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Respondent details

  • Company/Organisation: Keep Our NHS Public
  • Location: United Kingdom
  • Activity: The UK's National Health Service
  • Profile: Civil society group
  • Transparency register: No
  • Prior investment in the US: No


A. Substantive investment protection provisions

Explanation of the issue

The scope of the agreement responds to a key question: What type of investments and investors should be protected? Our response is that investment protection should apply to those investments and to investors that have made an investment in accordance with the laws of the country where they have invested.

Approach in most investment agreements

Many international investment agreements have broad provisions defining “investor” and “investment”.

In most cases, the definition of “investment” is intentionally broad, as investment is generally a complex operation that may involve a wide range of assets, such as land, buildings, machinery, equipment, intellectual property rights, contracts, licences, shares, bonds, and various financial instruments. At the same time, most bilateral investment agreements refer to “investments made in accordance with applicable law”. This reference has worked well and has allowed ISDS tribunals to refuse to grant investment protection to investors who have not respected the law of the host state when making the investment (for example, by structuring the investment in such a way as to circumvent clear prohibitions in the law of the host state, or by procuring an investment fraudulently or through bribery).

In many investment agreements, the definition of “investor” simply refers to natural and juridical persons of the other Party to the agreement, without further refinement. This has allowed in some cases so–called “shell” or “mailbox” companies, owned or controlled by nationals or companies not intended to be protected by the agreement and having no real business activities in the country concerned, to make use of an investment agreement to launch claims before an ISDS tribunal.

The EU's objectives and approach

The EU wants to avoid abuse. This is achieved primarily by improving the definition of “investor”, thus eliminating so –called “shell” or “mailbox” companies owned by nationals of third countries from the scope: in order to qualify as a legitimate investor of a Party, a juridical person must have substantial business activities in the territory of that Party.

At the same time, the EU wants to rely on past treaty practice with a proven track record. The reference to “investments made in accordance with the applicable law” is one such example. Another is the clarification that protection is only granted in situations where investors have already committed substantial resources in the host state - and not when they are simply at the stage where they are planning to do so.

Link to reference text

Taking into account the above explanation and the text provided in annex as a reference, what is your opinion of the objectives and approach taken in relation to the scope of the substantive investment protection provisions in TTIP?

We want to state from the outset that we are strongly opposed to ISDS in principle. In response to question 1, the national legislation of the US and EU member states already ensures investment protection both for companies and individuals. We believe that the objectives and approach taken regarding investment protection provisions in TTIP, such as the ISDS, are inherently in favour of protecting investor interests, over and above protecting the interests of EU citizens. It would seem that the information and the wording of this question are being used to demonstrate that tighter regulations will be used to differentiate and define what an ‘investor’ is. However, there is no evidence of a precise definition that differentiates between sustainable foreign direct investments and other forms of investment, such as speculative investments. However, we are less concerned with becoming involved in the detail - our real concern is the disproportionate and dangerous powers that are being given to foreign investors through the implementation of ISDS. There is no indication of any attempt to balance the rights and responsibilities of investors. It is claimed that the EU wants to rely on past treaty practice with a proven track record. ISDS is usually used in trade agreements where the domestic laws of host countries cannot be relied on. This is not the case for the US or EU member states. We believe that the focus of this question distracts attention from the real party that needs protection, the average EU citizen. The investment protection provisions are designed to protect the investor’s ability to make profit, even if this means curtailing the host state’s ability to pass legislation that would be in the public interest. Prioritising the protection of a multi-national corporation’s ability to make profit over a host state’s ability to protect the interests of their citizens through public policy legislation is unfair and undemocratic. We therefore strongly oppose the investment protection provisions, and the scope of these provisions, in TTIP.

Explanation of the issue

Under the standards of non-discriminatory treatment of investors, a state Party to the agreement commits itself to treat foreign investors from the other Party in the same way in which it treats its own investors (national treatment), as well in the same way in which it treats investors from other countries (most-favoured nation treatment). This ensures a level playing field between foreign investors and local investors or investors from other countries. For instance, if a certain chemical substance were to be proven to be toxic to health, and the state took a decision that it should be prohibited, the state should not impose this prohibition only on foreign companies, while allowing domestic ones to continue to produce and sell that substance.

Non-discrimination obligations may apply after the foreign investor has made the investment in accordance with the applicable law (post-establishment), but they may also apply to the conditions of access of that investor to the market of the host country (pre-establishment).  

Approach in most existing investment agreements

The standards of national treatment and most-favoured nation (MFN) treatment are considered to be key provisions of investment agreements and therefore they have been consistently included in such agreements, although with some variation in substance.

Regarding national treatment, many investment agreements do not allow states to discriminate between a domestic and a foreign investor once the latter is already established in a Party’s territory. Other agreements, however, allow such discrimination to take place in a limited number of sectors.

Regarding MFN, most investment agreements do not clarify whether foreign investors are entitled to take advantage of procedural or substantive provisions contained in other past or future agreements concluded by the host country. Thus, investors may be able to claim that they are entitled to benefit from any provision of another agreement that they consider to be more favourable, which may even permit the application of an entirely new standard of protection that was not found in the original agreement. In practice, this is commonly referred to as "importation of standards".

The EU’s objectives and approach

The EU considers that, as a matter of principle, established investors should not be discriminated against after they have established in the territory of the host country, while at the same recognises that in certain rare cases and in some very specific sectors, discrimination against already established investors may need to be envisaged. The situation is different with regard to the right of establishment, where the Parties may choose whether or not to open certain markets or sectors, as they see fit.

