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Tropical Forests Thrive on Radical Transparency

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The Ulu Masen forest ecosystem in the northern part of Indonesia’s Aceh province forms part of the largest single forested area in Southeast Asia. (Photo by Abbie Trayler-Smith / DFID) Creative Commons license via Flickr

By Sunny Lewis

STOCKHOLM, Sweden, February 15, 2017 (Maximpact.com News) – Commodity production drives two-thirds of tropical deforestation worldwide, asserts Trase, a new online information and decision-support platform aimed at improving the transparency, clarity and accessibility of information on the commodity supply chains that drive tropical deforestation.

Formally known as Transparency for Sustainable Economies, Trase is led by the Stockholm Environment Institute and the Global Canopy Programme.

Trase draws on deep untapped sets of data tracking the flows of globally-traded commodities, such as palm oil, soy, beef and timber, responsible for tropical deforestation.

Trase responds to the urgent need for a breakthrough in assessing and monitoring sustainability triggered by the ambitious commitments made by government leaders to achieve deforestation-free supply chains by 2020.

In Morocco last November, a Trase-led side event at the 22nd Conference of the Parties to the UN Framework Convention on Climate Change (COP22), attracted experts in environmental policy, data analysis and commodity supply chains who strategized on upgrading supply-chain transparency to achieve trade that is free of deforestation.

The side event was hosted by the EU REDD Facility, which supports partner countries in improving land use governance as part of their effort to slow, halt and reverse deforestation.

REDD stands for “reducing emissions from deforestation and degradation,” a mechanism that has been under negotiation by the UNFCCC since 2005. The goal is to mitigate climate change by protecting forests, which absorb the greenhouse gas carbon dioxide from the atmosphere.

Participants discussed how to bring about step changes in the capacity of supply-chain actors to meet zero deforestation and sustainability commitments. They examined incentives for encouraging governments in consumer and producer countries to cooperate.

Tools such as the platforms launched by Trase to collect and analyze data and information can help purchasers to develop better sourcing strategies and governments to develop policies in the forestry sector and commodity trade.

The international trade in commodities such as soy, palm oil and beef is valued at billions of dollars. These commodities trade along complex supply chains that often have adverse social and environmental impacts, especially in developing countries.

Over the past 10 years, participants acknowledged, agricultural expansion has caused two-thirds of tropical deforestation, which in turn has accelerated climate change and threatened the rights and livelihoods of indigenous peoples and communities that depend on forests.

Participants agreed that consumers and markets around the world are demanding greater sustainability in producing and trading agricultural commodities.

Nowhere is this demand greater than in the European Union, which has set a goal of halting global forest cover loss by 2030 at the latest, and reducing gross tropical deforestation by at least 50 percent by 2020.

The EU and several EU Member States have endorsed the 2014 New York Declaration on Forests .

In 2015, several EU Member States signed the Amsterdam Declaration , which recognizes the need to eliminate deforestation related to trade in agricultural commodities and supports private and public sector initiatives to halt deforestation no later than 2020.

The EU is also conducting a feasibility study for a EU Action Plan on deforestation.

Some of the most interesting deforestation transparency work is being done in Brazil.

Pedro Moura Costa, founder and CEO, BVRio Environmental Exchange, says his organization and Trase are piloting a program to bring more transparency to Brazilian timber supply chains, to assess the causes of illegally harvested timber and to find solutions to minimize risks.

Through the partnership, BVRio will upload data to the platform on the legal status of forest operations in Brazil. This will enable Trase to track legally and illegally harvested timber from sources to buyers at the end of supply chains.

On the banks of the Tapajós River, in Brazil’s Pará state, is a community forestry project that works with sustainable timber extraction in the Amazon.

Since 2003, Cooperativa Mista da Flona Tapajós (Coomflona) has been operating in the region and today employs 150 managers, as workers in this sector are known. The yearly production is around 42,000 cubic meters of timber, which Costa says could be fully commercialized if not for the competition with illegal timber products.

The issue of legality in supply chains is rarely considered in transparency initiatives, but is vitally important, Costa points out.

