raises many questions.

The Commission’s proposal is only a proposal. It must first be accepted at home within the European Union and later be put on the negotiating table with the U.S counterpart. There has been some suspicions that the U.S would have doubted the proposed changes and this suspicion has now been confirmed.

The U.S Trade Representative Michael Froman especially expresses scepticism about the proposal of appeal mechanism in which the entire case will be reheard (in the current system, an award may only be appealed on procedural grounds). The U.S is among the countries that has been sued the most in ISDS nevertheless it has never lost a case, and the U.S Trade Representative is hesitant to give investors a second chance in the proceeding. As he puts it, “It’s not obvious to me why you would want to give companies a second bite of the apple”.

Another aspect of the proposal that has been widely criticized is the closed list of arbitrators to be pre-appointed unilaterally by states, in contrast to the current system in which each party in dispute may appoint an arbitrator.

Michael Froman would prefer that the investment chapter of the TTIP has provisions closer to those in the U.S model investment agreement of 2012. This model agreement is considered to be the most progressive of its kind and is based on international “best practices”.

The text of the completely negotiated TPP, which has recently been released, is based largely on such American model agreement. Froman believes that this should be the starting point of the TTIP.

TPP is signed with ISDS provision

Two globes of EarthOn 4 October 2015, twelve countries representing 40% of the world’s economy signed the Trans-Pacific Partnership agreement. These countries consist of the United States, Mexico, Canada, Chile, Peru, Japan, Singapore, Brunei, Vietnam, Malaysia, Australia and New Zealand.

The text is yet to be released but official information about the agreement can be found among others on the U.S government website and the Canadian government website.

The signing of the TPP means that twelve countries with significant share in the world’s economy have been able to agree on one set of investment protection rules. As summarized on the U.S Trade Representatives website, the investment chapter will replicate the terms in the US 2012 Model Bilateral Investment Treaty. The rules require non-discriminatory investment policies and provide terms that assure basic rule of law protections. At the same time the rules ensure governments’ ability to achieve legitimate public policy objectives.

According to the Department of Foreign Affairs, Trade and Development of Canada, the investment chapter provides access to “an independent ISDS mechanism that is prompt, fair and transparent, and subject to appropriate grounds”.

This means that signing countries find ISDS to be relevant and necessary, not least between developed states. It may be noted that ISDS under the US 2012 Model Bilateral Investment Treaty includes a transparent proceeding and a possibility of a third party to participate in the proceeding. There is a good reason to guess the TPP will include these features too.