On the "importation of standards" issue, the EU seeks to clarify that MFN does not allow procedural or substantive provisions to be imported from other agreements.

The EU also includes exceptions allowing the Parties to take measures relating to the protection of health, the environment, consumers, etc. Additional carve-outs would apply to the audio-visual sector and the granting of subsidies. These are typically included in EU FTAs and also apply to the non-discrimination obligations relating to investment. Such exceptions allow differences in treatment between investors and investments where necessary to achieve public policy objectives.

Link to reference text

Taking into account the above explanations and the text provided in annex as a reference, what is your opinion of the EU approach to non –discrimination in relation to the TTIP? Please explain.

We oppose the Commission’s proposal in relation to the EU’s approach to non-discrimination with regard to TTIP because: We believe that the provisions being used to ensure non-discrimination actually create the reverse: the inclusion of the ISDS in the treaty gives an advantage to foreign investors over domestic investors. The Commission’s current proposals do not preclude the ‘importation of standards’ from the provisions included in other, bilateral investment protection agreements already in existence. This means that the Commission has failed in establishing legal certainty and investors will be able to cherry-pick provisions from other treaties that they find more favourable. In addition, ISDS gives the power to decide on what counts as discrimination to an unaccountable arbitration panel. National legal systems of the EU and US are already based on equal treatment and non-discrimination. Thus the solution to any discrimination that concerns the EC would be to remove ISDS and ensure all legal recourse takes place through domestic courts. This would not only prohibit discrimination, but ensure consistency and transparency in the way that potential disputes are settled. We therefore oppose the Commission’s proposal in relation to non-discriminatory treatment for investors.

Explanation of the issue

The obligation to grant foreign investors fair and equitable treatment (FET) is one of the key investment protection standards. It ensures that investors and investments are protected against treatment by the host country which, even if not expropriatory or discriminatory, is still unacceptable because it is arbitrary, unfair, abusive, etc. 

Approach in most investment agreements

The FET standard is present in most international investment agreements. However, in many cases the standard is not defined, and it is usually not limited or clarified. Inevitably, this has given arbitral tribunals significant room for interpretation, and the interpretations adopted by arbitral tribunals have varied from very narrow to very broad, leading to much controversy about the precise meaning of the standard. This lack of clarity has fueled a large number of ISDS claims by investors, some of which have raised concern with regard to the states' right to regulate. In particular, in some cases, the standard has been understood to encompass the protection of the legitimate expectations of investors in a very broad way, including the expectation of a stable general legislative framework.

Certain investment agreements have narrowed down the content of the FET standard by linking it to concepts that are considered to be part of customary international law, such as the minimum standard of treatment that countries must respect in relation to the treatment accorded to foreigners. However, this has also resulted in a wide range of differing arbitral tribunal decisions on what is or is not covered by customary international law, and has not brought the desired greater clarity to the definition of the standard. An issue sometimes linked to the FET standard is the respect by the host country of its legal obligations towards the foreign investors and their investments (sometimes referred to as an "umbrella clause"), e.g. when the host country has entered into a contract with the foreign investor. Investment agreements may have specific provisions to this effect, which have sometimes been interpreted broadly as implying that every breach of e.g. a contractual obligation could constitute a breach of the investment agreement.

EU objectives and approach

The main objective of the EU is to clarify the standard, in particular by incorporating key lessons learned from case-law. This would eliminate uncertainty for both states and investors.

Under this approach, a state could be held responsible for a breach of the fair and equitable treatment obligation only for breaches of a limited set of basic rights, namely: the denial of justice; the disregard of the fundamental principles of due process; manifest arbitrariness; targeted discrimination based on gender, race or religious belief; and abusive treatment, such as coercion, duress or harassment. This list may be extended only where the Parties (the EU and the US) specifically agree to add such elements to the content of the standard, for instance where there is evidence that new elements of the standard have emerged from international law.

The “legitimate expectations” of the investor may be taken into account in the interpretation of the standard. However, this is possible only where clear, specific representations have been made by a Party to the agreement in order to convince the investor to make or maintain the investment and upon which the investor relied, and that were subsequently not respected by that Party. The intention is to make it clear that an investor cannot legitimately expect that the general regulatory and legal regime will not change. Thus the EU intends to ensure that the standard is not understood to be a “stabilisation obligation”, in other words a guarantee that the legislation of the host state will not change in a way that might negatively affect investors. In line with the general objective of clarifying the content of the standard, the EU shall also strive, where necessary, to provide protection to foreign investors in situations in which the host state uses its sovereign powers to avoid contractual obligations towards foreign investors or their investments, without however covering ordinary contractual breaches like the non-payment of an invoice.

Link to reference text

Taking into account the above explanation and the text provided in annex as a reference, what is your opinion of the approach to fair and equitable treatment of investors and their investments in relation to the TTIP?

The Fair and Equitable Treatment (FET) provision has been heavily relied on in past ISDS cases as a means of allowing claims against democratically established regulations and procedures. We repeat our earlier point, that investors’ rights, including those of foreign investors, are already adequately protected from unfair or inequitable treatment by current US and European legal systems. By accepting the FET clause, Parties to the agreement are bound by a ‘stabilisation commitment’ which means they should not take any measures that are to investors’ disadvantage unless they are ready to be sued. The Commission statement that the proposed text on FET is closed is problematic because the proposed text combines a closed list with open ended and vague formulations. This leaves it up to arbitrators to interpret what constitutes FET – or what indicates a breach – and opens the way for investor rights to limit the governments’ right to regulate in the public interest. We also think it is problematic that parties will be able to expand upon the definitions in this list, as stated in your text: “Parties shall regularly, or upon request of a Party, review the content of the obligation to provide fair and equitable treatment”. Indeed, this is likely to cause more uncertainty, whilst leaving it unclear what the process for such an expansion would be. For all these reasons, we oppose the inclusion of the FET clause in TTIP and believe that ISDS must be removed from TTIP to ensure fair and equitable treatment for all investors, and more certainty of interpretation throughout the legislative process.

