The Media and the Investor-State Dispute Settlement: TTIP of the Iceberg

Edward Guntrip
Edward Guntrip

Cross posted with permission from International Law Matters (originally posted 3 November 2014).

In the United Kingdom (UK), the mainstream and popular media have been reporting details of the proposed impact of the Transatlantic Trade and Investment Partnership (TTIP) between the European Union (EU) and the United States of America (USA) (see for example, articles from the Independent, the Guardian, the Telegraph and the Huffington Post). The TTIP is a trade agreement that is intended to minimise regulatory differences and remove trade barriers between the EU and the USA. The TTIP also seeks to open the market between the EU and the USA for investment and services. In the majority of stories discussing the TTIP, journalists and columnists have raised concerns regarding its potentially negative influence. There is apprehension concerning the possibility of increased privatisation of state-run healthcare services, the relaxation of environmental standards, and the introduction of food that does not comply with existing EU standards. Examples of these types of media reports can be found here and here. In addition, the media is warning the public about the threat of investor-state dispute settlement (ISDS) (see for example, here).

The potential impact of the TTIP on citizens of EU member states and the USA needs to be fully discussed, and a dialogue between all interested parties is to be encouraged. An open conversation could have easily been achieved had those negotiating the TTIP made the negotiating aims tipptransparent from the outset. However, the mandate setting out the negotiating directives was only made public in October 2014 after seven rounds of negotiations. Given the recent change in policy regarding the transparency of the negotiations, the main source of information regarding the TTIP for the vast majority of people, so far, has been through reports in the media. Therefore, it is unfortunate that the debate has been presented to the public by the UK media in an incomplete manner. This practice has been most prevalent when the UK media discusses ISDS.

ISDS was established as an alternative dispute resolution forum for disputes over foreign direct investment (FDI). It was initially intended to provide a neutral forum for investment disputes. Foreign investors did not want to take the political risk of submitting disputes to a court that was likely to favour the interests of the state in which it was located. Hence, dispute settlement proceedings were held outside of domestic legal systems to avoid perceptions of bias and were adjudicated by experts rather than judges.

As it currently stands, the TTIP proposes that ISDS should be the primary form of dispute settlement for investment disputes that arise under the instrument (although this could change based on recent statements made by the new EU Commission President, Mr. Juncker). The adoption of ISDS in the TTIP created a flurry of resentment in the UK media given the ‘secretive’ nature of ISDS. Further, the public are being warned that ‘corporate lawyers’ decide these disputes. Rather than being seen as a neutral forum, ISDS is being portrayed as a forum that inherently favours corporate foreign investors. These allegations only constitute one perspective on the operation of ISDS. ISDS is becoming increasingly transparent. For example, in 2006, procedures were introduced into ISDS governed by the ICSID Arbitration Rules to enable non-disputing parties with an interest in the dispute to make submissions to an arbitral panel. Further, the recent development of the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration creates a means by which the public can be made aware of investment disputes. ISDS is not solely the domain of corporate lawyers. Decisions are made by international investment law experts who, in addition to corporate lawyers, include public international lawyers and advocates. Finally, empirical evidence from 2007 suggests that foreign investors win their claims only 40% of the time when they use ISDS to resolve their disputes. This dispels the notion that ISDS is weighted towards foreign investors. This material is not discussed by the UK media in their reports on the TTIP.

Whilst aspects of the TTIP’s ISDS clauses leave a lot to be desired (see, for example, the submission of around 120 academics, supported by this author, to the EU Commission highlighting some key difficulties) the procedures envisioned do not differ substantially from ISDS available in other international investment agreements (IIAs). The key protections offered to foreign investors remain largely the same. What is frustrating about the media’s portrayal of ISDS in relation to the TTIP is that, prior to the TTIP, nine EU member states were bound by IIAs with the USA that provide for ISDS (being Lithuania, Croatia, Latvia, Estonia, Bulgaria, Romania, Czech Republic and Poland). Despite the current applicability of ISDS to investment disputes between the USA and approximately one third of EU member states, the media has mentioned none of the nine existing IIAs. By failing to mention these IIAs, the UK media is not disclosing that ISDS already operates in some EU member states in broadly similar terms to those proposed in the TTIP. This is not to suggest that the current application of ISDS to some EU member states justifies the inclusion of ISDS in the TTIP. Rather, it highlights that only the TTIP is being demonised in the media.

The media’s concern regarding the use of ISDS in the TTIP seems hypocritical when both the USA and EU member states (including the UK) insist on the same protections when their investors undertake FDI in a foreign state. In many instances, ISDS governs FDI disputes between EU member states. What the UK media presents as threatening, intrusive and secretive is actually common practice and is seen as a means of protecting UK based investors. Yet, when ISDS is discussed in the context of the TTIP, according to the UK media, it becomes unacceptable. There are arguments that could be discussed that militate against the use of ISDS in the TTIP. Both the USA and EU member states are likely to provide a neutral forum for investment disputes, reducing the need to refer disputes to ISDS in order to avoid potential bias (a discussion of these arguments can be found here). However, this argument has not been put before the public. Instead, the TTIP is being targeted by the media as the source of the problem without considering the wider context in which ISDS operates and the broader purpose of ISDS (set out above).

The point of this post is not to promote the TTIP or to prevent discussion regarding the virtues (or otherwise) of the TTIP and its ISDS provisions. The TTIP should be scrutinised in the same manner that any international agreement that affects a state’s citizens should be examined. However, the manner in which the UK media has presented the TTIP and its ISDS provisions is skewed. As the media remains the key source of information for the general public regarding the TTIP, reporting should be more balanced and nuanced.  In particular, solely focusing on the TTIP draws attention away from the widespread practice of ISDS. Further, the presentation of one-sided arguments distorts public perceptions of international investment law. Therefore, it is suggested that it would be more beneficial to have an open and informed debate regarding ISDS more generally. Any reforms could be implemented on a larger scale, rather than focusing on one instrument that has happened to catch the media’s attention. After all, the TTIP is only the tip of the iceberg.

Dr Edward Guntrip teaches international investment law at Sussex Law School.