EU-US deal could unleash a "corporate litigation boom"
Online Publication Date: 11 June 2013
deal could unleash a "corporate litigation boom"
in SUNS #7601 dated 10 June 2013
7 Jun (Kanaga Raja) -- Investor-state dispute settlement under the proposed
Transatlantic Trade and Investment Partnership (TTIP) between the European
Union and the United States would empower EU and US-based corporations "to
engage in litigious wars of attrition to limit the power of governments on both
sides of the Atlantic," Corporate Europe Observatory (CEO) and the
Transnational Institute (TNI) have warned.
new briefing paper titled "A Transatlantic Corporate Bill of Rights"
released recently, CEO and TNI said that the tremendous volume of transatlantic
investment, with both partners accounting for more than half of foreign direct
investment in each others' economies, hints at the sheer scale of the risk of
such litigation wars.
issue has figured at the US Senate confirmation hearing for USTR nominee Mike
Froman, according to a post by Simon Lester at the IELP blog. According to the
post, Sen. Sherrod Brown (a trade critic) asked at the hearing something along
these lines: "Given that EU property rights protection is pretty good, do we
need investor-state in the TTIP?" Mr. Froman's answer was basically,
"we're still consulting on this and haven't made a decision." In
follow-up questions, with Brown trying to prod Froman a bit on why
investor-state was needed in this context, Froman responded with something
like, "we need to be aware of what excluding investor-state in this
agreement would mean for the system as a whole." - SUNS]
to CEO and TNI, leaked draft versions of the EU negotiating mandate for the
far-reaching free trade agreement with the US reveal the European Commission's
plans to enshrine more powers for corporations in the deal.
Commission's proposal for investor-state dispute settlement under the TTIP
would enable US companies investing in Europe to skirt European courts and
directly challenge EU governments at international tribunals, whenever they
find that laws in the area of public health, environmental or social protection
interfere with their profits. EU companies investing abroad would have the same
privilege in the US, said the briefing paper.
press release accompanying the briefing paper, Cecilia Olivet from TNI said:
"It is only a matter of time before European and US taxpayers start paying
the costs. Not only will our money go to pay for expensive lawsuits that
compensate big business, but we will also pay as critical environmental and
social regulations and policies are dismantled to clear the way for corporate
Eberhardt of CEO, the report's author, said: "Politicians might think they
are acting in the interests of ‘their' investors overseas, but they are in fact
exposing themselves to predatory legal action from corporations. It is high
time that Parliaments on both sides of the Atlantic grasp the political and
financial risks of investor-state dispute settlement and axe plans for this
looming transatlantic corporate bill of rights."
CEO-TNI report notes that as the main users of existing international
investment treaties, US and European companies have driven the investor-state
litigation boom of the past two decades.
far the largest number of the 514 known disputes initiated by the end of 2012
were launched by US investors. They have filed 24% (123) of all cases. Next in
line are investors from the Netherlands (50 cases), the UK (30) and Germany
(27). Together, investors from EU member states have filed 40% of all known
US has faced over 20 investment claims under NAFTA's (North American Free Trade
Agreement) investment chapter, while 15 EU member states are known to have
faced one or more investor-state challenges. The Czech Republic is the fifth
most sued country in the world, the report says.
and US companies have used these lawsuits to challenge green energy and
medicine policies, anti-smoking legislation, bans on harmful chemicals,
environmental restrictions on mining, health insurance policies, measures to
improve the economic situation of minorities and many more. Now they are
enthused about the prospect of an investment chapter in the EU-US free trade
deal (TTIP), the biggest investment deal ever negotiated."
report highlights some "emblematic" investor-state disputes such as
that of Vattenfall v. Germany, whereby in 2012, Swedish energy giant Vattenfall
launched an investor-state lawsuit against Germany, seeking 3.7 billion euros
in compensation for lost profits related to two of its nuclear power plants.
The case followed the German government's decision to phase-out nuclear energy
after the Fukushima nuclear disaster.
cited was Philip Morris v. Uruguay and Australia: Through bilateral investment
treaties, US tobacco giant Philip Morris is suing Uruguay and Australia over
their anti-smoking laws. The company argues that warning labels on cigarette
packs and plain packaging prevent it from effectively displaying its trademark,
causing a substantial loss of market share.
Argentina froze utility rates (energy, water, etc.) and devalued its currency
in response to its 2001-2002 financial crisis, it was hit by over 40 lawsuits
from companies like CMS Energy (US) and Suez and Vivendi (France). By the end
of 2008, awards against the country had totalled US$1.15 billion.
to the report, in May 2013, Slovak and Cypriot investors sued Greece for the
2012 debt swap which Athens had to negotiate with its creditors to get bailout
money from the EU and the International Monetary Fund (IMF).
the basis of the NAFTA between the US, Canada and Mexico, US company Lone Pine
Resources Inc. is demanding US$250 million in compensation from Canada.
to CEO and TNI, the ‘crime': The Canadian province of Quebec had put a
moratorium on ‘fracking', addressing concerns about the environmental risks of
this new technology to extract oil and gas from rocks.
report notes that corporate lobby groups in both the EU and the US have
pressured for the inclusion of investor-state arbitration in TTIP. The European
employers' federation, BusinessEurope, the US Chamber of Commerce, AmCham EU,
the Transatlantic Business Council and other corporate lobby heavyweights all
advocate such privileges for foreign investors.
