The European Union has signalled the difficulties of including an investment-protection clause in any free-trade agreement with the US by saying the step faces huge scepticism in Europe.
The European Commission made the assertion after completing a public consultation on the merits of negotiating investment-protection provisions in the planned Trans-Atlantic Trade and Investment Partnership.
The clause would allow foreign investors to use arbitration panels instead of using domestic courts to make claims against a national government when an investment is harmed, for example through expropriation.
Known as investor-state dispute settlement, the clause is controversial in the EU because of the potential limits it places on European governments’ ability to regulate in the public interest.
“The consultation clearly shows that there is a huge scepticism against the investor-state dispute settlement instrument.
“We need to proceed with caution,” EU Trade Commissioner Cecilia Malmstroem said yesterday in Strasbourg.
The commission’s stance highlights the balancing act facing Malmstroem, a Swede, as she tries to keep on track negotiations begun in 2013 to expand the world’s biggest economic relationship.
De Gucht, whom Malmstroem succeeded in November, said days before leaving office that the US may break off talks on a commercial accord with the EU in early 2015 unless Europeans show a firmer willingness to include investor-state dispute settlement provisions in any deal.
Malmstroem said yesterday that the matter is “very important” to the US.
She pledged to hold an open and frank discussion on the issue with EU politicians and European civil society before making any policy recommendations in the spring.
In the EU, any draft Trans-Atlantic Trade and Investment Partnership accord would need the backing of the bloc’s national governments and the European Parliament.
The commission will focus its dispute settlement deliberations on four areas: the protection of the right to regulate; the establishment of arbitration tribunals; the relationship between domestic judicial systems and dispute settlement; and the review of dispute settlement decisions for legal correctness through an appellate mechanism, said Malmstroem.