Legality is at the core of the EU Forest Law Enforcement, Governance and Trade (FLEGT) Action Plan issued in 2003. The Action Plan sets forth a range of measures available to the EU and its member states to tackle illegal logging in the world’s forests by engaging with national governments on illegal logging.

BVRio Environmental Exchange in 2016 launched a Responsible Timber Exchange, a trading platform to assist traders and buyers of timber in sourcing legal or certified products from all over the world.

The platform is integrated with BVRio’s Due Diligence and Risk Assessment tools, designed to assist traders and buyers of tropical timber in verifying the legality status of the products purchased and their supply chains. The system is based on big data analysis and conducts more than two billion crosschecks of data daily.

Since their release in 2015, the tools have been used by traders and environmental agencies worldwide to screen thousands of timber shipments.

Costa says, “Compliance with local legislation is an essential requirement of any initiative to promote good land-use governance and, ultimately, to achieve zero deforestation supply chains.

Companies too are engaged.

Trase can help us move away from the blame game, to start a practical discussion around issues and solutions,” says Lucas Urbano, project management officer for climate strategy with the Danone, based in Paris, one of the world’s largest dairy and packaged food companies.

Danone has committed to eliminating deforestation from its supply chains by 2020. The company is a signatory of the New York Declaration on Forests as well as a member of the Consumer Goods Forum.

For a company like Danone, transparency and better information about the impacts and conditions in jurisdictions where its supplies originate from are hugely important, Urbano recognizes.

Transparency is the first major step in eliminating deforestation from Danone’s value chains, because supply-chain complexity and opacity are barriers to action, he says.

Transparency initiatives such as Trase help Danone to understand who to convene and engage with in strategic supply chains. At the same time,” Urbano says, “transparency will make it impossible for companies to hide behind the complexity and opacity of supply chains.

Trase is made possible through the financial support of the European Union, the Nature Conservancy, the Gordon and Betty Moore Foundation, the Swedish Research Council FORMAS and the UK Department for International Development.


Featured Image: In Brazil, forest managers with the Cooperativa Mista da Flona Tapajós mark a tree for legal logging. (Photo courtesy BVRio Environmental Exchange) posted for media use

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Stock Exchanges Adopt Sustainability Reporting

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Trading floor at the New York Stock Exchange, May 15, 2014 (Photo by Scott Beale / Laughing Squid ) Creative Commons license via Flickr

By Sunny Lewis

GENEVA, Switzerland, December 13, 2016 (Maximpact.com News) – As many as 21 more of the world’s stock exchanges could introduce sustainability reporting standards before the end of the year, bringing the total number to 38, says an official with the United Nations Conference on Trade and Development .

Seventeen stock exchanges already recommend that their listed companies report on environmental, social, and governance, known as ESG, issues.

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James Zhan, director of investment and enterprise, UNCTAD (Photo courtesy UNCTAD) Posted for media use.

And James Zhan, director of the Division on Investment and Enterprise at UNCTAD, which co-organizes the UN’s Sustainable Stock Exchanges (SSE) initiative, said that 23 stock exchanges have committed to introduce new standards on sustainability reporting in 2016.

Just two have implemented so far, but more are expected to introduce new standards before the end of the year or early in 2017, he said.

The upsurge in sustainability reporting standards follows the launch of the SSE Model Guidance on Reporting ESG Information to Investors.

Twenty-one stock exchanges have confirmed to us they will introduce new guidelines either this year or within the first quarter of next year, and we know that many of them are close because they have posted draft guidelines on their websites for comment and discussion,” Zhan said.

Sustainability reporting has come of age,” he said, adding that the UN and nongovernmental organizations are no longer the only ones to advocate sustainability reporting and that “the markets themselves are demanding it.

In a newly published biennial report “2016 Report on Progress” on the progress made by Sustainable Stock Exchanges, SSE, the authors examined the environmental, social, and governance practices of 82 stock exchanges and found that exchanges are increasingly taking actions that contribute to the creation of more sustainable capital markets.

The report was prepared for the fifth SSE Global Dialogue held in September in Singapore. Representatives from 16 countries, including stock exchange chief executives, institutional investors and companies, senior government policymakers and United Nations representatives gathered to discuss the theme, “A New Global Agenda.

