Sofies verkehrte Welt

Interview: TTIP und Ceta brauchen keine Investorenschutz-Regeln

“Investorenschutz-Regeln haben in TTIP und Ceta nichts verloren”, sagt Professor Gus Van Harten aus Kanada. Der Jurist hat eine Studie vorgelegt, die eindeutig zeigt, dass von solchen ISDS-Regeln in der Vergangenheit vor allem große internationale Konzerne mit Milliarden-Umsätzen profitiert haben. Van Harten hält private Schiedsgerichte im Freihandel für unfair. Das ganze ISDS-System sei reformbedüftigt, sagt er. Das vollständige Interview im Wortlaut:

„The lion’s share of the financial benefits of ISDS awards have gone to larger companies, not smaller ones“, says Gus Van Harten. Foto: GVH


Gus, your research shows that big international companies are the ones which profit most from ISDS. Would you say that ISDS in general privileges large corporations over smaller ones?
Gus Van Harten: The purpose of this research was to examine how investment treaties lead to transfers of money. It showed that the primary transfer was from public funds to large companies or very wealthy individuals. By “large” companies I mean those with over USD 1 billion in annual revenue, and by small I mean those with less than that figure in annual revenue.
A secondary transfer, which I have not reported here, was from public funds and some foreign investors to lawyers and arbitrators who work in arbitrations. This is one way to measure how ISDS benefits large companies compared to smaller companies. Clearly, it shows that the lion’s share of the financial benefits of ISDS awards have gone to larger companies, not smaller ones.

What is the reason for that?
GVH: The purpose of this research was to explain what has happened so far in ISDS cases on the public record (up to spring of 2014). It was not to predict the future, or to explain or test why the past cases happened the way they did. However, I can offer some possible explanations: the costs of accessing ISDS are very high, about USD 8 million in fees per case, for both sides, making the system prohibitive for small investors to access in the vast majority of cases where there is less than tens of millions of dollars in dispute.

Does that mean that small companies often do not make use of ISDS, when they get into trouble in foreign countries with their investments?
GVH: It does not necessarily mean that. However, in general, it seems very clear that most companies, in most if not all countries, do not rely on ISDS under investment treaties very often, although its use has been increasing. Rather, they presumably rely on domestic courts or contractually-agreed forums if they have a problem involving the state, where they sometimes win and sometimes lose. There are dozens of new cases per year under investment treaties worldwide, of which a minority are brought on by smaller companies. Dozens of cases is not a high number, and it indicates that only a tiny fraction of small companies resort to ISDS when they have problems in another country. The most significant cases are the big-money ones because of the amounts at stake, and these were overwhelmingly brought on by large companies.

What was for you the most surprising outcome of your research?
GVH: I think the most surprising aspect was the share of amounts awarded that was tracked to extra-large companies over USD 2 billion in annual revenue and very wealthy individuals over USD 100 million in net wealth. They are the big winners from the financial transfers arising from ISDS, by a wide margin and to a degree that went beyond my expectations. Put differently, they are the big winners from the informal subsidy that ISDS represents: a publicly-backed insurance for foreigners against the business risks of democracy and politics in a country.

[box type=“bio“] Gus Van Harten, Associate Professor Osgoode Hall Law School, York University Toronto, Canada. He teaches Administrative Law, International Investment Law, and Governance of the International Financial System. He was previously on the faculty of the London School of Economics where he taught Administrative Law, International Economic Law, International Commercial Arbitration, and Public International Law.[/box]

Do you think that ISDS is a good and fair instrument in world trade?
GVH: I have produced a range of research on ISDS in which I elaborate on the concern that ISDS lacks institutional safeguards of procedural fairness and judicial independence. I think ISDS should be replaced by a judicial process, especially in a treaty between countries that have courts which are clearly superior to ISDS in terms of their fairness and independence. I also think it is important for foreign investors to be protected; however, I think a judicial process would work better than ISDS for foreign investors, especially smaller companies, and for countries and their people. And, the idea of a judicial process is clearly incompatible with ISDS as it is currently designed in existing treaties or proposed in new ones.