is also part of a hope that an EU-US deal would set a global ‘gold standard', a
model for investment protection for other agreements around the world."
report asserts that if big business has its way, TTIP's investment protection
provisions will be even more slanted in favour of corporations than current EU
and US practice.
energy giant Chevron, too, is lobbying for an investment chapter which goes
beyond the current US model treaty. Having been sued several times by Canadian
companies under NAFTA, the US has twice revised its template for international
investment treaties to better protect its policy-space.
wants a revival of some of these excessive investor rights such as the
‘umbrella clause' in TTIP, which would considerably expand a state's
report notes that Chevron is currently engaged in a controversial legal battle
with Ecuador. The company initiated arbitration to avoid paying US$18 billion
to clean up oil-drilling-related contamination in the Amazonian rainforest, as
ordered by Ecuadorian courts.
case has been lambasted as ‘egregious misuse' of investment arbitration to
evade justice. No wonder Chevron dedicated its complete contribution to the US
government's TTIP consultation to investment protection, ‘one of our most
important issues globally' as they put it."
Europe, says the report, Chevron wants the "the strongest possible
protection" from government measures to "mitigate the risks
associated with large-scale, capital intensive, and long term projects [...]
such as developing shale gas". Because of its health and environmental
impacts, several EU governments have decided to put a break on shale gas
proposed investment protection chapter would empower energy companies like
Chevron to challenge such precautionary measures because it would oblige
governments ‘to refrain from undermining legitimate investment-backed
expectations', as Chevron demands," the report further states, adding that
the mere threat of a million-Euro investor-state lawsuit could be enough to
scare governments into submission and weaken or prevent fracking bans and
from CEO said, "Chevron's agenda shows what investor-state dispute
settlement is all about. It's a power grab from corporations - to rein in
democracy and policies to protect people and the planet."
CEO-TNI report also found that whenever policy-makers in the EU and the US have
set out to change international investment treaties in recent years, law firms
and investment arbitrators together with industry associations have mounted
fierce lobbying campaigns to counter reforms to better balance public and
is not surprising - investment arbitration is big business for them. The tabs
racked up by elite law firms can be US$1,000 per hour, per lawyer in investment
treaty cases, with whole teams handling them. The private lawyers who decide
these disputes, the arbitrators, also line their pockets, earning daily fees of
US$3,000 and more."
and US lawyers dominate the field, seeking out every opportunity to sue
countries. Nineteen of the top-20 law firms representing claimants and/or
defendants in such disputes are headquartered in Europe or the US, the large
majority of them (14) US firms. Out of the 15 arbitrators who have decided 55%
of the total investor-state disputes known today, ten are from the EU or the
US, the report said.
of the usual arguments for investor-state arbitration - the need to grant legal
security to attract foreign investors to countries with weak court systems -
"turns to dust" in the context of TTIP, say CEO and TNI, arguing that
if US and EU investors already make up for more than half of foreign direct
investment in each others' economies, then it is clear that investors seem to
be happy enough with the rule of law on both sides of the Atlantic.
is confirmed by an internal European Commission report from 2011 stating that
"it is arguable that an investment protection agreement with the US would
be needed with regard to the rule of law."
report notes that citizens and organised civil society, on the other hand,
oppose investor-state dispute settlement, citing, for example, a statement by
the Transatlantic Consumer Dialogue, supported by consumer groups from the EU
and the US, as saying that the TTIP "should not include investor-state
dispute resolution. Investors should not be empowered to sue governments to
enforce the agreement in secretive private tribunals, and to skirt the
well-functioning domestic court systems and robust property rights protections
in the United States and European Union."
to the report, some EU member states also seem to question the need for
investment protection clauses between two legal systems which are as
sophisticated as in the EU and the US. Some fear a flood of claims from the US
with its more aggressive legal culture. There are concerns that the US
financial sector could attack policies to tackle Europe's economic crisis such
as bail-outs and debt restructuring.
the other hand, member states such as Germany and the Netherlands, which
support far-reaching investor rights, rather want to avoid pro-public interest
legal language which is more common in the US and which, in their view, would
‘dilute' investment protections.
the US government and the European Commission seem to be determined to use TTIP
to empower foreign investors to bypass local courts and sue states directly at
international tribunals when democratic decisions impede their expected
report finds that in leaked versions of its proposed negotiation mandate, the
Commission made detailed suggestions for a "state-of-the-art
investor-to-state dispute settlement mechanism" and investor rights which
mirror the proposals from business lobby groups.
proposal will put many policies at risk and most likely create a chilling
effect on governments looking to pass new rules to protect the environment and
society," say CEO and TNI.
and TNI stress that it is "high time that governments and parliaments on
both sides of the Atlantic grasp the political and financial risks of
investor-state dispute settlement and axe the plans for this looming
transatlantic corporate bill of rights. The European Parliament in particular
should put a leash on the Commission which is obviously disregarding MEPs' call
for ‘major changes' in the international investment regime."
on earth should legislators grant business such a powerful tool to rein in
democracy and curb sound policies made in the interest of the public,"
they ask. +
- We would like to thank SUNS for permission to carry this article. The
briefing is available for download at