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The EU is once again facing criticism for its pursuit of investor-state dispute settlement-like mechanisms.

 

 

EU IS UNDER FIRE FOR PURSUING ISDS MECHANISMS

 

 

Despite setbacks at the end of 2017, trade negotiations between the EU and Mercosur (Argentina, Brazil, Paraguay and Uruguay) look set to resume soon, according to the commission (Also see "IPR-Enhancing EU-Mercosur Trade Talks Set To Resume After Stalling" - Pink Sheet, 10 Jan, 2018.). The deal has come under heavy criticism from public health advocates who claim that provisions that would enhance intellectual property rights in the Latin American countries would hinder access to affordable medicines.

 

NGOs are also calling on both sides to ensure that ISDS mechanisms are excluded from the deal. “Before negotiations end, we would like to see the parties explicitly refusing to pursue investor-state dispute settlement (ISDS)-like mechanisms to any issues related to – or having implications for – public health,” Jaume Vidal, policy advisor at Health Action International, said in a statement criticizing the EU-Mercosur trade deal.

 

“We are concerned that such instruments could be part of future EU trade deal negotiations, for instance with Morocco or Mexico” - HAI

 

Similarly, a letter from several NGOs to the deal’s chief negotiators, dated Dec.1, 2017, called on all parties to “refuse to accept the application of investor-state dispute settlement (ISDS)-like mechanisms to any issues related to, or having implications for, public health, including but not limited to IP protection, price regulation, formulary selection and public procurement of medicines.” NGOs, including HAI, Médecins Sans Frontières, Global Health Advocates, Oxfam International, Salud por Derecho and IFARMA, signed the letter.

 

Such mechanisms allow investors to sue states for what they claim are discriminatory practices and appear in different forms in some trade deals, including the North American Free Trade Agreement (NAFTA) and the EU-Canada Comprehensive Economic and Trade Agreement (CETA).

 

HAI points to some ISDS cases involving pharmaceuticals. For example, Novartis AG challenged a move by the Colombian government to declare its anti-cancer, Gleevec/Glivec (imatinib) to be of public interest (Also see "Novartis Takes On Colombia Over Glivec Pricing" - Scrip, 22 Dec, 2016.). And in a NAFTA tribunal, Eli Lilly & Co. tried to claim $500 million from the Canadian government over court decisions to invalidate two patents (Also see "Pharma Patents Are Vulnerable In Canada As Lilly Loses NAFTA Challenge" - Pink Sheet, 22 Mar, 2017.).

 

Multilateral Investment Court

According to the European Commission, ISDS mechanisms are not part of the Mercosur-EU deal. “Investment protection is not part of the mandate on which negotiations are based and therefore is not covered,” it told the Pink Sheet. Nevertheless, HAI remains concerned. Although there are no explicit mentions of ISDS mechanisms in the deal, the EU could try to win support from Mercosur member states for the Multilateral Investment Court (MIC) project. Moreover, HAI thinks something similar to an MIC mechanism will feature in other trade talks. “We are concerned that such instruments could be part of future EU trade deal negotiations, for instance with Morocco or Mexico,” it added.

 

Inclusion of such provisions is certainly possible in both deals. CETA and the EU-Vietnam Free Trade Agreement both “foresee setting up a permanent multilateral mechanism and contain a reference to it,” says a commission statement about the MIC project. It also says that “the EU now includes similar provisions in all of its negotiations involving investment.”

 

Under the MIC project, imitated in 2015, the commission wants to set up a permanent body that would decide investment disputes. “International investment rules and international investment dispute settlement have a role to play in encouraging and retaining investment. So it’s in the EU’s interest to ensure that the resolution of investment disputes operates effectively on an international level,” according to the commission.

 

A permanent multilateral investment court would, for the EU, replace bilateral investment court systems included in EU trade and investment agreements. And through an MIC, the commission wants to address concerns surrounding ISDS mechanisms, which have come heavy fire, for example during the Transatlantic Trade and Investment Partnership talks. Critics claim they undermine a state’s right to regulate, are not impartial and lack consistency and transparency. In addition, it is claimed that such mechanisms also lack appellate mechanisms, are costly and bypass domestic courts.

 

Opponents of the MIC project say that only foreign investors would be able to claim through the court and that states would always be defendants. Meanwhile, states or peoples damaged by investors would not have the same recourse, say critics.

 

Indeed, opposition to an MIC is likely to be fierce. “The [ISDS] mechanism is now so discredited … that a change of name, or some other cosmetic change without greater transparency and accountability, will not be easily accepted by a number of stakeholders,” said HAI.

 

In September 2017, the commission published a Recommendation, authorizing the opening of negotiations for a convention establishing a multilateral court for the settlement of investment disputes. If the council adopts this decision, the EU would be able to take part in negotiations for a new multilateral investment court.

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