It is expected to contribute an extra €300bn a year to the global economy, and fundamentally shift the balance of geopolitical power. But what does the proposed Transatlantic Trade and Investment Partnership trade deal mean for the legal market on both sides of the Pond? Alex Newman speaks to the lawyers getting involved

It has been billed as the largest free trade agreement in history, yet many trade lawyers are still in the dark when it comes to the details of the Transatlantic Trade and Investment Partnership (TTIP) deal. 

TTIP, which was announced last summer and is now being negotiated, will for the first time create a trade treaty between the US and the EU in its entirety. Designed to drive growth by removing trade barriers and tariffs, independent research cited by the European Commission suggests the annual benefits could be as much as €120bn (£99.9bn) to the EU economy, €90bn (£74.9bn) to the US and €100bn (£83.2bn) to the rest of the world.

"Everybody is going to be affected by this, and it really will change the balance of political power," says Ross Denton, a UK-qualified partner in Baker & McKenzie's European competition and trade department. "In recent years the balance [of US trade] has been gradually shifting towards Asia, because they don't have the same heavy tariffs. But if you eliminate most tariffs between the EU and US, then this will have huge ramifications for business."

While no one is in any doubt that TTIP will be transformative, how that transformation will look remains unclear. "It's sort of like Japanese or German grammar," quips one London-based partner. "We're never going to get the full meaning until the very end of the sentence."

Significant workflows

While the treaty will not have a large impact on the legal services market itself, it is set to create significant workflows for law firms. It is little surprise that it has already piqued the interest of an increasing number of trade lawyers clustered in Washington, Brussels and London; a raft of lawyers, lobbyists and other professional services firms are already involved in negotiations. Then there is the interest it has stirred up among clients keen to know what the treaty will mean for them if and when it is implemented. Finally, there is the hotly debated area of investor-state dispute settlements (I-SDSs). So which firms are already involved and who will be best placed to advise if the treaty is implemented?

The concept of the transatlantic trade agreement is nothing new, but negotiations were given fresh impetus by the continuing economic crisis and the World Trade Organisation's Doha Development Round – the long-stalled talks to lower trade barriers around the world. With the EU and US each armed with about 30 negotiators, the TTIP discussions began in July 2013 and are about to enter their fourth round.

As long as contentious points can be dealt with, the parties hope to reach an agreement that will usher in significant reductions in costs for companies, investors and other traders, by eliminating customs duties and removing or standardising testing or certification requirements. "Companies could also benefit from the agreement as it would bring a more consistent level of protection for corporate assets," suggests Brussels-based Sidley Austin partner Arnoud Willems, who says his team is "actively involved" in the negotiations. 

"Strong chapters on intellectual property, including trade secrets and investment protection are being discussed," he adds. "In particular, companies may get a direct right of action against measures taken by the EU, its member states or the US that would devalue cross-border investments."

The biggest challenge at present is that the negotiation process appears too opaque, meaning there is not enough insight into what is being discussed and what is likely to be introduced. "The latest update said nothing, and it's fair to say there is little transparency on the European side," says London-based Baker & McKenzie of counsel Jennifer Revis. 

Perhaps working in the favour of lawyers and their clients is public demand that the content of the negotiations be transparent. "There is a sense that the agreement would be rejected by civil society if it was perceived as a done deal, or that only the interests of big corporations could be represented," says Willems. "Stakeholder meetings and consultations have been organised, and negotiators engage continuously with various stakeholders in formal and informal settings."

Call for advice

With this perceived lack of transparency and the fact that negotiations are still ongoing, lawyers are limited on the advice they can give their clients. Nevertheless, there is still a lot of counsel being sought. Several firms are being asked by clients to provide briefings or monitoring services to help assess the impact of various policy options being considered by the negotiators in sectors such as agriculture, chemicals, financial services and cloud computing. Corporates in some industries have also approached some trade-focused firms with industry-specific questions, concerning, for example, privacy and data migration, hoping to push particular provisions into the agreement itself.

Much of the work is being carried out by only a small handful of firms, with those in the US generally favoured over their UK rivals. Among the early winners are firms with strong trade teams in Washington and Europe, such as Hogan Lovells and Covington & Burling. Meanwhile, Sidley Austin also carries out work for third-party countries interested in the negotiations and which are keen to understand how the treaty might impact their own free trade agreements with either the US or the EU.

When it comes to lobbying work, lawyers are taking various roles. "At a basic level, some law firms simply follow the negotiations closely and are able to provide reliable monitoring services," explains Willems. "At the other end of the spectrum, the most sophisticated clients would ask law firms to craft language that could be included in the agreement for their benefit. This exercise is done on the basis of the firm's knowledge of previous free trade agreements and dispute settlement procedures, or creatively for novel issues." 

