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Matthias Fekl: ‘The EU should have its own arbitration court’

EurActiv 03/06/2015

Matthias Fekl: ‘The EU should have its own arbitration court’

Cécile Barbière
translated from French by Samuel White

EXCLUSIVE / France’s Minister of State for Foreign Trade, Matthias Fekl, delivered a proposal for TTIP arbitration reform in Brussels yesterday, in which he recommended the creation of a European court to settle trade disputes. He spoke to Cécile Barbière from EurActiv France.

You have submitted a French proposal to the European Commission for a system to replace the investor-state dispute settlement (ISDS) mechanism. Why?

This French proposal is a response to the very strong concerns being raised over arbitration [Ed note: In TTIP]. We hope to invent something completely new: dispute settlement practices for the 21st century.

It is unacceptable that states could have their democratic and sovereign decisions called into question by private tribunals. It is unacceptable that conflicts of interest can exist, that someone can be the judge one day and the defendant the next, in the same trial. The balance of power must be redressed in favour of the public.

What concrete proposals has France made?

France proposes the creation of an international dispute settlement court in several stages. The first stage is European. We recommend that this court should be established and should have authority over all the EU’s future trade deals.

This court could then become the forerunner of a permanent international and multilateral court. France is sticking to its tradition of multilateralism in diplomacy. This idea appears to have lost favour with the WTO, but we think a return to multilateralism is vital.

What powers would this European dispute settlement court have?

This court would lead to the creation of a new institutional framework. It would oversee a list of judges authorised to settle disputes between investors and states by examining them against ethics and transparency standards. One measure we suggest is the implementation of a five-year "quarantine" period – before and after a judge’s service in this court – during which a judge may not work as a private attorney, to avoid the conflicts of interest that are so common under the current system.

How would the arbitration procedure work?

An investor should think twice before attacking a state: hence the idea of sanctions and potentially hefty fines for abusive complaints. We suggest that the future court should be able to impose penalties of up to 50% of the value of the damages claimed by investors.

Also, simple changes in the law that leads to variations, even very significant variations, in a company’s profits, are never an adequate reason to take legal action against a state. The aim is to preserve a state’s sovereign right to implement public policies without being dragged before a court.

We hope to pass very strong regulations on indirect expropriation, and it must be the states, and they alone, that have the power to interpret treaties when ambiguities arise.

Finally, we also propose a specific paragraph on the financial sovereignty of states, which clearly excludes questions of sovereign debt from the possibility of settlement through arbitration. This is a very relevant concern, especially since the 2008 financial crisis. These are national decisions.

We cannot accept that a state may be attacked before an arbitration tribunal for implementing banking resolutions or restructuring its sovereign debt.

In recent months, the question of arbitration has become central to the debate over the trade agreement currently being negotiated between the United States and the European Union. Is the European Union prepared to completely overhaul the system?

The atmosphere in Europe surrounding the question of arbitration in the transatlantic trade agreement [TTIP] has changed. Initially, I was almost alone with Sigmar Gabriel [Germany’s Minister for Economic Affairs and Energy] in pointing out problems. This is no longer the case today. Our positions on the arbitration clause are at the centre of the European debate today.

We are putting forward this proposal because we want it to be accepted, and without delay. We are very close to Germany on this point. They are also calling for the establishment of a permanent court.

This is not something that will happen over night. But I think this path is a realistic one, and the right one to take. We hope this court materialises quickly.

European Commissioner for trade, Cecilia Malmström, has already said that an international court is not a possible solution in the short term. The United States has also clearly expressed its opposition to such a system. Do you think that the French proposal will resonate in spite of this opposition?

The Americans are opposed to multilateralism! That is no secret. It is one of the constant features of their diplomacy.

Our proposals on arbitration, which were considered radical a few months ago, are now at the centre of the European debate. Situations evolve and opinions change. Today we are making very ambitious proposals to try and change the lines of the debate.

Everyone is now talking about the possibility of a court. Some want to put it off indefinitely, but this is unacceptable.

Could the TTIP negotiations come unravelled on any other snags?

Ultimately, if the aim of the negotiations is to bring Europe lower standards, food that we do not want to eat, and energy and climate choices that are not our own, and if in return we still cannot access American public markets, or have our geographical indications recognised, there will obviously be problems. Our needs must be taken into account. The negotiations may be under way, but the timetable should not be allowed to triumph over the substance. We will judge the final agreement on its merits, to decide if it is acceptable and in the interests of France.

If there is no progress on these subjects, the very point of the negotiations is questionable.

 source: EurActiv