By Robin Emmott
BRUSSELS (Reuters) – The EU’s trade chief proposed on Tuesday creating a new European court to settle disputes in international trade agreements, a step aimed at overcoming growing public resistance to a free-trade accord with the United States.
Cecilia Malmstrom, the European Union’s trade commissioner, said the bloc needed to reform the way investors bring cases in trade treaties, amid concerns that U.S. firms could challenge EU law under the current system if Brussels and Washington reach agreement on a transatlantic trade deal they are negotiating.
In a blog, Malmstrom proposed “a permanent multilateral investment court” that would take cases arising from the EU’s many free-trade accords, not just transactions with the United States, either as a separate institution or part of an existing international body.
“Our new approach ensures that a state can never be forced to change legislation, only to pay fair compensation in cases where the investor is deemed to have been treated unfairly,” Malmstrom said.
Anti-globalisation and green groups as well as some EU governments fear U.S. multinationals will use the investor-to-state dispute settlement (ISDS) mechanism to challenge food and environmental laws in Europe on grounds that they restrict free commerce.
Malmstrom is trying to convince a skeptical European Parliament, which must sign off on any deal, to support an accord containing investment arbitration, which the United States says is non-negotiable.
She will present her proposals to the Parliament’s trade committee on Wednesday and to EU trade ministers on Thursday.
A EU-U.S. accord could generate $100 billion a year in additional economic output on both sides of the Atlantic, a European Commission study found.
In Europe, many feel a deal would only benefit big companies.
No other subject has united European opposition to the proposed EU-U.S. accord as much as investment arbitration, even though EU governments have negotiated some 1,400 investment protection agreements since the 1960s.
The Commission, the EU executive, says the ISDS mechanism is needed because the World Trade Organization, for example, only accepts state-to-state disputes, meaning in practice only big companies have the muscle to lobby governments to take up their cases.
Malmstrom said she would guarantee companies access to an appeals system, and make arbitration tribunals more like traditional courts, with a code of conduct for arbitrators.
Some anti-trade campaigners also accuse the European Union and the United States of trying to set up “secret courts” to undermine the rights of ordinary citizens.
(Reporting by Robin Emmott; editing by Philip Blenkinsop and John Stonestreet)