Opposition is mounting to special provisions within the EU/USA transatlantic trade deal. Many are concerned that protecting commercial interests could prevent governments doing what their electorates want

The most contentious issue so far in the Transatlantic Trade and Investment Partnership (TTIP) trade deal between the European Union and the USA is the provision for Investor-State Dispute Settlement (ISDS). Opposition is mounting, and with the German government making its opposition clear, ISDS may already be dead in the water. Even the influential libertarian Cato Institute in the US has published the case for dropping ISDS so that the TTIP deal can survive.

ISDS allows foreign investors to take governments to special courts for compensation if they consider their interests to have been affected by government decisions, and the European Trade Commissioner promised in January that a consultation on its inclusion in TTIP would begin in early March (no sign of it yet!)

Trade unions, environmental campaigners and consumer representatives on both sides of the Atlantic have expressed their concerns that ISDS can stop governments doing what their electorates want. Compensation costs when governments lose can be only part of the picture: the costs of the litigation, and the regulatory ‘freeze’ that ISDS encourages (making civil servants reluctant to propose potentially expensive actions) also need to be taken into account.

And then there’s the special privilege accorded to foreign investors of a different legal channel just for them, closed to other stakeholders affected by trade deals and government action like workers laid off or seeing their wages cut.

But the disenchantment with ISDS isn’t confined to civil society. The French government was always hostile, and many countries on the south and eastern periphery have been burned by ISDS provisions in existing treaties negotiated with the USA after the fall of communism: a new report from Corporate Europe Observatory/TransNational Institute indicates that 'investors are claiming more than €1.7 bn in compensation from Greece, Spain and Cyprus in private international tribunals.'

Even the British government has published research concluding that ISDS in TTIP would have little or no economic benefit and significant political costs.

Now the German government has joined the campaign to exclude ISDS from TTIP. Brigitte Zypries, a junior economy minister, told the German parliament that 'from the perspective of the [German] federal government, US investors in the EU have sufficient legal protection in the national courts.'

The same is true of Britain, where John Healey, Labour MP and chair or the All-Party Parliamentary Group on TTIP, asked ministers what provisions currently exist to protect US investments in the UK, and was told in no uncertain terms that sufficient legal protections exist. And they seem to have worked for over 200 years!

Employers continue to fight a rearguard action, claiming either that such provisions are vital to encourage inward investment (in which case you do have to ask why they doesn’t appear to have been necessary before now, with EU-US investment running into trillions of dollars), or that TTIP needs to have ISDS in it so that similar guarantees can be imposed on Africa, Asia and Latin America.

Former USTR and World Bank President Robert Zoellick argued in the Financial Times that ISDS was crucial to a bilateral investment treaty with China (something the EU is already beginning to negotiate) to defend US investments there, and encourage the development of a better investment climate (although others argue that creating a separate legal channel does the precise opposite.)

Such bullish language suggests that neoliberal free marketeers may have over-reached on special deals for foreign investors. Now, campaigners are calling for the recently agreed EU-Canada and EU-Singapore agreements to be re-examined, on top of the decisions of the South African and Indian governments to review all their bilateral investment treaties.

Instead of extending ISDS to cover the biggest inward investment markets in the world, between North America and Western Europe, they may end up with less than they started with.

Owen Tudor is head of the TUC's European Union and International Relations department. This post first appeared in full on the TUC's Touchstone website