Top Court Throws Out Corporate Sovereignty For All Trade Deals Within EU; Those Involving Other Nations Likely To Suffer Same Fate

from the ISDS-is-dying dept

Techdirt has been writing about what the world calls investor-state dispute settlement (ISDS) for over five years. But early on, we decided that the harmless-sounding initials "ISDS" didn't really convey the seriousness of what was going on here. Instead, we've been using the phrase "corporate sovereignty", because that is what ISDS is: an assertion that the rights of corporates can trump those of entire countries. That's achieved by means of special tribunals that exist outside national legal systems, and which can effectively over-rule them. Many people think this is a really bad idea, and in an important new ruling, the EU's top court has just agreed (pdf):

the Court concludes that the arbitration clause in the BIT [bilateral investment treaty] has an adverse effect on the autonomy of EU law, and is therefore incompatible with EU law.

The specifics of the case concern a dispute between a Dutch insurance company and the Slovak government:

In 2004 Slovakia opened its sickness insurance market to private investors. Achmea, an undertaking belonging to a Netherlands insurance group, set up a subsidiary in Slovakia with a view to offering private sickness insurance services there. However, in 2006 Slovakia partly reversed the liberalisation of its sickness insurance market, and prohibited in particular the distribution of profits generated by sickness insurance activities.

In 2008 Achmea brought arbitration proceedings against Slovakia under the BIT, on the ground that the prohibition was contrary to the agreement and had caused it financial damage. In 2012 the arbitral tribunal found that Slovakia had indeed infringed the BIT, and ordered it to pay Achmea damages in the amount of approximately €22.1 million.

This is a classic case of a government changing its policy, as governments often do, and a company demanding compensation as a result. What this -- and the general theory behind ISDS -- overlooks is that business is by its nature risky; profits are the reward for taking on risks successfully. Corporate sovereignty demands free insurance for foreign investors, guaranteeing that they will not lose out, whatever happens, without actually needing to pay for a formal insurance policy (which is in any case available for those that want such protection). That kind of guarantee is not something that members of the public ever get for free, so it's not clear why corporates should either.

In this case, the Slovak government brought an action in a German court asking for the ISDS award to be set aside. The German court recognized that the case raised important general issues, and referred it to the EU's highest court, the Court of Justice of the European Union (CJEU), for a ruling on the underlying law. The CJEU confirmed something that Techdirt and many others have pointed out for years -- that the arbitration tribunal was outside the entire EU system of law:

by concluding the BIT, Slovakia and the Netherlands established a mechanism for settling disputes which is not capable of ensuring that those disputes will be decided by a court within the judicial system of the EU, only such a court being able to ensure the full effectiveness of EU law.

As such, it was incompatible with EU law, and therefore not valid. That's great news for the Slovak government, and for other Member States that have been hit or threatened with huge corporate sovereignty penalties because of similar intra-EU BITs. But much more significant than the specific result is the general reasoning of the court. Given that the ISDS tribunal in the dispute between the Slovak government and the Dutch insurance company was outside the EU system of law, and therefore deemed illegal, it would seem that any similar arbitration tribunal considering corporate sovereignty cases would also be illegal under EU law. That would apply not just to those adjudicating disputes between EU countries and EU companies, but also to any trade deal that included ISDS. Potentially, then, the CJEU's ruling means that every corporate sovereignty chapter in every EU trade deal is illegal, and unenforceable.

We should find out soon enough. In December last year, Belgium submitted a request to the CJEU asking it to rule on whether the European Union's updated version of ISDS, the Investment Court System (ICS), was compatible with the EU's core treaties. Since the ICS too is outside the EU's main legal system, it's hard to see how the CJEU could rule that it is compatible, assuming it applies the logic of the case discussed above. If the ICS falls, then ISDS will be effectively dead in the EU, and probably dying everywhere else.

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

How We Got To The Point That Hollywood Is Trying To Attack The Internet Via NAFTA

from the a-little-history-lesson dept

Visit EveryoneCreates.org to read stories of creation empowered by the internet, and share your own! »

Last week we announced our new site EveryoneCreates.org, featuring stories from many different creators of music, books, movies and more about how important the internet and fair use have been to their creations. As we noted, the reason for the site is that the legacy copyright gatekeepers at the MPAA and the RIAA have been using the Trump-requested NAFTA renegotiations to try to undermine both fair use and internet safe harbors by positing a totally false narrative that the internet has somehow "harmed" content creators.

