Monday, 30 March 2015

TTIP: the threat to local authorities and public services

As the perils of TTIP are still not widely known and only a few organisations. including the Barnet Alliance and the Green Party seem to be ringing the alarm bells, I am reposting this long piece first published on the Barnet Alliance website LINK.

The EU and the US have been negotiating the Transatlantic Trade and Investment Partnership (TTIP) Agreement since July 2013. The consequences of this treaty could have a profound effect on EU member states at regional and local levels.TTIP would affect many sectors which are the responsibilities of local and regional authorities.
 The broad scope and myriad responsibilities of German Federal States, regional governments and local authorities across the EU would have justified involving them in the decision-making process as stakeholders. However, this has not happened. Representatives of regional and local governments as well as the public are puzzling over the content, the scope and the possible consequences of this treaty. It is therefore the aim of this short briefing to shine a light on possible consequences of this treaty for local and regional government. However, as negotiations are still ongoing, and owing to the restricted access to documentation, we can only present a rough estimation as to what TTIP will entail.

TTIP will have a profound effect on many areas under the remit of regional and local authorities and is examined in more detail here under in order to allow for a realistic assessment of risks. The source for this analysis are a series of leaked documents such as the text of the negotiating mandate of the EU Commission and drafts texts of various chapters and appendices.

As TTIP negotiations cover a very broad spectrum of topics, only those which are of relevance to local and regional authorities are considered for this briefing:

They include the planned Investor State Dispute Settlement (ISDS) of arbitration, and issues relating to the status of public services, grants, subsidies and public tendering.

The Effects of TTIP on Local and Regional Governments.

by Thomas Fritz
Translation by Phil Fletcher

Arbitration tribunals: Local authorities and international courts.

When the Lisbon Treaty came into force in 2009, the European Commission was given the exclusive authority over direct foreign investments. This allows it to include into trade agreements far reaching provisions for investor protection, provisions which had already been included in a multitude of bilateral treaties. The mandate to negotiate on TTIP, which the European Council granted the European Commission, also provides for investor protection including ISDS, albeit on condition of an overall “satisfactory” result of the negotiations for the EU.

Increasing criticism of the lack of transparency of the ISDS arbitration process led the Commission to temporarily suspend negotiations on this topic and conduct a three months’ public consultation on the modality of investor protection in TTIP. By the deadline of 13.7.2014 almost 150,000 replies were received, an indication of the scale of public interest.

According to the Commission publication of an analysis of the comments and suggestions received is not to be expected before November 2014.

The list of questions in the consultation was essentially directed towards possible reforms of ISDS, but not towards the possibility of completely opting out of ISDS provisions. In its points of reference, the Commission relied heavily on CETA (Canada-EU Trade Agreement), which also contains ISDS provisions. (1).

The ISDS procedure allows foreign investors to by-pass the judicial system of sovereign nations to sue for compensation in international arbitration tribunals when they consider their profits threatened by governmental measures or regulations. At present, the most common fora in use are the tribunals attached to the ICSID (International Centre for Settlement of Investment Disputes). The number of ISDS cases worldwide has greatly increased in recent years. At the start of the 90s there were 10 known cases. By the end of 2013 the number of known cases had increased to 568. (2)

This judicial process is very different from conventional judi.ial systems and processes. Typically, a tribunal of 3 arbitrators is appointed. Each party to the dispute names their own arbitrator and both agree on a chairperson. These arbitrators work mostly for large international law firms and often work on several cases simultaneously. As ISDS cases are extremely lucrative, law firms strive to obtain as many such cases as possible. They actively encourage companies to make claims and to offer their services to claimants as well as arraigned governments. On average, ISDS procedural costs amount to $8 million and can be as much as over $30 millions. Tribunals are held in secret and keep most of the documentation secret. Their judgements are binding and there is no right of appeal. (3).

With TTIP, the number of ISDS cases can be expected to increase dramatically, as over half US investments (around $ 2.4 billons in 2013) are invested in the EU and only nine East European countries currently have investor protection agreements with the US that include ISDS provisions. (4).

If TTIP is signed, not only would thousands of US Companies be able to make claims under ISDS for the very first time, but also European companies with branches in the USA. According to Public Citizen, the American consumer protection organisation, there are about 51,000 branches of US firms located in the EU, of which 6,800 are in Germany.

