Top German Judges Tear To Shreds EU's Proposed TAFTA/TTIP Investment Court System

from the wrong-way-forward dept

Tue, Feb 9th 2016 3:26am — Glyn Moody

As Techdirt has repeatedly pointed out, one of the most problematic aspects of the TAFTA/TTIP deal being negotiated between the US and the EU is the inclusion of a corporate sovereignty chapter -- officially known as "investor-state dispute settlement" (ISDS). Techdirt isn't the only one worried about it: no less a person than the EU's Trade Commissioner, Cecilia Malmström, said last year that she "shares" the concerns here. Her response was to draw up the new "ICS" -- "Investor Court System -- as an alternative. US interest in ICS is conspicuous by its absence, but Malmström keeps plugging away at the idea, evidently hoping to defuse European opposition to TTIP by getting rid of old-style corporate sovereignty.

That plan has just received a huge setback in the form of an "Opinion on the establishment of an investment tribunal in TTIP". It comes from the German Magistrates Association, which Wikipedia describes as "the largest professional organization of judges and public prosecutors in Germany." So these are not a bunch of know-nothing hippie activists, but serious establishment figures with a deep knowledge of the law. Here's their basic position on Malmström's ICS, translated from the original German by TNI:

The German Magistrates Association [DRB] rejects the proposal of the European Commission to establish an investment court within the framework of the Transatlantic Trade and Investment Partnership (TTIP). The DRB sees neither a legal basis nor a need for such a court.

The clearly implied assumption in the proposal for an International Investment Court that the courts of the EU Member States fail to grant foreign investors effective judicial protection, lacks factual basis. Should the negotiating partners have identified weaknesses in this area in individual EU Member States, these should be taken up with the national legislature and clearly defined. It would then be up to the legislators and those responsible for the judiciary to provide remedy within the proven system of national and European legal protection. Only in this way can the full legal rights to which any law-seeking party in Germany and the European Union is entitled, be guaranteed. The creation of special courts for certain groups of litigants is the wrong way forward.

The judges then spell out in more detail what they see as the problems with the idea, and they are pretty damning. First, they point out that the ICS would have power over the entire European Union and its member states, and that its decisions would be binding: The establishment of an ICS would oblige the European Union and the Member States, upon the conclusion of an agreement, to submit to the jurisdiction of an ICS and the application of certain international procedures chosen by the plaintiff.
Presumably, the same would be true of the US and its state governments, which may be why the USTR is not hugely keen on the idea. Not content with undermining the EU's political system, ICS would do the same to the EU's judiciary too: an ICS would "deprive courts of Member States of their powers in relation to the interpretation and application of European Union law and the Court of its powers to reply, by preliminary ruling, to questions referred by those courts and, consequently, would alter the essential character of the powers which the Treaties confer on the institutions of the European Union and on the Member States and which are indispensable to the preservation of the very nature of European Union law"
The German judges go on to repeat a point many others have made: that there is simply no need for any kind of ISDS or ICS system. Here's why: The Member States are all constitutional states, which provide and guarantee access to justice in all areas where the state has jurisdiction to all law-seeking parties. It is for the Member States to ensure access to justice for all and to ensure feasible access for foreign investors, by providing the courts with the relevant resources. Hence, the establishment of an ICS is the wrong way to guarantee legal certainty.
Finally, the judges note that one of the claimed advantages of the ICS system over the current corporate sovereignty approach, judicial independence, is illusory: Neither the proposed procedure for the appointment of judges of the ICS nor their position meet the international requirements for the independence of courts. As such, the ICS emerges not as an international court, but rather as a permanent court of arbitration.
In other words, Malmström is simply re-branding ISDS, and trying to put lipstick on a pig.

This attack from a very unexpected quarter is a really devastating blow for the ICS idea. It will be hard for Malmström to claim with a straight face that, unlike the current corporate sovereignty system, ICS is a real court, with all the protections that ISDS lacks, because a large number of EU experts in this area have just stated unequivocally that it isn't. The judges' opinion makes it even more likely that the US will reject the ICS idea out of hand, not least because it can now simply point to the German Magistrates Association's analysis as proof that ICS doesn't do what Malmström says it does.

That leaves the really interesting question: where does the EU's Trade Commissioner go from here? She can hardly return to the old-style ISDS for TAFTA/TTIP, since she has been busy rubbishing it in order to promote her new ICS idea. Moreover, this latest rejection comes at just the wrong time, since it is widely expected that corporate sovereignty will be one of the main items on the agenda for the next round of TAFTA/TTIP negotiations. Awkward.