Yet, as we know, and as the stories from various artists show, nothing is further from the truth. For most artists and content creators, the internet has been a huge boon. It has helped them create new art, share it and distribute it to other people, build a fan base and connect with them, and make money selling either their work or related products and services. As we've discussed before, in the past, for most artists, if you did not find a giant gatekeeper to take you on, you were completely out of the market. There was very little "long tail" to be found in most creative industries, because you either were "chosen" by a gatekeeper or you went home and did something else. But the internet has changed that. It has allowed people to go directly to their audiences, or to partner with platforms that help anyone create, distribute, promote and monetize. Indeed, the internet has undoubtedly helped everyone reading this to create art -- whether for profit or just for fun. And if that's the case with you, please share your story.

But it is worth taking a step back and asking an even larger question: how the hell did we get here? How did we get to the point that the MPAA and the RIAA are using NAFTA negotiations to try to undermine the internet. Rest assured: there's a long, long history at play here, and it's important to learn about it. The idea that you can or should regulate the internet or intellectual property in trade agreements should seem strange to most people -- especially as most trade agreements these days are about increasing free trade by removing barriers to trade, and copyright by its very nature is mercantile-style trade protectionism that places artificial limits and costs on trade that might otherwise be cheaper.

An excellent history on this topic comes from the aptly named 2002 book Information Feudalism: Who Owns the Knowledge Economy by Peter Drahos and John Braithweaite. It tells the story of how a concerted effort by legacy copyright maximalist organizations laid the groundwork for making sure that copyrights and patents were always included in trade agreements, by getting them in as a key part of the World Trade Organization and by the creation of TRIPS -- Trade-Related Aspects of Intellectual Property Rights. The book details how the legacy industries turned "intellectual property" from a question of benefiting the public to a solely commercial arena of corporate ownership and trade.

Once that was in place, these same industries wasted little time in exploiting the reframing of issues around copyright and patents. Famously, the DMCA itself was created in this manner. The record labels and movie studios had a friend in the Clinton White House in Bruce Lehman, who wrote a white paper in 1995 requesting draconian changes to copyright law targeting the internet. However, he found little support for it in Congress. Five years ago, Lehman himself admitted that when Congress refused to act he did "an end-run around Congress" by going to Geneva and pushing for a trade agreement via the World Intellectual Property Organization (WIPO) which required DMCA-like copyright rules.

With that treaty in hand, Lehman and his Hollywood friends came back to Congress, insisting that our "international obligations" now required Congress to create and pass the DMCA, or we'd suddenly face all sorts of trade and diplomatic problems for failing to live up to those "international obligations" that they themselves had put into the trade agreement. Indeed, ever since then, nearly every international trade agreement has included some crazy provisions related to copyright and patents and other IP rights -- all designed to effectively launder these laws through the highly opaque international trade negotiation process, and then insist that legislatures in various countries simply must ratchet up their laws to meet those obligations.

Given all that, there's at least some irony in the fact that these same groups that forced the DMCA on Congress through an international trade agreement back in the mid-1990s are now trying to use a different trade agreement 20 years later to force changes to that very same law (and others). Once again, the process is opaque. And once again, the industry is well connected and represented on a variety of the "Industry Trade Advisory Committees" (ITACs), giving them much greater access to the details of the negotiations while the public is kept in the dark.

But the history here is clear. Moving copyright into trade agreements was a purposeful move, pushed for by legacy industries so they could promote their favored protectionist laws around the globe, in part by moving them away from being designed for the public's benefit and towards a world in which information and knowledge was considered to be privatized, owned, and locked up by default. It ignored the fact that, often, the public can benefit the most when information is open and widely shared. And, decades later, we're still dealing with the fallout from these bad decisions.

And that's why it's so important for policy makers to understand that it's complete hogwash to argue that the RIAA and MPAA are "representing artists" in trying to undermine the internet this way. Most artists recognize that the internet and various platforms are a key part of their ability to create, distribute, share, and support their artwork these days -- and they are not being represented at the NAFTA negotiating table.

Share your story at EveryoneCreates.org to let policymakers know how important an open internet and fair use is to your own creativity.