This compares with 24,000 European companies that have branches in the USA. 5.

Compensation in Billions

As compensation in ISDS cases can reach enormous dimensions – large investments easily command billions – the question of liability is extremely important for regional and local authorities. According to EU regulation passed in April 2014, regarding financial responsibility in ISDS disputes, the EU is liable for payment of compensation arising from non-compliance.

If member states commit infringements they must bear any compensation demanded, unless it can be proved that the disputed measures were enacted in following EU legislation. (6).

What would happen if a claim against measures taken by a local or regional authority was successful? According to international law, the national government is liable for any infringements against international treaties, including those committed by regional or local authorities. In Germany, infringements of international law are regulated by the German Legal Code (article 104a, paragraph 6) and by the laws governing the Bearing of Costs (Article 1, Paragraph 1). Financial costs arising from infringements are therefore born by the level on which the violation occurred.

If the violation is deemed to have been committed by both, the German Federal Government and a Federal State, then costs are to be distributed in proportion to the extent in which the Federal Government and the Regional Government have contributed to this infringement.

Thus regional governments in EU countries may be included in ISDS processes and so be exposed to the risks of compensation claims. In Germany, regional and local governments could, of course, also be liable to claims for compensation brought under German national liability legislation. However, with ISDS claims there exist very particular risks depending on how the TTIP defines Investment Capital and how tribunals interpret this definition. A glance at past cases arbitrated by ad-hoc tribunals indicate that measures taken below the level of central government do frequently permit compensation claims.

ISDS past claims: targeting regional and local governments

Hamburg Vattenfall vs. Germany
In 2009, Vattenfall, the Swedish energy company filed a claim against Germany at the international tribunal..
.The Hamburg environmental office had introduced certain measures as a condition for awarding the operating licence for the coal-fired power station at Moorburg, near Hamburg..
The measures were intended to prevent deterioration contamination of the water quality of the Elbe as the company had planned to draw off river water for cooling and discharge it back into the Elbe.
However, Vattenfall claimed that these measures would make the investment uneconomical. Their claim was based on the Energy Charter signed by Germany, which is a bilateral trade agreement that allows for of the tribunals in the ISDS provision. Vattenfall demanded 1.4 billion Euros.
This case was settled in March 2011 with a settlement before the Hamburg High court and based on precedent.
It ruled that Hamburg Environmental Office was to grant a “modified permit regarding legal water rights” which had been softened toned down in favour of Vattenfall.

Quebec Province Lone Pine Resources vs. Canada
In September 2013, Lone Pine, the Canadian Oil and Gas Company applied for arbitration to demanded compensation of $ 250 million. In 2011, Quebec had imposed a moratorium on fracking and had revoked some licenses for drilling.
Lone Pine had filed this law-suit via its parent company in Delaware, a well-known US tax haven, and was thus able to take advantage of the investor protection in the North American Free Trade treaty, NAFTA.
Lone Pine accused the Canadian Province of being arbitrary, erratic and of acting illegally. 10.

Guadalcazar Municipality Metalclad vs. Mexico
The US Company Metalclad received permission at national level to install a hazardous waste dump in the municipality of Guadalcazar in the Mexican [federal] state of San Luis Potosi. However, the local authority of Guadalcazar refused to give permission as there were concerns about water contamination.
Residents had been complaining for years about polluted drinking water.
Subsequently, members of the ofthe authorities in the federal state authority of San Luis Potosi supported the local authorities by declaring the area around the special waste dump a nature reserve.
Metalclad used the refusal to grant permission to file a claim under
the arbitration provisions in the NAFTA agreement before an ICSID Tribunal. Mexico was ordered to pay compensation of $16.6 Million. 11.

Santa Fe Province, Argentina Suez vs. Argentina
A consortium, lead by Suez, the French service providers, were granted a concession for the water supply and waste water treatment for the Argentinian Province of Santa Fe.
After devaluation of the Argentinian Peso, negotiations with the provincial authorities collapsed the company’s demand for an] increase of the water rates. The increase the province agreed to was deemed insufficient by investors. 12.
After the consortium declared itself bankrupt, the provincial government of Santa Fe ended the concession in 2006.
The Consortium filed a claim for compensation via an ICSID tribunal. In the 1st court ruling, the tribunal found that Santa Fe had violated the “legitimate expectations” of Investors, & thus against the provision of “fair and just treatment”.
A final decision has not yet been made on the amount of compensation. Suez claims that their losses amount to almost $200 Million. 12.

