World Economy

Doubts Over EU Proposals

Doubts Over EU ProposalsDoubts Over EU Proposals

The European Union has more work to do, experts say, if it hopes to seal a transatlantic trade deal that has been criticized for leaving governments open to international legal action from companies affected by changes to tax and regulation.

The European Commission, the EU’s executive arm, is right now negotiating a trade and investment treaty with the United States–the Transatlantic Trade and Investment Partnership–that it says could add €119 billion annually to Europe’s economy and €95 billion to the US economy.

However the treaty faces growing opposition in Europe from politicians, labor unions and campaign groups who fear it may prevent governments from being able to ban unsafe products or tax businesses because of a provision protecting investors’ rights.

The provision referring to “fair and equitable treatment”, was introduced to treaties decades ago to allow investors to seek redress if their assets were expropriated by governments.

It allows businesses to sue via international courts that do not defer to national interests and has increasingly been used to sanction governments over everything from banning chemicals, withdrawing tax breaks or writing new environmental regulations.

Matthias Fekl, French minister for trade, is especially critical of the EU’s plan to include this right to sue in tribunals in the treaty.

He said in a recent interview that France would “never allow private tribunals in the pay of multinational companies to dictate the policies of sovereign states.”

But businesses and their lobby groups have told the European Commission they object to any scaling back in their ability to sue governments or any requirement they do so in national courts.

In response, the EC has redrafted parts of the trade treaty to limit the circumstances under which a claim can be made.