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Filed Under: corporate sovereignty, courts, eu, germany, isds, judicial system, tafta, ttip

27 Comments

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That One Guy (profile), 9 Feb 2016 @ 3:24am

Solving a termite infestation by buying a new house next door
The Member States are all constitutional states, which provide and guarantee access to justice in all areas where the state has jurisdiction to all law-seeking parties. It is for the Member States to ensure access to justice for all and to ensure feasible access for foreign investors, by providing the courts with the relevant resources. Hence, the establishment of an ICS is the wrong way to guarantee legal certainty.

This really needs to be brought up any time someone defends the idea of corporate sovereignty clauses, because of what those clauses are basically saying at the core:

'The local courts do not, or can not be trusted to, provide justice for both parties.'

That is basically the excuse behind corporate sovereignty, that the courts of a given country are not balanced such that corporations would be treated 'fairly' under the law. Yet were this actually the case the solution is simple, and it does not require adding another 'court' to the mix:

Don't do business in that country.

If a given country can't be trusted to act in a fair manner, then corporations should not be doing business in or with that country. A country that no business wants to set up shop in is one that's going to see it's economy take a steep dive, and they'll either recognize the problem and fix it, ensuring fair treatment, or ignore it and suffer for it. Not to mention if they have no interest in ensuring that their own courts are balanced, the idea that they'd care one bit about an 'independent' court's rulings is absurd, and does nothing to solve the problem.

Corporate sovereignty is taking one problem, not even trying to fix it, and instead just adding another problem on top of it.
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- Anonymous Coward, 9 Feb 2016 @ 3:57am
  
  Re: Solving a termite infestation by buying a new house next door
  Very true. The mechanics of free markets as you describe them would eventually change things in the 'unfair' country.
  
  But that takes time.
  
  And for these corporations it takes way too long; they want the new court to be able to force any opposing country. They do not want to wait for the country to change slowly (if at all). They want to enter that market when they choose to.
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  - Anonymous Coward, 9 Feb 2016 @ 4:39am
    
    Re: Re: Solving a termite infestation by buying a new house next door
    Get real. They don't want to enter markets in the EU that are currently hostile to private property ownership and prone to randomly nationalize foreign businesses, because there are no such markets in the EU.
    
    To see what ISDS is really about, note that ISDS overrules the legislative branch. If I'm a national legislature and I pass a law, the national courts mostly will rule in my favor if someone wants to break that law. Under sane circumstances the only exception is if my law is struck down as unconstitutional, say because it violates a right of the accused, or the right to free speech.
    
    ISDS proposes to add a layer of "courts" that can rule in favor of a corporation that challenges that law, and slap the country with a fine, even though due process was followed.
    
    In effect ISDS adds a stealth clause to the Constitution saying that the right to private profit through extremely laissez-faire capitalism will remain unabridged, unhindered in particular by such pesky nuisances as public safety and public health laws, environmental regulations, or etc.
    
    It's an attempt to give corporations the right to do anything they can financially afford to do, in other words, and the hell with the environment, the people, sound public policy, or any notion of civics.
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    - Anonymous Coward, 9 Feb 2016 @ 4:51am
      
      Re: Re: Re: Solving a termite infestation by buying a new house next door
      And make no mistake about what will happen if TTIP's ISDS sees the light of day in Europe.
      
      Some American corporation will buy up some land near a little village in Norway or Switzerland or France and put a tall, barbed-wire fence around it, then drill wells and start pumping fluids into them whose ingredients they will insist are "a trade secret", refusing to disclose them even to the government there.
      
      Sometime later, the well-water in the village will turn purple, catch on fire, and start causing cancer, and there won't be a damn thing anyone can do about it legally.
      
      The food market will be flooded with imported meat of questionable provenance containing high levels of hormones. When independent labs report this, they'll be smeared in the press and opposed with a slick advertising campaign. When government labs report it they'll be sued out of existence in an ISDS tribunal. When there's an outbreak of E. coli nobody will be able to do anything, because profit uber alles.
      
      A toy will hit the market that contains chemicals that turn out to be harmful to childhood brain development ...
      
      You get the picture.
      
      How can I possibly know this, you ask?
      
      Because these things, and more, already happen inside of the US, and it's the ability to do business that way that large US corporations and their wealthy backers wish to export around the world, that's why.
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      - Anonymous Coward, 9 Feb 2016 @ 5:02am
        
        Re: Re: Re: Re: Solving a termite infestation by buying a new house next door
        And then there's what will happen to political rights in the EU, where presently there's a vibrant array of different and varied political parties, many of them on the bona fide left.
        
        First, people will become accustomed to their governments being increasingly powerless to stop the carcinogenic purple well-water and the contaminated meat.
        
        Meanwhile, ISDS challenges will be raised to national laws limiting concentration of media ownership, and will be successful. National broadcasters will be attacked in ISDS tribunals on the grounds that "this heavily subsidized 'public broadcaster' is unfair competition that unnecessarily hinders good honest profit-seeking private entrepreneurship", and will, one by one, be shut down or privatized to stem the financial hemmorhage from mounting steep ISDS fines.
        
