Follow Up to Acryonym Monday - ISD and TTIP

On Monday Will pointed to some indication that an investor-state dispute clause may be a sticking point in the much anticipated Transatlantic Trade and Investment Partnership (TTIP). As Simon Lester points out, it's not quite clear from the EU TTIP negotiating mandate whether the EU wants to strengthen any ISD or weaken it (ungated version here). Civil society groups are already decrying any ISD as an "assault on democracy, human rights, and the public interest," citing a rise of "expropriation trolls" and that an ISD would prevent the eurozone from having the policy flexibility needed to effectively deal with crises. (see also similar critiques of the Trans Pacific Partnership here)

Typically, discussions of ISDs focus on the preferences and bargaining power of potential investors and potential host governments. The stereotypical case of a potential treaty with an ISD is between an advanced industrialized country and an emerging economy. Therefore most commentators focus on the extent to which host governments are able to resist pressure from rich countries to cede jurisdiction of investment matters to an international arbitral board. Developing countries that need foreign investment are typically in weak bargaining position vis-a-vie large multinationals who have great powers negotiation on their behalf.

Of course, the power asymmetries that so clearly define most ISD negotiations do not obtain in the US-EU case. What is particularly interesting about these negotiations is the relative parity of negotiation partners. Simon wonders if the EU wants a weak ISD or a strong one. I'd argue that it depends on what sorts of rules an ISD would enforce. Business interests in the EU want the TTIP to export European standards to the US, as this would provide them with an advantage. Of course, US firms want an ISD to protect American investors from European regulations. There's a bunch of political science work that examines how the US and EU compete over regulatory authority: see here, here, here, and here for examples. The bottom line, I think, is that an ISD is going to be a very, very tough sell in the context of a US-EU deal. The EU negotiating mandate still maintains its preference for the inclusion of an ISD clause, but I would not be surprised if a final deal severely restricts the ISD mandate or removes it entirely.