The example of Vattenfall who opposed a measure set by Hamburg, shows that formal arbitration to secure company interests may not even be necessary. By just filing a case governments can be forced to withdraw regulations that are deemed necessary.[i]

Case precedent alone, often amounting to compensation running into billions, has a threatening effect, and particularly so in the case of cash-strapped or indebted regional or local authorities.

The case of company Lone Pine against Quebec Province demonstrates that German companies as well as companies in other EU nations with branches in the USA would be able to make use of TTIP to file law suits against the German Government. There are over 3,500 German firms with branches in the USA who could make claims. This path would also be open to shell companies. (7).

The European Commission claims that only concerns with “substantial business interests” would be entitled to claim under ISDS provisions. However, owing to the very broad definition of what constitutes an investment (see Chapter 3 of what?) a German shell company (or a shell company of any other EU state) with an address in Delaware and a small amount of shares would be able to drag the government of an EU country before such a kangaroo court. (8).

Investments and services: protecting private profit

In February 2014, “Zeit Online” published a leaked document on planned TTIP legislation covering investments and services. This draft already contained some elements that specifically relate to regional and local authorities. (13)

The draft agreement is based on a very broad definition of what constitutes an investment and includes shares, loans, credit, concessions, building contracts and intellectual proprietary rights.
Also protected as an investment are local authority contracts for the provision of public services
 Contracts for the delivery of public services have only recently been included in the EU guidelines on outsourcing; it stipulates the exception of water supply, ambulance and fire services and credit unions. Representatives of local authorities are campaigning for these to be taken out of the TTIP remit as well. Whether or not they will be listened to will only become apparent at the end of the negotiations.

Regulation becomes risky.

The TTIP draft contains other regulations that affect the sovereign rights of local authorities regarding planning, finance and administration. Provisions covering the right of domicile prohibit a number of quantitative restrictions to market access (Article 4: Market access) with respect to the registration of enterprises (numbers, monopolies, justification of economic need), the value of an investment, the quantity of output or the proportion of foreign capital holding. Also prohibited are stipulations with regard to the form of legal redress an enterprise may seek.

Some local and regional measures could come into conflict with these access obligations such as refusals of operating rights to major supermarkets in order to protect local independent shops from the competitive advantage of supermarkets). This is a sector in which many US enterprises are involved. Investors can also use TTIP provisions to combat measures that restrict supplier or customer traffic.

Transport companies will be interested in TTIP rules that regulate market access. For example, in several German towns the giant US online platform Uber is able to put competitive pressure on the local taxi trade, armed with Google and Goldman-Sachs venture capital. Using taxi apps they link up
Transport companies will be interested in TTIP rules that regulate market access. For example, in several German towns the giant US online platform Uber is able to put competitive pressure on the local taxi trade, armed with Google and Goldman-Sachs venture capital. Using taxi apps they link up
customers with private drivers, thus undercutting regulatory wage rates in a sector which is already blighted by low wages. (16) Hamburg has introduced measures to protect local taxi companies but it is entirely feasible that a company such as Uber would use TTIP to counter any possible regulatory measures.

TTIP market access regulation would also offers a number of levers whereby companies could enforce privatisation of mutual savings banks (17). Some German federal states allow Sparkassen (mutual savings banks) to increase capitalisation for the distribution of higher dividends to local authorities. Therein lie considerable dangers of privatisation for these mutuals as share capital could end up being traded on the open market.

German federal states have set an upper limit to share capital and restrict acquisition to public interest bodies such as mutual savings banks, federal banks and their associations. However the legitimacy of such restrictions is already under attack in terms of EU rules. US finance companies or German banks with branches in the US would be able to use any TTIP clauses that forbid restrictions of foreign investment or a specific legal status of an investment. The TTIP agreement would help them enforce allocation of share capital to private banks. (18)

Investor right to equal treatment – and beyond

Some TTIP clauses concern the principle of non-discrimination which stipulates treatment equal to domestic investors and foreign investors in comparable situations (e.g. Article 5: National Treatment[iii]) However, contemporary trade agreements such as TTIP aim far beyond equal treatment. They extend to governmental measures which do not necessarily discriminate against foreign investors, but could affect all types of investors equally.

