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The European Parliament Votes to Remove Investor-State Arbitration from the Trans-Atlantic Trade and Investment Partnership (TTIP) Negotiations

On 8 July 2015, the European Parliament voted favorably on a non-binding resolution that approves of the negotiation of the Transatlantic Trade and Investment Partnership (TTIP), an international trade and investment agreement between the United States and the European Union. Importantly, however, the resolution also supports the removal of investor-state arbitration from the TTIP. The European Parliament instead recommends to the European Commission negotiators framing the TTIP with their U.S. counterparts that investor-state arbitration be replaced with “a new system for resolving disputes between investors and states which is subject to democratic principles and scrutiny”.

The resolution also calls for transparency in these proceedings, which should be resolved by “publicly appointed, independent professional judges in public hearings”. Consistent with a “Concept Paper” previously issued by the European Commission, the European Parliament urges that the TTIP include an appellate mechanism to ensure the consistency of judicial decisions as well as the jurisdiction of courts of the EU and of EU Member States. Finally, the European Parliament calls for limited investment protection provisions covering national treatment, most-favored nation, fair and equitable treatment, and expropriation.

The European Parliament’s resolution marks the culmination of increasingly skeptical views of the EU institutions towards investor-State arbitration. European Trade Commissioner Cecilia Malmström had previously announced the EU’s new objectives for investment protection in TTIP. On 5 May 2015, these objectives were published in a “Concept Paper” that outlined certain EU priorities in negotiating the TTIP investment chapter. Commissioner Malmström’s objectives were then also endorsed by a resolution of the European Parliament’s Committee on International Trade (INTA Committee) on 28 May 2015. The 8 July 2015 resolution of the European Parliament appears to be based on the European Commission’s Concept Paper to some degree, though it would seem that the European Parliament has even more significant concerns over investor-State dispute settlement (ISDS) than the Commission.

The European Parliament’s vote is yet another challenge to efforts across the Atlantic to negotiate the TTIP, notwithstanding the recent affirmative vote in the U.S. Congress to grant “Trade Promotion Authority” to President Obama. Business groups were particularly disappointed by the European Parliament’s vote, urging both the European Commission and the Office of the United States Trade Representative (USTR) to negotiate a TTIP that will “include an effective ISDS system that protects investors from unjust discrimination and unfair treatment.” The tenth TTIP negotiating round is currently underway, and so next steps on this contentious issue will be a matter of “wait and see.”

Special thanks to Warren Bianchi for his assistance with this blog post.