Fact sheet: Investor-State Dispute Settlements and Financial Markets
12.05.2014: Impact of Investor-State Dispute Settlements, as included in several investment treaties like the planned CETA and TTIP, on financial markets, regulation and crisis management.
Since the 1950s, bilateral investment protection agreements have become more common between states. The reason: investors from industrial countries desired a secure environment for their investments and better protection from expropriation in reputably volatile developing countries. Claims by foreign investors are heard in front of an arbitration board. Such agreements are no longer exclusively concluded between industrial and developing countries, but also between industrial countries themselves. That is why investment protection and the possibility for an investor to sue a foreign governement are also part of the planned free trade agreements between EU and the US (TTIP) and Canada (CETA).
In this fact sheet, the enforceable rights as well as some cases related to financial markets are discussed. These cases show that as a result of investor-state dispute settlements, there is a growing risk of states losing leeway for regulating financial markets or resolving financial crises. In the future, more and more laws and policies could be indirectly annulled. Governments already anticipate potential lawsuits in their legislative processes. In light of the financial crises over past decades and the difficulties which arise, this is a highly worrisome prospect. In the long run, strong regulations on market access in conjunction with investor-state dispute settlements could put pressure on certain structures of the German financial system as these could create market distortions from the investor perspective.