This is possible in the case of an important TTIP investment standard, termed the “common equal treatment” (Article 12: Treatment of Investment).It is the standard underpinning most ISDS cases. The leaked TTIP draft defines this standard with reference to a list of transgressions, including “apparent arbitrariness” as well as “infraction of legitimate expectations of investors” which governments may have raised in investors. These are all standard clauses that companies have already used in numerous investor claims. For instance, Lone Pine claimed the fracking moratorium imposed by Quebec Province was “arbitrary”.

In another case, an ICSID tribunal ruled against the Argentinean Province Santa Fe for disregarding the “legitimate expectations “of water suppliers Suez, when they refused to allow Suez to increase water rates.

The clause relating to “protection from expropriation” (Article 14 : Expropriation) encompasses direct as well as indirect expropriation, whereby the latter plays an especially important role.
The TTIP draft defines “indirect expropriation” as a measure or series of measures amounting to an expropriation. As this standard leaves very much room for interpretation it is also much in use to underpin claims. For example, an ICSID tribunal ruled against the Mexican municipality of Guadalcavar, deeming its refusal to grant permission for a toxic waste dump tantamount to indirect expropriation ( See Box 2). Many other measures could clash with both these standards. An example might be the cap on rents planned in Germany.

TTIP vs Protection of Tenants

The purpose of the cap on rents currently being planned by the German Federal Government is to limit sharp rent increases for new tenants, especially in desirable residential areas.
German Federal States are required to designate areas where “competition on the rental market” is tight and in which rents with new rental contracts must not exceed a 10% increase in the level of rents typical for that area.
However, property investors could view this as a violation of their “legitimate” profit expectations and therefore a breach of the “common and equal treatment rule”.
Numerous US investor companies have holdings in the German property market; Cerberus, Blackrock, Cohen and Steers, Lone Star and the property management company RREEF, a US subsidiary of Deutsche Bank, for example.  In many cases these holdings originated in the privatisation of social housing assets.

The business model of financial investors is fixated on short-term maximisation of profits, very often at the expense of tenants.  Housing companies are amalgamated and then floated on the stock exchange. To render share holdings as lucrative as possible an approach of minimising maintenance and maximising rent increases is used, especially with new tenants and modernisations. Housing tends to be modernised in boom areas and neglected in poorer areas.

Anticipation of profits instead of social justice
 These methods are successful.  For instance, only nine months after floating the former Berliner Wohnungsgesellschaft (Berlin Housing Association) on the Stock Exchange, Cerberus and Goldmann Sachs sold their entire share holding, making a handsome profit.  Likewise the US investor Fortress, who sold its major share holding of GAGFAH, which was also once a community mutual which was subsequently listed on the Stock Exchange. (19, 20).

Catch-all clause for all contractual undertakings
A substantial extension of investor protection lies embedded in the so-called TTIP Umbrella Clause. It is hidden in Article 12.4 of the leaked draft. According to this article, the party to a TTIP contract has to “fulfil every commitment entered into with the investor of the other party or an investment of investors”. According to the broad interpretation of tribunals thus far, this umbrella clause encompasses various commitments, which governments or governmental authorities have entered into, whether of a contractual or of a legal nature.

Consequently, any infringement of a contract between US investors on one hand, and regional or local governments on the other hand leads automatically to an infringement of TTIP, and this opens the door to the ISDS mechanism. This umbrella clause lifts common disputes that are normally dealt with by national laws governing contracts into the domain of international trade agreement law.
This also applies to contracts for which there is no provision made for international arbitration.
The umbrella clause applies to many cases involving the everyday operations of local government.

For example, it would therefore be possible for foreign companies to counter claims by a local authority for defective workmanship of a building contract, for example, with a counter-claim via an international tribunal.

Social service provision: social wellbeing threatened by market liberalisation

According to the mandate for TTIP negotiations the EU aims to secure the “highest level of liberalisation” for social services that have been accepted by the EU and the US in other trade agreements.

Furthermore this should “fundamentally include all sectors and types of provision” and, simultaneously, offer two new options for market access. The only areas to be excluded are services which take place in the exercising of legislative power and audiovisual services[iv]. (24).