Filed Under: cda 230, copyright, dmca 512, everyone creates, fair use, international trade agreements, patents, safe harbors, trade agreements, wipo, wto

Top German Judges Slam EU Plans To Create Global Court To Enforce Corporate Sovereignty

from the let's-just-make-up-the-laws-as-we-go-along dept

A few weeks ago, we wrote how many -- even the US Trade Representative, Robert Lighthizer -- seem to think it's time for corporate sovereignty, also called "investor-state dispute settlement" (ISDS), to go. For some reason the European Commission disagrees. As Techdirt readers may recall, after receiving a bloody nose in a public consultation about corporate sovereignty, the Commission announced to great fanfare that it was "replacing" ISDS with something called the Investment Court System (ICS). In fact, this amounted to little more than putting lipstick on the ISDS pig, since ICS suffered from the same fundamental flaw: it gave companies unique rights to sue countries in a supra-national court. The EU is still plugging away at the ICS idea, and it now wants to go further by creating a truly global corporate sovereignty system enforced by a new Multilateral Investment Court (pdf), an initiative formally launched a couple of months ago:

the [EU's] approach since 2015 has been to institutionalise the system for the resolution of investment disputes in EU trade and investment agreements through the inclusion of the Investment Court System (ICS). However, due to its bilateral nature, the ICS cannot fully address all the aforementioned problems. Moreover, the inclusion of ICSs in [EU] agreements has costs in terms of administrative complexity and budgetary impact.

The multilateral investment court initiative aims at setting up a framework for the resolution of international investment disputes that is permanent, independent and legitimate; predictable in delivering consistent case-law; allowing for an appeal of decisions; cost-effective; transparent and efficient proceedings and allowing for third party interventions (including for example interested environmental or labour organisations).

When the ICS was first proposed, the German Association of Judges, which Wikipedia describes as "the largest professional organization of judges and public prosecutors in Germany", ripped it to shreds. The same august body has just meted out similar treatment to the Multilateral Investment Court, and has asked the German government "to deny the European Commission the required mandate to negotiate the establishment of a Multinational Investment Court (MIC)."

The document, originally in German, and available in an unofficial translation by EuroMinds Linguistics (pdf), contains a devastating analysis of the MIC and its flaws. For example, it points out that international investment protection law is characterized by a "lack of substantive law principles". That is, there are no global investment laws that the MIC could apply when deciding cases. The MIC would effectively be making it up as it went along. The German Association of Judges points out why the situation would be even worse for the MIC than for the ICS or ISDS tribunals:

Because of [the arbitration courts'] position, they can override decisions of national administrations and courts in favour of an investor. This exercise of power, exercised by an arbitral tribunal, has thus far been limited to the enforcement of individual arbitral awards. However, it would be considerably strengthened if the arbitral tribunals were upgraded to an MIC with permanent jurisdiction, which would operate under an international convention. Together with the investment protection agreements, as part of European law, the MIC Convention will be recognised by international law and can thus bind national courts. This will make the MIC a standard-setting organization.

In other words, the MIC would be able to create what amount to global laws, without any democratic input or scrutiny. The document also explains -- as many have before -- why special investor courts are unnecessary:

The protection of individual goods, including those of investors, is the daily work of the judges of all judicial courts and instances. In principle, these rights can also be claimed by foreign investors.

...

the best investor protection is a functioning, uncorrupted administration and jurisdiction and a democratic legislative process. It is the task of every investor to determine this; they can avoid investments in countries that do not fulfil these standards. If they, nonetheless, take the risk, no special protection is necessary.

Obvious really.

Recognizing that the German government and European Commission will probably try to go ahead with the MIC initiative anyway, the German Association of Judges makes a number of sensible suggestions for improving the idea, and limiting the possible damage. However, the real solution would be for the EU to join other, wiser nations and abolish the system completely.

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Filed Under: corporate soveregnty, eu, ics, isds, trade agreements

Lawyers Gearing Up To Hit UK With Corporate Sovereignty Claims Totalling Billions Of Dollars Over Brexit

from the nobody-painted-that-on-the-side-of-a-bus dept

We're not hearing much about corporate sovereignty -- also known as "investment state dispute settlement" (ISDS) -- these days. It's definitely still a problem, especially for smaller countries. But the big fights over the inclusion of corporate sovereignty chapters in the two global trade deals -- the Transatlantic Trade and Investment Partnership (TTIP), and the Trans-Pacific Partnership (TPP) agreement -- have been put on hold for the moment. That's for the simple reason that both TPP and TTIP are in a kind of limbo following the election of Donald Trump as US President with his anti-free trade platform.

