The Lobbyists' Charter
The government of the United States of America and the European Commission
As part of the Trans-Atlantic Trade and Investment Partnership (TTIP)
Hereby solemnly pledge to grant industry lobbyists the following powers to restrict democratic decision-making now and in the future:
Currently, EU and US citizens and companies can sue their governments in local courts. However, if current EU proposals are approved, TTIP will include investor-to-state dispute settlement (ISDS) clauses. These clauses will give foreign investors (multinationals) extra rights, rights that citizens do not have.
The EU and US will give these rights to corporations, in the full knowledge that tribunals' interpretations of ISDS rights keep getting broader. They now also even include expected future profits. ISDS gives multinational companies the right to sue states before special tribunals (these tribunals are outside of all national court systems) if changes in law may lead to lower profits than expected. Multinational companies can use ISDS to challenge environmental protection laws, health and privacy policies and reform of copyright and patent law.
The European Commission and European Council want broad and unspecific protections in the Transatlantic Trade and Investment Partnership (TTIP or TAFTA): "the investment protection chapter of the Agreement should cover a broad range of investors and their investments, intellectual property rights included, whether the investment is made before or after the entry into force of the Agreement." (EU Council, 2013)(.doc file) There is no legal, practical, financial or administrative justification for such protections in an agreement between the EU and US.
Multinationals will no longer have to use the local court system, they can use arbitration. The companies have a 50% influence on the make-up of the tribunals. They can appoint one of the three arbitrators, the two arbitrators together decide on the third one. The arbitrators have great power, this power is not surrounded by conventional institutional safeguards for independence: tenure, prohibitions on outside remuneration by the arbitrator and neutral appointment of arbitrators. The for-profit arbitrators are paid at least 3000 US dollar a day. This creates perverse incentives: accepting frivolous cases, let cases drag on, let the only party that can initiate cases win to stimulate more cases, pleasing the official that can appoint arbitrators. The appointment of arbitrators is not neutral, it gives the US an unfair advantage. The US never lost an ISDS case.
The tribunals are placed outside and above the local court system, they are the final interpretors of the investment protections.
Damages demanded in international arbitration are very high. For instance, after the nuclear disaster in Japan, the German government decided to close down two nuclear reactors. The Swedish company Vattenfall is now claiming 3.7 billion euro using investor-to-state dispute settlement.
Threatening with ISDS has a chilling effect. "It’s a lobbying tool in the sense that you can go in and say, 'Ok, if you do this, we will be suing you for compensation.' It does change behaviour in certain cases.", said Peter Kirby of law firm Fasken Martineau about investor rights in trade agreements.
ISDS does not have conventional institutional safeguards for independence, there are perverse incentives and the US has an unfair advantage. Unsurprisingly, international arbitration is riddled with conflicts of interest. The European Commission does not want to solve the systemic flaws but only aims to add a code of conduct sometime in the future, – if the other parties still agree then.
Legal costs in investor-state disputes average over US $8 million, exceeding US $30 million in some cases; they are not always awarded to the winning party. Bulgaria was forced to pay US$6,243,357 in legal fees after winning a case involving allegedly fraudulent activity by the company that was suing the country (Plama Consortium v Bulgaria). The European Commission now proposes that the tribunal shall order that the costs of arbitration be borne by the unsuccessful disputing party, but the tribunal can deviate from this rule in "exceptional circumstances".
We noted above that the European Commission and Council want broad investor protections in the treaty with the US, including with regard to intellectual property rights.
Canada made some minor adjustments to its patent system to ensure better access to medicine. To "compensate" it for possible reductions in profits that this reform may cost, United States pharmaceutical company Eli Lilly now claims 500 million dollars in ISDS arbitration.
ISDS clauses give multinationals extra rights, above local protections. An Ecuadorian court ordered Chevron to pay US$18 billion to clean up oil-drilling-related contamination in the Amazonian rainforest. Chevron is challenging this decision using investor-to-state dispute settlement.
See CEO and TNI, 2012, Chapter 5, Speculating on injustice: Third-party funding of investment disputes.
The tribunals are placed outside and above the local court system, above our supreme courts whose job it is to defend the core legal provisions of our sovereign states. Australia introduced health warnings on tobacco packaging. Tobacco company Philip Morris claimed that their trade marks lost value, and sued Australia in local courts. Philip Morris lost the local court cases and then started an ISDS case. ISDS tribunals will also be able to review decisions of the European Court of Human Rights.
The EU Commission and Council want to include ISDS in trade agreements, from which it is near impossible to withdraw. This will create a lock-in.
The EU Commission and Council want to include ISDS in all upcoming EU trade and investment treaties.
EU Member States signed many bilateral investment treaties containing investor-to-state dispute settlement clauses, but since the Lisbon Treaty, the EU gained competence. From now on, the European Commission will negotiate and the European Parliament and the Member States have a veto. The European Parliament is critical about ISDS. As the EU Parliament is now involved, we have a unique chance to reform investor protections.
The US signed many treaties containing investor-to-state dispute settlement clauses. They also want investor protections in the Trans-Pacific Partnership Agreement (TPP) currently under negotiation.
The European Commission is supporting this approach even though ISDS does not have conventional institutional safeguards for independence, there are perverse incentives and the US has an unfair advantage. The US never lost an ISDS case - the European Commission is promoting the interests of US companies over those of European citizens and European businesses!
This document was prepared by European Digital Rights, with expert input from the Transnational Institute