TOKYO, Aug. 27 ─ Successful conclusion of the Japan and EU free trade agreement by the end of 2017 seems increasingly doubtful as the European Commission insists it will not agree to include a controversial investment protection provision in the accord.
“It is worrying; we have major differences,” said a senior Japanese government official on condition of anonymity.
The so-called investor state dispute settlement (ISDS) provision allows foreign investors or companies to sue governments over regulations if they allegedly harm their investments.
Tokyo is eager to include the ISDS, which is also part of the Trans-Pacific Partnership (TPP) and other trade agreements with Japan.
Brussels wants the ISDS system to be replaced with a new system as some EU members fear the ISDS provision is a threat to their sovereignty.
The EU has pushed to create a new permanent international investment court with independent judges to adjudicate disputes with governments. Such a provision has been included already in a trade agreement with Canada, which will soon go into force.
In July, Japan and the EU secured their trade agreement in principle. It would open up the Japanese market to the EU’s key farm exports, while the two agreed to take the ISDS issue off the negotiating table to tackle later this year.
Tokyo and Brussels hope to reach a compromise by the middle of 2018 at the latest, before the next European Parliament elections takes place in 2019, officials said.