TTIP seems completely moribund, whereas TPP -- re-branded as TPP11 to reflect the fact that there are only 11 countries now that the US has pulled out -- is showing the odd twitch of life. A recent article in the Canadian newspaper National Post points out that the departure of the US might even allow some of the worst bits of TPP to be jettisoned:

the Americans insisted on longer intellectual property patent terms and stronger copyright regulations than many countries wanted. Canada will now argue for shorter patent terms, in support of its generic drug sector and in an attempt to keep drug costs down.

Canada is also keen to water down the investor-state dispute settlement negotiated by the U.S. in the original deal, and bolster the state's right to regulate in the public interest.

The move by Canada to rein in some of the worst excesses of corporate sovereignty follows the EU's lead in this area. As Techdirt reported, during the TTIP negotiations between the EU and US, the former suggested replacing the old ISDS with a "new" Investment Court System (ICS). Although the US was not interested, Canada later agreed to this slightly watered-down version for the CETA trade deal with the EU.

The ICS still doesn't exist, and is still something of a mystery in terms of how it will work. It was proposed in an attempt to head off massive public concern about corporations being able to sue governments -- and thus taxpayers -- for huge sums, completely outside the normal legal system, and subject to few constraints. But even ICS was not enough to stop the Belgian region of Wallonia nearly de-railing the CETA deal at the last moment.

Anxious to avoid that happening again, the President of the European Commission, Jean-Claude Juncker, had a rather radical suggestion in his recent State of the Union address. In order to make future trade deals easier to push through the legislative process in the EU, Juncker proposed removing investment protection chapters from them completely, and negotiating a separate deal covering this aspect. An article on Politico.eu explains the thinking behind that move:

Slicing out investment protection will give [Juncker] an immediate legal advantage. Under EU law, a trade deal without investment clauses could be ratified exclusively by the European Parliament and by the member countries as represented at the Council in Brussels. That effectively removes the direct veto powers of the Walloons.

Simon Lester, Trade Policy Analyst at the Cato Institute, thinks the US should follow suit -- an idea that someone from the same group suggested a few years ago:

The Europeans have faced a greater struggle with investment protection and ISDS than has been the case in the United States, but these provisions have been a problem here as well. If we want to make it easier to get trade negotiations completed and trade agreements passed by Congress, we should consider following the EU's lead.

Although removing corporate sovereignty from trade deals does not solve the larger problem of giving companies special protection, it is a step in the right direction. For example, after concluding trade deals that do not have ISDS chapters, governments may decide to bring them in as quickly as possible in order to enjoy their claimed benefits. When commercial relations work perfectly well without them -- as is already the case for both the US-Australia trade deal, and the one between the EU and South Korea, neither of which include corporate sovereignty -- governments may decide to leave it at that, and forget about further negotiations covering investment.

Unfortunately, none of these recent moves is likely to help the UK, currently struggling with the implications of last year's "Brexit" referendum to leave the EU. Ever-inventive lawyers have realized that an unexpected withdrawal of the country from the EU could represent an excellent opportunity for companies that have invested in the UK to claim that they will suffer as a result, and to use corporate sovereignty clauses to claim compensation potentially amounting to billions of dollars. Corporate Europe Observatory has a new post exploring what could happen here:

the UK's impending exit from the European Union may bring new investment arbitration opportunities. The country has 92 investment agreements in force, which investors from other countries could use to file ISDS claims against the UK. In conferences and alerts for their multinational clients, some of the top investment arbitration law firms are already assessing the prospect of such Brexit claims. Depending on how the Brexit negotiations turn out, these lawsuits could be about anything from foreign carmakers or financial companies losing free access to the EU market, to the government scrapping subsidies for certain sectors. One lawyer from UK-based law firm Volterra Fietta has even suggested that "there may be a number of investors that would have come to the UK expecting to have a certain low wage group of employees", which might sue for loss of expected profit if they lose access to underpaid, foreign workers.

But the clever lawyers don't stop there. They see opportunities for corporations to use Brexit as a way to sue other EU countries too:

Several law firms have published briefings suggesting that it would be an advantage for corporations if they structured their foreign investment into the remaining EU member states through the UK. This means that if you are a German company, for instance, and have an investment in Romania you could let this investment 'flow' through a subsidiary -- possibly only a mailbox company -- in the UK. You could then sue Romania via its bilateral investment treaty with the UK -- even if no such treaty was in place between Romania and Germany.

