Investment Protection Debate: Pros and Cons of Investment Protection in the TTIP Agreement

Negotiations between the USA and the EU have attracted growing public interest in recent months. The main bone of contention is the investment section which, in addition to investment liberalisation, features investment protection provisions and regulations on their implementation. Are fears that US investors could challenge European legislation in areas like the environment and the social sector justified? According to Peter Draper, Tutwa Consulting, Pretoria, and Andreas Freytag, University of Jena, TTIP may need investment protection, but no international arbitrage. In their opinion, it is in no way detrimental to the mutual attractiveness of investment locations to guarantee the protection of foreign direct investment against discrimination and expropriation. For that reason, argue Draper and Freytag, TTIP should feature general investment protection, but should rely on national systems to implement contracts. In such a case scenario disputes would be settled by the host country’s courts. Frank Schorkopf, University of Göttingen, highlights that the investors are often citizens who are saving for their old age and their children’s education via pension funds and asset management. Whoever thinks that capital ownership is a less protection-worthy form of ownership should consult the fundamental right to entrepreneurial freedom anchored in the European Union’s Charter of Fundamental Rights. The protection of property is also a human right worthy of protection between OECD states. The USA and the EU should use this opportunity to design capital investment protection in an exemplary fashion in the planned agreement. Interventions in investments are also possible in the public interest if they are commensurate. He advocates scepticism about criticism of investment protection that seeks to justify a hidden and cheap policy change provision. Christian Bellak, Wirtschaftsuniversität Wien, believes that investor-state dispute resolution should not be included in TTIP for legal, democratic policy and economic reasons. This process is neither an effective control of government action nor an efficient system, nor an appropriate way to deal with disputes about public regulation. Stormy-Annika Mildner, Christoph Sprich, Federation of German Industries (BDI), and Elizabeth Johnson, Robert Bosch Stiftung, argue in favour of making investment protection a part of the TTIP agreement. Investment protection contracts are nothing new in the field of international commercial law. Moreover, an investment contract with the USA could be an important intermediate step towards an improved form of multilateral investment protection. For Stefan Beck and Christoph Scherrer, University of Kassel, the investment protection clauses are “privileging of companies at the cost of democracy”. In their view, the more frequently lawsuits involving large amounts of money and costs occur, the more likely the potential threat of a lawsuit alone would be to have a prohibitive impact on political representatives. In this fashion democratic policy measures that were rejected by companies would not only be potentially expensive, but would be prevented from the outset. In this sense the scope for legal action could directly influence state regulations, and fears that environmental, health or working standards could be undermined, are not unfounded.