US Says ‘No’ To Corporate Sovereignty Reform; Hungary Says ‘No’ To Corporate Sovereignty

Last week we wrote about an attempt by the EU’s Trade Commissioner, Cecilia Malmström, to “save” the corporate sovereignty chapter in TAFTA/TTIP as more people wake up to its dangers, and resist its inclusion. Along with tinkering at the edges, her proposal for reform did have one more substantive idea: to create “a permanent multilateral investment court.”

The intention was presumably to address the key objections to investment-state dispute settlement (ISDS) tribunals — that they are secret, unpredictable and have no conflict of interest rules or appeals process — by importing some of the key strengths of traditional courts, which are open and impartial, follow precedent and allow appeals. Of course, that approach begs the question why new courts are needed at all, when national courts already exist. But it seems that we won’t be having a debate on that particular issue, since the US has lost no time pouring cold water on the whole idea, as AFP reports:

A senior US official rejected Monday an EU proposal to create an international investment court that was aimed at resolving one of the disputes holding up their free trade deal.

The comments by US Undersecretary for International Trade at the Commerce Department, Stefan Selig, include the following claim:

“The criticisms that they undermine governments’ right to regulate, I think are just misguided,” Selig said during a visit to Paris when asked about Malmstroem’s proposals.

As I wrote last year, far from being “misguided,” the past experience with corporate sovereignty shows that those criticisms are entirely justified. Selig then goes on to say:

The United States believes the ISDS mechanism “increases the security of companies willing to make investments and arguably makes that country, whether it’s the United States or any country in Europe, a more attractive investment destination.”

But again, that assertion is belied by the facts. According to the European Commission’s recently-updated figures, in 2013, the total US investment in the EU was €1.65 trillion; the EU investment in the US was even higher — €1.69 trillion. The size of these numbers is the best indication that companies are more than happy to send money across the Atlantic, even without ISDS.

The US refusal even to consider a major reform of corporate sovereignty poses big problems for the EU negotiators. It’s clear that the strategy was to try to win over critics of ISDS by promising that its flaws — admitted even by the European Commission — would be fixed through the creation of a new court. With that option no longer on the table, it looks increasingly like TTIP’s ISDS will simply involve some minor tweaks.

However, last week another country was making its position on corporate sovereignty clear, reported here by the Budapest Business Journal:

Hungary is against the inclusion of the investor-state dispute settlement (ISDS) clause in the Transatlantic Trade and Investment Partnership (TTIP) free trade agreement between the United States and the European Union, [Hungary’s] Foreign Ministry state secretary István Mikola said yesterday following a convention of foreign trade ministers in Brussels.

Since TAFTA/TTIP is what is known as a “mixed agreement,” both the EU and all the member states must ratify it before it comes into force. If Hungary refuses to do that on the grounds that it contains ISDS, it’s possible the whole deal would simply collapse (it’s not clear what would happen in practice, because this is largely uncharted territory). Moreover, Hungary is not the only country that is likely to vote down TTIP if it includes ISDS:

Mikola said that Hungary’s views on the ISDS clause are shared by 6-7 other EU member states, but he did not name those states.

That’s further evidence that the central stumbling block for TTIP is corporate sovereignty. Indeed, it seems that ISDS is fast becoming as toxic as ACTA three years ago, when politicians rushed to dissociate themselves from the idea before rejecting it completely.

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