This kind of "creativity" is yet another reason why tweaks to corporate sovereignty of the kind contemplated by the EU and Canada are simply not enough: ISDS needs to be dropped completely from all trade deals -- past, present and future.

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Filed Under: brexit, corporate sovereignty, eu, isds, trade agreements, trade deals, uk

Canada Capitulates: Supreme Court Throws Away Government's Great Pharma Patent Victory

from the who-needs-the-law-when-you-can-bully? dept

Techdirt readers will probably recall a long-running saga involving corporate sovereignty, $500 million, the US pharma company Eli Lilly, and drug patents. In its claim against the Canadian government, made using NAFTA's Chapter 11, Eli Lilly insisted it should have been given some drug patents, despite Canada's courts finding that they had not met the requirements for patentability -- specifically that there was no evidence that the drugs in question provided the benefits in the patent. Eli Lilly said that Canada was being unreasonable in setting a slightly higher bar than other countries by demanding that a patented drug should actually do something useful. As Mike reported back in March, even the lawyers that made up the corporate sovereignty tribunal hearing this case agreed that Canada was within its rights to take this view. They not only dismissed the claim, but ordered Eli Lilly to pay Canada's legal fees.

This was a huge win for Canada in particular, and governments in general. At the time, it all felt a little too good to be true. And now seems it was: as infojustice.org reports, the Supreme Court of Canada has just overturned decades of precedent -- and implicitly the Eli Lilly ruling -- by making it easier for Big Pharma to gain patents on medicines that don't really work:

This reversal in AstraZeneca Canada Inc. v. Apotex, Inc. is particularly disconcerting because Canada had just won an investor-state arbitration award in the long awaited Eli Lilly v. Canada case upholding its more stringent promise/utility doctrine that had been used successfully to overturn two dozen secondary patents, particularly those claiming new uses of known medicines, where patent claimants failed to present evidence in support of the prediction of therapeutic benefit promised in their patent applications.

Thus Canada's Supreme Court has inexplicably thrown away the government's earlier victory, and undermined the country's more rigorous approach to granting pharma patents. Writing for infojustice.org, Brook K. Baker believes this stunning capitulation is a result of unremitting bullying from the US:

Canada had been under intense pressure from the US, which had placed Canada on its Special 301 Watch List for five years threatening that the promise/utility doctrine unreasonably harmed Big Pharma in the US and from the pharmaceutical industry itself which claimed that the doctrine violated global patentability criteria. President Trump's hardball campaign promise to rewrite or leave the North American Free Trade Agreement because of its failure to adequately protect US intellectual property interests may also have played a role. Likewise, President Trump's more recent assertions that US payers are unreasonably subsidizing biomedical research and development because other countries, like Canada, are paying lower prices for innovator medicines than insurers and other payers in the US may also have increased pressure on the Court.

It's really sad to see the Canadian court kowtowing like this, undermining its own independence and moral authority in the process. Weaker patents will lead to the Canadian taxpayer paying higher prices for less-effective drugs. Worst of all, the Big Pharma bullies, aided and abetted by a newly-aggressive US government indifferent to other countries' health problems, will be encouraged to push for even more patent protection all around the world. That will lead not just to higher prices, but to more suffering and avoidable deaths, as crucial medicines become unaffordable for poorer patients.

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Filed Under: canada, corporate sovereignty, isds, patents, trade agreements
Companies: apotex, astrazeneca, eli lilly

EU's Brexit Strategy Shows How Aggressive Transparency Can Be Used To Gain The Upper Hand In Negotiations

from the poor-Theresa-May-doesn't-stand-a-chance dept

We're big fans of transparency around here, as you may have noticed. In particular, Techdirt has repeatedly called for trade deals to be negotiated more openly to allow greater input from the public -- and less backlash when they find out what has been agreed without them behind closed doors. But a fascinating post from the Institute for Government, a UK-based think-tank "working to make government more effective", points out that aggressive transparency can also be used to gain the advantage during high-level political negotiations.