        Rupert Murdoch will then quietly buy out most of the media, and starting from early in this process, suppress the story of the media being quietly taken over. Gradually, over many years, the media will all start to sound the same, and it will be the familiar, odious sound of Fox News.
        
        Sometime after that, the power of the political left in the EU will be broken, and you will see lots of dismal alternatives resembling the US Republican Party and the (non-Sanders wing of the) US Democratic Party replace the formerly vibrant multi-vendor marketplace.
        
        And then come voting restrictions limiting the ability of the poor to actually use the franchise, and the immigration changes that nominally are restrictive but result in fact in floods of cheap labor, and the ag-gag laws, and stringent "anti-industrial-espionage" laws affecting anyone sampling river water near a fracking well, and ...
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        Wendy Cockcroft, 9 Feb 2016 @ 6:05am
        
        Re: Re: Re: Re: Re: Solving a termite infestation by buying a new house next door
        I don't know if you've noticed this but Red Scare politics is going mainstream in Europe at the moment, particularly in the UK. You know it's bad when a LABOUR MP invokes "those damn Communists!" when trying to head off a debate about scrutinising TTIP.
        
        http://38degreesmanchester.org.uk/blog/we-are-making-a-difference/
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        That One Guy (profile), 9 Feb 2016 @ 6:14am
        
        Re: Re: Re: Re: Re: Re: Solving a termite infestation by buying a new house next door
        Really? Now that's desperation if they're pulling out the communist boogieman, though I guess the 'modern' 'because terrorist' doesn't quite fit to try and shut down debate over the agreement.
        
        Which is not to say that I don't expect that they won't use it, it's just going to take them a bit more work to do so.
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        Wendy Cockcroft, 9 Feb 2016 @ 7:45am
        
        Re: Re: Re: Re: Re: Re: Re: Solving a termite infestation by buying a new house next door
        Well most of us are too savvy to fall for it and I'm quick to call it out whenever I see it because the last thing we need is to become as polarised as people are in the States.
        
        That said, the Left over here is largely noisy and ineffectual because they're always bleating on about class, which annoys me intensely because none of it involves challenging the neoliberal consensus and that's what we need.
        
        Getting TTIP and CETA onto the table in Parliament instead of just waving it through was a big victory for us and the best thing is that it was a cross-party thing, not a left or a right wing thing. I was most encouraged to see certain Conservative MPs come out on our side because they believe in democracy.
        
        I remember they tried to invoke the terrorist boogeyman over ACTA and that fell flat (wasn't that a Dutch chap?) but don't be surprised to see anyone who is flat out against CETA and TTIP being labelled "terrorist" and having that used to try to shove it through. E.g. "If you don't support this, you're not only an anti-American commie pinko tree-hugging hippie, you're a terrorist, too!"
        
        Damn, I'm still shocked that a Labour MP called up the commie boogeyman. He's in the wrong party!
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        Anonymous Coward, 9 Feb 2016 @ 12:58pm
        
        Re: Re: Re: Re: Re: Re: Solving a termite infestation by buying a new house next door
        What we need right now is Green Scare politics. Green, the color of money. Scare, as in "the greedy capitalists are scheming to destroy liberty for all but the 0.01% again!"
        
        After all, if it's bad for the communists to scheme to destroy liberty for all but the top echelons of a Party apparatus, then it's equally bad for the capitalists to scheme to destroy liberty for all but the top echelons of the Fortune 500, right?
        [ link to this | view in chronology ]
        
        Wendy Cockcroft, 10 Feb 2016 @ 2:34am
        
        Re: Re: Re: Re: Re: Re: Re: Solving a termite infestation by buying a new house next door
        Shhhhh! We're not supposed to think for ourselves!
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      - Anonymous Coward, 9 Feb 2016 @ 9:13am
        
        Re: Re: Re: Re: Solving a termite infestation by buying a new house next door
        and then of course when someone tries to put a stop to all the death and destruction they get sued for harming the company's profits...
        
        This is about as unsurprising as an episode of Tales Of The Unexpected!
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Lisboeta, 9 Feb 2016 @ 3:56am

Kudos to Germany. Dare I hope that equivalent bodies in other affected countries will issue similar statements? Indeed, the whole notion of ICS casts aspersions on the validity, independence and status of those nations' judiciaries. Why aren't they all getting publicly riled up? (Yes, it's probably political interference....)
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Yes, I know I'm commenting anonymously, 9 Feb 2016 @ 4:01am

Self-interest?
"These judges just want to keep the juicy cases in their own courts" will be the excuse of the corporate entitlement maximalists to dismiss this opinion as insignifiant.
(Even though all the points are valid.)
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- A. Lauridsen, 9 Feb 2016 @ 4:09am
  
  Re: Self-interest?
  That may be the case, it doesn't reduce the strength of their argument, though.
  
