Sigmar Gabriel TTIP
German Vice Chancellor and Minister of Economics Sigmar Gabriel (R) is a vocal opponent of including the investor-state dispute settlement (ISDS) clause in TTIP negotiations.Reuters

A senior Portuguese government official has accused Germany of creating an uneven playing field by trying to remove an investor protection mechanism from the EU-US free trade agreement.

Negotiations on the Transatlantic Trade and Investment Partnership (TTIP) have been interrupted by German officials' uncertainty over the inclusion of the investor-state dispute settlement (ISDS) clause from any future agreement.

In September, the German Economy Minister Sigmar Gabriel told parliament: "It is completely clear that we reject these investment protection agreements."

Speaking in London, Portugal's Secretary of State for Europe Bruno Maçães said that he was "surprised when some countries that invented ISDS consider it to be evil".

ISDS grants a foreign investor the right to initiate dispute settlement proceedings against a foreign government, in a private tribunal. It is commonly included in free trade agreements, but opponents say it could leave local level policymakers vulnerable to legal action from overseas investors, should local laws interfere with their ability to turn a profit.

The first ISDS clause appeared in an agreement between Germany and Pakistan in 1959, with Germany seeking to protect its companies from loss of investment due to the volatile political and economic environment in the Asian country.

Currently, nine European Union countries have trade agreements which include ISDS clauses with the US. Many others operate some sort of variant investor protection mechanism, with only Portugal, Spain and Sweden not having any investor protection with the US.

Furthermore, Germany has negotiated 14 ISDS provisions within intra-EU trade agreements, which Maçães believes is "completely against EU law".

"How can you tell the US that these countries are reliable when Germany has investment protection with 14 of them and doesn't want to give them up?" he asked.

Maçães has been a strong proponent of TTIP at home and abroad. The trade deal could, he said, be transformative for certain sectors of the Portuguese economy, particularly footwear and textiles.

"Some Portuguese businesses have a lot to gain. Footwear and textiles could almost overnight change their scale. There could be 500% increase in footwear exports to the US in one year," he said, adding that companies which support TTIP need to be more vocal, to turn the argument into a straight shout for profit margins, rather than an esoteric debate on free trade.

Public Opposition

The public opposition to TTIP across Europe has been fierce, with demonstrations taking place across the continent over fears that it will escalate privatisation of public services. Opponents also claim that the negotiations have lacked transparency.

"It seems to me there's a political agenda that's not connected to the public discourse around the agreements. One of the definite things the EU elections shows is that there's a real lack of trust in the commission and what they're negotiating. The fundamental thing is transparency," Jude Kirton-Darling, the Labour MEP for North-West England told IBTimes UK.

Maçães said the Council for Europe had made an error in not immediately making the mandate for TTIP – which establishes the directives negotiators have been given on behalf of the European Commission – available to the public. The mandate was leaked in 2013, but was formally declassified in October this year.

It includes a directive to discuss ISDS, but Maçães said this does not mean it will be included in the final text of any document. Instead, he hopes that the level of public debate will lead to an improved form of ISDS being established through the TTIP negotiations and called on opponents of the mechanism to use this opportunity to embrace change, rather than obstructing it.

"If you disagree with it [ISDS] you should support the process of changing... TTIP could be this process. It's subject to intense media scrutiny and every country has the power to veto it," he said.

The clause could be adapted to ensure governments can only regulate on a non-discriminatory basis, meaning they could only change regulations if they affect local and foreign actors in the same way.

Other social decisions should always remain on a local level, Maçães added, saying: "I believe in an ISDS which has no restriction on increasing the minimum wage."

Earlier this year, a public consultation launched by the commission into the inclusion of ISDS in TTIP attracted 150,000 responses.

The former Trade Commissioner Karel De Gucht subsequently removed it from the negotiating table and his successor, Cecelia Malmström, has been non-committal about whether it will be included in the final text. Nor has Jean-Claude Juncker, the Commission's President, been unequivocal in his rhetoric on the matter.

However, a group of 14 European foreign ministers penned a letter to Malmström in October requesting that ISDS be added to negotiations again. Maçães, who was one of the signatories, says that this was merely in keeping with the initial mandate and, again, does not mean it will be included in a final agreement (which, in any case, could be years away if it is not agreed before the US primaries begin early in 2016)

One high-profile and ongoing ISDS tribunal case is the Uruguayan government versus Philip Morris, the Swiss-based tobacco giant. Philip Morris has accused Uruguay of violating the bilateral investment treaty between Switzerland and Uruguay, saying that anti-smoking legislation (such as Uruguay's 'single presentation' ordinance and its requirement that health warnings cover 80% of a cigarette pack) devalues its cigarette trademarks and investments. The company is seeking financial compensation.