Explanation of the issue

The right to property is a human right, enshrined in the European Convention of Human Rights, in the European Charter of Fundamental Rights as well as in the legal tradition of EU Member States. This right is crucial to investors and investments. Indeed, the greatest risk that investors may incur in a foreign country is the risk of having their investment expropriated without compensation. This is why the guarantees against expropriation are placed at the core of any international investment agreement.

Direct expropriations, which entail the outright seizure of a property right, do not occur often nowadays and usually do not generate controversy in arbitral practice. However, arbitral tribunals are confronted with a much more difficult task when it comes to assessing whether a regulatory measure of a state, which does not entail the direct transfer of the property right, might be considered equivalent to expropriation (indirect expropriation).

Approach in most investment agreements

In investment agreements, expropriations are permitted if they are for a public purpose, non-discriminatory, resulting from the due process of law and are accompanied by prompt and effective compensation. This applies to both direct expropriation (such as nationalisation) and indirect expropriation (a measure having an effect equivalent to expropriation).

Indirect expropriation has been a source of concern in certain cases where regulatory measures taken for legitimate purposes have been subject to investor claims for compensation, on the grounds that such measures were equivalent to expropriation because of their significant negative impact on investment. Most investment agreements do not provide details or guidance in this respect, which has inevitably left arbitral tribunals with significant room for interpretation.

The EU's objectives and approach

The objective of the EU is to clarify the provisions on expropriation and to provide interpretative guidance with regard to indirect expropriation in order to avoid claims against legitimate public policy measures.  The EU wants to make it clear that non-discriminatory measures taken for legitimate public purposes, such as to protect health or the environment, cannot be considered equivalent to an expropriation, unless they are manifestly excessive in light of their purpose. The EU also wants to clarify that the simple fact that a measure has an impact on the economic value of the investment does not justify a claim that an indirect expropriation has occurred.

Link to reference text

Taking into account the above explanation and the text provided in annex as a reference, what is your opinion of the approach to dealing with expropriation in relation to the TTIP? Please explain.

The EU and US legal systems already provide a highly adequate compensation remedy in the event of direct and indirect expropriation, if domestic and foreign investors or citizens have been affected by unequal treatment. The idea that the EU will provide interpretative guidance ‘with regard to indirect expropriation in order to avoid claims against legitimate public policy measures’ is not reassuring. We think that the whole point of ISDS claims is that they can still be brought even if a state is legitimately legislating in the interest of public policy. Moreover, the possibility that corporations may have the potential opportunity to sue, whether for loss of profit or even anticipated future profits, is known to have a ‘chilling’ effect on our state legislators. This indirect influence on democratic process is unacceptable. We think that even though you state in this consultation that ‘non-discriminatory measures taken for legitimate public purposes, such as to protect health or the environment, cannot be considered equivalent to an expropriation’ this will not curtail the ability of a corporation to bring a claim under ISDS. We see through current ISDS claims that are being brought under other trade and investment treaties that corporations are easily able to bring claims against states that legislate to protect health or the environment (see the cases of Uruguay and Canada that we have detailed in Qu 5). This is further emphasised when we look at the reference text provided by the EC claiming that, the case of disputes, states will be put under pressure to comply with a necessity test undertaken by the arbitrators. These individuals will have unwarranted powers to interpret the provisions of the agreement to decide, for example, on whether a measure is for “public purpose” (and therefore perilously near to taking over the role of the state to use its right to regulate). Moreover, we do not think it is appropriate that the arbitrators are able to interpret what constitutes “manifestly excessive” or whether a measure serves the protection of legitimate public welfare objectives such as health, safety and the environment. This is the role of the democratically elected state, and not a legitimate or accountable role for the arbitrators to play. For these reasons, we oppose special rights for investors in relation to expropriation and indirect expropriation in TTIP.

Explanation of the issue

In democratic societies, the right to regulate of states is subject to principles and rules contained in both domestic legislation and in international law. For instance, in the European Convention on Human Rights, the Contracting States commit themselves to guarantee a number of civil and political rights. In the EU, the Constitutions of the Member States, as well as EU law, ensure that the actions of the state cannot go against fundamental rights of the citizens. Hence, public regulation must be based on a legitimate purpose and be necessary in a democratic society.

Investment agreements reflect this perspective. Nevertheless, wherever such agreements contain provisions that appear to be very broad or ambiguous, there is always a risk that the arbitral tribunals interpret them in a manner which may be perceived as a threat to the state's right to regulate. In the end, the decisions of arbitral tribunals are only as good as the provisions that they have to interpret and apply.

 Approach in most investment agreements

Most agreements that are focused on investment protection are silent about how public policy issues, such as public health, environmental protection, consumer protection or prudential regulation, might interact with investment. Consequently, the relationship between the protection of investments and the right to regulate in such areas, as envisaged by the contracting Parties to such agreements is not clear and this creates uncertainty.

In more recent agreements, however, this concern is increasingly addressed through, on the one hand, clarification of the key investment protection provisions that have proved to be controversial in the past and, on the other hand, carefully drafted exceptions to certain commitments. In complex agreements such as free trade agreements with provisions on investment, or regional integration agreements, the inclusion of such safeguards is the usual practice.

