Witnesses
I: Dr
, Professor of
International Economic Law, City, University of
London, Ruth
Bergan, Co-ordinator,
Trade Justice
Movement, and Pia
Eberhardt, Researcher and Campaigner, Corporate
Europe Observatory.
Q161 : Ruth, why
has investor protection and in particular investor-state dispute
settlement proved to be so controversial?
Ruth Bergan: I think you have heard some
of the reasons why we think it is controversial. It is this basic
point that it sets up an unfair system where international
investors have a different and quite privileged legal system that
nobody else can access. That also then means that they have a
greater and a particular way of influencing national regulation
that I think people are very surprised and very concerned about
when they learn what is happening. When they learn that Germany
lowered environmental standards in the face of a case brought
by Vattenfall, there is a sense that that is not
how regulations and democracy should work. That is what drives
the concerns about it.
To expand on that, in the UK we certainly do not offer
these kinds of privileges to UK citizens. You have the Wednesbury
convention, which suggests that administrative decisions by the
Government should not be subjected to the kinds of things that
investment treaties offer unless a decision was so outrageous in
its defiance of logic or accepted moral standards that no
sensible person could have arrived at it. It is a much higher bar
than is ever offered to international investors under these
treaties. I think that sense of unfairness is really
acute.
Added to that, there is the fact that there are no
responsibilities and nothing required of investors within the
treaties. They get the privileges no matter what the kind of
investment, with no particular requirement to have behaved in an
environmentally or socially responsible fashion.
It is also, as Pia was saying, limited to companies that
can afford the legal costs to access the system, so again it is
not small businesses that are using the system. On the whole, it
is bigger businesses.
Q162 : What is
regulatory chill?
Pia Eberhardt: Regulatory chill refers to a situation where
a Government or a Parliament does not proceed with, for example,
an environmental law, because it is afraid of being sued or
because a lawsuit has already been threatened and that is
potentially so expensive that the measure is not taken forward.
We have evidence that this happens in the world of ISDS. Ruth
already mentioned one case against Germany. It was the first case
by Vattenfall, a Swedish energy company, over
€1.4 billion. It was about environmental restrictions on a
coal-fired power plant that the local governments had in place.
More specifically, the question was how much water could be taken
out of the local river to cool the plant and then put back into
the river. The restrictions were tightened. That led to an ISDS
claim against Germany over €1.4 billion and that put so much
pressure on the local government to settle the case. As part of
the settlement, they relaxed the restrictions, so Vattenfall actually got what it
wanted...
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