The rise of non-partner consultants in the trade practices of several top US firms may go some way to explaining how this intermediary role is achieved, and how this 'crafted' language could end up in the agreement. Examples of non-lawyer consultants, all of whom have EU-level diplomatic or political experience, include: Jean De Ruyt, Wim van Velzen and Paul Adamson, who are all senior European policy advisers at Covington, and Hugo Paemen, a consultant at Hogan Lovells.

Investor-state dispute settlements

One area of the proposed treaty is already garnering huge public interest, despite the lack of detail. I-SDSs – a staple of trade agreements that allow investors to initiate dispute proceedings against governments that may have broken treaties – have come under attack. In a letter to the heads of the EU and US trade delegations, a coalition of NGOs in December alleged that I-SDSs would force "governments to compensate corporations for public health, environmental and other public interest policies and government actions", and that TTIP would lead to a dramatic increase in the use of such disputes. Associated with this are complaints that disputes lawyers could benefit from a surge of arbitration work from their client lists in this area.

Several lawyers have dismissed the claims, both that there would be an increase in disputes, and that such mechanisms are in any way anti-democratic. "The process, which we international trade lawyers have made a practice out of, is that if you've got an agreement about investment rules and this is broken, then there should be fair recourse for the injured party," says Bakers' Denton. "I can see the fact that it is a closed process can create the element of speculation or suspicion. But in practice it is not really a case of corporations having a say over EU or US law."

Stuart Eizenstat, Covington's international practice head and a former US ambassador to the EU, thinks the NGOs' interest in the dispute settlements is for want of a better attack point. He says: "If anything, the EU has more elevated environmental protection and labour regulations than the US, and these would not be compromised because, even in a case where the arbitrators find there was a violation by a state, the state is sovereign and does not have to change law or regulation. Although of course it might have to pay compensation.

"The NGOs are losing the forest for the trees. When I worked in the Clinton administration we promoted US investment in developing countries, and they in turn wanted that investment because it invariably creates jobs and raises environmental and labour standards. One of the ways you incentivise this investment is to have a forum for resolving bilateral trade and investment disputes."

Most lawyers watching the negotiations from a disputes angle also believe that both the EU and US will uphold high standards of transparency in drafting the provisions on settlement mechanisms, and that TTIP may include avenues to seek diplomatic or domestic remedies before a formal arbitration. Eizenstat says he has even told the business community in Washington that I-SDSs "provide some protection, but are not a cure-all".

Fellow Washington-based Covington disputes partner Marney Cheek (pictured, below) says: "Advisers with a lot of experience in this field will be watching these developments very closely. But bringing an I-SDS claim is usually a last resort, and will be rare given the diplomatic solutions that could be pursued. Sure, you'll see some new disputes arise, but I don't think it will lead to a boom."

Implementation

Of course the real work will largely begin once the treaty is implemented, which trade partners argue could happen as early as the end of this year, or as late as 2017. "After the conclusion, it may bring quite a lot of work," says Jones Day government regulation partner Renato Antonini. "The main challenge for corporates and their advisers will be harmonisation and assistance with compliance programmes. 

This might not always involve great legal complexity but businesses will require it, with some areas of procurement and intellectual property likely to be particularly interesting."

This view is seconded by Revis, who suggests TTIP will result in an upsurge in compliance work, which happened after the signing of the EU-Korea Free Trade Agreement. "Two important points on this are that the US is very active in the compliance action stakes and the penalties for non-compliance are potentially significant," she says. "There is generally a high level of non-compliance with regards to claims for preferential treatment of imports, because the rules can be complex to apply."

As to which firms are best placed to provide this advice, there is some consensus that those with well-connected trade practices in Washington, London, Paris and Brussels will do well, with US firms expected to have the upper hand. 

"There are only a handful of firms that have the scale and the expertise to take on international trade matters," Willems says. "Historically, UK firms have been less successful at penetrating the US market than the other way around, which means US firms are best placed to provide reliable advice on regulatory frameworks on both sides of the Atlantic."

Denton, who believes law firms will also have to fight off other professional services from muscling in on the compliance work, adds: "We were sort of musing with a client on why London isn't more active on the trade front. We're a bit mystified as to why London-based service provision is so light. But that's a good thing for us!"

However, magic circle partners are also predicting an increase in work in this field despite their smaller US presences. As one partner at a magic circle firm comments: "A Washington base is useful, which the leading UK firms have, but equally there's no reason why a lot of this work couldn't be done from London and Brussels."

For now, the advisory winners and losers are yet to be decided. But with so much political and corporate skin already in the game, it looks certain that TTIP will become an area of escalating focus for lawyers too.

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Key areas for lawyers to negotiate

• Rules of origin
• Regulatory cooperation in financial services
• Investor-state dispute settlements
• Public procurement
• Intellectual property
• Competition policy
• Dispute settlement
• SMEs

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