04 November 2016

John Hendy QC, Chair of the Institute of Employment Rights and a leading barrister, has become the latest signatory to a legal statement made by 101 law professors warning against investor-state dispute settlement (ISDS) mechanisms in international trade deals.

The statement, issued by campaigning organisation Stop TTIP, was specifically aimed at the Transatlantic Trade and Investment Partnership (TTIP) between the EU and US; and the Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada.

ISDS systems (and Investor Court Systems (ICS) in CETA), are the legal mechanism through which foreign investors can sue national governments for introducing policies that affect their profit margins. Many campaigners and lawyers have warned of the potential for such mechanisms to be used to hold governments to ransom when they wish to pass laws that could protect public health, workers' rights, and the environment.

The Stop TTIP statement argues that investment protection and ISDS systems provide an unfair privilege to foreign investors in relation to all other members of society. Some of the standards written into treaties "are highly disputed since they cover situations in which legitimate public welfare regulations result in the payment of compensation to foreign investors", it said.

ISDS also "weakens the consideration of public interests and restricts democratic change", the authors said, warning that this could lead to "billions of damages paid out of public budgets" and a potential "regulatory chill" should governments become cowed by wealthy multinationals. The legal experts, from across 24 European countries, highlighted that this situation has already occurred in both developed and developing economies signed up to similar international trade deals.

What's more, within the ISDS system, only investors can bring cases, and arbitrators are paid per case, thereby incentivising the system to find in favour of the investor. Arbitrators are also allowed much wider discretion than judges when it comes to deciding the level of compensation and the admission of claims.

The statement argues that attempts by the EU to reduce the risks involved with investor protection systems offer some improvements but are "bound to fail", noting for instance that the "impartiality and independence" of judges could still not be guaranteed.

Finally, the legal experts noted that ISDS is in "strong tension" with EU law and its democratic principles, as well as being unecessary in developed countries with existing court systems capable of taking on investors' cases and offering adequate legal protection.

"We therefore strongly demand not to weaken and undermine the rule of law and the democratic principles upon which our member states and the European Union were founded by providing foreign investors with an unnecessary, systemically biased and structurally unsound parallel legal and judicial system in TTIP or CETA," the statement concludes.

Read the full statement here