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TTIP and the rule of law: a response to Jude Kirton-Darling MEP

No TTIPThanks to Jude Kirton-Darling MEP for replying to our previous article. No-one could suggest she was capable of doing anything ‘shabby’. We are grateful that it is she, not us, who has to deal with the complex procedures of the European Parliament which she describes. We make several points of substance by way of response.

Investor protection and ISDS

First, the form of investor-state dispute settlement (ISDS) proposed by the European Parliament’s International Trade Committee, whilst an improvement on the original ISDS, is utterly unacceptable. ISDS in that or any other form still gives a unique legal privilege to multinational corporations to sue governments outside the democratically scheme of laws and courts of the EU and its Member States. On this we and Jude appear to be in total agreement.

We must say, however, that we do not confuse investor protection and ISDS.  We see them as two sides of the same coin – one is to protect foreign owned multinationals from the democratic process, and the other is to give them a privileged means of enforcing their protection. Neither is defensible. ‘Investor protection’, may be ‘a set of legal safeguards so as to create incentives to investment’, as Jude says. But that set of legal rules gives a set of exclusive rights to multinationals which are not available to the corporations (still less the citizens) of the States involved.

So, under TTIP, any US corporation setting up in the UK will have all the usual protections of a UK company: limited liability, low corporation tax, cheap labour, minimal employment protection, sophisticated commercial laws, and access to reputable courts to enforce its rights.

But, in addition, TTIP will give the multinational special ‘investment protection’ which allows it to sue the UK government if democratic laws or judgments of British courts interfere with its profits by allegedly ‘expropriating’ its assets or which subject it to treatment which is said to be not ‘fair and equitable’. The purely British company simply does not have this extra right and is stuck with the laws of the land. ISDS is no more than the private mechanism for enforcing this privilege beyond the rule of law.

We do not understand why Jude asserts that the right to sue under UK (or German) law is not available to a US company investing in the UK (or Germany) – or vice versa. Our commercial courts are full of cases brought by foreign companies on the basis that they have suffered some wrong under UK law (litigation between Russian oligarchs and their companies is notorious).

On what conceivable basis should such foreign companies be given the right to sue our government as well if they don’t like the decisions of our courts or the statutes we have passed? Yet that extra right is what TTIP would give them and the example we cited of the tobacco multinational suing Australia in an ISDS in another free trade agreement to challenge the judgment of the High Court of Australia typifies the special privilege of ‘investment protection’ which TTIP proposes.

Workers’ rights

So far as workers’ rights are concerned, the International Trade Committee Report is drafted at best in aspirational rather than mandatory terms. The demand is to ‘aim’ for, rather than insist upon full ratification of ILO Conventions on matters such as freedom of association and the elimination of discrimination. But most EU States have already ratified most of these ILO Conventions. The United States, on the other hand, has one of the lowest levels of ratification of ILO conventions in the world. And there is no question of the US agreeing to ratify trade union rights as a condition of TTIP going ahead; it would be implausible to think otherwise.

This is simply because – unlike in the UK – the ratification of such international treaties in the US is not in the gift of the Executive. Treaties can be ratified only with the consent of the Senate – and there is NO chance of the Senate agreeing to the ratification of Conventions extending trade union rights, under this administration or any other in the foreseeable future. We understand that ILO Convention 87 has been on the floor of the Senate since 1949, and that it is likely to remain there for another 66 years, if not indefinitely.

US negotiators will be happy with an aspirational commitment to ‘aim’ to ratify these treaties, simply because it requires their government to do nothing.   They will also be content with equally vacuous commitments to ‘further improve’ labour standards, and will no doubt smile at a commitment to:

ensure that labour and environmental standards are made enforceable, by building on the good experience of existing [Free Trade Agreements] by the EU and US and national legislation.”

It would of course be a good idea to have labour standards that are ‘enforceable’.   But no existing free trade agreements currently make ILO Conventions enforceable. The ‘good experiences‘ of US national legislation in enforcing ILO standards which EU parliamentarians propose to emulate – are non-existent.

The truth is that on labour standards, the US is the prime example of regulatory failure, which a Senate captured by special interests has prevented Carter, Clinton and Obama from addressing.   Indeed US national legislation guarantees that only 10% of American workers are covered by a collective agreement negotiated by a trade union (compared to 61% across the EU, with ten countries exceeding 80%).

In the absence of mandatory provisions on workers’ rights, TTIP will create unsustainable pressures on EU social rights.  In the absence of obligations on the US, the pressure to create a level playing field will inevitably lead to a dilution of European standards, with obvious implications stretching well beyond the TTIP debate.


Finally, we confess that we do not understand why it was better to agree to an ameliorated ISDS in the International Trade Committee rather than oppose any form of ISDS there, given that such opposition is the position the Socialists and Democrats will adopt when the Report is debated in the full Parliament.

Jude points out that outright opposition to ISDS in the Committee would have failed. But presumably the result would have been that the Report with its unmitigated ISDS proposal would then have gone to the Parliament, hopefully to be beaten there.

Opposition in the Committee would not have been an empty gesture; it would have made clear the principled (and hopefully successful) position that the S&D group will take on ISDS through the Amendment to the Report tabled by Jude when the Parliament debates TTIP.

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