What do you think is especially unfair in ISDS?
GVH: One can define fairness in a lot of ways. My primary concern is procedural: because only foreign investors can access ISDS, all other parties whose rights or interests may be affected by the adjudication of the dispute – and who cannot obtain full standing in the process – are treated unfairly. Take the example of a domestic company that is in competition with a large foreign company in bidding for a public contract. The domestic company is at a disadvantage in the bidding competition, and more broadly in the marketplace, because it lacks the ability to access an exceptionally powerful process to pressure governments.
More broadly, the unfairness works in favour of foreign companies that are deep-pocketed and thus are capable of credibly threatening an ISDS claim. All other investors are disadvantaged because (a) they are domestic investors and thus not allowed to bring on an ISDS claim at all or (b) they are shallow-pocketed foreign investors who do not have enough money to bring an ISDS claim and thus cannot credibly threaten to do so. That is a broader concept of fairness than the procedural point I mentioned, but it is still important, especially because of how it can distort the marketplace and create special entitlements by some foreign investors to public money.

Should we have a reform of the ISDS system?
GVH: I would look at this in a somewhat different way. Has anyone made a compelling case for replacing courts with for-profit arbitrators in the resolution of these types of disputes, and for providing special access to the effective public subsidy that I mentioned above, only for the purpose of protecting foreign investors? I don’t think so. For that reason, I don’t think the institutional shift in power and re-allocation of public funds has been justified.


European flags in a row
Die Europäische Kommission will Freihandelabkommen mit den USA, Kanada, Japan und anderen Ländern abschließen. Foto:


What about the future of ISDS?
GVH: First and most clearly, ISDS has no place in a treaty between countries with mature and reliable court systems. Second, it has a much more limited role in other treaties; that is, all countries should have an opportunity to show that their courts offer justice to foreign investors before an ISDS claim is allowed. Third, any provision for ISDS should be based on a judicial process to make the process independent, fair, and open. Fourth, although this is more aspirational, there should be a re-balancing in that foreign investors should be expected to meet basic responsibilities of minimum good conduct alongside their rights and protections.

Is ISDS dispensable in Ceta and TTIP?
GVH: Yes, especially in CETA and TTIP, for the reasons I’ve mentioned above. This is a very clear case in my view.

Are there any alternatives? For example: Europe currently debates state arbitration.
GVH: The primary alternative is contract-based adjudication. All investors should make their own choices in the marketplace about whether to invest in a particular place, and whether to negotiate for ISDS protections in their contracts. The other alternative is domestic courts backed by diplomatic protection. Most foreign investors still rely on these alternatives, even when ISDS under a treaty is present. I have not seen any serious research to show that they are worse off when they do so than foreign investors that resort to ISDS under a treaty, even for large companies. I think that research would be a prerequisite to making the case that ISDS under the treaties should replace (rather than supplement in extraordinary cases) these other options. Alongside these two alternatives, I think that a state-state dispute resolution offers a reasonable back-up. Indeed, state-state adjudication is the protection that applies to all market actors, except foreign investors, under all trade deals including the WTO and NAFTA.

Who was the client of your research?
GVH: There is no client – or, as I think about it, the client is the public because I am a publicly-funded academic. The research was done by me as an academic and not on behalf of anyone. I have tenure and a set salary as an independent. To preserve my claim of academic objectivity, I have declined all paid work as a lawyer, arbitrator, or expert in ISDS. In that sense, it is independent academic research.

Interview: Silvia Liebrich, Wirtschaftsredakteurin Süddeutsche Zeitung


[box] Sonderrechte für die Großen: Kritiker privater Schiedsverfahren bemängeln unter anderem, dass die Sonderklagerechte für die Wirtschaft allein den Interessen großer Konzerne dienten. TTIP-Befürworter argumentieren hingegen, dass dieses Instrument der gesamten Wirtschaft nutze, also auch kleineren Firmen. Dafür steht auch der BDI ein, der Spitzenverband der deutschen Industrie. Doch stimmt das wirklich? Eine Studie aus Kanada macht zumindest deutlich, wer in der Vergangenheit profitiert hat: 64 Prozent aller bekannten Entschädigungszahlungen gingen demnach an Unternehmen mit einem Jahresumsatz von mehr als zehn Milliarden Dollar, 29 Prozent an kleinere Konzerne mit einem Umsatz zwischen einer und zehn Milliarden Dollar Umsatz. Während nur sieben Prozent der erstrittenen Mittel an Firmen flossen, die weniger als eine Milliarde Dollar Umsatz vorwiesen. weiterlesen….[/box]