EU Drops Corporate Sovereignty For Internal Bilateral Agreements, But Top Court Adviser Says It Can Be Used In CETA

from the one-step-forward,-one-step-back dept

As Techdirt noted last September, corporate sovereignty -- the ability of companies to sue entire countries for allegedly lost profits -- has been on the wane recently. One important factor within the EU was a decision earlier last year by the region's top court that investor-state dispute settlement (ISDS) -- the official name for corporate sovereignty -- could not be used for investment deals within the EU. The reasoning was that ISDS courts represented a legal system outside EU law, which was not permitted when dealing with internal EU matters. As a direct consequence of that ruling, the Member States of the EU have just issued a declaration on the legal consequences (pdf). Essentially, these are that all bilateral investment treaties between Member States will be cancelled, and that corporate sovereignty claims can no longer be brought over internal EU matters.

However, that leaves an important question: what about trade deals between the EU and non-EU nations -- can they include ISDS chapters? In order to settle this issue, Belgium asked the Court of Justice of the European Union (CJEU) whether the corporate sovereignty chapter of CETA, the trade deal between the EU and Canada, was compatible with EU law. As well as clarifying the situation for CETA, this would also provide definitive guidance on the legality of ISDS in past and future trade deals. As is usual in cases sent to the CJEU, one of the court's top advisers general offers a preliminary opinion, which has just been published (pdf):

In today's Opinion, Advocate General Yves Bot holds that the mechanism for the settlement of disputes is compatible with the EU Treaty, the [Treaty on the Functioning of the European Union] and the Charter of Fundamental Rights of the European Union.

His argument is that ISDS courts can't bind national courts, so the latter's autonomy is not threatened, and thus corporate sovereignty chapters are compatible with EU legislation. That may be true as a matter of law, but ignores the political reality of corporate sovereignty. If huge fines are imposed by ISDS tribunals unless proposed changes to laws are dropped, governments frequently roll over and do as the corporations wish, because it seems the easier, cheaper option. So even though in theory corporate sovereignty cases can't override national laws, in practice that's often the outcome.

However, this is only the Advocate General's view, which isn't necessarily followed in the main CJEU ruling. It will be interesting to see whether the EU's top court extends its earlier ruling on intra-EU investment agreements, and throws out ISDS for all trade deals, or whether it agrees with Advocate General Bot and permits corporate sovereignty chapters for things like CETA.

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Filed Under: ceta, cjeu, corporate sovereignty, eu, isds, trade agreements