The EU's objectives and approach

The objective of the EU is to achieve a solid balance between the protection of investors and the Parties' right to regulate.

First of all, the EU wants to make sure that the Parties' right to regulate is confirmed as a basic underlying principle. This is important, as arbitral tribunals will have to take this principle into account when assessing any dispute settlement case.

Secondly, the EU will introduce clear and innovative provisions with regard to investment protection standards that have raised concern in the past (for instance, the standard of fair and equitable treatment is defined based on a closed list of basic rights; the annex on expropriation clarifies that non-discriminatory measures for legitimate public policy objectives do not constitute indirect expropriation). These improvements will ensure that investment protection standards cannot be interpreted by arbitral tribunals in a way that is detrimental to the right to regulate.

Third, the EU will ensure that all the necessary safeguards and exceptions are in place. For instance, foreign investors should be able to establish in the EU only under the terms and conditions defined by the EU. A list of horizontal exceptions will apply to non-discrimination obligations, in relation to measures such as those taken in the field of environmental protection, consumer protection or health (see question 2 for details). Additional carve-outs would apply to the audiovisual sector and the granting of subsidies. Decisions on competition matters will not be subject to investor-to-state dispute settlement (ISDS). Furthermore, in line with other EU agreements, nothing in the agreement would prevent a Party from taking measures for prudential reasons, including measures for the protection of depositors or measures to ensure the integrity and stability of its financial system. In addition, EU agreements contain general exceptions applying in situations of crisis, such as in circumstances of serious difficulties for the operation of the exchange rate policy or monetary policy, balance of payments or external financial difficulties, or threat thereof.

In terms of the procedural aspects relating to ISDS, the objective of the EU is to build a system capable of adapting to the states' right to regulate. Wherever greater clarity and precision proves necessary in order to protect the right to regulate, the Parties will have the possibility to adopt interpretations of the investment protection provisions which will be binding on arbitral tribunals.  This will allow the Parties to oversee how the agreement is interpreted in practice and, where necessary, to influence the interpretation.

The procedural improvements proposed by the EU will also make it clear that an arbitral tribunal will not be able to order the repeal of a measure, but only compensation for the investor.

Furthermore, frivolous claims will be prevented and investors who bring claims unsuccessfully will pay the costs of the government concerned (see question 9).

Link to reference text

Taking into account the above explanation and the text provided in annex as a reference, what is your opinion with regard to the way the right to regulate is dealt with in the EU's approach to TTIP?

The fact that ISDS prohibits a state’s democratic duty and responsibility to regulate and legislate in the interests of its people, is what makes ISDS so inherently unacceptable – it prohibits a fundamental democratic process and thus ISDS is an assault on democracy. Our fundamental human rights and social rights must not be overruled by the economic rights of corporations. No regulation by the EU can change the fundamental nature of ISDS, which allows corporations to sue governments for loss of profits, even if the legislation in question is in the interests of its people. It is a matter of concern that the stated objective of the EU is “to achieve a solid balance between the protection of investors and the Parties’ right to regulate”. To our mind, the right of an elected government to regulate should take priority over the protection of investors. The right to regulate is only mentioned in the preamble to the text and is not binding. The freedom of legislators is limited, so restricting the potential of governments to respond appropriately to future socio-political events. The way that the exceptions in the text are formulated lacks clarity and public interest objectives are not excluded from the scope of the investment protection provisions. The public welfare objectives quoted by the Commission are too narrowly defined and do not, for example, include workers' rights, social rights, human rights, education, care, financial market regulation, regional and industrial policy or tax policy. The EC has to be aware of the way ISDS has been used when included in other investment treaties. Under the North American Free Trade Agreement, for example, the American- based tobacco conglomerate Philip Morris is suing Uruguay for millions of dollars because the Uruguay government legislated to put health warnings on cigarette packages. This demonstrates how ISDS has paved the way for corporations’ profits to be prioritised over the democratic right of states to legislate policy in the interest of its citizens. The consultation document spells out the measures that may be taken to protect Parties’ right to regulate in the context of ISDS, but the threat to this right to regulate comes from TTIP and measures like ISDS! We oppose ISDS on the grounds that it places investment protection against the sovereign right to regulate

B. Investor-to-State dispute settlement (ISDS)

Explanation of the issue

In most ISDS cases, no or little information is made available to the public, hearings are not open and third parties are not allowed to intervene in the proceedings. This makes it difficult for the public to know the basic facts and to evaluate the claims being brought by either side.

This lack of openness has given rise to concern and confusion with regard to the causes and potential outcomes of ISDS disputes. Transparency is essential to ensure the legitimacy and accountability of the system. It enables stakeholders interested in a dispute to be informed and contribute to the proceedings. It fosters accountability in arbitrators, as their decisions are open to scrutiny. It contributes to consistency and predictability as it helps create a body of cases and information that can be relied on by investors, stakeholders, states and ISDS tribunals.

Approach in most existing investment agreements

Under the rules that apply in most existing agreements, both the responding state and the investor need to agree to permit the publication of submissions. If either the investor or the responding state does not agree to publication, documents cannot be made public. As a result, most ISDS cases take place behind closed doors and no or a limited number of documents are made available to the public.

The EU’s objectives and approach 

The EU's aim is to ensure transparency and openness in the ISDS system under TTIP. The EU will include provisions to guarantee that hearings are open and that all documents are available to the public. In ISDS cases brought under TTIP, all documents will be publicly available (subject only to the protection of confidential information and business secrets) and hearings will be open to the public. Interested parties from civil society will be able to file submissions to make their views and arguments known to the ISDS tribunal. 

