MEP support falters for trade deal

European Parliament’s second-largest bloc bickers over EU-US trade as vote looms.

An intra-party battle over a controversial provision of the EU-US trade agreement threatens to undo fragile support for the deal in the European Parliament.

With only a few days remaining before the Parliament’s June 10 vote on whether to approve the EU’s position on the Transatlantic Trade and Investment Partnership (TTIP), members of the Progressive Alliance of Socialists & Democrats (S&D), the second largest group in the assembly, are wrestling over their position.

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Two separate S&D factions have failed to agree on how strongly to oppose a controversial provision that lets foreign investors sue national governments for financial compensation if a change in law affects their holdings.

If the S&D MEPs cannot settle on a position on the so-called Investor State Dispute Settlement (ISDS) proposal before next week’s plenary session, Parliament’s support for the whole trade deal could be threatened.

The current proposed resolution on ISDS, agreed by S&D and European People’s Party (EPP) members last week in the Parliament’s International Trade Committee, would phase out the ISDS provision, and move toward Trade Commissioner Cecilia Malmström’s idea of a “permanent solution” for resolving disputes between investors and states.

But the S&D group has now rejected the text approved last week, by a vote of 29-10, in the trade panel. The group clearly wants changes, yet is split over whether to adopt a hardline position on ISDS or to include minor changes in a compromise with the conservative parties, including the EPP.

The ISDS provision has recently complicated talks between European and American negotiators. Standard in many trade agreements, the measure authorizes companies to sue public authorities in ad-hoc arbitration tribunals, instead of going through national jurisdictions to seek damages and compensation.

On Wednesday, a majority of the S&D group supported an amendment proposed by Bernd Lange, a German MEP who chairs the International Trade Committee. Lange’s amendment suggests a “permanent solution” for resolving disputes between investors and states “without the use of the ISDS private arbitration.”

But another block of S&D MEPs, supported by other, smaller left-leaning party groups — including the Europe of Freedom and Direct Democracy (EFDD), the European United Left-Nordic Green Left (GUE-NGL) and the Greens — submitted another amendment to the committee-approved text. This text would “oppose the inclusion of ISDS in TTIP” altogether, but enforce investment protection with other options “such as domestic remedies.”

“By domestic remedies, we mean public courts and tribunals,” said Maria Arena, a Belgian member of the S&D party who signed the amendment. “We can rely on our stable jurisdictions. We are the biggest trade area in the world and, apart from Eastern European countries, we’ve never had ISDS.”

Arena added that the amendment had received 150 signatures, of which 66 came from the S&D.

For David Borrelli, a MEP member of the EFDD group who sits on the trade committee, “This decision is not going to be based on the political groups. It is based on single individuals and nationalities, so it is difficult to assess the outcome in a situation like this.”

Wednesday’s vote is crucial for the negotiations on TTIP over the longer term. Though the Parliament itself only observes the negotiations, the final trade deal must be approved by the assembly. The Commission therefore needs the Parliament on its side.

But a complete dismissal of ISDS is likely to provoke outrage in the US, where it is a standard tool for investment protection.  

“ISDS is a sticking point,” said Charles de Marcilly, a political analyst and director of the Robert Schuman Foundation in Brussels. “It’s the Parliament’s role to alert and set red lights for the Commission if the proposed TTIP law doesn’t go in the right direction.”

But a parliamentary resolution on TTIP could only achieve the desired impact if it is voted with “a stable majority,” the German MEP Daniel Caspary of the European People’s Party said. With the current split in the S&D, the opposite could happen — or the resolution could fail completely.

Last week’s vote in the trade committee was seen as a milestone for the Parliament’s support for the trade deal. That show of support included agreement on an ISDS reform proposal recently pitched by Malmström as a basis for “a permanent solution for resolving disputes between investors and states … where potential cases are treated in a transparent manner by publicly appointed, independent professional judges in public hearings and which includes an appellate mechanism,” ensuring “a consistency of judicial decisions [and respecting] the jurisdiction of courts of the EU and of the Member States.”

The compromise also included a weakened call for the creation of an international trade court to hear investment dispute cases. The final text says that “in the medium term, a public International Investment Court could be the most appropriate means to address investment disputes.”

To reach the agreement, the S&D faction backed down from its original rejection of the ISDS mechanism. In return, the EPP accepted language submitted by the Socialists stating that the Parliament takes “into account the EU’s and the US’ developed legal systems … to provide effective legal protection based on the principle of democratic legitimacy, efficiently and in a cost-effective manner.”

“The compromise struck in the International Trade Committee is a good one,” said Frank Proust, a French MEP from the EPP group. “It states clearly that the old form of ISDS arbitration should not be included into TTIP.”

Said Proust, “We want to create a trade standard with TTIP that applies to all future agreements such as Vietnam, Singapore or eventually China.”

In recent months, the Commission has had to change its position on the investor court under pressure from the Parliament.

TTIP, if agreed, would affect more than 800 million people in Europe and the United States and about two thirds of the world’s richest countries. The goal is to spur a transatlantic market by making exports, imports and investments easier, while jump-starting growth.

“Discussions are still ongoing,” said Lange. “Our aim remains to ensure that a broad majority will support this resolution.”