EU proposes investor dispute court for trade deal with US

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Brussels (dpa) – The European Union is proposing to establish a court to resolve disputes involving investors as part of the mammoth free trade deal it is negotiating with the United States, EU Trade Commissioner Cecilia Malmstrom said Wednesday.

If approved, the Transatlantic Trade and Investment Partnership (TTIP) would create the world’s largest free trade zone and could help revive the EU’s flagging economy, its proponents argued.

But the deal has been bogged down by concerns that it could allow corporations to evade national laws.

At issue is the so-called investor-state dispute settlement clause, which exists in many free trade deals and spells out how to handle disputes between companies and national governments.

But there is a “fundamental lack of trust by the public in the fairness and impartiality” of this model, Malmstrom said Wednesday, instead proposing a new court-based system.

Under it, a bilateral court would handle disputes under the EU-US deal with a view to having a similar setup in future free trade agreements, such as with Japan. It is too late now to include it in a deal finalized with Canada, Malmstrom said.

The new system would be “accountable, transparent and subject to democratic principles,” the commissioner said. It would employ judges, not arbitrators, whose qualifications must be comparable to those found in domestic or international courts.

Under the proposal, judges would be appointed in advance by Brussels and Washington and assigned to cases at random. They would not be able to work as lawyers advising parties in investment cases to avoid any conflict of interest. There would also be an appeal tribunal.

The court would hear cases such as “targeted discrimination on the base of gender, race or religion, or nationality; expropriation without compensation; or denial of justice,” a commission statement said.

In the longer run, the EU’s executive body is also working on the establishment of an international investment court to replace existing mechanisms and handle investor-state disputes affecting a range of different countries.

The new plan for TTIP – which follows lengthy consultations with member states, stakeholders and interest groups – must be discussed with EU lawmakers and member states before it can be presented to Washington in the framework of the ongoing negotiations, Malmstrom said.

The proposal was welcomed by the main groups in the European Parliament, which has a say on the final TTIP deal and had called for many of the changes.

The industry association BusinessEurope was more cautious with its director general, Markus Beyrer, noting that “these new ideas need to be further assessed as they have never been implemented before.”

But the environmental advocacy group Greenpeace said the new plan would be “ineffective” as long as the free trade agreement struck with Canada remains unchanged because any US company with a Canadian subsidiary would have access to the old dispute settlement system.

The Transport & Environment campaign group also lambasted the proposal as a “cosmetic exercise,” arguing that multinational companies should rely on national legal systems rather than have special courts.

The commissioner acknowledged that replacing the contentious investor-state dispute settlement clause would not satisfy all the opponents of TTIP.

“There are always people … who are against free trade in general,” she said. “But I hope that the serious people can see that we have really tried to take on board the criticism that has been there.”

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