The majority view of the European Parliament is against such a scheme, while the outgoing US administration had considered the file still under negotiation until 2016. Since 2017, no TTIP negotiation round has been held and the TTIP negotiations are currently on 'hold'.

With the entry into force of the Lisbon Treaty, the competence to negotiate investment agreements was transferred from Member State level to the EU. There are currently around 1 400 bilateral investment treaties (BITs) that Member States have in force; these can remain in force by virtue of Regulation 1219/2012 unless the EU concludes an agreement with the third country in question. The EU has therefore begun to negotiate its own investment agreements (either as investment chapters in broader FTAs, i.e. Canada, Singapore, Japan and the US, or as stand-alone investment agreements, i.e. China).

Investor-state dispute settlement (ISDS), understood as a dispute settlement mechanism using arbitration fora to solve disputes between states and foreign investors, has been widely used in EU Member States’ bilateral investment treaties (BITs) and US trade agreements and BITs. It was also initially advocated by the EU as a dispute resolution model in its investment negotiations. Subsequently, however, ISDS became a highly controversial issue in the TTIP negotiations and faced strong criticism from parts of civil society, the European Parliament and certain Member States.

In recent years, investors facing possible administrative, regulatory or judicial measures leading to discrimination or adverse treatment have increasingly turned to an independent arbitration tribunal based on the ISDS clauses in the respective bilateral investment treaties. By the end of 2013, there were 560 such investment disputes worldwide (based on approximately 3 000 BITs). This increase in international arbitration cases has prompted significant concern by critics that investment protection rules could be abused by foreign investors with a view to preventing (or at least limiting) countries’ ‘right to regulate’, i.e. to make legitimate policy choices, especially in the fields of environment, public health and social protection. Such concerns have been voiced mostly by NGOs, think tanks, some political parties and national parliaments that have called not only for the removal of ISDS clauses from the TTIP, but also for rejection of the TTIP altogether.

On 27 March 2014, prompted by civil society and by critics in some EU Member States, the European Commission launched a public consultation on investment protection provisions, including on ISDS in the TTIP. By the closing date of the consultation, on 14 July 2014, the Commission had received 150 000 replies.

In the follow-up to the consultation, the Commission, in May 2015, submitted a concept paper to ‘further improve’ investment protection standards and ISDS.

The European Parliament’s recommendations

In its resolution of 8 July 2015 containing recommendations to the European Commission on the TTIP negotiations, the European Parliament stressed, regarding this chapter, the need to:

• ensure that foreign investors are treated in a non-discriminatory fashion, including in cases of grievances, while benefiting from no greater rights than domestic investors;
• replace the ISDS system with a new system for resolving disputes between investors and states which is subject to democratic principles and scrutiny, where potential cases are treated in a transparent manner by publicly appointed, independent professional judges in public hearings;
• include an appellate mechanism, where consistency of judicial decisions is ensured, the jurisdiction of courts of the EU and of the Member States is respected, and where private interests cannot undermine public policy objectives.

How the Commission’s textual proposals take the EP’s recommendations into account

The Commission proposed a new investment court system in autumn 2015 (see Investment Court System for TTIP).

References:

• European Parliament, EXPO, Transatlantic Trade and Investment Partnership (TTIP) negotiations: State of play, Briefing, 2014
• European Commission, Inside TTIP. The Transatlantic Trade and Investment Partnership (TTIP), towards an EU–US trade deal : an overview and chapter-by-chapter guide in plain English, 2016
• European Parliament, Resolution of 8 July 2015 containing the European Parliament’s recommendations to the European Commission on the negotiations for the Transatlantic Trade and Investment Partnership (TTIP), 2014/2228(INI)

DISCLAIMER: Textual proposals of the Commission represent the negotiating position of the European Union in the TTIP negotiations; they are not necessarily representative of the final text of the agreement as the latter will be the result of the negotiations between the EU and the US.

Author: Jana Titievskaia, Members' Research Service, legislative-train@europarl.europa.eu