European Commission to establish trade disputes court

The European Commission is to establish a special court to settle disputes between investors and states in a bid to resolve one of the major impasses in the ongoing negotiations on the EU-US trade deal.

EU trade commissioner Cecilia Malmstrom announced plans on Wednesday to establish a special court to deal with disputes between investors and states in trade agreements. The new system will replace the existing investor-to-state dispute settlement (ISDS) clause that is included in most trade agreements, which gives investors protection in the event that governments make decisions that impinge negatively on business, effectively giving corporates the power to sue states. The inclusion of an ISDS clause has proven to be one of the most controversial aspects of the proposed EU-US trade deal, becoming a lightning rod for public opposition to the trade deal across the European Union. There had been fears that US companies could use the ISDS clause to challenge EU regulatory standards.

The new court will be a 15-judge court system. Judges will be publicly appointed, and a special appeals mechanism will also be established.

The new Investment Court System will apply to the Transatlantic Trade and Investment Partnership (TTIP) deal with the US and all subsequent trade deals. Announcing the establishment of the new court in Brussels, Commissioner Malmstrom said the EU’s proposal was for “a new transparent and fair court system based on a democratic principle. “

“What has clearly come out of the debate is that the old, traditional form of dispute resolution suffers from a fundamental lack of trust,” she said, pointing out that the Commission had taken into accounts the concerns of stakeholders during public consultations on the proposed EU-US trade deal.

But opponents of the deal criticised the move. “Clearly the European Commission is doing everything it can to call ISDS something else,” Sinn Féin MEP Matt Carthy, a member of the European Parliament’s trade committee, said. “The basic fact of the matter is that, when we’re dealing with two advanced economies like the EU and the US, there is no need for a separate mechanism that is accessible only to large corporates,” he said, citing Ireland as an example of a country that has no ISDS procedure but has successfully developed trade links with other countries.

Fine Gael MEP Sean Kelly who also sits on the trade committee welcomed the announcement. “I welcome the move to improve the system which exists where we have 4,000 ISDS arrangements across the world,” he said. “The new court will guarantee greater transparency, while also giving certainty in terms of the rights of countries to regulate.”

The Commission’s proposal must now be presented to the European Parliament and Council for assessment. Washington has not yet responded to the proposal - the US has previously insisted that an ISDS clause should be part of any trade deal with the European Union.

Though the EU-US trade deal was launched in June 2013, negotiations have been progressing slowly, due to significant public opposition to the scheme, particularly in countries such as Germany and Austria. The European Commission estimates that a transatlantic trade deal could boost EU GDP by 0.5 per cent, by streamlining regulations and standards across the two markets and removing trade barriers.