This means most social services provided by local authorities are subject to negotiation.
The reference to services as provided by „legislative power “applies to a very narrow definition in GATS (General Agreement on Trade in Services) of the WTO (World Trade Organisation) in which such remits “may not be rendered for commercial purposes or run in competition with one or more other service providers.

However, in many areas of basic social service provision private and public providers compete with one another, be those public utilities, transport, public education, health, culture or the arts. As competition is widespread in all these areas, they are all subject to rules governed by TTIP.

A leaked document dated 26.05.2014 shows how far-reaching these liberalisation proposals are. (25).
It contains the blueprint for a list of services and investments that have to be liberalised, and is based on parallel negotiations regarding agreements on the provision of services in TISA (Trade in Services agreement). This TISA proposal was recently published on the website of the EU Commission. (26).

The TTIP provision contains a-clause on public services excluded from the market access rules of the agreement. According to this clause this includes services which are considered a public obligation on a national or local level or are exclusively provided by private enterprises. (27).

This is followed by a sample list of sectors in which these forms of public service may be found. However, these exceptions contain enormous loop-holes.

Public Services and Obligations vulnerable
There are many services run by local authorities which would not be classed a monopoly or be an exclusive right handed to private operators as, for example care homes, adult evening institutes or music schools. There is another problem in that this exception applies to market access, not to common equal treatment or to important standards for the protection of investments only.

Because of this loop-hole US Companies could prosecute local authorities or competing public service providers as an infringement of “equal treatment” or as “indirect expropriation”
American providers of IT training could therefore take legal action against any local authorities offering computer courses in their municipal evening institutes. The TTIP list of obligations vouchsafes market access to privately financed providers in adult education.(28).
Core municipal services such as waste water services and refuse disposal have also been placed on this list of full market access rights. (29).

These concessions could be utilized by large European service providers with subsidiaries in the USA, in order to oppose irksome obligations regarding routine maintenance, demanded of local firms by German local authorities. For instance Veolia and Suez are important players in the German Water and Energy sectors. (30).

In principle, the EU also grants market access to hospitals and care homes, usually tied in with concessionary terms and need to supply testing. Germany additionally reserves the right to allocate rescue and ambulance services only to non profit-making organisations. But once a private provider of health services has been granted a concession, they would then be able to use TTIP to campaign against any unwanted measures. (31).

Thus path is cleared for US investors who have invested in large chains of hospitals. For example Fresenius, who own the HELIOS clinics, are owned by several American companies, including Black Rock and the Capital Group companies. American shareholders in the Rhoenklinik include the finance conglomerates Goldman-Sachs and Morgan Stanley. (32).

Return to public ownership: a breach of contract

In addition there are also proposals which massively restrict the scope for action by regional and local governments. The TTIP list of obligations is followed by the so-called hybrid list appendage, which is also used with the TISA agreement. The EU Commission published two documents of explanations as to how such lists are to be understood. (33).

Thus the majority of the measures excluded from the scope applicable to common equal treatments are subject to the principles of “Standstill “and “Ratchet”that fix limitations to the legal status quo: no deregulation, privatisation etc. may be rescinded. The “ratchet effect” stipulates that any future liberalisation automatically becomes part of the TTIP commitment as well. These could also not be repealed. In practice this means that any retraction of any liberalisation, once implemented, would constitute a breach of contract if steps were taken to return to public ownership. They can also not be repealed at a later date. With these proposals TTIP generates the risk thatany regional or local policies orientated towards the common good will be undermined.

Subsidies: The battle for state subsidies.

What will be especially critical for public services is how the provision of basic services by local authorities will be regulated. Drafts seen to date do not give any concrete indications. We have not as yet seen the section dealing with state subsides. CETA, the latest draft of which was published by the German TV news programme “Tagesschau”, nevertheless gives us an indication as this is the blueprint for TTIP. (34).

Spread over several sections are various paragraphs and clauses related to state subsidies. According to Chapter 9 of CETA (subsidies), one party can demand consultations with the other party, when a “subsidy or an aspect of state financial support for a trade in service provision could undermine their interests”. In this case, the respondent must endeavour to either “eliminate” or “to minimize any negative Effect” (Article X.3). However, there are no options for sanctions because this article is excluded from the arbitration mechanism of the agreement. The chapter on cross-border trade in services, on the other hand, does foreclose on subsidies (Article X.1).