In this case it is the critical "Brexit" negotiations between the EU and the UK that will determine their future relationship if and when the UK leaves the European Union. The stakes are incredibly high: the financial implications alone run into hundreds of billions of euros. Moreover, the UK's place in the world is also at play, as it extracts itself from the biggest geopolitical bloc in an attempt to go it alone. As the post points out, the approaches taken by the EU and the UK could hardly be more contrasted:

The European Council [one of the key EU bodies setting strategy] has published its "transparency regime" for the Brexit negotiations, committing the EU to a far greater degree of transparency than anything that we have seen in the UK. It sets out the ten classes of documents that could be issued by the Council, the [European] Commission and [EU] member states, along with a default level of public disclosure for each.

The UK government, by contrast, has said rather sniffily it would not be offering a "running commentary on Brexit negotiations", and aims to keep its plans totally under wraps. The Institute for Government points out that this is a big mistake:

The EU wants to be able to control the public narrative around Brexit. Two weeks ago, the EU published its draft negotiating mandate. Its proposals on the prerogative of the European Court of Justice, the rights of EU citizens in the UK and the sequencing of the negotiations were in all the UK papers. Having taken a self-imposed vow of secrecy, Prime Minister Theresa May was unable to respond to any of the issues of substance.

In other words, 500 million Europeans are only hearing the EU's side of the story, and the EU's views on what should happen during Brexit. Theresa May's secrecy means that she cannot rebut any of the assertions, nor offer her own vision (cynics say that is because she has neither a vision nor a plan….) The post points out that the EU's approach is not naïve or simplistic, but carefully planned and nuanced -- open for this aspect, but more reticent elsewhere:

A degree of secrecy is necessary to allow negotiators the space to think innovatively, to propose and weigh potential compromises. So, the EU stops short of a commitment to total transparency. It wants talks to be open, but not wide open.

The UK on the other hand wants to run as much of the negotiations behind closed doors as possible. That may just be the preferred operating style of this government or it may be a conscious decision. Whatever the reason, it will play right into the EU's hands.

It's a perceptive analysis that adds to the already compelling reasons why such high-level talks should be open and transparent as a matter of course. It's a pity that the one person who needs to take heed of that fact -- the UK's Prime Minister -- almost certainly won't. Both she and the country she nominally controls are likely to pay a high price as a result.

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Filed Under: brexit, eu, negotiations, secrecy, trade agreements, transparency, uk

Cheese: The Final Frontier For The Completion Of The Canada-EU Trade Deal CETA

from the blessed-are-the-cheesemakers dept

Remember CETA, the "Comprehensive Economic and Trade Agreement" between the EU and Canada? After years of on-off moments, including one last burst of uncertainty in March of this year, it finally seemed that everything had been settled, and that the deal would soon come into force. But it turns out that there is another, hitherto-unsuspected problem -- cheese:

Canada's CBC reported on its website that plans to have CETA (the Comprehensive Economic Trade Agreement) in place on 1 July were "threatened by a new cheese dispute". It said Europeans were upset at how Canada would allocate import quotas for new EU products, including 18,000 additional tonnes of cheese that Canada has agreed to import tariff-free.

Euractiv has all the details of the problem, which turns out to be bickering over how EU cheese producers will share that new tariff-free allowance. That's just last-minute haggling, and presumably will be solved with some appropriate sticks and carrots on both sides of the Atlantic. But an earlier report on the same site indicates there are deeper issues with CETA that remain unresolved:

In France, 110 MPs have demanded the opinion of the Constitutional Council on the legality of CETA. A ruling is due this summer. And Belgium, whose calls for additional guarantees had led to a confrontation with Brussels, has promised to take its concerns to the Court of Justice of the European Union in the coming weeks.

Most recently, it is France's new President Emmanuel Macron who has put the issue back on the negotiating table, promising in the last days of his presidential campaign to set up an expert committee to examine the CETA agreement before ratification.

The last one of these is particularly problematic. Macron has adopted a surprisingly muscular style in his first few days as French President, most famously in his handshake with Donald Trump, and won't want to be seen backing down from his promise to seek expert scrutiny of CETA before ratification. Looks like there's life in that cheesy CETA saga yet.