One development in the new agenda is the number of exchanges now partnering with the SSE initiative. Fifty-eight stock exchanges, representing over 70 percent of listed equity markets, have made public commitments to advancing sustainability in their markets and are now official SSE Partner Exchanges.

Market transparency is gaining in acceptability too. Twelve exchanges currently incorporate ESG reporting into their listing rules and 15 provide formal guidance to stock issuers.

The progress of SSE’s campaign to encourage exchanges to issue guidance signals that the industry is ready to take the lead when presented with practical opportunities to develop more sustainable markets.

Another significant development is the growth of green finance. Green bond listings grew considerably and there is increasing interest among equity investors in issues like stranded assets and carbon risk.

The Luxembourg Stock Exchange now lists 110 green bonds and represents half of all listed green bonds globally.

Today 11 stock exchanges offer green bond listings, demonstrating that exchanges are already supporting the transition to a green economy and there is room for further growth.

ESG indices remain the most popular sustainability instrument among exchanges, with 38 of 82 exchanges providing them.

Upon joining the ESG guidance campaign in September 2015, Oscar Onyema, CEO of the Nigerian Stock Exchange, said, “The Nigerian Stock Exchange is using its unique platform to advocate for the adoption of global corporate governance standards and sustainable business practices. We are committed to developing principle-based sustainability reporting guidelines and a roadmap that will inspire sustainability imperatives in the Nigerian capital market.

Looking at the policy landscape, many governments, too, are encouraging corporate disclosure of ESG factors, with 30 of the largest 50 country economies having at least one regulation on disclosure of ESG factors in place.

Government involvement on the investment side is less developed, with eight of the 50 countries implementing an investor stewardship code that addresses ESG factors.

Despite many reasons to be optimistic, the SSE’s data show that more action is needed if stock exchanges are going to play an important role in promoting the reorientation of financial markets to support the Sustainable Development Goals.

By reporting on sustainability issues, companies tend to act more sustainably too, Zhan said. They may have an incentive to do so, since analysts increasingly see a positive correlation between sustainable performance and strong financial performance too.

Zhan said the SSE initiative had helped spread corporate sustainability reporting, by distributing model guidelines for use by the stock exchanges themselves and their listed members.

The SSE initiative works to “advance sustainability” in the markets. It is organized by UNCTAD, the United Nations Global Compact, the United Nations Environment Programme Finance Initiative (UNEP-FI) and the Principles for Responsible Investment.

The private sector is seen as critical to achievement of the UN’s Sustainable Development Goals , and the SSE initiative is viewed as an important channel to get the private sector more involved in accomplishing these goals.

Launched by UN Secretary-General Ban Ki-moon in 2009, the SSE initiative now includes 58 stock exchanges, representing more than 70 percent of listed equity markets, and some 30,000 companies with a market capitalization of over US$55 trillion.

The SSE initiative was built on the demand from exchanges for a place to come together with investors, companies and policymakers to share good practices and challenges in a multi-stakeholder environment.

Since 2012 when the first five stock exchanges – BM&FBOVESPA in São Paulo, Brazil; Borsa Istanbul; Egyptian Exchange (EGX); Johannesburg Stock Exchange (JSE); and Nasdaq – made a public commitment to advancing sustainability in their market, the initiative has grown into a global partnership platform including most of the world’s exchanges.

Through the SSE, exchanges have access to consensus and capacity building activities, guidance, research and other support to assist in their efforts to contribute to sustainable development.

Market expectations are shifting quickly and we see more and more stock exchanges viewing sustainability reporting as necessary and inevitable,” said Anthony Miller, UNCTAD’s SSE initiative coordinator. “Those expectations create their own momentum.”

The report concludes with recommendations for exchanges that range from introducing ESG reporting guidance to promoting gender-diverse boards to listing green bonds.

By putting the recommendations into action, exchanges can take leadership roles in creating more stable capital markets and a sustainable society.


