Thinking out legal remedies under TTIP
Last week, the EU commission presented its reform proposal for the investment chapter in the currently negotiated EU-US free trade agreement TTIP. The proposal has rightly sparked an overall positive response, as its many improvements set new benchmarks for international investment law. However, a more fundamental question, brought up again in the aftermath of the Commission’s proposal, still remains open: Why should only foreign investors, and not domestic enterprises, consumers and workers, have the right to claim TTIP provisions intended to protect their respective rights and interests? Isn’t an exclusive right to bring individual claims an unjustified advantage for foreign investors over other individuals and groups that are equally affected by TTIP?
The “privilege argument” and a remaining imbalance
This “privilege argument” has so far been put forward as a rather unspecific political objection. Yet, it is based on the correct assumption that, similar to foreign investors, domestic enterprises, consumers and workers will be “market actors” (in a non-technical sense) of the envisaged transatlantic free trade area. They will enter into economic relations and sometimes economic competition with foreign investors and among each other. Their rights and interests are likely to be affected by TTIP as well.
Among foreign investors and these other groups, one can detect an emerging imbalance: First, substantive standards of protection benefitting other groups – such as labour standards – are likely to be less pronounced in TTIP than substantive rules of investment protection (this at least applies to other treaties already been made public, such as CETA, for example). Second, there is an imbalance concerning opportunities to claim and enforce these standards: Even where substantive standards of protection will be included in TTIP (which can be assumed at least for certain areas), it is unlikely that there will be any avenue for domestic enterprises, consumers and workers to claim these standards before a TTIP dispute settlement body. In procedures before a TTIP investment court (as proposed by the Commission), their role will be mostly be a reactive one: They could either, after a claim has been brought by an investor, intervene in support of the respondent state (however, without being able to bring an own claim for relief), or they could act as amicus curiae (see for both Sec. 3, Art. 23 TTIP-Proposal). However, contrary to investors, it is unlikely that they will be entitled to claim substantive standards of protection on their own initiative. This procedural inequality could lead to a treaty practice where foreign investors have better chances to accentuate their rights and interests, whereas on the other hand, deficits could emerge in the protection of the remaining groups.
In theory, rules on stakeholder and civil society participation could help to mitigate the lack of judicial avenues and could lead to a more active role of other market actors. Yet, despite some interesting elements, the current design and practice of civil society participation is unlikely to provide an equivalent substitution (on some of the issues see here, on practical experience see here, on proposals for improvement see here).
Apart from these participatory mechanisms, domestic enterprises, consumers and workers, as far as the international level is concerned, are still by and large dependent on the TTIP state parties to claim and enforce “their” standards of protection through inter-state dispute settlement. However, these mechanisms, which are known from earlier agreements and are likely to be included in TTIP as well, are not a particular cause for optimism either: Regarding labour standards, for example, it is doubtful whether the respective bodies are competent to make legally binding decisions at all (see e.g. Ch. 24 Art. 9 – 11 CETA-Draft). Moreover, experience with earlier agreements shows that the efficacy of inter-state dispute settlement mechanisms highly depends on the governments’ goodwill and the general state of political relations among the parties. Whereas on several occasions, trade unions and NGOs successfully persuaded governments to initiate labour dispute settlement procedures, the eventual outcome often did not sufficiently meet the petitioners’ demands (see e.g. here).
As a consequence, to bring a claim on their own behalf, domestic enterprises, consumers and workers have to seek redress before national courts. Moreover, it is likely that they will only be able to invoke standards of domestic law, as any TTIP standards may not be directly enforceable in domestic courts (at least, classes in comparable agreements explicitly exclude this, see e.g. Ch. 33 Art. 14.16 CETA-Draft).
Particularly in comparison with investment protection, this is somewhat surprising, as one main argument frequently made in favour of internationalised investment protection points at alleged or actual insufficiencies of domestic court systems and legal proceedings.
A subjective legal position for other groups as a possible avenue towards more equality of chances?
How to deal with this imbalance? A widespread reaction is to simply reject substantive and procedural investment protection rules as a whole. Yet, such a “negative approximation” of the protection of investors and other market actors is only one option. To adjust the imbalance, the parties could as well pursue a “positive approximation”, strengthening the position of other groups to claim the standards protecting their rights and interests on their own.
At first glance, this might appear no less politically out of reach than the idea of a TTIP Investment Court only a few months ago. On the other hand, especially the EU has decades of experience in balancing the rights and interests of different market actors in the context of an international economic arrangement. Besides securing substantive standards of protection, experiences have also been made with regard to the design of legal remedies. Establishing individual or collective remedies for all relevant groups, not least as “functional subjective rights” for the better implementation of common standards of protection, has at least in Europe rather strengthened than hampered the economic development. Of course, this is not to say that the current European mechanisms should (or even could) be incorporated into TTIP one-to-one. Furthermore, this is not to argue that all groups should have direct access to a TTIP Court, as other, equally efficient arrangements that better take into account the peculiarities of the respective standards are conceivable. However, the comparison illustrates the potential of a model of substantive, and even more so procedural, treaty provisions that (inter alia) aim at maintaining and promoting an economic balance among the groups affected by the treaty. A stronger position of the remaining market actors, including procedural avenues for enforcement, could be a way to address imbalances and thereby enhance the overall acceptance of TTIP.
How such a model of enhanced legal remedies in TTIP (and those agreements for which TTIP is intended to be a model) could look like in detail has to be left to future analyses. From a legal perspective, drafting it is without doubt a demanding, but by no means an impossible exercise. During the last months, the EU Commission, governments, the public and academia have impressively shown that intensively engaging in subject-matters such as international investment law, despite all the efforts and occasional side effects, can produce remarkable results within a short period of time. It would be appreciated if such a controversial, but eventually constructive debate could be maintained and continued with regard to other open issues in TTIP.