The section on investment capital is different. It excludes subsidies only from rules governing market access and non-discrimination but not from the principle of fair and equal treatment, and protection from expropriation – a dangerous loophole (Article X.14).

Pressure can be exerted even prior to any consultation regarding elimination of public subsidies, but of particular concern is the loop-hole in the section on investment capital. If similar stipulations were to be taken up into TTIP, then private competitors could argue that a public sector competitor receiving subsidies could be responsible for their loss in revenue and present this as an indirect form of expropriation. Local authority funding for voluntary sector organisations or housing associations could well fall within the remit of investment tribunals (ICSID tribunals).

Subsidies under attack

Future scope for action by regional governments such as German federal states would also be curtailed. Should any new subsidies for education, culture or the media impinge upon the business prospects of a US provider already active in the market, they could regard this as a breach of their legitimate expectations and “an infringement of “fair and just treatment”.

Just how determined private operators are to take action against local authority subsidies is shown by the example of the German Federal Association of Private Clinics – BDPK. In a test case, the BDPK sued the District Council of Calwfor subsidies to clinics operated by the District Council. The BDPK regarded this as an infringement ofEU laws governing financial assistance. The Tuebingen Regional Court dismissed the case, but the BDPK announced that it would appeal. (34).

 Observers are concerned that the BDPK will pursue all legal steps from the regional High Courts in Stuttgart via the Federal Courts all the way to the European Court. Unlike the District Council legal costs would not be a problem for the BDPK.Understandably so, as the BDPK are owned by HELIOS, a very large chain of hospitals, which is in turn financed by Fresenius who is armed with US investmentcapital. TTIP would enable US investors in Fresenius such as Black Rock to exert pressure on local authorities via claims for compensation.

Obligation to tender: an attack on the sovereignty of local authorities

Public contracts are of considerable financial importance. It is therefore hardly surprising that access to public contracts is a key TTIP interest on both sides of the Atlantic. According to the TTIP negotiating mandate, the EU wants to secure access to national, regional and local authorities on both sides. Representatives of the EU Commission, in a meeting with the EU Trade Committee, affirmed their aim of creating an integrated procurement market along the lines of “buy transatlantic”. (37).

Creeping privatisation of social service provision
Local and regional governments have been struggling for some time with a public tendering regulation that is becoming more and more restrictive as it obliges them to tender Europe-wide for contracts above a certain value for supply, services and construction contracts. The obligation to put contracts out to tender restricts their options to employ local companies or non-profit making organisations.Comprehensive tendering processes allow more and more companies to take advantage of these business opportunities, rendering them in end effect as a lever for the privatisation of public service provision by stealth. In addition, most tenders are accepted on the basis of lowest cost and at the expense of social and environmental considerations. (39).

As the planned TTIP chapter on procurement is not as yet to hand, we have to rely on clues available in the CETA agreement as to the likely components of contracts. The CETA section on government procurement covers the purchase of goods, services and construction projects by EU, national, regional and local governmental entities. (40).

Appendices to this section set out the threshold value above which procurement entities have to offer contracts to Canadian bidders. These thresholds are given in terms of special drawing rights (SDR)[v], an IMF currency basket not traded on the money markets.[vi]

According to Appendix 2, sovereign states and regions must open out to tender, on a transatlantic basis, the supply of goods or services above a value of 200,000 SDR.

This obligation applies specifically to hospitals, schools, universities and social services (housing, social insurance, social care). Other procurement entities are given a transatlantic tendering threshold at 355,000 SDR and above. For building contracts the threshold is 5 million SDR. Annex 3 of this section sets out the threshold for networks of public service providerssuch as drinking water, energy and transport. It amounts to 400,000 SDR for the procurement of goods and services and 5 million SDR for construction contracts.

The EU has here made a few, albeit extremely narrow, exceptions. The TTIP provision contains a clause of exception covering public services which are to be ring-fenced from regulations regarding market access. This clause states that “provision of services which can be regarded as a public duty, on either a national or local level can be subject to state monopoly or exclusive rights which would otherwise be granted to private operators.”

