I've been watching the confirmation hearing for Cecilia Malmström as the next EU trade commissioner. It was really very interesting. Much more detailed questions and answers than we usually see in U.S. congressional hearings.
She suggested that she was open to the possibility of excluding ISDS from TTIP, but seemed mostly to be happy with the current state of ISDS in CETA (although I felt like a couple brief comments indicated she could accept some rethinking of these provisions).
My sense is that she is open to thinking deeply about the use of investor state dispute settlement, in the CETA, TTIP and elsewhere. There are difficult questions, and she is looking for sensible answers. She notes that there are thousands of investment treaties already out there; we need to think about the entire system. She also mentions certain problem countries for foreign investment, including Venezuela, Argentina, Zimbabwe. More generally, she asserts that European foreign investment needs protection.
For what it's worth, here are two things she might want to consider when thinking about the future of international investment obligations.
First, what exactly is the scope of the problem of bad treatment of foreign investors? In particular, which countries are the main source of the problem, and what exactly is the nature of this bad treatment? As far as I know, there has never been an empirical study of this issue, which I think makes it very difficult to formulate appropriate international rules. We seem to be operating under assumptions about how foreign investment is treated around the world. However, these assumptions come from decades ago, when investment treaties were first drafted, and I'm not sure the assumptions reflect actual practices today. In the current environment, subsidies to foreign investors may be a bigger concern than bad treatment. It's true that there are some problem countries, as she mentions. But it may not make sense to take the situation in Zimbabwe as the basis of a general system of investment treaties.
Second, as much as the European Commission and others have tried to clarify the scope of "fair and equitable treatment," it still seems very vague to me. Looking at the CETA investment text, what does "manifest arbitrariness" mean? What are some examples of a "fundamental breach of due process"? What is the scope of the provision on "targeted discrimination" based on race, gender and religion? If there are no clear answers to these questions, it may be worth reconsidering these provisions.