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Filed Under: canada, ceta, cheese, eu, trade agreements

Financial Times Editorial: Time To 'Ditch' Corporate Sovereignty In Trade Deals

from the more-trouble-than-it's-worth dept

The European Union's top court has just handed down an important ruling about an otherwise minor trade deal between the EU and Singapore. The two sides initialled the text of the agreement in September 2013, and since then it has been waiting for the Court of Justice of the European Union (CJEU) to hand down its judgment. The issue is who gets to sign off on the deal: is it just the European Union, or do all 28 Member States of the EU need to agree too? There's clearly a big difference there, because in the latter case, there are 28 opportunities for the deal to be blocked, whereas in the former situation, the EU can simply wave it through on its own. The CJEU ruling (pdf) is fairly straightforward: the EU can sign and conclude trade deals covering most areas, but not for a few that must involve the EU Member States. Of most significance is the following:

The regime governing dispute settlement between investors and States also falls within a competence shared between the EU and the Member States. Such a regime, which removes disputes from the jurisdiction of the courts of the Member States, cannot be established without the Member States’ consent.

That is, the thorny area of corporate sovereignty, also known as investor-state dispute settlement (ISDS), is one of the few that requires the approval of all Member States. There's an interesting corollary to that ruling: if the EU wants to agree trade deals as quickly as possible, without the risk of Member States vetoing them -- as Wallonia did with CETA -- it should not include a corporate sovereignty chapter.

If it seems hopelessly naïve to think that might ever happen, here's an editorial in a ruthlessly hard-headed newspaper, the Financial Times (FT), recommending that it should (paywall):

[The CJEU's ruling] would be an excellent opportunity for the EU to go further, and reverse one of its bigger recent errors in trade policy. It should ditch the whole idea of having rules on investment, or at least rules allowing companies to sue a government directly, in FTAs. Such "investor-state" provisions have attracted intense opposition, not just from the Walloons but also from anti-corporate campaigners.

Removing these rules would ease the way for future deals. As they do not seem to encourage foreign direct investment, they are more trouble than they are worth. Freed from this unnecessary encumbrance, the EU would find it easier to sustain with its quiet run of closing bilateral trade pacts.

When Techdirt first started writing about corporate sovereignty, four years ago, it was an obscure area of trade policy that few knew about. The insiders who were familiar with the mechanism assumed it was a fixed and indispensable part of free trade deals. Now we have one of the most influential business newspapers calling it an "error" that should be "ditched," since ISDS chapters are "more trouble than they are worth." We've come a long way.

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Filed Under: corporate sovereignty, isds, trade agreements

Just Because Eli Lilly's Corporate Sovereignty Claim Over Patents Failed Doesn't Mean The Threat Has Gone Away

from the don't-relax-yet dept

Back in March, Mike wrote about how Eli Lilly's demand for $500 million "compensation" from Canada for rejecting two of its patents was finally thrown out. This was a long-running story, and was widely-regarded as a crucial test. Had Eli Lilly won, people suggested, it would have opened the floodgates for many such corporate sovereignty claims. Some also claimed that Eli Lilly's defeat showed what is officially known as the "investor-state dispute settlement" (ISDS) system was actually working well, and needed neither abolishing nor tweaking. But an interesting analysis by Cynthia Ho, who is a professor at Loyola University Chicago School of Law, suggests that things might not be so clear cut. Here are the key points she makes in a column published by Intellectual Property Watch:

It is true that Eli Lilly ultimately failed to persuade the investment tribunal that Canada's invalidation of two patents, based on its interpretation of "useful," compromised guarantees under NAFTA's investment chapter. But, it should be noted, this failure was principally evidentiary in nature. That is, Eli Lilly failed to provide adequate evidence in support of its claims, all of which were premised on its assumption that there was a dramatic change in the law. The tribunal, however, never questioned whether IP rights that were invalidated consistent with domestic law could constitute a violation of international investment law. Even more importantly, the tribunal never questioned whether patent laws consistent with TRIPS could nonetheless be challenged as compromising investment agreements. In addition, although some have suggested that Eli Lilly could not win, the tribunal explicitly stated that the claim was not frivolous.

As Ho points out, there are a number of troubling aspects to the tribunal's decision, even if it went against Eli Lilly. The main one is that countries still have the threat hanging over them of corporate sovereignty cases being brought and won because of disputes over patents and copyright. That would represent a radical departure from traditional ISDS cases, which are typically over physical assets like mines and oil fields. Moreover, she suggests that even if a new law were fully consistent with the main Trade-Related Aspects of Intellectual Property Rights (TRIPS) treaty, it could still be challenged using a corporate sovereignty claim -- in effect, setting ISDS tribunals above global agreements like TRIPS:

the tribunal stated that a judicial decision could form the basis of an investment claim without any actual denial of justice. In addition, while the Eli Lilly tribunal stated that it is inappropriate for ISDS tribunals to serve as an "appellate tier" over domestic decisions, it would be premature to assume, as some have suggested, that this single decision obviates any such concern. Importantly, there is no precedent in investor-state disputes and, unlike the [World Trade Organization] system where panel decisions tend to be consistent and uniformity is promoted with a standing appellate body, there are often inconsistent investor-state rulings with no current mechanism to promote uniformity.

