MEPs and EU trade ministers reject Malmström's ISDS reforms

Cecilia Malmström
EU trade commissioner Cecilia Malmström

European Union Trade Commissioner Cecilia Malmström has presented her proposals to resolve the investor-state dispute settlement (ISDS) controversy in the United States-European Union Transatlantic Trade and Investment Partnership (TTIP). She presented her ideas to the European Parliament's trade committee yesterday and to European Union trade ministers today.

What is Malmström proposing?

EurActiv reports, "In the formal proposal published on Tuesday by Malmström in her blog, the Commission suggests steps that can be taken to transform ISDS into a system which functions more like traditional courts. That involves the appointment of permanent arbitrators, with similar qualifications to those of national judges, and the introduction of a bilateral appeal system. In parallel, the EU wants to work towards the establishment of a permanent multilateral investment court with tenured judges, who would replace the bilateral mechanism over time."

The article also suggests:
1- Malmström does not want ISDS to allow for 'forum shopping' in which corporations pick the most suitable agreement to bring forward an ISDS claim
2- ISDS would only be used when a company has been treated unfairly, such as through the expropriation of property
3- 'Mailbox' cases would be prohibited, only companies with real business operations could bring forward an ISDS challenge

It has also been reported that:
4- Arbitrators would be selected from a pre-vetted list agreed upon by both sides
5- Malmström would implement "a multilateral appeal mechanism as part of a permanent court"

How did MEPs respond yesterday?

Another EurActiv article reports, "Unimpressed lawmakers failed to greet it as a full-fledged reform."

MEP Bernd Lange (with the Progressive Alliance of Socialists and Democrats) commented, "The proposal is a step in the right direction but it still does not go far enough to restore public confidence on the issue. We need reassurance that a standing court is a clear commitment and not merely part of a plan for the future. The Commission must take this into account, as well as the other demands we have outlined, if we are to support the agreement in the European Parliament." And MEP Ska Keller (with the Greens/ European Free Alliance) said, "Cosmetically changing the mechanism but keeping the same prerogatives for corporations would be little more than a PR stunt, ignoring the core of the problem. The proposal changes nothing about the fact that investors get an extra-judicial system that will only deal with their rights, not their obligations."

And how did EU trade ministers respond today?

While the Bankless Times reports Germany, France and Italy responded favourably to Malmström, that may be overly-optimistic business news reporting given French Secretary of State for Foreign Trade Matthias Fekl more specifically said the Commission's proposals move in the right direction, but that the recommendations are not sufficiently precise.

That concern about the ambiguity in Malmström's proposals is echoed by Osgoode Hall Law School professor Gus Van Harten. He comments, "I have seen quite a few reforms proposals that were deeply flawed but still promoted heavily by trade ministries and the ISDS legal industry. I’ve learned to wait for the text before accepting promises of ensuring independence, fairness, openness, subsidiarity, or balance. So far, in every case, the 'reforms' that emerged in the texts have led to the same destination: the unjustified privileging of foreign investors—especially the most powerful and wealthy actors in the world—and a serious threat to democracy, courts, and public budgets."

What's next?

On June 9, resolutions on the TTIP, notably on its ISDS provision and these suggested reforms, are expected to be voted on in the European Parliament. 

With respect to CETA, it is believed that the legal scrubbing and translation of the document should be completed by December. It is then anticipated that ratification votes in EU national legislatures could begin as soon as January with the ratification vote in the European Parliament taking place in April.

The Council of Canadians argues that an amended ISDS provision in TTIP is insufficient and that it should be completely removed. And given a non-amended ISDS provision remains within the CETA text, we have additionally argued, along with our European allies, that US corporations with operations in Canada could still use CETA and its ISDS provision to challenge European regulations and laws.

To read the Commission's 12-page proposal for reforms to ISDS in TTIP, click here. To read Van Harten's 15-page critique of those proposals, please click here.