The EU took a leading role in establishing new United Nations rules on transparency[1] in ISDS. The objective of transparency will be achieved by incorporating these rules into TTIP.

Link to reference text

Taking into account the above explanation and the text provided in annex as a reference, please provide your views on whether this approach contributes to the objective of the EU to increase transparency and openness in the ISDS system for TTIP. Please indicate any additional suggestions you may have.

The ISDS gives corporations more than an equal standing in relation to states. Only corporations can sue governments under ISDS – governments cannot sue corporations. ISDS tribunals are given more power than national courts. These fundamental changes affecting the relationship between corporations and states is unconstitutional and undemocratic. Making the ISDS process more transparent and open does not deal with this. Allowing corporations to withhold ‘confidential information and business secrets’ as determined by the arbitrators does not suggest transparency: transparency would be better served if disputes were dealt with under existing legal systems. There is no mention of the conflict of interest that arbitrators may face, and how this would be dealt with. The premise of ISDS is to protect multi-national corporation’s profits first. This is undemocratic because a state is elected by its citizens on the explicit notion that it is to legislate in their interest. If the state is inhibited from legislating in the interests of their citizens because it is restricted by the fear of being sued through the mechanism of ISDS, then the ISDS produces an undemocratic and unconstitutional process. We believe this unacceptable. As explained, making the process more open and transparent does not resolve the undemocratic imbalance of power weighted towards corporations, jeopardising citizen’s interest. But more than this, it does not address the fact that there is no democratic oversight of the arbitration tribunal – the ISDS system does not have a Supreme Court above it. We believe this is a highly inappropriate legislative set up, creating a serious risk of one-sided decisions. We oppose the mechanism for ISDS and demand that it be abolished from TTIP for all of the above reasons.

Explanation of the issue

Investors who consider that they have grounds to complain about action taken by the authorities (e.g. discrimination or lack of compensation after expropriation) often have different options. They may be able to go to domestic courts and seek redress there. They or any related companies may be able to go to other international tribunals under other international investment treaties.

It is often the case that protection offered in investment agreements cannot be invoked before domestic courts and the applicable legal rules are different. For example, discrimination in favour of local companies is not prohibited under US law but is prohibited in investment agreements. There are also concerns that, in some cases domestic courts may favour the local government over the foreign investor e.g. when assessing a claim for compensation for expropriation or may deny due process rights such as the effective possibility to appeal. Governments may have immunity from being sued. In addition, the remedies are often different. In some cases government measures can be reversed by domestic courts, for example if they are illegal or unconstitutional. ISDS tribunals cannot order governments to reverse measures.

These different possibilities raise important and complex issues. It is important to make sure that a government does not pay more than the correct compensation. It is also important to ensure consistency between rulings.

Approach in most existing investment agreements

Existing investment agreements generally do not regulate or address the relationship with domestic courts or other ISDS tribunals. Some agreements require that the investor choses between domestic courts and ISDS tribunals. This is often referred to as "fork in the road" clause.

The EU’s objectives and approach

As a matter of principle, the EU’s approach favours domestic courts. The EU aims to provide incentives for investors to pursue claims in domestic courts or to seek amicable solutions – such as mediation. The EU will suggest different instruments to do this. One is to prolong the relevant time limits if an investor goes to domestic courts or mediation on the same matter, so as not to discourage an investor from pursuing these avenues.  Another important element is to make sure that investors cannot bring claims on the same matter at the same time in front of an ISDS tribunal and domestic courts. The EU will also ensure that companies affiliated with the investor cannot bring claims in front of an ISDS tribunal and domestic courts on the same matter and at the same time. If there are other relevant or related cases, ISDS tribunals must take these into account. This is done to avoid any risk that the investor is over-compensated and helps to ensure consistency by excluding the possibility for parallel claims.

Link to reference text

Taking into account the above explanation and the text provided in annex as a reference, please provide your views on the effectiveness of this approach for balancing access to ISDS with possible recourse to domestic courts and for avoiding conflicts between domestic remedies and ISDS in relation to the TTIP. Please indicate any further steps that can be taken. Please provide comments on the usefulness of mediation as a means to settle disputes.

Attempts to sold the problem of multiple claims ignore the problems inherent in ISDS - such as the way, as a private arbitration process, it puts an end to the level playing field that currently exists for domestic and foreign investors. If the EC genuinely wants to encourage companies to use domestic courts rather than international tribunals, then it follows logically that they should not be supporting ISDS within TTIP. Arbitration under ISDS does not allow for a legislative feedback loop. In democracies, the legislator makes the law and the courts interpret it. If the end result (the case law) is not satisfying, the legislator can amend the law. Over time, societies can find a fair balance through this legislative feedback loop. International tribunals do not have a legislative feedback loop and thus investor-states dispute heard in such tribunals are not assessed in light of a mature or fairly developed legal procedure. The only way to ensure a fair, democratically-sound, objective arbitration of state-investor disputes is by ensuring that they are only heard in domestic courts. For these reasons, we oppose the privatisation of the legal system that ISDS represents and demand that ISDS is removed from TTIP , ensuring that investor-state disputes are settled according to established legal systems in domestic courts.

Explanation of the issue

There is concern that arbitrators on ISDS tribunals do not always act in an independent and impartial manner. Because the individuals in question may not only act as arbitrators, but also as lawyers for companies or governments, concerns have been expressed as to potential bias or conflicts of interest.

Some have also expressed concerns about the qualifications of arbitrators and that they may not have the necessary qualifications on matters of public interest or on matters that require a balancing between investment protection and e.g. environment, health or consumer protection.

