Eli Lilly Loses Quixotic Quest To Get Canada To Pay $500 Million For Rejecting Its Bad Patents

from the corporate-sovereignty-saved dept

Over the last few years, we've written a ton about "corporate sovereignty" provisions in trade agreements. Technically, these tend to be called "Investor State Dispute Settlement" or ISDS provisions, but I really believe that a decent part of the reason they're called something so boring is to stop people from paying attention to just how nefarious these provisions truly are. One of the reasons we first started paying attention to these provisions -- as they were showing up in agreements under negotiation, such as the TPP and TTIP -- was following a story involving the pharmaceutical giant Eli Lilly demanding $100 million from Canada for rejecting two of its patents.

The issue was that Canada had rejected these two patents because the company couldn't prove that the patented drugs were actually useful. Eli Lilly claimed that Canada had no right to reject patents on that basis, arguing that it was a "dramatic" shift in how patents were reviewed, and thus it was "expropriating its property" and undermining the company's "expected future profits." Think about that for a second. By the time this case went to an actual tribunal, the amount that the company was demanding had ballooned from $100 million to $500 million. This battle has waged on for many years -- and for Eli Lilly, this was a huge deal. Management at the company basically bet the company on continuing to get new patents, and any hiccup -- even a rejection of patents for not being useful -- could be a disaster for the company. The company even pushed to get Canada slammed during diplomatic proceedings in the infamous Special 301 Report for the USTR for daring to reject its patents -- and the USTR complied.

Well, it looks like all of that may have been for nothing. That's because Eli Lilly has lost entirely, and not only won't it be getting the $500 million it wanted, but it also has to pay Canada's $5 million in legal fees. You can read the final award here or down below. Of course, some may argue that this shows that the ISDS corporate sovereignty provisions work out fine in the end, with tribunals getting things right (even if that's not actually true in many cases), but just the fact that the Canadian government had to go through this massive and expensive process for many years just for rejecting two bad patents should show why ISDS provisions are such a problem.

In the ruling, the tribunal even notes the Special 301 report that Eli Lilly worked so hard to have call out Canada's patenting practices, but more or less dismisses it, by noting that others, such as Mexico didn't complain similarly:

The Tribunal has paid particular attention to the 2014 and 2015 editions of the Special 301 Report of the USTR. In these documents, USTR notes that the United States “has serious concerns about the lack of clarity and the impact of the heightened utility requirements for patents that Canadian courts have applied recently”. This comment cannot be dismissed outright as a lobbying effort by Claimant, as suggested by Respondent. However, the Special 301 Report stands alone in the record as a complaint regarding Canada’s utility doctrine from any other State, including Mexico, in the decade since the promise utility doctrine was allegedly adopted. For the Tribunal, that silence speaks louder than the single, brief criticism contained in the USTR’s Special 301 Report.

In other words, sure, maybe it wasn't just because Eli Lilly heavily lobbied Congress and the USTR to attack Canada on this point, but the fact that no other country seems concerned with Canada's standards for denying patents, it certainly looks like this wasn't such a big deal.

Also in the ruling, there's a focus on "expectations." Remember, a big part of Eli Lilly's claims was how this impacted its "expected" profits. But here, the tribunal basically notes that just because Eli Lilly expected Canada to ignore its own law, it doesn't mean that it actually enforcing its own laws is some nefarious plot:

The record shows that at the time Claimant made its investments, it was aware that Canadian patent law required patented inventions to be useful. Eli Lilly executives testified that they understood the Canadian utility requirement to be a low threshold. In fact, it appears that the utility of Strattera and Zyprexa in Canada was taken for granted within the company. Claimant expected its patents would not be invalidated for lack of utility.

However, this perception cannot amount to a legitimate expectation. For the reasons stated above, the Tribunal has found that each of the three elements of the alleged promise utility doctrine had a foundation in Canadian law when Claimant’s patents were filed. At that time, although Claimant may not have been able to predict the precise trajectory of the law on utility, it should have, and could have, anticipated that the law would change over time as a function of judicial decision-making.