  Every EU country has a strong and independent judicial system, that is one of the most basic requirements, if not they would not have been offered membership.
  
  There is no need for neither ISDS nor ICS in any country where there the judicial system is strong and independent of the legislative and judicial powers.
  
  ISDS AND ICS is a travesty to democracy.
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WTF, 9 Feb 2016 @ 4:19am

know-nothing hippie activists?
How much hubris is require to write "know-nothing hippie activists"?
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- Jerry, 9 Feb 2016 @ 4:26am
  
  Re: know-nothing hippie activists?
  Yeah I know, it totally undermined the whole article. You realize immediately the write is a card-carrying douche bag.
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  - That One Guy (profile), 9 Feb 2016 @ 4:38am
    
    Re: Re: know-nothing hippie activists?
    On the one hand I was tempted to wait and see how many more 'different' people you'd have 'agree' with you before you caught on, but on the other hand I just have to congratulate you for completely missing the point in your attempt to focus just on a single line, ignoring that it's not a dig at the judges, but against those who try and dismiss concerns over corporate sovereignty by categorizing them along those lines.
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    - AJ, 9 Feb 2016 @ 5:11am
      
      Re: Re: Re: know-nothing hippie activists?
      I think I just witnessed the internet version of sticking your foot in someone's ass.. well done That One Guy.....
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  - klaus (profile), 9 Feb 2016 @ 5:19am
    
    Re: Re: know-nothing hippie activists?
    Wait... did you just change your username so you could agree with your own post?
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    - Wendy Cockcroft, 10 Feb 2016 @ 2:31am
      
      Re: Re: Re: know-nothing hippie activists?
      I think "WTF" means "when trolling fails." LOL!
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    - Anonymous Coward, 10 Feb 2016 @ 3:35am
      
      Re: Re: Re: know-nothing hippie activists?
      Yeah, protip: when engaging in sockpuppetry on sites with anon comments, reset your DHCP lease between the first post and the "reply", or use Tor or something for one of them, or for both with "new Tor circuit for this site" in between.
      
      Failure to do so will reveal you to all and sundry as a rank n00b.
      
      And no, I will not explain in more technical detail what a "DHCP lease" is or how to get and use Tor. Last thing we need is all the rank n00bs thinking they're experts or something. A little knowledge is a dangerous thing. :)
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      - Anonymous Coward, 10 Feb 2016 @ 3:38am
        
        Re: Re: Re: Re: know-nothing hippie activists?
        I concur.
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Anonymous Coward, 9 Feb 2016 @ 4:25am

Maybe now Americans will start opposing the TPP even more, since it has the same type of corporate Court arbitration.
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Anonymous Coward, 9 Feb 2016 @ 6:14am

the whole idea of the 'negotiations' (and i use the term very loosely!) by USTR and the EU Commission, is to put in place a way of completely substituting what businesses want over the needs and protections of every citizen within, not just the countries involved but the entire World, throwing law and justice right out the window, forever! and it would be forever, because once in, there isn't a hope in hell of ISDS or any derivative being removed/replaced by a proper legal system again! this goes back to a point i made before about how the governments of almost all countries are now run by Conservative-leaning parties that want everything possible for businesses to ensure maximum profits, even when it means removing every legal right and protection for every citizen. the only way to stop this, not just now but in the future, is to not allow any sort of negotiation in secret! every negotiation MUST involve people powered groups, people protection groups, health and safety groups, etc, etc, etc. if these 'deals' are allowed to continue in the same way as others have or are, the planet will become nothing but a giant corporation, where the most important thing is making money and a few people extremely rich and powerful and the least important things are everyone else and the Planet! remember, this is the only place we have to live. once it's gone, there's no bringing it back! and if there is life anywhere else in the galaxy, if they have any sense, they'll keep us the fuck away from them!!
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Anonymous Coward, 9 Feb 2016 @ 7:50am

your rulers have sold you for a seat in the new world order

watch braveheart again
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Anonymous Anonymous Coward, 9 Feb 2016 @ 9:13am

What is the meaning of sovereign?
One day last week Scott Greenfield writing at Mimesis Law about a totally unrelated subject, and in response to a comment stated
"No sovereign can bind another sovereign."
Could it be that these German judges are just looking at things in this manner? I also wonder if this is actually true in the international law space?
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- Wendy Cockcroft, 10 Feb 2016 @ 2:33am
  
  Re: What is the meaning of sovereign?
  In the international law space you may find that the Golden Rule applies: he who has the gold makes the rules. Also, might makes right.
  
  I have yet to see any of the major powers ever get sanctioned in any meaningful way for the crap they've pulled.
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