Featured image: Nasdaq displays the SSE logo in Times Square, New York City, March 2016 (Photo courtesy UNCTAD) Posted for media use

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Happy Employees Attract SRI Fund Investments

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By Sunny Lewis

WARWICK, UK, February 11, 2016 (Maximpact.com News) – Google employees enjoy free rides to work at the California company’s headquarters campus, plus breakfast, lunch, and even dinner if they stay late – for free. New dads receive six weeks of paid leave, and moms can take 18 weeks. And Googlers can even bring their pets to work.

Employees at the Silicon Valley Internet giant enjoy free oil changes and car washes, massages and yoga, a play room, back-up child care assistance and $12,000 a year in tuition reimbursement.

Other California tech companies, too, top numerous lists of the best places to work. The California-based business software company Intuit offers education support up to $5,000 a year, as long as the employee’s courses are related to financial services. At the office, employees enjoy a state-of-the-art gym, dry cleaning services and on-site therapeutic massages.

Dr. Onur Kemal Tosun of Warwick Business School points to Pride Transport, a Utah-based trucking company. “It uses employee engagement as a competitive advantage to keep good drivers. Not only is their pay competitive, but they find accommodation for them while they are on the road and help their families while the truckers are away,” he says.

Dr. Tosun has just published a study of 1,585 U.S. corporations and 47 socially responsible investment (SRI) funds in which he quantifies how much more investment from socially responsible funds employee satisfaction attracted. He concluded it was 35 percent.

“This increased investment makes sense as firms investing in their employees signal high corporate social responsibility (CSR), which in turn potentially enhances a firm’s reputation and prestige,” said Tosun, an assistant professor of finance in Warwick Business School at University of Warwick.

“Improvements in this area of CSR have been known to boost loyalty, employee contribution, and motivation through which productivity, firm performance and firm value increase. Naturally, this would draw funds’ investment,” he said.

“Increases in society CSR, such as improving housing in a bad neighborhood by a construction company or covering education fees for local children, also sees firms gain a significant growth in investment,” Tosun explained.

“McDonald’s is a good example,” he said, “it has a society focus CSR. Ronald McDonald House Charities provides free ‘home away from home’ accommodation to families while their child is in hospital.”

As it happens, more than 16 percent of the assets under professional management in the United States are in SRI funds. This sector is growing quickly. SRI funds expanded their portfolios about 76 percent over two years – from $3.74 trillion (2012) to $6.57 trillion (2014).

For his study, Tosun created a unique new measure of investment patterns. “I use a comprehensive measure that combines SRI funds’ own CSR perception with corporate CSR scores to explain funds’ investment in these firms,” he explains.

A firm’s CSR score was measured by summing “Strengths” and “Concerns” of each issue area in the “Kinder, Lydenberg, and Domini Index.”

Funds’ CSR sensitivity was evaluated by SRI funds’ investment policy data for positive investment or negative, restricted, investment, available from Bloomberg’s Environmental, Social and Governance Service.

Tosun then combined the CSR score of each company with the CSR sensitivity of each SRI mutual fund investing in that firm.

“My research also shows firms in specific sectors can benefit more from increased CSR efforts, but on the whole CSR investment is a worthwhile endeavor for any firm looking to attract SRI funds,” he says.

But Tosun writes that CSR investments might not improve a fund’s bottom line, although they had higher returns than the market during the crisis period of 2007-2008.

“I show funds having CSR sensitivity underperform the market in general,” he writes, “and fail to improve their portfolio performance after they invest in firms with high CSR.”

The study, “Is Corporate Social Responsibility Sufficient Enough to Explain the Investment by Socially Responsible Funds?” has been submitted for publication to a number of finance journals.

HappyWorkingWomanAward-winning journalist Sunny Lewis is founding editor in chief of the Environment News Service (ENS), the original daily wire service of the environment, publishing since 1990.


Main image: Workers on the Scania front axle assembly line (Photo by Scania Group) creative commons license via flickr.
Bottom image: This happy woman works at TimeWarner in the Media Sales division. (Photo by Dylan H.) creative commons license via flickr.

