TTIP (the Transatlantic Trade and Investment Partnership) is a comprehensive trade and investment agreement currently being negotiated between the EU and the US. The main aims of the proposed agreement are to increase trade and investment between the US and EU through the reduction of tariffs, harmonising regulations (such as banking, food safety and environmental regulation), providing protection to investors and increasing access to services and government procurement markets.

A similar agreement has been negotiated between the EU and Canada (CETA), the text of which has already been agreed, and which is forming the basis of negotiations with the US. However, it appears unlikely that there will be agreement on the text of TTIP before the end of 2015.  The tenth round of negotiations is scheduled to take place from 13 to 17 July 2015.

ISDS provisions

A key area of controversy in relation to TTIP, and of most interest in terms of international arbitration, is the potential inclusion of investor state dispute settlement (ISDS) provisions, which would allow foreign investors to bring proceedings directly against a state (in this context, the "state" would be the EU itself and/or an individual EU member state) via a separate arbitration process rather than using the domestic legal system.

The rationale is that such a mechanism provides investors with a greater level of certainty that their claims will be adjudicated in an impartial manner and increased prospects of enforcement. However, because the majority of EU member states do not currently have in place bilateral investment treaties with the US, the inclusion of ISDS provisions could risk subjecting such states to claims they would not have otherwise been exposed to. There are also concerns that ISDS provisions afford investors excessive protection in respect of policy measures that negatively affect them, and as such may unduly restrict the freedom of governments to regulate in the public interest.

Other issues that have been raised in relation to the inclusion of ISDS provisions in TTIP are as follows:

  • The supervision and functioning of arbitral tribunals: there are concerns as to the transparency of arbitral proceedings and the need to ensure the independence of arbitral tribunals
  • The interpretation of investment protection provisions: current EU proposals would include a mechanism by which the contracting parties (i.e. the US and EU) would be able to adopt agreed interpretations of the TTIP investment provisions which would be binding on arbitral tribunals. There is debate as to the extent to which such agreed interpretations should be binding on on-going arbitral disputes and/or be capable of having retrospective effect
  • Reducing the risk of frivolous and unfounded claims: current EU proposals would include procedural mechanisms for disposing quickly of frivolous claims and a provision that the losing party to bear all of the costs of the proceedings. There is debate as to the efficacy of such proposals in deterring unmeritorious claims
  • The relationship between ISDS and domestic remedies: current EU proposals would include provisions precluding the bringing of claims under the TTIP ISDS provisions and in domestic courts at the same time. There is debate as whether such mechanisms would unduly restrict an investor's legitimate right to pursue different remedies in parallel proceedings in different fora and 
  • The review of ISDS decisions: there are proposals for some form of appellate mechanism to review arbitral decisions, though the precise details of such proposals are yet to be made public.

On 8 July 2015, the European Parliament approved a resolution in relation to TTIP which, among other things, recommended to the European Commission negotiators that ISDS provisions should be replaced with “a new system for resolving disputes between investors and states which is subject to democratic principles and scrutiny, where potential cases are treated in a transparent manner by publicly appointed, independent professional judges in public hearings and which includes an appellate mechanism, where consistency of judicial decisions is ensured, the jurisdiction of courts of the EU and of the Member States is respected, and where private interests cannot undermine public policy objectives”.  It will be interesting to watch the progress of the negotiations of the TTIP on this issue, in particular whether the ISDS provisions are replaced by something more akin to a global court for investment disputes.

Other key issues

Another key issue in relation to TTIP is the likely benefit that will be derived from it. The UK government and the European Commission say that TTIP can deliver significant economic benefits to the member states of the EU − potentially an additional £100 billion annually. Detractors say that it is impossible to estimate the financial benefit of the agreement at this stage and have focussed on the potential for TTIP to lead to the loss of jobs in certain sectors.

Attempts are also being made to harmonise financial regulation including by examining the differing EU and US programmes of reform to the regulations governing banks and other financial institutions following the 2008 credit crisis. The aim is to ensure consistent implementation of internationally agreed standards and to consult before implementing new financial measures. This is with a view to establishing greater financial stability and a larger more efficient market place for EU and US financial institutions (which would be able to operate abroad without additional regulatory intervention). Critics argue that there is already sufficient regulatory cooperation and that TTIP is not the forum for such agreements to be made, as negotiations are being conducted away from domestic parliaments and public scrutiny and without heavy involvement from industry advisors. Further concerns include greater financial instability, delay in implementation of required financial reforms and watering down of safeguards enacted to protect citizens following the credit crisis.

A further aim of TTIP's regulatory harmonisation is to bring EU standards on food safety and the environment closer to those of the US. Critics say that the difference in regulation is so fundamental that harmonisation is impossible. For example, the US tends to focus on achieving its food safety objectives by regulating the end product, while the EU tends to regulate the whole production process. Harmonisation would therefore require a fundamental change in rules.  The same is true in relation to environmental issues. For example, the EU's REACH regulations are far tougher on potentially toxic substances: in the EU, a company has to prove a substance is safe before it can be used, while in the US the opposite approach is taken, and any substance can be used until it is proven to be unsafe.

Information on TTIP and CETA can be found on the European Commission website, here and here