The legacy of Magna Carta

We’ve just been celebrating the 800th anniversary of the signing of Magna Carta, which many regard as the founding document of the UK’s (largely unwritten) Constitution. And the key achievement of Magna Carta was to put an end to the absolute rule of the Monarch, and to assert for the first time that every man, be he peasant, gentleman, baron or King, was equally subject to the rule of law – and to ensure that redress should be available to those disadvantaged by the failure of others to obey the law.

In these days of Constitutional Monarchy, the government has taken over many of the previous rôles of Monarchy. But the rules continue to apply. Like the King, the government is also subject to the rule of law. The elected government has the democratic right to make the law, but it does not have the right to break it.

Classical liberal economics stresses the vital importance of the rule of law, of property rights and enforceable contracts, as the basis of a free society and a workable economy. Consider most of the world’s trouble spots, and the lack of these basic elements of civilisation is at the root of their problems. If you enter into an agreement, or a contract, or a treaty, you should observe it. And it will normally include some kind of mechanism to provide redress in the event of non-compliance. Indeed a contract or treaty without such provisions is of little value.

So I am rather astonished at the large number of e-mails I am getting regarding TTIP (The Transatlantic Trade and Investment Partnership, or EU/US Trade Agreement), with particular and quite aggressive concerns raised about ISDS (the Investor/State Dispute Settlement system). They are horrified that ISDS will “allow corporates to sue democratic governments”, as though this were a new thing. But already companies that feel they have been disadvantaged by a failure of a government to behave properly can and do sue governments on the basis of existing law. In Britain, the wind industry is currently threatening to sue the government over subsidy cuts. BAA threatened to sue the government over the third Heathrow runway, and now protesters are threatening to sue as well.

In Germany, the nuclear industry is planning to sue the German government (rightly, in my view) for very large sums of money for Angela Merkel’s peremptory decision to close the German nuclear plants. There is nothing “democratic” about allowing governments to break the law, or to renege on contractual or treaty provisions. Indeed, that’s the route to tyranny and despotism.

ISDS is variously described as “an assault on democracy” and “riding rough-shod over the will of the people”. In fact it is simply a dispute resolution procedure in the event of non-compliance. Correspondents write about ISDS as if it were some demonic device newly created by rapacious American corporations to damage trading partners. In fact ISDS provisions are already a commonplace of international treaties – a treaty is worth little without a compliance mechanism. But according to the Chartered Institute of Arbitrators, the existing network of 1400 European Bilateral Treaties (BITs) – all of which include ISDS — already provide good protection to many European investors. These include 8 existing BITs between EU Member States and the US. The UK itself has negotiated 94 Bilateral Investment Treaties, the majority of which include ISDS provisions.

In other words, ISDS provisions are already widely used, and have a good track record. Only two cases have ever been brought against the British government under ISDS, and neither succeeded. Rather than “riding rough-shod over the democratic will of the people”, ISDS simply ensures that governments are called to account, and required to live up to contracts and treaties that they have voluntarily and democratically entered into.

Imagine that you wanted to invest in another country with which the UK had an investment treaty. Imagine it was Russia, say. And suppose the Russian government decided to nationalise your investment. Wouldn’t you hope that there would be a compliance mechanism to ensure that you got appropriate compensation? And wouldn’t you be happier if any legal action took place in some kind of international tribunal rather than in a Russian Court? Do you see anything anti-democratic in that?

I think that there are real issues of concern with TTIP. We in UKIP believe that Britain should be free to negotiate its own bilateral deal with America – indeed I believe that had it not been for the EU’s straitjacket, we should have had a UK/US trade deal decades ago. Then there is the issue of public services and especially the NHS. As TTIP develops (and that could take months or years), we in UKIP will be watching at every stage to ensure that there’s no threat to the NHS. But to be fair, that’s the position that just about every politician – and the European Commission – takes. There are questions about the tribunal mechanism for ISDS resolution, and we would insist that the proceedings of any such tribunal should be open and transparent. A rather more worrying concern would be any tendency for the EU and the USA together to seek to establish some kind of joint global hegemony over regulation. Similarly, any tendency to use TTIP to increase regulation – perhaps by introducing conditions from both sides – is to be resisted. But if they approach regulatory convergence in terms of mutual recognition rather than aggregating two sets of rules, so much the better.

There has been a strident and aggressive populist campaign against TTIP, which (like the rather similar campaign against shale-gas) has engaged in shameless scare-mongering and black propaganda. That campaign is leftist, protectionist, anti-trade, anti-American, anti-capitalist – and also anti-growth, anti-jobs and anti-prosperity. It is an hysterical response to a Treaty for which a final text has not yet been written.

My conclusion is that there are risks with TTIP, as there would be with any major new treaty. But we are aware of the risks, and will watch carefully to see that they are dealt with. And provided they are, a good TTIP agreement will offer huge benefits on both sides of the Atlantic.