by Pia Eberhardt

Jun. 10, 2013 (TSR) –  On Friday, European trade ministers are expected to approve the European Union’s negotiating mandate for a far-reaching free trade agreement with the United States. Leaked draft versions of the mandate reveal the European Commission’s plans to enshrine more powers for corporations in the deal. As a result, EU member states could soon find domestic laws to protect the public interest challenged in secretive, offshore tribunals where national laws have no weight and politicians no powers to intervene.

The commission’s proposal for investor-state dispute settlement under the proposed trade deal would enable American companies investing in our continent 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. European companies investing abroad would have the same privilege in the US.

Such far-reaching investor rights would bring a corporate litigation boom – that has so far mainly affected developing countries – to the US and Europe. Investor-state disputes have risen thirteen-fold from a few dozen cases in the mid-1990s to 514 cases by the end of 2012 – often involving millions of dollars and regularly undermining democratic policies. In both Uruguay and Australia, US-based tobacco giant Philip Morris has sued over health warnings on cigarette packets; Swedish energy multinational Vattenfall is seeking $3.7bn from Germany following a democratic decision to phase out nuclear energy; and American company Lone Pine is suing Canada for US$250m over a moratorium on controversial shale gas extraction – fracking – in Quebec.

Sometimes the mere threat of a claim or its submission has been enough for legislation to be abandoned or watered down. In other cases tribunals – ad hoc three-member panels hired from a small club of private lawyers riddled with conflicts of interest – have granted billions of euros to companies, paid out of taxpayers’ pockets. The tremendous volume of transatlantic investment hints at the enormous risks of investor-state dispute settlement rights under the proposed EU-US free trade deal. Both partners make up for more than half of foreign direct investment in each other’s economies.

Thousands of EU and US companies have affiliates across the Atlantic. They could make investor-state claims via these affiliates in order to compel their own governments to refrain from regulations they dislike. The result: a litigious war of attrition to limit the power of governments on both sides of the Atlantic. Why on earth should legislators grant business such a powerful tool to rein in democracy and curb sound policies made in the interest of their people? Corporate lobbying is one answer. BusinessEurope, the US Chamber of Commerce, AmCham EU, the Transatlantic Business Council and other corporate lobby heavyweights all advocate the inclusion of investor-state arbitration in the proposed free trade deal.

They have made clear that industry would oppose any deal in which investment protection was traded off against public policy objectives, including human rights and labour protections. The lobby push of US energy giant Chevron is particularly revealing. It is currently engaged in a controversial legal battle with Ecuador. The company initiated investment arbitration to avoid paying $18bn to clean up oil-drilling-related contamination in the Amazonian rainforest, as ordered by Ecuadorian courts. The case has been lambasted as egregious misuse of investment arbitration to evade justice.

In Europe, 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 European governments have decided to put a break on shale gas development – or ‘fracking’. The proposed investment chapter in the EU-US trade deal 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 the company demands.

But resistance against this corporate assault on democracy and the public interest is growing. Consumer groups, trade unions, digital rights activists and environmentalists oppose investor-state dispute settlement in the proposed EU-US trade deal. The Greens, Socialists and the Left Group in the European Parliament are equally concerned. Some 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.

There are also fears that the American financial sector could file a flood of claims challenging policies to tackle Europe’s economic crisis such as bail-outs and debt restructuring. It is high time that parliamentarians and governments grasp the risks of investor-state dispute settlement in the proposed EU-US trade deal and axe the commission’s plans for this looming transatlantic corporate bill of rights. It should not be on the negotiating agenda.

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Pia Eberhardt is a researcher at the Corporate Europe Observatory campaign group and the author of the report A transatlantic corporate bill of rights – investor privileges in EU-US trade deal threaten public interest and democracy.

First published in Public Service Europe.

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