Study shows benefits of arbitration in TTIP outweigh drawbacks

The advantages of investment arbitration agreements in the Transatlantic Trade and Investment Partnership (TTIP) between the United States and the European Union outweigh their risks, says a study sent to the House of Representatives on Wednesday by Lilianne Ploumen, Minister for Foreign Trade and Development Cooperation. Ms Ploumen believes that such agreements need to be framed more carefully in future in order to minimise the risks of abuse.

The study was prompted by understandable concerns about arbitration in the TTIP among companies and civil society organisations in the Netherlands and elsewhere, who were also involved in the study. ‘The study looks carefully at the risks and benefits of investment arbitration agreements in the TTIP. It shows that the risks to the Netherlands are limited. Most of its recommendations for improving these agreements have my full support,’ says Ms Ploumen. The study was conducted by the universities of Leiden and Halle (Germany) and Dutch-based consultancy Ecorys.

Negotiations in the TTIP often involve investment arbitration agreements, which protect companies operating abroad from unlawful expropriation, unfair treatment, discrimination, and other forms of damage. If companies do suffer any such damage, they can try to recoup it from the public authorities by means of arbitration.

Owing to concerns about the content of investment arbitration agreements, Ms Ploumen commissioned a study of their risks. The study finds that their benefits outweigh their drawbacks. Nor does it see any reason for expecting an ‘American claim culture’ to dominate the resolution of disputes. The study also argues that the risk of a ‘regulatory chill’ (the freezing of public policy out of fear of claims) is limited, as are the financial risks to the Netherlands of entering into investment arbitration agreements.

If such agreements are incorporated into the TTIP, Ms Ploumen sees scope for improving them. She agrees with the study’s finding that these agreements should be less accessible to shell companies. She also supports its conclusion that the arbitration tribunals need to act faster on unfounded claims, and welcomes its recommendation that disputes should be resolved more often via mediation.

Ms Ploumen’s letter to the House also states that she will act resolutely within the EU to improve investment arbitration agreements. She will share the study’s findings with her EU counterparts and work with other member states as far as possible to bring about improvements.