The True Cost Of Corporate Sovereignty For The EU: €3.5bn Already Paid, €30bn Demanded - Even Before TAFTA/TTIP

from the and-guess-who-foots-the-bill? dept

While the debate about the inclusion of a corporate sovereignty chapter in TAFTA/TTIP continues to rage in the EU, the European Commission insists there's nothing to worry about here. In a recent article published in the Frankfurter Allgemeine Zeitung (original in German), the new European Commissioner for Trade, Cecilia Malmström, wrote that EU member states have signed 1400 agreements with other nations that included corporate sovereignty provisions -- implying that such investor-state dispute settlement (ISDS) elements are perfectly normal, don't cause problems, and won't cause problems.

But there are two flaws with this logic. First, only nine of those 1400 agreements are with the US, and on the other side were Bulgaria, Croatia, Czech Republic, Estonia, Latvia, Lithuania, Poland, Romania and Slovak Republic. In other words, all countries keen to escape from Russia's influence after the break up of the Soviet Union, and therefore willing to sign up to more or less anything -- even treaties with ISDS -- that might help them do that. Most of those 1400 agreements are with small, developing nations with few investments in the EU. That naturally means there are few opportunities to bring cases under ISDS.

The other flaw with the European Commission's implied logic that ISDS hasn't been a problem in the past, and thus won't be in the future, is that even that isn't true, as an important new piece of research by Friends of Earth Europe, entitled "The Hidden Cost of EU Trade Deals" demonstrates. For the first time, it gathers together all the corporate sovereignty cases that have been brought so far against EU countries, and comes up with the following statistics: 127 known ISDS cases have been brought against 20 EU member states since 1994.



The total amount awarded to foreign investors -- inclusive of known interest, arbitration fees, and other expenses and fees, as well as the only known settlement payment made by an EU member state -- was publicly available for 14 out of the 127 cases (11%) and amounts to €3.5 billion. That figure is almost certainly an underestimate: thanks to the shocking lack of transparency in ISDS cases, details about the often very large payments are not always made public, which means that we don't have access to information about all awards made against EU nations. Moreover: Details of the compensation sought by foreign investors was publicly available for only 62 out of the 127 cases (48%). The compensation sought for in these 62 cases amounts to almost €30 billion. Again, that figure of €30 billion is almost certainly an underestimate of the true value of total claims against EU governments -- and hence against the EU public, which ultimately foots the bill in the event of tribunals making awards to companies. What makes that €30 billion figure so disturbing is that it represents a lower bound for ISDS cases in a situation where few US companies were able to bring claims, because of their limited investment in Eastern European countries.

If there is a corporate sovereignty chapter in TAFTA/TTIP, more than 14,000 American firms that own more than 50,000 subsidiaries in EU countries will have the ability to sue the EU (pdf) -- 95% of them for the first time. Moreover, they will be able to do that for all their existing investments in Europe, not just new ones, as the following section in the EU negotiating mandate makes clear (pdf): the investment protection chapter of the Agreement should cover a broad range of investors and their investments, intellectual property rights included, whether the investment is made before or after the entry into force of the Agreement. That clearly exposes EU member states -- and their citizens -- to the threat of an even greater level of claims than the €30 billion currently in play. Indeed, it is not fanciful to expect that figure at least to quadruple if ISDS is included in TTIP. That would mean claims -- not necessarily successful, of course -- of around €120 billion.

That's exactly the maximum expected boost to the EU's economy that the European Commission claims would be provided by TTIP by 2027 (pdf). In other words, even if the most optimistic forecasts for TAFTA/TTIP in EU were realized, a big chunk of that benefit could be wiped out by a wave of ISDS cases brought by US companies. Exactly the same is true with the roles reversed: much of TAFTA's claimed benefits for the US economy are likely to be cancelled out by claims from 3,000 European firms owning more than 24,000 subsidiaries in the US that would suddenly be able to bring corporate sovereignty cases against the US government. On the basis of what is already happening, including ISDS in TAFTA/TTIP looks almost certain to nullify most of the claimed benefits of signing any treaty, and on both sides.

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Filed Under: corporate sovereignty, eu, investor state dispute settlement, isds, tafta, tpp, ttip