The rest of Ho's column explores these and other concerns, and is well-worth reading. It may be that her fears are overblown, and that Canada's success in defending its patent system will discourage others from bringing similar cases. But given the unpredictable nature of ISDS cases, and the fact that a new wave of speculative funding is available, it is quite likely that investors will be emboldened to try their luck in this area again, irrespective of the Eli Lilly defeat.

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Filed Under: canada, corporate sovereignty, isds, nafta, patents, trade agreements
Companies: eli lilly

Want To Promote Breastfeeding? That's A Trade Barrier, Says US Trade Rep

from the milk-of-human-kindness dept

As most people know, babies who are breastfed from birth enjoy a wide range of benefits. Here's what the United Nations Children's Fund (Unicef), a global organization with nearly $5 billion of funding, has to say on the topic of breastfeeding:

It has profound impact on a child's survival, health, nutrition and development. Breast milk provides all of the nutrients, vitamins and minerals an infant needs for growth for the first six months, and no other liquids or food are needed. In addition, breast milk carries antibodies from the mother that help combat disease.

…

Breastfeeding also lowers the risk of chronic conditions later in life, such as obesity, high cholesterol, high blood pressure, diabetes, childhood asthma and childhood leukaemias. Studies have shown that breastfed infants do better on intelligence and behaviour tests into adulthood than formula-fed babies.

Formula milk, by contrast, can actively harm babies:

Formula is not an acceptable substitute for breastmilk because formula, at its best, only replaces most of the nutritional components of breast milk: it is just a food, whereas breast milk is a complex living nutritional fluid containing anti-bodies, enzymes, long chain fatty acids and hormones, many of which simply cannot be included in formula. Furthermore, in the first few months, it is hard for the baby's gut to absorb anything other than breastmilk. Even one feeding of formula or other foods can cause injuries to the gut, taking weeks for the baby to recover.

The case for breastfeeding, and against formula milk, seems pretty clear. But a new publication from the Office of the United States Trade Representative (USTR), the "2017 National Trade Estimate Report on Foreign Trade Barriers" (pdf), begs to differ. As a post on the Public Citizen site explains, the USTR calls out several countries for promoting breastfeeding over formula as a "technical barrier to trade" that might harm the profits of US industries. These are some of the polices that the USTR wants eliminated:

Hong Kong: The Report criticizes a Hong Kong draft code, designed to "protect breastfeeding and contribute to the provision of safe and adequate nutrition for infants and young children." USTR labels the policy as a technical barrier to trade due to its potential to reduce sales of "food products for infants and young children."

Indonesia: USTR labels a draft regulation in Indonesia that would prohibit the "advertising or promotion of milk products for children up to two years of age" as a technical barrier to trade.

Malaysia: USTR questions Malaysia's proposed revisions to "its existing Code of Ethics for the Marketing of Infant Foods and Related Products" that would restrict corporate marketing practices aimed at toddlers and young children.

Thailand: The report critiques Thailand for introducing a new regulation that would impose penalties on corporations that violate domestic laws restricting the "promotional, and marketing activities for modified milk for infants, follow-up formula for infants and young children, and supplemental foods for infants."

Although "technical barriers to trade" sound like a minor issue, they lie at the heart of modern trade deals. Traditional tariffs are now relatively low in many parts of the world, which means that the hard part of trade negotiations is often these "non-tariff barriers" (NTBs). Indeed, it was in large part a failure to agree on the removal of NTBs that caused the TAFTA/TTIP talks to grind to a halt, and then end up in limbo when the Trump administration took them over.

The USTR's attack on policies that promote breastfeeding over formula milk may seem extreme. But they are typical of the way the USTR views the world primarily through the optic of boosting the profits of US companies, with no thought to the harms this may inflict on people in other nations as a result. No wonder that trade deals are viewed so negatively in many parts of the world.

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Filed Under: breastfeeding, trade agreements, trade barrier, ustr