Trade Bill

Lord Hendy Excerpts

Report stage & Report: 2nd sitting (Hansard) & Report: 2nd sitting (Hansard): House of Lords
Tuesday 15th December 2020 Lords Chamber

[Baroness McIntosh of Pickering (Con)]

My Lords, the authors and mover of these two amendments have done the House a great service. I welcome my noble friend the Minister to his place for the first of these debates that he will be summing up this afternoon. This is a very vexatious area in trade disputes, and it has been very much at the fore of this critical stage of an agreement on free trade with our EU partners— I know that is not the subject of this afternoon’s debate. It is worrying that, at this late stage, we are still arguing—and have been for two years, since the European Union (Withdrawal) Act was passed—about what the dispute resolution mechanism will be.

I will make a general point: it is extremely important at this stage that we know what the dispute resolution mechanisms will be. I place on record my acceptance as less than satisfactory of the arrangements of the World Trade Organization. I think it fair to say that the current position of the United States in this regard is less than clear. As I understand it, in his time, President Obama made moves to remove the US from the general World Trade Organization dispute resolution mechanism scheme—the next stage after disputes have been raised. It is by no means clear, and I have not yet heard—I may have missed it—what the incoming Biden Administration will do in this regard.

My noble friend Lord Caithness mentioned the Huawei decision, and, obviously, we are also caught, as I understand it, in the Boeing situation, with infringement tariffs being whacked on us for the Airbus scenario—and, latterly, we have come forward, seeking to do the same to Boeing, for similar infringements of the World Trade Organization arrangements there. As such, I am very uneasy that, in the current state of the Bill, I do not see any reference to what the dispute resolution mechanism will be in the agreements that fall under this—unless I have missed it—so I would like confirmation of what that resolution mechanism will be.

I welcome that the noble Baroness, Lady Kramer, said that the UK has been at the forefront of setting this in the EU-Canada arrangement—but then my noble friend Lord Lansley said that those arrangements have never been brought into effect in relation to the EU. This is a very grey area, and it is vital that, before the Bill leaves Parliament, we know what the dispute resolution mechanism in this regard will be. Mindful of the lengthy debate that we had in Committee, I seek further clarification at this stage, using these two amendments as an opportunity to probe in this regard.

[Lord Hendy (Lab) [V]]

My Lords, I am grateful to the noble Baroness, Lady Kramer, and my noble friend Lord Stevenson, for moving and speaking to Amendments 15 and 19, respectively. They significantly improve, but do not eliminate, ISDS. On that basis, I support them, since my assessment is that the elimination of ISDS is not currently politically feasible.

We now know a lot about ISDS, which is relatively common in international trade agreements. We know how objectionable it is and the chilling effect it can have. It is objectionable because it overrides the supremacy of Parliament, defeats the rule of domestic law—a concept familiar to all of us after recent debates—and discriminates on grounds of nationality. Far from taking back control and asserting British sovereignty, the current catchwords of government, ISDS surrenders both.

A couple of years ago, a petition against the inclusion of ISDS in the then-proposed EU-US trade deal, TTIP, attracted 3 million signatures—500,000 of them in the UK. The legitimacy of ISDS in EU agreements is now doubted by the Court of Justice of the European Union as well as by EU citizens. In Slovak Republic v Achmea, the court held that ISDS in the Netherlands-Slovakia trade agreement

“has an adverse effect on the autonomy of EU law”

and is therefore incompatible with it. By like reasoning, ISDS in UK trade deals will adversely impact the autonomy of UK law.

ISDS is a mechanism whereby a corporation of one state party to the international trade agreement can bring a claim for compensation against the other state. It sounds fair, but it is not fair. ISDS claims bypass the courts of both state parties, and bypass the laws of both states. ISDS is a special privilege accorded only to foreign corporations, for use, in the case of the UK, against a democratic sovereign Government. ISDS is a right to claim compensation against the host state in which the corporation has made its investment—a right denied to the corporations and citizens of that state. That point is important and goes beyond the insult to sovereignty.

ISDS offends against the rule of law because a right and remedy against a host state is given to one class of putative claimant—foreign investment corporations—and denied to all the citizens, companies, co-operatives, trade unions and other organisations in the host state. ISDS offends against the rule of law, whereby that right and remedy is exempt from the courts and the legal system of the host country. It offends the principle of non-discrimination because that right and remedy is only available to non-nationals of the host state.