Public bodies are thus denied any leeway to alter these thresholds. In Germany, associations of towns, regions and local authorities are therefore calling for an increase in the threshold below which contracts to not have to be put out to tender as specified under the CETA rules, described above. (41).
However, the EU Commission has already rejected these demands in the latest round of negotiations with reference to the international obligations of the EU.

Business Europe, the European federation of employers demand that the current thresholds should in fact be lowered. If the business lobby prevails even more local authorities would be forced to tender according to these rules. (42, 43).

Social standards are missing

TTIP also affects tentative efforts at socio-environmental reform in the allocation of procurement contracts;regulations to encourage support for sustainable procurement, for example. No TTIP document relating to this is topic available to us. However, the section in CETA relating to procurement does at least allow for linking contracts to environmental criteria. (44).
Social standards are restricted by comparison. Thus, in Article 3 (Security and General Exceptions) exceptions for the protection of public morals, order and security as well as the protection of public health, animals and plants are provided for. But social standards such as the adherence to wage agreements are missing.

Under Article 9.6, procurement entities are permitted to specify technical requirements to protect natural resources or the environment. However, social standards are missing here too.
Article 14 specifies supplementary contractual criteria to the effect that a) the most advantageous offer or b) if cost is to be the only criterion then the lowest price is acceptable. Lawyers are as yet divided as to whether or not the most advantageous offer should include aspects of social justice. (45).

If the EU and the US agree on similar terms for TTIP then a number of tendering and tariff rules could be under threat as being viewed as an infringement of the TTIP agreement.[vii] Some elements, especially those to do with social and labour rights could come under attack. Omission of social standards, as is in the case with CETA, makes tenders linking to wage tariffs particularly vulnerable.


1. Measures taken by local authorities that could compromise the business interests of investors active on both sides of the Atlantic would lead to more and more claims for compensation to be adjudicated by international arbitration tribunals. In the past, international arbitration tribunals have often been called upon to handle claims against measures taken by local or regional governments, especially in connection with environmental issues, granting of concessions or refusal of a permit to operate.

Due to the large number of transatlantic investments which would fall under TTIP protection for the first time, the number of such cases is very likely to increase.

2. Draft TTP chapters on services and investments impact on the sovereign rights of local authorities with regards to their mandate to dutifully act in matters of market access, non-discrimination and rules governing the protection of investments. Measures such as imposing restrictions on trading estates to protect small business from undue competitive forces, the support of mutuals or caps on housing rents could all be interpreted as infringements of TTIP.

3. As there is no exemption in TTIP of social service provision in principle, there is cause for concern that increasing liberalisation and privatisation of services run by local authorities are at risk. The clauses governing exemptions for public services in the first drafts have too many loopholes for these to offer effective protection. They offer private companies numerous options to take action against competition from local authorities or private companies operating under contract from a public body. Moreover, “Standstill and Ratchet “ clauses mean that any attempt to take back into public ownership a service already privatised would amount to a breach of TTIP provisions.

4. At present no TTIP draft is as yet available to allow a robust interpretation of proposed regulations governing subsidies. However, if TTIP is to follow the prototype of the CETA, subsidies for public services would be vulnerable indeed. Subsidies could be interpreted as “indirect expropriation”, a possibility not excluded in CETA. Private contractors such as large hospital chains, who have already filed claims against local governmentsubsidies, could take advantage of such clauses.

5. If TTIP contains rules similar to CETA regarding allocation of contracts then a very large and far-reaching procurement market is created, which would ease access for private companies to public contracts on both sides of the Atlantic. Through the fixing of thresholds above which tenders have to be offered to providers on both sides of the Atlantic, public bodies lose room for manoeuvre to preserve purchasing autonomy when procuring. Socio-environmentalreforms of the procurement process via contractual specification stipulating adherence to wage tariffs or environmental criteria[viii]could come into conflict with TTIP regulations. Because social standards are inadequately anchored in CETA they are particularly vulnerable to disregard under TTIP.