Approach in existing investment agreements

  Most existing investment agreements do not address the issue of the conduct or behaviour of arbitrators. International rules on arbitration address the issue by allowing the responding government or the investor to challenge the choice of arbitrator because of concerns of suitability.

Most agreements allow the investor and the responding state to select arbitrators but do not establish rules on the qualifications or a list of approved, qualified arbitrators to draw from.

  The EU’s objective and approach

The EU aims to establish clear rules to ensure that arbitrators are independent and act ethically. The EU will introduce specific requirements in the TTIP on the ethical conduct of arbitrators, including a code of conduct. This code of conduct will be binding on arbitrators in ISDS tribunals set up under TTIP.  The code of conduct also establishes procedures to identify and deal with any conflicts of interest.  Failure to abide by these ethical rules will result in the removal of the arbitrator from the tribunal. For example, if a responding state considers that the arbitrator chosen by the investor does not have the necessary qualifications or that he has a conflict of interest, the responding state can challenge the appointment. If the arbitrator is in breach of the Code of Conduct, he/she will be removed from the tribunal. In case the ISDS tribunal has already rendered its award and a breach of the code of conduct is found, the responding state or the investor can request a reversal of that ISDS finding.

In the text provided as reference (the draft EU-Canada Agreement), the Parties (i.e. the EU and Canada) have agreed for the first time in an investment agreement to include rules on the conduct of arbitrators, and have included the possibility to improve them further if necessary. In the context of TTIP these would be directly included in the agreement.

As regards the qualifications of ISDS arbitrators, the EU aims to set down detailed requirements for the arbitrators who act in ISDS tribunals under TTIP. They must be independent and impartial, with expertise in international law and international investment law and, if possible, experience in international trade law and international dispute resolution. Among those best qualified and who have undertaken such tasks will be retired judges, who generally have experience in ruling on issues that touch upon both trade and investment and on societal and public policy issues. The EU also aims to set up a roster, i.e. a list of qualified individuals from which the Chairperson for the ISDS tribunal is drawn, if the investor or the responding state cannot otherwise agree to a Chairperson. The purpose of such a roster is to ensure that the EU and the US have agreed to and vetted the arbitrators to ensure their abilities and independence.  In this way the responding state chooses one arbitrator and has vetted the third arbitrator.

Link to reference text

Taking into account the above explanation and the text provided in annex as a reference, please provide your views on these procedures and in particular on the Code of Conduct and the requirements for the qualifications for arbitrators in relation to the TTIP agreement. Do they improve the existing system and can further improvements be envisaged?

As conceded in your own text – the arbitrators working in these international tribunals are likely to have conflicts of interests because they also act as lawyers for corporations, and many have investments in multi-national corporations. In addition, finding against a corporation in an investor-state dispute is unlikely to make them a popular choice in any future case. We have already drawn attention to conflict of interests that arbitrators may face, indeed there is evidence to suggest that arbitration tribunals are susceptible to outside influence in a way that domestic courts are not. For instance in the case of Loewen, a Canadian investor in funeral services, suing the US government, one of the tribunal members publicly conceded to meeting with US Department of Justice officials, who put pressure on him saying “You know judge, if we lose this case we could lose NAFTA”.This does not do much to reassure the public on the objectivity of the international tribunal The Code of Conduct proposed in the consultation text has not been finalised, and there has been no guarantee that it will come into effect. Given the aforementioned ease in which influence can be had over arbitrators, we are not convinced that a Code of Conduct will make any difference. Moreover, Codes of Conduct are by definition guidelines. Therefore it is contradictory to say that they are legally binding. Thus, arbitrators have no real incentive to adhere to them even if they were established. It is an important consideration that arbitrators are paid on a day to day rate, therefore having an incentive to maximise the number of days they work. Furthermore, given that it is only investors who can bring claims, the arbitrators have a real incentive to rule in favour of the investors, so as to encourage more claims to be brought. The only way of removing this incentive is by ensuring cases are heard in domestic courts, not in unaccountable tribunals. We are not prepared to provide suggestions for requirements for arbitrators when we do not believe arbitration under ISDS is unnecessary and undemocratic. We cannot comment on the specifics of a Code of Conduct where this has not been finalised.

Explanation of the issue

As in all legal systems, cases are brought that have little or no chance of succeeding (so-called “frivolous claims”). Despite eventually being rejected by the tribunals, such cases take up time and money for the responding state. There have been concerns that protracted and frequent litigation in ISDS could have an effect on the policy choices made by states. This is why it is important to ensure that there are mechanisms in place to weed out frivolous disputes as early as possible.

Another issue is the cost of ISDS proceedings. In many ISDS cases, even if the responding state is successful in defending its measures in front of the ISDS tribunal, it may have to pay substantial amounts to cover its own defence.

Approach in most existing investment agreements:

Under existing investment agreements, there are generally no rules dealing with frivolous claims. Some arbitration rules however do have provisions on frivolous claims. As a result, there is a risk that frivolous or clearly unfounded claims are allowed to proceed. Even though the investor would lose such claims, the long proceedings and the implied questions surrounding policy can be problematic.

The issue of who bears the cost is also not addressed in most existing investment agreements. Some international arbitration rules have provisions that address the issue of costs in very general terms. In practice, ISDS tribunals have often decided that the investor and responding state pay their own legal costs, regardless of who wins or loses.

The EU’s objectives and approach

The EU will introduce several instruments in TTIP to quickly dismiss frivolous claims.

ISDS tribunals will be required to dismiss claims that are obviously without legal merit or legally unfounded. For example, this would be cases where the investor is not established in the US or the EU, or cases where the ISDS tribunal can quickly establish that there is in fact no discrimination between domestic and foreign investors. This provides an early and effective filtering mechanism for frivolous claims thereby avoiding a lengthy litigation process.

