January 13, 2015 / 4:23 PM / 3 years ago

EU buys time to defuse U.S. investor arbitration dispute

European Trade Commissioner Cecilia Malmstrom of Sweden arrives at a hearing before the European Parliament's Committee on International Trade at the EU Parliament in Brussels September 29, 2014. REUTERS/Francois Lenoir

BRUSSELS (Reuters) - The European Union promised on Tuesday more talks with campaigners against a free-trade accord with the United States, delaying a long-awaited decision on how to protect investors in the world’s biggest trade deal.

Almost a year after Brussels launched a public consultation to defuse a row over investment protection in the proposed pact, Trade Commissioner Cecilia Malmstrom said the results showed “a huge scepticism” about arbitration and how to handle it.

The online consultation was meant to reassure campaigners and give the European Union a new negotiating position, but there is a risk now of a broader delay to an accord with Washington that political leaders would like to see this year.

“We need to have an open and frank discussion about investment protection,” Malmstrom said after the European Commission released the consultation results. “The consultation clearly shows that there is a huge scepticism,” she said.

As reported by Reuters in November, the vast majority of the 150,000 replies were submitted by campaigners hostile to the deal. Of those, 70,000 were effectively from seven groups that provided ready-made answers for their supporters.

They fear U.S. multinationals would use the investor-to-state dispute settlement (ISDS) mechanism to challenge food and environmental laws in the EU. The European Parliament, which must ratify an agreement, says it cannot accept an EU-U.S. trade agreement that contains such provisions.

“The ISDS clause, if retained, would mean we’d be a step closer to corporations writing our laws instead of governments,” said Keith Taylor, a British lawmaker from the Green party in the European Parliament.

Opponents also say they fear being forced to import genetically-modified crops or chlorine-washed chicken and note a U.S. tobacco company’s use of ISDS to challenge Australia’s laws on cigarette packaging.

But advocates of the Transatlantic Trade and Investment Partnership, or TTIP, say the accord would bring big economic benefits to Europe’s weak economy by uniting half the world’s economy and removing barriers to small companies to do business.

The European Commission, which handles trade policy for the EU’s 28 countries, has frozen negotiations with Washington on the ISDS issue and needs to restart them to win a deal with the United States, which wants strong investor protection.

Malmstrom said there was no deadline for restarting talks on ISDS, but an EU official said the Commission hoped to define its position before the summer. Solutions include setting up an appeals body and making arbitration panels more transparent.

Additional reporting by William Schomberg in London; Editing by Philip Blenkinsop

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