Footnotes – list of references

2. UNCTAD 2014: Recent Developments in Investor-State Dispute Settlement(ISDS), IIA Issues Note, No 1, April
3. Congressional Research Service 2013: U.S. Direct Investment Abroad: Trends and Issues, 11th December
5. GRIT/GTAI 2012: German-American Trade, Investment and Jobs.
7. RGIT/GTAT 2012: German-American Trade, Investment and Jobs
9. Vattenfall vs. Germany ICSID Case No. ARB/09/6, Award 11.. March 2011 Washington DC
11. Metalclad vs. Mexico.ICSID Case No. ARB(AF)/97/1. Award, 30.8.2000
12. Suez vs. Argentina, ICSID Case No. AEB/03/17, Decision on Liability, 30.7.2010
18. Seikel, Daniel 2011: Wie die Europäische Kommission Liberalisierung durchsetzt:
Der Konfliktum das öffentlich-rechtliclhe Bankenwesen in Deutschland, Max-Plank-Institut für Gesellschaftsforschung,MPIfG Discussion Paper 11/16. Ver.di 2008: Gegen die Privatisierung von Sparkassen in Hessen: Dokumentation einer Kampagne, Berlin, März.
20. /wirtschaft/Fortress-stoesst-Gagfah-ab-article12989661.html
22. In the Original „ Each Party shall observe any obligation it has entered into with regard to an investor of the other Party or an investment of such an investor“.
23. Marshall, Fiona 2011: Risks for Host States of the Entwining of Investment Treaty and Contract Claims: Dispute Resolution Clauses, Umbrella Clauses, and Fork-in-the-Road. IISD, Best PracticesSeries, Bulletin 4
24. Rat der Europäischen Union, Leitlinien für die Verhandlungen über die transatlantische Handels- und Investitionspartnerschaft zwischen der Euroäischen Union und den Vereinigten Staaten von Amerika, Brüssel 17.6.2013, 11103/13.
27. Please see: European Commission, Draft services/investment offer 26.05.2014, p. 36
28. Ebd., P.80. Der Eintrag „3) EU: none“ bedeutet , dass die EU keine Beschränkungen der TTIP-Marktzugangsregeln fuer die kommerzielle Präzenz (d.h. die Niederlassung) von Anbietern aufrechterhält.
29. Ebd., P. 80-81.
30. Food & Water Watch 2013: TAFTA: The European Union’s Secret Raid on US Public Water Utilities, Fact Sheet November 2013
31 Ebd., P. 82f.
37. BMWI-Bericht: Sitzung des Handels-politischen Ausschusses (Mitglieder) am 11.07.2014
39. Schulten, Thorsten et al. 2012: Pay and Other Social Clauses in European Public Procurement, WSI/Hans Böckler Stiftung, Düsseldorf, December 2012
41. Bundesvereinigung der kommunalen Spitzenverbände 2014: Forderungen an das neugewählte Europäische Parlament. 10.4.2014
42. Weidenholzer< Josef 2013 Konzessionsrichtlinie: Verhandlungen abgeschlossen 16.9.2013.
43. Businesseurope 2013: Public Procurement in the Transatlantic Trade and Investment Partnership (TTIP), Position Paper 11.12.2013
45. Krajewski, Markus/Krämer, Rike Die Auswirkungen des revidierten WTO- Übereinkommens über öffentliche Beschaffungen („Government Procurement Agreement“, GPA) von 2012 auf soziala und arbeitnehmerfreundliche Beschaffungsentscheidungen. Abschlussbericht, Hans-Böckler-Stiftung, Februar 2013


  1. Hi Martin. So, are the Greens basically Old Labour? I might vote for them if they are.

  2. Hi, Martin

    Thanks for this. I have included link to the Barnet Alliance for Public Services source to a new guidance page on the blog of the non-party-political Kilburn Unemployed, General Election and you

    Much attention has been given lately to the 'soundness of mind' of airline pilots who cannot walk away from the disasters they might cause when at the controls. But what of the 'soundness of mind' and 'fitness of purpose' of 'key decision makers' who too easily walk away without a public enquiry into the disasters they cause when at society's controls. General Election 2015 and you seeks to make voters more aware of what is at stake in this GE with a focus on poor people's main issues.

  3. Anon,
    don't knock the greens...allow them the chance to prove themselves.
    after all with the benefit of hindsight,
    most of us can see that we desperately need a government which is "green at heart"
    the only thing is Will the people "give the greens an opportunity next month"?
    we need a government that won't agree with the exploitation of the common people
    which leads to unnecessary suffering and problems.