The new Transatlantic Trade and Investment Partnership (TTIP) between the U.S. and Europe is already starting to stir controversy – and it hasn’t even been signed yet. Of particular concern: the changing rules for multinationals and the potential impact on global energy markets.

People protest against the Transatlantic Trade and Investment Partnership (TTIP) with the U.S. in Duesseldorf, Germany. Photo: AP

The ongoing negotiations aimed at concluding the Transatlantic Trade and Investment Partnership (TTIP) between the EU and the U.S. are in full swing. Not only will this trade pact shift economic relations between Brussels and Washington to a new level, but also it might have implications for third-party countries not involved in the partnership, including Russia.

The current status of the TTIP is an ongoing series of trade negotiations begun in early 2014 between the EU and the U.S. These talks are intended to produce a bilateral trade agreement that will dramatically reduce regulatory barriers to trade for big business. Laws and regulations that would be affected include those governing food safety, environmental protection, and banking safeguards, to name a few.

The new TTIP could also revolutionize relations between multinational corporations and the governments of individual states. This, in turn, could lead to the rise in the ranks of indignados (“outraged”) countries, which could view the new TTIP rules as unfair and controversial. The social discontent that TTIP may induce in many countries can become ammunition provided to any nations adversely affected.

As a result, the signing of the TTIP has been described by its critics as an assault by multinational corporations on state sovereignty and the national laws of many countries. There are three reasons for such concern.

First, a country’s public services (public health, education, and water services) could be vulnerable to privatization. In addition, national and EU standards on food safety and the environment could be lowered, bringing them more into line with laxer American ones. At a time of alarming climate change, TTIP would further diffuse responsibility for environmental damage.

Second, the serious problem stems from the TTIP-encouraged establishment of so-called Investor-State Dispute Settlements (ISDS), which would allow corporations to sue the state if government policies were to cause a decline in corporate profits. This further shift in power towards global economic organizations and away from enfeebled states would mean that multinational companies could dictate national policy.

There have been around 500 cases of corporations taking countries’ governments to court since 1987. They are brought before arbitration tribunals made up of appointed corporate lawyers having a vested interest in ruling in favor of business.

A noteworthy legal case is in Germany, where Swedish energy giant Vattenfall has filed a lawsuit against the German government for loss of billions of euros in profits after Berlin decided to phase out nuclear power plants following the 2011 Fukushima nuclear plant accident.

This threat to state sovereignty is especially perceptible in Chapter II, Articles 3-18, of the draft treaty. Article 14 sets forth rules which would restrict a government’s ability to nationalize a company. If it did wish to expropriate an enterprise, it would need to offer the corporation affected with appropriate compensation.

For a different take on this issue, read "How the TTIP will impact Russia's interests in Europe"

In addition, ISDS rules would allow an investor to sue the country hosting its investment independent of whether the government of the investor’s country of origin took part in or was supportive of the litigation. Furthermore, a small group of legal experts sitting in a court of arbitration could hand down binding decisions that could nullify existing legislation in signatory states.

Not surprisingly, various public organizations in Europe are alarmed by the threat to national sovereignty presented by TTIP and have appealed to the European Commission to have ISDS rules dropped from the trade talks. Their argument is about fairness: If multinationals can challenge government policies why is the reverse situation ruled out?

Third, the TTIP treaty could have an impact on international politics and energy markets, helping Europe to reduce its dependence on Russia’s gas. Some EU states have been lobbying the American government to relax the prohibition on the export of American crude oil and natural gas. TTIP could help the EU lift this ban, which would allow them to reduce their dependence on energy imports from Russia.

In addition, Russia is hardly likely to be interested in the strengthening of economic ties between the U.S. and the EU, given the current confrontation between Washington and Moscow. An article published in Foreign Policy indicates that TTIP is not in Russia’s interests. The headline is also illustrative of what’s at stake: “Vladimir Putin hates the TTIP.”

The author, James Stavridis, a retired U.S. Navy admiral and recent NATO Supreme Allied Commander Europe, argues that TTIP would not only establish a free zone between the U.S. and EU and increase their trade by as much as 50 percent, but also it has implications for Russia. In this context, he sees TTIP as a geopolitical tool to weaken Russia.

“The increased linkages between the United States and our European allies and partners will stand in direct opposition to Putin’s key strategy of driving a wedge between the United States and the EU,” he said. “TTIP would be a powerful signal to Putin’s Russia that Europe and the United States stand together in all dimensions — values, politics, security, and trade. And if Putin hates it, TTIP probably makes sense.”

The opinion of the author may not necessarily reflect the position of Russia Direct or its staff.