American and European negotiators have met for the second round of bilateral talks for the Transatlantic Trade and Investment Partnership (TTIP) on Monday. In different negotiating groups such as "market access", "public procurement" and "regulatory aspects", EU and US officials are working to simplify business rules for both sides of the Atlantic.
In one of the groups, negotiators are trying to establish a mechanism for investor-state dispute settlement (ISDS). This would allow an American investor to claim damages from the EU in front of an international court if the EU was to modify its public policy in a way that would spoil the investor's profits. Canada is feeling the heat of such a dispute since a group of investors has sued the region of Quebec under NAFTA for its ban on fracking. Argentina had to pay US investors hundreds of million dollars for their losses after it had to devalue its currency in 2001.
If US and EU negotiators agree to put an ISDS clause into the TTIP, this could curb the EU's and the member states' regulatory powers. A British fracking ban could for example cost the EU millions of Euros if it spoils a planned investment by US investors. In the same way, if a European country was to introduce an eco-tax or a financial transactions tax (FTT), this could also lead to compensation for American investors.
EU and US negotiations keep affirming that both entities have a well-developed legal system and the need for ISDS should never arise. But once the system is in place, it can be freely used by every investor who wants to. It is a system that can become very dangerous for the shaping of democratic politics.
For this reason, there should be no ISDS clause in the TTIP.