Can the courts in America be privatized?

AK criticizes investment protection agreement: "privatization of the judiciary"

Free trade agreements such as TTIP make it possible for international corporations to take legal action against states - those affected analyze experiences in investment disputes

Vienna (OTS) - "This amounts to a privatization of the judiciary", explains Mahnaz Malik, an experienced lawyer and arbitrator from London at the event organized by the Chamber of Labor, the Vienna University of Economics and Business and the Austrian Research Foundation for International Development (ÖFSE) with international experts on all aspects of investment protection and free trade agreements . "What national judges normally do, is done in investor dispute settlement proceedings by private ad-hoc arbitration boards at a higher price," said Malik. The EU-USA free trade agreement TTIP could also make this possible. This means that regulations in the public interest can be undermined. In the meantime, for example, the nuclear phase-out in Germany, minimum wages in Egypt or consumer protection regulations for smokers in Australia have been brought before such bodies by international corporations.

"The current pause in negotiations in the TTIP finally offers the opportunity for the excessive investor protection to be widely discussed in public," said Valentin Wedl, head of the EU and International Affairs department at AK Wien. "It cannot be that international corporations get exclusive rights of action in order to undermine democratic decisions of developed constitutional states such as Austria, Canada or the USA".

"Is there a need for such a system?"
Are investment protection agreements a problem? For lawyer Malik, perspective is what counts. "From the perspective of the foreign investor, the special lawsuit rights are useful. Not so much for states, for them it is difficult, expensive and one-sided. In this constellation, you can only sit in the dock. But above all - and this applies to both sides - the outcome of arbitration proceedings is unpredictable. " Malik's concerns: Unlike decisions by national courts, decisions by private arbitration tribunals such as ICSID cannot be judged and changed in a second instance, they are binding. At the same time, different arbitration tribunals often decide very differently in comparable cases. Another point of criticism: proceedings before private arbitration tribunals are expensive. The average procedural costs alone before an international arbitration tribunal such as ICSID amount to around 800,000 US dollars. In addition, there are legal fees of several million dollars, not to mention the compensation payments in the event of a defeat by the state. Malik:
"What if there are functioning national courts? I can't see how Austria should benefit from offering US investors these legal privileges."

The number of investment disputes is increasing
In the last year alone, 60 new lawsuits were brought against states by foreign investors, more than half of them against developing countries. But that's only the tip of the iceberg because there is a lack of transparency. US corporations in particular have already filed more than 120 lawsuits. Some countries, such as South Africa and Indonesia, have since terminated their agreements after broad public discussions. It is currently being debated in other countries. Argentina and Venezuela are among the most sued states, but Austria's neighbor, the Czech Republic, comes in third place. Lawsuits against EU member states make up 21 percent of all lawsuits, mostly against younger member states such as the Czech Republic, Hungary, Poland, Slovakia or Croatia. But Spain was also sued eight times last year, the reason being, for example, crisis-related cuts in subsidies.

Austria currently has 62 bilateral agreements with investor-state dispute settlement procedures. Austria has not yet been sued on the basis of these agreements, but Austrian companies have used the bilateral agreements to sue other states.

"Investors come, regardless of whether there are investment protection agreements or not"
Patience Okala, a member of the Investment Promotion Commission in Nigeria, has experience of litigation against the State of Nigeria. A lawsuit is currently pending. In Nigeria, the government is currently negotiating a new model agreement because they do not want to be confronted with numerous lawsuits in the future. In future, investment protection agreements should therefore also meet social and environmental requirements. As a developing country, Nigeria is also dependent on foreign investment. From their point of view, investment protection agreements are also a way of creating incentives for this. But: "Regardless of whether there are investment protection agreements or not, foreign investors come to the country because they want to use natural resources," explains Okala.

Karin Küblböck, research assistant at the ÖFSE, sees a further danger in the agreements: "Such arbitration proceedings also have intimidation potential in other countries, which in the future will think twice about enacting similar laws if they run the risk of being sued for dearly before arbitration tribunals . "

Due to the current broad criticism and public discussion, the EU Commission launched a public consultation on investment disputes in the TTIP at the end of March 2014. In particular, the Chamber of Labor demands:
+ Suspension of all negotiations with the US, not only with regard to investment disputes, and wide-ranging public debate on all contract contents
+ Full transparency in the TTIP negotiations: "Tell us what you are negotiating."
+ Reform of Austrian investment protection agreements
+ No investment protection regulations and no investor-state dispute settlement procedure in free trade agreements with third countries such as the USA or Canada

Inquiries & contact:

AK Vienna Communication
Susannika Glötzl
Tel .: + 43-1 501 65-2406 // +43 664 8454 226
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