To further discourage unfounded claims, the EU is proposing that the losing party should bear all costs of the proceedings. So if investors take a chance at bringing certain claims and fail, they have to pay the full financial costs of this attempt.

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Taking into account the above explanation and the text provided in annex as a reference, please provide your views on these mechanisms for the avoidance of frivolous or unfounded claims and the removal of incentives in relation to the TTIP agreement. Please also indicate any other means to limit frivolous or unfounded claims.

The detail of a suggested mechanism that would allow a quick dismissal of frivolous cases is missing although it seems that it would be up to arbitrators, who run the risk of being biased, to decide what was frivolous. We believe that the proposal of the EC that the losing party should bear the costs of the proceedings is actually harmful. It means that states who are sued by corporations will not only have to pay the huge compensatory fines, but also will have to pay heavy costs on top of this. This seems biased towards corporations, given that they can sue for loss of anticipated or future profits and not just the real costs of any alleged unfair treatment. The fact that TTIP negotiators see the need to ward off a host of malicious and unfounded claims – on average costing 6 to 8 million dollars - demonstrates the problems associated with ISDS and the vulnerability of governments when this mechanism is in place. The best solution for dealing with frivolous claims would be to resolve disputes in domestic (or EU) courts. In those situations the question of how costs are awarded is already established and the process is set in such a way that it is at least difficult to maliciously draw out matters to incur extra cost to the other party. This is an argument for the removal of ISDS as opposed to looking for ways to manage the problems it creates.

Explanation of the issue

Recently, concerns have been expressed in relation to several ISDS claims brought by investors under existing investment agreements, relating to measures taken by states affecting the financial sector, notably those taken in times of crisis in order to protect consumers or to maintain the stability and integrity of the financial system.

To address these concerns, some investment agreements have introduced mechanisms which grant the regulators of the Parties to the agreement the possibility to intervene (through a so-called “filter” to ISDS) in particular ISDS cases that involve measures ostensibly taken for prudential reasons. The mechanism enables the Parties to decide whether a measure is indeed taken for prudential reasons, and thus if the impact on the investor concerned is justified. On this basis, the Parties may therefore agree that a claim should not proceed.

Approach in most existing investment agreements

The majority of existing investment agreements privilege the original intention of such agreements, which was to avoid the politicisation of disputes, and therefore do not contain provisions or mechanisms which allow the Parties the possibility to intervene under particular circumstances in ISDS cases.

The EU’s objectives and approach

The EU like many other states considers it important to protect the right to regulate in the financial sector and, more broadly, the overriding need to maintain the overall stability and integrity of the financial system, while also recognizing the speed needed for government action in case of financial crisis.

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Some investment agreements include filter mechanisms whereby the Parties to the agreement (here the EU and the US) may intervene in ISDS cases where an investor seeks to challenge measures adopted pursuant to prudential rules for financial stability. In such cases the Parties may decide jointly that a claim should not proceed any further. Taking into account the above explanation and the text provided in annex as a reference, what are your views on the use and scope of such filter mechanisms in the TTIP agreement?

The fact that the consultation recognises that ISDS claims restrict the democratic right of a state to regulate during a financial crisis reinforces our responses in this consultation, that ISDS causes an undemocratic imbalance of power weighted in favour of foreign corporations, over the state. Not withstanding your reassurances, we do not believe that the EU or US would be able to implement a filter mechanism to monitor ISDS claims. (Corporations are currently suing the Greek and Cypriot governments for legislating during those states’ financial crises. ISDS is unlikely to be a mechanism that can be controlled and it is a farce for this consultation to claim a filter mechanism would enable the EU or US to be able to do so. Corporations with much at stake would challenge these filters. And if filters were in principle applied to financial matters why should there not be filters for other issues, for example the protection of public services from competition? There is no end of possible extension of filters, rendering them a useless tool. It is significant that it is proposed to filter only financial matters – where corporate profits are at stake. The only solution that stops the reckless behaviour of corporations from suing a state for regulating during a financial crisis is to abolish ISDS from TTIP. The need for filtering mechanisms highlights the dangers of ISDS. Rather than deliberating on the use and scope of such filters, we argue that ISDS should not be included in TTIP.

Explanation of the Issue

When countries negotiate an agreement, they have a common understanding of what they want the agreement to mean. However, there is a risk that any tribunal, including ISDS tribunals interprets the agreement in a different way, upsetting the balance that the countries in question had achieved in negotiations – for example, between investment protection and the right to regulate. This is the case if the agreement leaves room for interpretation. It is therefore necessary to have mechanisms which will allow the Parties (the EU and the US) to clarify their intentions on how the agreement should be interpreted.

Approach in existing investment agreements

Most existing investment agreements do not permit the countries who signed the agreement in question to take part in proceedings nor to give directions to the ISDS tribunal on issues of interpretation.

The EU’s objectives and approach 

The EU will make it possible for the non-disputing Party (i.e. the EU or the US) to intervene in ISDS proceedings between an investor and the other Party. This means that in each case, the Parties can explain to the arbitrators and to the Appellate Body how they would want the relevant provisions to be interpreted.  Where both Parties agree on the interpretation, such interpretation is a very powerful statement, which ISDS tribunals would have to respect.

The EU would also provide for the Parties (i.e. the EU and the US) to adopt binding interpretations on issues of law, so as to correct or avoid interpretations by tribunals which might be considered to be against the common intentions of the EU and the US. Given the EU’s intention to give clarity and precision to the investment protection obligations of the agreement, the scope for undesirable interpretations by ISDS tribunals is very limited. However, this provision is an additional safety-valve for the Parties.