TPP Unites Old Enemies, Makes New Ones

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Maori (Indigenous New Zealander’s) demonstrate against the Trans-Pacific Partnership in Auckland, February 4, 2016

 

 

 

 

By Sunny Lewis

AUCKLAND, New Zealand, February 9, 2016 (Maximpact.com News) – “We expect this historic agreement to promote economic growth, support higher-paying jobs; enhance innovation, productivity and competitiveness; raise living standards; reduce poverty in our countries; and to promote transparency, good governance, and strong labor and environmental protections,” declared the ministers of the 12 Trans-Pacific Partnership (TPP) countries on February 4 as they signed the document that for the first time opens trade across the region.

The TPP eliminates 98 percent of all tariffs among the 12 countries: Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States and Vietnam.

The agreement includes former enemies at war as well as overwhelmingly Catholic countries such as Peru and Chile, the Buddhist-Shinto country of Japan, and majority Muslim nations such as Brunei and Malaysia.

But many civil society groups oppose the agreement for a host of reasons. They warn it will undermine environmental protections, human rights, labor rights, indigenous rights and internet freedom, despite official assurances to the contrary.

After more than five years of negotiations, ministers finalized the text at a session in Atlanta, Georgia on October 5, 2015 and agreed to sign it within 90 days. That signing event took place in Auckland on February 4, 2016.

New Zealand Prime Minister John Key said the agreement “will be overwhelmingly positive for New Zealand in supporting more trade and investment, jobs and incomes.”

“TPP will provide much better access for goods and services to more than 800 million people across the TPP countries, which make up 36 percent of global GDP,” said Key. “TPP is our biggest-ever free trade deal and is estimated to boost our economy by at least $2.7 billion a year by 2030.”

“It is New Zealand’s first Free Trade Agreement relationship with five of the TPP countries, including the largest and third-largest economies in the world – the United States and Japan. Successive New Zealand governments have been working to achieve this for 25 years, the prime minister said.

Prime Minister Key views the TPP as not only good for New Zealand, but also for the entire Asia Pacific region.

“Other countries have already signalled an interest in joining TPP and this could lead to even greater regional economic integration. A more prosperous and therefore secure region, is in all of our interests,” Key said.

The next step is for member countries to ratify the TPP so it can take effect.

The agreement can take effect only with the approval of at least six countries, which account for at least 85 percent of the combined gross domestic product of all member nations.

This means that it must be adopted by the legislatures of the two largest TPP economies, the United States and Japan.

Just 71 years ago, the United States dropped nuclear bombs on Japanese cities, as the two nations were bitter enemies locked in a struggle for control of the Pacific during World War II.

But now Japanese Prime Minister Shinzo Abe says the Trans-Pacific Partnership will allow Japan and the United States together to write the rules for the global economy.

Speaking at an economic forum in Tokyo in October, the day after the long-secret text of the TPP was made public, Abe said, “Rules should not be something that are imposed on you – you make them. The TPP is the structure where Japan and the U.S. can lead in economic rule-making.”

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The TPP protest movement has been building for years. Here, American workers demonstrate against the Trans-Pacific Partnership in Leesburg, Virginia, September 9, 2012. CWA stands for Communications Workers of America.

 

 

U.S. President Barack Obama said after the document was signed on February 4, “TPP allows America – and not countries like China – to write the rules of the road in the 21st century, which is especially important in a region as dynamic as the Asia-Pacific.”

“It eliminates more than 18,000 taxes that various countries put on Made in America products,” said Obama. “It promotes a free and open Internet and prevents unfair laws that restrict the free flow of data and information.”

“It includes the strongest labor standards and environmental commitments in history – and, unlike in past agreements, these standards are fully enforceable.”

Fifty years ago, the United States and Vietnam were engaged in a fierce war, and U.S. demonstrations against involvement in the Vietnam war sharply divided the country.

Today, both countries are signatories to the Trans-Pacific Partnership.

Authorized by Prime Minister Nguyen Tan Dung, Minister of Industry and Trade Vu Huy Hoang took part in the signing ceremony in Auckland.

The World Bank’s latest “Taking Stock” report features a special section on the Trans-Pacific Partnership Agreement, in which it projects that the TPP is expected to generate considerable benefits for Vietnam, despite “implementation challenges.”

“The recently concluded TPP will not only improve market access, but will also serve as a critical anchor for the next phase of structural reforms in Vietnam.” says Sandeep Mahajan, lead economist for the World Bank Vietnam.

