Trade (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) Bill [HL]

Debate between Lord Davies of Brixton and Lord Purvis of Tweed

Committee stage
Thursday 14th December 2023 Grand Committee

[Lord Davies of Brixton (Lab)]

My Lords, I speak in favour of Amendment 26 and my Amendment 33. As my noble friend has clearly explained, this is about investor-state dispute settlement mechanisms. This is a very important issue, so I make no apology for exploring it in further detail, even at this late hour for a Committee.

For the benefit of new readers of Hansard—I am aware that everyone here is by now more than aware of what we are talking about—the investment chapter of the CPTPP contains the ISDS mechanism. The provision allows companies to sue Governments over decisions that impact their corporate profits, even if those decisions are made in the public interest. That is the key point. In simple terms, ISDS allows firms to sue the Government for legislation that they have introduced for the general public good, where those decisions impact on company profits. This can have disastrous effects across the board of social and public policies, but particularly on policies on the environment and health and measures to combat climate change.

These concerns are widely shared and this is a big issue, which is why I wanted it to be discussed in a separate group. The noble Baroness, Lady Hayman, mentioned it, and she apologised for being unable to be here to support the arguments being made. ISDS has been used to challenge important environmental regulations under separate arrangements: water pollution controls in Germany, a ban on fracking in Canada and various regulations on mining in east Asia and South America.

I am a bit hesitant to mention the impact assessment because, effectively, the Minister suggested earlier that although I have read all 142 pages of it, I need not really have bothered. He did not seem to feel that what was in it should be taken seriously—but it does touch on this. There is one bullet point of 26 words, which covers the issue, and it says:

“A modern and transparent investor-state dispute settlement mechanism will ensure that UK investors can access an independent international tribunal should they not receive such treatment”.


Well, that is only half of what the mechanism achieves. The other half is foreign companies suing this Government for measures that they take. My view is that is the more important part, yet we have no assessment of its impact, which I would have thought is essential. The truth is there is a real proximate risk that ISDS would be used to challenge new regulations which are essential for fighting climate change.

There is also evidence that ISDS in recent trade agreements would be used to challenge health provision, labour rights and other important legislation. Here are some further examples. ISDS was used in Egypt to challenge an increase in the minimum wage. Philip Morris sued Australia for attempting to introduce plain-packaged cigarettes—albeit it lost, as was explained. However, it is the threat that is the real problem. Then Slovakia was sued for attempting to nationalise part of the health service.

I am not given to quoting the CBI—it is not my usual source—but it has expressed concerns. It stated in 2021 that there was,

“a risk of the UK becoming disproportionately targeted through ISDS”

and that

“there could also be environmental implications of the UK being exposed to the ISDS mechanism”.

That is the CBI expressing its concern. The UK did not include ISDS in its recent trade agreements with Australia, New Zealand and Japan, and the provisions were suspended in the rollover agreement with Canada. The Government could have sought explicit side-letters in CPTPP to be exempt but has chosen not to do this, which means that, if this treaty is passed, the UK will now, de facto, have ISDS agreements with Canada and Japan. This contract would effectively import these settlement mechanisms into the existing agreements, which the Minister has referred to.

In my view, the ISDS process is suspect in and of itself. Arbitrators appointed to reach a settlement are paid on a case-by-case basis and benefit from an increase in claims. Governments cannot do it the other way; they cannot use the ISDS system to sue investors, so arbitrators naturally have a bias towards companies or investors so that they encourage further investor claims and thereby benefit commercially.

There is a code of conduct for ISDS proceedings. It was established under the partnership to address legitimacy concerns that arise when a system allows adjudicators to act as an arbitrator in one case and legal counsel in another—so-called double-hatting. This provides some objectivity in the process, which other agreements lack.

However, if we look at the recent record, we find that the most utilised treaty for challenging climate action is the Energy Charter Treaty, under which many cases have been brought by western-based companies against Governments taking action to limit their expanded use of fossil fuels. So problematic has this flood of cases become that the largest European countries have now all signalled their exit from the treaty. The Government themselves have said that they are reviewing their Energy Charter Treaty membership and will

“carefully consider the views of stakeholders in business, civil society and Parliament”.

In this context, we are not really having a debate about the ISDS process in general—that is a big debate, and one we need to have—but there is a growing realisation that these clauses are an impediment to social policies and to climate action in particular. It seems perverse to sign us up to another ISDS clause in the partnership, exposing us to potential future lawsuits from companies with tens of billions of pounds invested in the UK.

I have two questions for the Minister. First, the impact assessment says that it is a “modern and transparent” mechanism, but what is modern and transparent about it? Secondly, should we not have an assessment of the likely impact of the mechanism where foreign commercial interests can require limits? In effect, they have a veto on our domestic policies. We are told that the whole point of leaving of the European Union was to take back control, as my noble friend mentioned, but these mechanisms reduce our control, taking it away from intergovernmental bodies and handing it over to people totally outside any sort of responsibility to the public.

