01/07/2015

By James Tumbridge, Head of the Intellectual Property and Litigation department in the London office at Pillsbury Winthrop Shaw Pittman LLP

Should businesses fear TTIP?

Talks are underway between the US and the EU to establish a Transatlantic Trade and Investment Partnership (TTIP). With the deal facing obstacles in the US Congress as well as a growing attack in Europe, businesses leaders might be forgiven for wondering whether TTIP is worth all this bother.

A golden opportunity for exporters

Sadly there are huge inaccuracies being reported in Europe around TTIP’s potential down sides: It’s been described as a ‘Trojan horse’ for corporations, just a way to claim damages if a Government stops them doing business. Fears are raised of countries the world over, being sued and losing huge sums, to these terrible faceless ‘corporations!’ Frankly, such hyperbole is misleading. The reality is that TTIP is about creating jobs and growth in the Western Economies that are still recovering from the 2008 global financial crash.

TTIP at its heart is about free trade and it will give European businesses a better path to success in the USA.

Government disputes under TTIP

Much of the concern with TTIP has been over the Investor-to-State Dispute Settlement (ISDS) procedures. ISDS arbitration is a system of international arbitration designed to protect foreign investors from discrimination or unfair treatment by Governments. ISDS arbitration is a process under which a company can make a complaint against a Government. This can lead to compensation being paid to the investor who has, for example, had their property confiscated. It is not of itself a right to compensation. It is a process under which a company can make a complaint against a Government. It is too easy to forget that in some parts of the world, the court system and judiciary do not feel free to criticise their own Government, and the ISDS procedures are about ensuring there is a trustworthy disputes process.

Private companies and public services

There are horror stories circulating that TTIP will allow private US companies to demand rights to run British hospitals, the perception being that this will be done cheaply to the detriment of patients. The concern is that, should the UK Government intervene and take the contract away, the US company can use ISDS to sue it for huge sums. These fears are overstated. Even though the details of the TTIP deal are still being finalised, there is no guarantee that the agreement will give any such rights or protections to a US company. It is also worth remembering that the following provisions are already on the table:

• The EU has made it clear that the right of national governments to regulate would be explicitly protected in TTIP.
• The EU is insisting on protections for public services, including an intention that a Government can decide a service may only be provided by a public sector provider.
• The UK Government has stated that its aim in TTIP is to safeguard the Government’s right to make UK policy in the public interest.

Next steps

The creation of TTIP has been a protracted process but this is understandable given the mutual desire in both the USA and EU to get this right. We must also not forget that the deal is not one way: if rights are given to US companies, then European companies get the same rights in the USA. Both European and US companies need assurances that if they make investments, the country they invest in will treat them fairly.

If the right deal can be struck on TTIP, the outcome will be job creation and economic growth. TTIP could be the shot in the arm that the EU export market needs to shake off the shadow of the global financial crisis.