The Trans-Atlantic Free Trade Agreement (TAFTA) is in trouble. Report after report has indicated that the massive U.S.-EU deal is on shaky ground now that the NSA spying scandal has fueled European privacy concerns and botched the hopes of U.S. telecommunications firms to use the deal to downsize data privacy protections. The discovery of an unapproved strain of genetically-modified wheat in Oregon has also thrown water on plans for the deal, stoking European resistance to U.S. agribusiness's calls for TAFTA to be used to dismantle Europe's GMO labeling policies. And France's refusal to accept Hollywood's demands to fill French TV with U.S. movies has only further crippled prospects for the deal.

But there's another polemical component of TAFTA that could prove just as critical in contributing to the deal's unraveling: the extreme corporate privileges of the "investor-state" system slated for inclusion in the pact. About 10,000 people in the U.S. lambasted this extreme provision within 32 hours last month, spurred by a single email, in comments to the Obama administration on TAFTA.

The incredible inclusion of the investor-state disptue settlement regime in TAFTA was first revealed when the German blog Netzpolitik leaked the EU Council’s mandate to the European Commission to negotiate the deal. This extreme system empowers corporations to circumvent domestic court systems and directly challenge a government’s public interest laws before a three-person, extrajudicial tribunal if the corporations feel the laws affect their ability to make a profit. Corporations have already used the system to attack a slew of environmental and health policies, resulting in tribunal orders for taxpayers to pay more than $3.5 billion to foreign corporations under U.S. trade and investment deals alone.

Corporate Europe Observatory and the Transnational Institute have teamed up to publish a joint report taking a closer look at how the inclusion of investor privileges in the agreement would grant exorbitant rights to corporations and threaten crucial public interest laws in both the U.S. and the EU.

The report outlines the lobbying efforts of corporations advocating for the inclusion of investor privileges in the agreement. The U.S. Chamber of Commerce said in a statement to USTR that the investment chapter of the U.S.–EU trade pact should serve as "the 'gold standard’ for other investment agreements.” Chevron has requested that TAFTA require governments to fulfill foreign investors' "expectations" and that such investor privileges cover “both existing and future investments." Chevron is intimately familiar with the investor-state system, having launched an investor-state case against Ecuador to avoid paying the $18 billion that Ecuadorian courts have ordered the company to hand over to clean up its mass-contamination of the Amazonian rainforest.

Corporations in the U.S. and EU are already the most frequent (ab)users of the investor-state system, having launched cases under existing "trade" and investment deals to challenge important domestic regulations such as green energy and medicines policies, bans on harmful chemicals, and environmental restrictions on mining, among others.

The sheer number of cross-investing corporations in the EU and U.S. increases the risk of investor-state disputes if TAFTA (also known as TTIP) would take effect. According to the report :

“The tremendous volume of transatlantic investment – both partners make up for more than half of foreign direct investment in each others' economies – hints at the sheer scale of the risk of such litigation wars. Additionally, thousands of EU and US companies have affiliates across the Atlantic; under TTIP they could make investor-state claims via these affiliates in order to compel their own governments to refrain from regulations they dislike.”

The inclusion of the investor-state system in this proposed U.S.-EU deal is even more incredible considering the ostensible premise for the extreme regime. The stated justification for empowering foreign corporations to completely circumvent a domestic legal system and have their case against a sovereign government heard by an extrajudicial tribunal of three private attorneys has been that some domestic legal systems are too ill-functioning to trust. That accusation is hardly one that either the U.S. or EU are likely to levy at each other. Again, from the report:

“One of the usual arguments for investor-state arbitration – the need to grant legal security to attract foreign investors to countries with weak court systems – turns to dust in the context of TTIP. If US and EU investors already make up for more than half of foreign direct investment in each others' economies, then it is clear that investors seem to be happy enough with the rule of law on both sides of the Atlantic.”

For more information about the dangers of the investor-state regime and its expansion through TAFTA, please check out the full report.