[Lord Purvis of Tweed (LD)]

My Lords, I thank noble Lords for allowing us to raise very important issues relating to ISDS. We have previously debated these in considering trade Bills and particular FTAs, and I have a great deal of sympathy for the arguments that have been made. My party supports a multilateral investment tribunal and appellate mechanism for the resolution of investment disputes. I have been studying the European Union’s recent proposals on moving towards a more global, multilateral element, and that is my party’s position.

As we have heard, these amendments are important because it is vital that the Government state their view. We knew that the noble Lord, Lord Grimstone, was a strong supporter of ISDS mechanisms because he said so during consideration of the Trade Bill, but, as has been mentioned, we then had FTAs that excluded them. There is now uncertainty regarding those who were excluded but who are now also members of the CPTPP.

Like other noble Lords, I have questions to ask the Minister. Does the UK support an appellate mechanism within the CPTPP? Will the UK, as an acceded member, seek to implement the mechanism through the CPTPP in our relationships with Canada and Japan? Without the side letter, there is uncertainty. Will a company or a member be able to choose to resolve disputes through the CPTPP process or the FTA process? I am not aware of how that would operate, so some clarity from the Government will be important.

Professional Qualifications Bill [HL]

Debate between Lord Davies of Brixton and Lord Purvis of Tweed

Committee stage
Monday 14th June 2021 Lords Chamber

[Lord Davies of Brixton (Lab)]

My Lords, I crave the indulgence of the House; I hide behind the excuse of being a beginner. I put my name down to this amendment because it is one of those probing amendments about which you think, “Why not? What is the possible objection?” I really have no more to add to what the noble Baroness, Lady Noakes, said in moving the amendment. There is a certain amount of pleasure in this: I suspect that I will rarely agree with the noble Baroness, but on this occasion I do, so I am more than happy to reinforce the points she made.

[Lord Purvis of Tweed (LD) [V]]

My Lords, in the Minister’s letter to the noble Baroness, Lady Hayter, yesterday—which I hope has been circulated to all those who have been participating in the Committee, as the noble Baroness, Lady Noakes, indicated—the Minister cited the reason for moving away from what he termed the “prescriptive and unpopular” EU-derived system of mutual recognition across members. The next sentence says:

“But it did at least give all regulators [Inaudible] a means to establish international recognition routes with EU member states.”


The Government say that it was “prescriptive and unpopular”, so they want to do exactly the same. However, there is not the same kind of protections on the regulators at the moment for their operational independence if they decide not to enter into an agreement. There will be substantially good reasons why they may not want to, and they were outlined by the GMC on its response to the Government’s consultation on the CPTPP.

The GMC has indicated that the approach of the UK regulators in many areas has gone beyond simply looking at the areas listed by the Government in this Bill, which we debated at our first Committee sitting. The regulators on health and certain other areas look at the broad fitness to practise, the background education and the ability to verify the educational standards in country of that applicant. Unless they are satisfied with that broad range of all the other areas, they do not wish to have mutual recognition. However, this is where the problem arises: in the future, it might be desirable that we have mutual recognition in professions with applicants from a certain country, but not yet. It should be up to the regulator and there should be independence when making the decision that a country’s standards on the education and training route for that applicant were not sufficient to meet UK standards.

At the moment, there is insufficient protection in Clause 4, because, as the Minister keeps reminding us, it is purely enabling, and could be completely undermined by Clause 3. The powers in Clause 3 can, in effect, force the regulator to move. It is not simply the slightly benign word that the Minister used in his letter— to “encourage”. Perhaps I am alone in being slightly cynical, but whenever I hear the Government say that they want to encourage someone, then that someone should be worried. It is not simply about encouragement, however. Clause 3 allows for that regulator to move to start the process of a mutual recognition agreement.

There is another reason why I think this probing amendment is justified, and I hope that the Minister can offer the reassurance that the noble Baroness seeks. The Government do not seem to know what the problem is in regard to many of the regulators yet, but they want an answer to them all under this. This comes at a great cost, because this Bill, as the impact assessment indicated, may well cost up to £42 million. These costs are passed on to the applicants. The Alice in Wonderland nature of it is that the Bill’s stated purpose is to reduce the fees for those applicants. However, it is the regulators who want to avoid a situation where they are forced through an MRA agreement to have a fee system imposed on them by the Government. That is why the justification for the voluntary nature of it is very strong. If the Minister were able to say that he would consider adding to Clause 4, which offers the kind of reassurance in statute that would be required, we would be more amenable to be assuaged.