The Financial Times has published a letter from the head of the International Chamber of Commerce forcefully rebutting some of the more widespread canards, circulating in Europe and elsewhere, concerning investor-state dispute settlement (ISDS). (See below for the full text of the letter.)

ISDS provisions provide for the referral of disputes between foreign investors and host governments to neutral tribunals, rather than local courts, in cases of expropriation or other government actions that impact a company’s investment. Strong ISDS rules have been developed over the years via numerous European, U.S. and other trade and investment agreements as a way to promote cross-border investment, by providing a measure of certainty in investment decisions that might otherwise be lacking.

ISDS has emerged as a major lightning rod for opponents of the Transatlantic Trade and Investment Partnership (TTIP), which seeks to remove many remaining barriers to cross-border commerce between the United States and the European Union.

In his letter, ICC Secretary General John Danilovich said that “too much of the recent European debate on investor-state dispute settlement (ISDS) has been driven by hearsay, superstition and myth,” and that anti-ISDS fervor has been largely motivated by misplaced anti-Americanism. Sixty percent of recent ISDS cases worldwide, he noted, were launched by European investors.

“A gold-standard agreement in TTIP,” Danilovich wrote, “could play a central role in fostering improved conditions for a much-needed expansion of global investment flows.”

Text of the ICC letter to the Financial Times on investor-state dispute settlement:

Financial Times

February 9, 2015

Letters

Ditching investor-state dispute settlement may come at quite a cost

Sir, John Kay is no doubt correct to conclude that excluding investment protection standards from the Transatlantic Trade and Investment Partnership would make it “much easier” to sell the proposed deal to a sceptical European public (“Free trade should not put democracy in the dock”, February 4). But would this be the right thing to do?

While greater public engagement in trade policy making is welcome, too much of the recent European debate on investor-state dispute settlement (ISDS) has been driven by hearsay, superstition and myth. Professor Kay shows that even the most reasoned commentators can fall into this trap, casually depicting big — “predominantly American” — businesses as rapacious users of ISDS.

The facts tell a different story: ISDS cases remain relatively rare and almost 60 per cent of claims filed over the past five years have been made by European investors. The importance of fact-based policy making is emphasised by the global dimension to the TTIP talks. Estimates may vary about the economic value of a transatlantic investment pact, but it would be short-sighted to ignore the negative precedent that a weak or non-deal would set for future negotiations.

By contrast, a gold-standard agreement in TTIP could play a central role in fostering improved conditions for a much-needed expansion of global investment flows. Prof Kay would be well advised not to lose sight of this broader perspective: ditching ISDS from TTIP might be the easy thing to do, but it may come at quite a cost in the long run.

John Danilovich
Secretary General,
International Chamber of Commerce,
Paris, France

View this letter on the Financial Times website (paid login may be required)