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Taking into account the above explanation and the text provided in annex as a reference, please provide your views on this approach to ensure uniformity and predictability in the interpretation of the agreement to correct the balance? Are these elements desirable, and if so, do you consider them to be sufficient?

We are not convinced that the negative effects of ISDS can be mitigated by the intervention of the non-disputing party, not least because the tribunals are ultimately unaccountable, and proceed in secret. Moreover, as the US and EU are setting up TTIP in such a way as to inherently advantage large corporations, these provisions would likely be inherently biased in favour of the corporate party. The only solution to ensure the “uniformity and predictability” that the EC seeks is to have these disputes heard in domestic courts, which are transparent and accountable, and where there is established case law and a legislative feedback loop. The ISDS must be removed from TTIP – this is the only way to ensure “uniformity and predictability” in the way investor-state disputes are heard.

Explanation of the issue

In existing investment agreements, the decision by an ISDS tribunal is final. There is no possibility for the responding state, for example, to appeal to a higher instance to challenge the level of compensation or other aspects of the ISDS decision except on very limited procedural grounds. There are concerns that this can lead to different or even contradictory interpretations of the provisions of international investment agreements. There have been calls by stakeholders for a mechanism to allow for appeal to increase legitimacy of the system and to ensure uniformity of interpretation.


Approach in most existing investment agreements

No existing international investment agreements provide for an appeal on legal issues. International arbitration rules allow for annulment of ISDS rulings under certain very restrictive conditions relating to procedural issues. 

The EU’s objectives and approach 

The EU aims to establish an appellate mechanism in TTIP so as to allow for review of ISDS rulings. It will help ensure consistency in the interpretation of TTIP and provide both the government and the investor with the opportunity to appeal against awards and to correct errors. This legal review is an additional check on the work of the arbitrators who have examined the case in the first place.

In agreements under negotiation by the EU, the possibility of creating an appellate mechanism in the future is envisaged. However, in TTIP the EU intends to go further and create a bilateral appellate mechanism immediately through the agreement.

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Question 12. Taking into account the above explanation and the text provided in annex as a reference, please provide your views on the creation of an appellate mechanism in TTIP as a means to ensure uniformity and predictability in the interpretation of the agreement.

Much like many of the mechanisms that have been put forward in this consultation – we do not believe any substantial information has been provided to demonstrate how this would work in practice. We believe that questions such as this do more to reinforce the fact that ISDS present countless affronts to democratic process, undermine the rule of law and disproportionately favour corporations over democratically elected states. Moreover an appeal process would increase costs, bureaucracy and time. Acknowledging the lack of a current appellant mechanism does not resolve any of our aforementioned qualms with the ISDS. We fundamentally disagree with the ISDS clause; we believe it must be abolished from TTIP.

C. General assessment

General assessment
  • What is your overall assessment of the proposed approach on substantive standards of protection and ISDS as a basis for investment negotiations between the EU and US?
  • Do you see other ways for the EU to improve the investment system?
  • Are there any other issues related to the topics covered by the questionnaire that you would like to address?

What is your overall assessment of the proposed approach on substantive standards of protection and ISDS as a basis for investment negotiations between the EU and US? ISDS is a biased and undemocratic system which gives foreign investors privileges that no other part of our society has, and yet without corresponding responsibilities. It allows these investors to avoid our existing legal systems. It undermines the sovereign right of our government to regulate in the public interest. The measures put forward in this consultation do nothing to alleviate our concerns. We are opposed to TTIP and we do not see the need for ISDS as part of this treaty. We do not believe it is democratically appropriate to make taxpayers (as the payout will come from them) liable for corporate risk. Moreover we find the evidence for the economic benefits of TTIP (on which the treaty is based) unconvincing and therefore do not see the need for it either. As it stands, the consultation is painfully inaccessible to the average EU citizen. Given that this provision is being proposed by the EU Commission, an unelected and thus unaccountable governing body, we had hoped they would be making an extra effort to keep this consultation (and indeed the negotiating process itself) transparent, and objectively inform their citizens about TTIP. Do you see other ways for the EU to improve the investment system? ISDS is fundamentally flawed. It privileges foreign corporations over national ones, and unaccountable trade tribunals over our legal systems and the sovereignty of our governments. Your questions should not be how to improve ISDS but about the fundamental desirability of its inclusion in TTIP. Are there other issues related to the topics covered by the questionnaire that you would like to address? First, we want to have on record our concerns about the nature of the questionnaire. We have been given the impression that the consultation was to be truly inclusive. However, the complex and technical nature of the questionnaire will exclude responses from many civil society groups and concerned individuals who, unlike corporations, will not be able to employ experts to interpret the questions and guide their answers. The bias towards corporations that is characteristic of TTIP and ISDS is also apparent in the consultation. Second, the questionnaire starts from the assumption that TTIP and ISDS are fundamentally positive measures, and is formulated in such a way that it disallows other perspectives. We are concerned that many responses to the questionnaire – for instance, suggested ways of ‘improving’ ISDS - will be taken as a tacit indication of fundamental support for the measure. We hope to see transparency in the way that the findings are reported, for example with the views of those who oppose ISDS given proper attention. Third, TTIP negotiations are being conducted in secret – for instance, although there are occasional briefings, the general public or civil society groups do not have access to the text of the treaty. This consultation allows glimpses into the nature and scope of negotiations on ISDS. However, without full access to negotiation documents (not just on ISDS but the wider documents on TTIP) we cannot give a fully informed opinion. This supposedly public consultation is therefore a chimera.