As the TPP economy with the lowest per capita GDP, Vietnam has unique comparative advantages, particularly in labor-intensive manufacturing. Simulations suggest that the TPP could add as much as eight percent to Vietnam’s GDP, 17 percent to its real exports, and 12 percent to its capital stock over the next 20 years.

An agreement that opens trade, forges bonds between old enemies, and brings together 800 million people of many different faiths and languages – what could go wrong?

Plenty, according to protesters in some of the TPP countries.

Environmentalists object to language such as this. “3. The Parties further recognize that it is inappropriate to establish or use their environmental laws or other measures in a manner which would constitute a disguised restriction on trade or investment between the Parties.”

A movement of labor, environmental, family farm, consumer, faith and other organizations has escalated its campaign to defeat the Trans-Pacific Partnership with a joint 1,525-group letter urging the U.S. Congress to oppose the trade agreement.

“As you would expect from a deal negotiated behind closed doors with hundreds of corporate advisors, while the public and the press were shut out, the TPP would reward a handful of well-connected elites at the expense of our economy, environment and public health,” said Arthur Stamoulis, executive director of Citizens Trade Campaign, which organized the letter.

The TPP would roll back environmental enforcement provisions found in all U.S. trade agreements since the George W. Bush administration, requiring enforcement of only one out of the seven environmental treaties covered by Bush-era trade agreements, Stamoulis charged in a letter to supporters emailed last week.

“Beyond just failing to mention the term “climate change” in its thousands of pages, the TPP would also provide corporations with new tools for attacking environmental and consumer protections, while simultaneously increasing the export of climate-disrupting fossil fuels,” Stamoulis wrote.

The U.S.-based global climate campaign 350.org called the TPP “a toxic deal that would give dangerous new powers to the fossil fuel industry and pose a serious harm to the climate.”

“The TPP is a fossil fuel industry handout,” said Payal Parekh, 350.org Global Managing Director. “This partnership in pollution gives corporations the right to challenge any local government or community that tries to keep fossil fuels in the ground.”

“The deal signed in New Zealand today makes a mockery of the climate agreement decided in Paris last December. If countries are serious about addressing the climate crisis, they need to stand up to coal, oil and gas companies, not reward them with new rights and privileges,” Parekh warned.

350.org is one of many organizations around the world that will be mobilizing members to fight back against the TPP and block its final approval and implementation.

Corporate Accountability International, based in Boston, states, “We oppose the TPP because it prioritizes corporate interests over public health, the environment, human rights, and democracy.”

In Kuala Lumpur in January, some 5,000 Malaysians protested the TPP on Saturday, days before parliament was due to open a debate on the pact.

Many of the demonstrators were from the opposition Parti Islam Se-Malaysia (PAS). They voiced fears that their country could lose control of its economy if it enters the partnership with the United States.

The Canadian nonprofit OpenMedia calls the TPP a “reckless Internet censorship deal.”

“We are planning to grow a global coalition and build an international action platform to turn public opinion against the TPP, country by country. We will jam public consultations, build an international action kit, and support our allies across the globe to kill this agreement once and for all.”

“The TPP won’t come into force until it gets ratified,” says OpenMedia. “That means the final and most crucial phase of the battle begins today.”


 

Award-winning journalist Sunny Lewis is founding editor in chief of the Environment News Service (ENS), the original daily wire service of the environment, publishing since 1990.

Featured image:  U.S. Trade Representative Michael Froman (right) attend the Trans-Pacific Partnership Ministerial Meeting in Sydney, October 25, 2014. Both men signed the TPP pact February 4, 2016. (Photo by TPP Media Australia) under creative commons license via Flickr
Main image : Maori demonstrators against TPP (Photo by Dominic Hartnett) under creative commons license via Flickr
Image 01: American workers demonstrate against the Trans-Pacific Partnership in Leesburg, Virginia, September 9, 2012. CWA stands for Communications Workers of America. (Photo by GlobalTradeWatch) under creative commons license via Flickr

Investment Court Could Restore Trust in Dispute Resolution

By Sunny Lewis

BRUSSELS, Belgium, September 25, 2015 (Maximpact News) – Europeans no longer trust the way the EU resolves disputes between investors and states, says European Trade Commissioner Cecilia Malmström. The Swedish politician proposes to restore that trust by establishing a “modern and transparent” Investment Court System to replace the existing investor-state dispute settlement (ISDS) arbitration model.

