Malmström proposes investment court for TTIP

3:47 min

The EU's Trade Commissioner Cecilia Malmström, responding to criticism on the controversial free-trade agreement TTIP, unveiled on Wednesday proposed changes to a vital part of the deal.

TTIP stands for the Transatlantic Trade and Investment Partnership, a huge free-trade pact between the U.S. and the European Union that's still being negotiated.

But one of the biggest sticking points in negotiations was with dispute resolution – when a company is unhappy with another country and wants to do something about it.

TTIP had a mechanism for dealing with this called investor-state dispute settlement or ISDS. And what ISDS meant is that corporations would be able to challenge governments in a private trade tribunal.

And for many people that's worrying. They say that system would give businesses excessive power and allow them to challenge governments every time new legislation is introduced that might harm their profits.

What Malmström proposed, after lengthy discussions and public input, is to replace ISDS with an investment court system. That would mean it would have publicly appointed judges, and not arbitrators, who would have to have the same type of credentials as judges in national or international courts.

"I want the rule of law, not the rule of lawyers. I want to ensure fair treatment for EU investors abroad, but not at the expense of governments' right to regulate. Our new approach ensures that a state can never be forced to change legislation, only to pay fair compensation in cases where the investor is deemed to have been treated unfairly," Malmström wrote.

The proposal has been met with mixed opinions and will still need the Commission to hash it out with both the EU Parliament and Council. And since it is a trade deal, it would also need the US's seal of approval before moving forward.