I mentioned that, having taken the EU side on issues related to regulatory trade barriers, I would criticize the EU soon, to make sure that this blog is "fair and balanced". So here goes.
The European Commission has posted a short document in which it defends investor state dispute settlement. In the document, the Commission puts forward what it considers to be "incorrect claims" about investor state, and then rebuts each one. I'll address a couple of these, one post at a time. Here's the first one.
Claim: Investor-state dispute settlement subverts democracy by allowing companies to go outside national legal systems.
The Commission responds "Untrue!" They elaborate by noting that:
- Many "healthy, vibrant democracies" have signed on to investor state;
- Relying on national courts to enforce obligations in investment agreement can be hard, because: those courts might be biased or lack independence; they may not be accessible to foreign investors at all; and countries might not incorporate investment agreement rules into national law.
My first concern here is that this presentation of the issue by the Commission seems to blur together two separate concepts: democracy and national sovereignty. They really need to be separated out and discussed individually.
On the democracy point, while this isn't something I have focused on in my own critique of investor state, I do think the issues are more complicated than the Commission lets on. For those countries that are democracies, allowing lawsuits to be brought in international courts takes the issue out of democratic legal systems, and puts them into an international arena that has something of a democracy deficit. Democracy is a complex and nuanced thing, but presumably it involves, to some extent, input from people directly or through their representatives. There isn't much of that at the international level. So does investor state "subvert" democracy? That may be overstating things a bit, but I see how one could argue that democracy is undermined to some extent -- that is, there is less democracy -- through the investor state system. The fact that democracies agreed to it in the first place doesn't change this. Democracies can agree to all kinds of things which would undermine democracy.
The more important point, I think, is that investor state allows companies to go outside national legal systems. As far as I can tell, that aspect of the investor state critique is certainly true. To some extent, policy-making is shifted from national lawmaking processes to international courts. Maybe that's fine, but for those who support this, I would say they should make clear this is happening and explain why it is a good idea. In this regard, the Commission makes several points -- noted above -- regarding how national courts are unsatisfactory for investment disputes. But not all nations' courts have these problems. An obvious question arising from the Commission argument is, should international courts only play a role where national legal systems are problematic? And what are the implications of providing for these courts where the national systems are just fine? There may be an argument that fundamental legal principles such as "fair and equitable treatment" should operate at the international level to constrain national governments as a general matter, as a form of global constitutional law. But defenders of the system seem to want to bend over backwards to avoid addressing this issue head on.