The Investment Court would be part of all Europe’s ongoing and future trade negotiations, particularly the Transatlantic Trade and Investment Partnership between the European Union and the United States now under negotiation.

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EU Trade Commissioner Cecilia Malmström debates with Members of the European Parliament the best dispute resolution system for investors in the context of the Transatlantic Trade and Investment Partnership. (Photo © European Union 2015 – European Parliament creative commons license)

 

The existing ISDS system enables an investor to bring a dispute before an arbitration tribunal. It operates on an ad hoc basis with arbitrators chosen by the disputing parties.

Instead, Malmström proposes a permanent tribunal of 15 publicly appointed, highly qualified judges and an accompanying six-judge appellate panel.

ISDS provisions appear in trade agreements such as the North American Free Trade Agreement and in such international investment agreements as the Energy Charter Treaty, but there is widespread disatisfaction with the ISDS system.

“From the start of my mandate almost a year ago, ISDS has been one of the most controversial issues in my brief,” blogged Malmström on her official site last week. “I met and listened to many people and organizations, including NGOs, which voiced a number of concerns about the old, traditional system.”

“It’s clear to me that all these complaints had one common feature – that there is a fundamental and widespread lack of trust by the public in the fairness and impartiality of the old ISDS model,” she wrote. “This has significantly affected the public’s acceptance of ISDS and of companies bringing such cases.”

Malmström has her eye on eventually establishing a permanent international investment court.

But a senior U.S. trade official has criticized the proposal.

Stefan Selig, U.S. undersecretary for international trade at the Commerce Department, told Agence France Presse in May that the United States prefers the ISDS mechanism because it “increases the security of companies willing to make investments…”

EU investors are the most frequent users of the existing system. To Malmström this means that the EU must take responsibility for reforming and modernizing the system.

“Some have argued that the traditional ISDS model is private justice,” she wrote. “What I’m setting out here is a public justice system – just like those we’re familiar with in our own countries, and the international courts which Europe has so actively promoted in the past.”

In crafting the proposal, Malmström has engaged in extensive public consultations, followed by detailed discussions with the 28 EU Member States, the European Parliament, national parliaments and stakeholders.

Setting up an Investment Court System would create trust, Malmström believes, if it is “accountable, transparent and subject to democratic principles.”

Judges, not arbitrators, would decide cases, and the judges would be publicly appointed. “We will guarantee there is no conflict of interest,” wrote Malmström.

Proceedings would be transparent, hearings open and comments available online, and a right to intervene for parties with an interest in the dispute would be provided.

And an Appeal Tribunal would form an essential part of the Investment Court System.

On September 16 Malmström made the proposal public and sent it to the European Parliament and the Member States.

EU First Vice-President Frans Timmermans likes the idea, which he says breaks new ground.

“The new Investment Court System will be composed of fully qualified judges, proceedings will be transparent, and cases will be decided on the basis of clear rules. In addition, the Court will be subject to review by a new Appeal Tribunal,” Timmermans explained. “With this new system, we protect the governments’ right to regulate, and ensure that investment disputes will be adjudicated in full accordance with the rule of law.”

“I’m convinced that this system will also benefit investors,” Malmström wrote. “These changes will create the trust that is needed by the general public, while encouraging investment.”

An overview of the proposal Transatlantic Trade and Investment Partnership  and a reader’s guide to the proposal Guide to the Draft text on Investment Protection and Investment Court System in the (TTIP) is also available.

Featured Image: Trade Commissioner Cecilia Malmström discusses the Transatlantic Trade and Investment Partnership at a breakfast with women of the ALDE party, the Alliance of Liberals and Democrats for Europe Group, July 9, 2015 (Photo courtesy ALDE Group via Flickr creative commons license)

Award-winning journalist Sunny Lewis is founding editor in chief of the Environment News Service (ENS), the original daily wire service of the environment, publishing since 1990.