The idea behind ISDS was to encourage investment in developing nations, where there was a fear that a sketchy government might seize a factory or something. But that's not a problem between Canada and the US, and Eli Lilly should have been able to put on its big boy pants and recognize that maybe, just maybe, Canada can reject some of its patents, and the company doesn't need to throw an international hizzy fit. Next time, rather than betting the company on patents, perhaps the company will start thinking about business models that don't require a complete lottery ticket.

Filed Under: canada, corporate sovereignty, drugs, isds, nafta, patents, tpp, us
Companies: eli lilly

After Voting To 'Escape' EU Sovereignty, Post-Brexit UK Will Become Subject To Corporate Sovereignty On A Massive Scale

from the out-of-the-frying-pan,-into-the-fire dept

One of the slogans used by those in favor of the UK leaving the European Union -- aka Brexit -- was that it would allow Brits to "take back control." In particular, it was claimed, Brexit would stop the European Union and its top court from "imposing" their decisions that took precedence over national laws. It was an appealing slogan for many -- a bit like "Make America great again" -- but as with other appealing slogans, with time it proved rather hollow. In the wake of the UK referendum in favor of Brexit, the British government is faced with the task of coming up with large numbers of trade deals that will somehow compensate for the almost-certain loss of preferential access to the EU. Naturally, the most important of these "new" trade deals is with the US. Unfortunately, the British negotiating position is fatally undermined by the fact that the UK is desperate for a deal, whereas the US doesn't need it at all. Inevitably, then, the US will get to dictate its terms, and UK government will be forced to accept them, however bad they are, because it has no alternative. So much for "taking back control."

Rather belatedly, people are beginning to wake up to what that is likely to mean in practice. Here, for example, is an analysis on BuzzFeed of a key problem with the UK government's plan to sign lots of new trade deals to plug the gap left by exiting the EU:

Trade experts have warned that signing such deals without the EU judicial system will almost inevitably mean signing up to systems known as "ISDS" (Investor State Dispute Settlement) -- secretive, binding arbitration systems that can force countries to overturn their laws when it hurts corporate interests. These formed the core of international opposition to trade deals such as TTIP (between the EU and US) and CETA (between the EU and Canada).

It might be argued that ISDS -- corporate sovereignty -- isn't a new issue for the UK. The country already has many trade deals that include corporate sovereignty chapters:

UK corporations have been some of the most active users of ISDS to enforce their rights overseas, analysis of the 700 or so known disputes shows. Sixty-four of the 700 were made by UK companies against overseas governments, while only one ISDS dispute has ever been filed against the UK -- and didn’t go anywhere.

The UK has been able to use ISDS as an offensive weapon without being hit by many claims itself because most of its existing trade deals are with countries that have relatively small economies. They have few companies or individuals who are in a position to make major investments in the UK, which means few are able to use corporate sovereignty clauses against the UK. The UK, by contrast, has plenty of rich investors who can and do take advantage of secret ISDS tribunals.

That situation will change dramatically if and when the UK signs a trade deal with the US -- the British government has made clear that doing so will be a priority post-Brexit. The US has huge investments in the UK, and these are likely to be covered retrospectively by ISDS in any trade deal. That was the intention in TAFTA/TTIP, which now seems likely to suffer the same fate as TPP. After all, why wouldn't Trump demand this strong protection for investments made by US companies -- and by himself?

As the BuzzFeed article points out, requiring a corporate sovereignty chapter in a US-UK trade deal would lead to a rather ironic situation. The Brexit vote, which many insisted would allow the UK to throw off the yoke of supposedly "anti-democratic" supranational EU judgments, is almost certain to see a post-Brexit UK subject to large numbers of supranational ISDS judgments that are even less democratic.

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

US Government To Start Working On NAFTA 2.0 Immediately; What Will It Do On Corporate Sovereignty?

from the probably-not-what-it-should-do dept

Alongside his general dislike for existing trade deals, Donald Trump singled out the North American Free Trade Agreement (NAFTA) for particular scorn, calling it "the worst trade deal maybe ever." It looks like he not only plans to renegotiate NAFTA, but he also wants to make that one of his priorities, judging by this story in The Globe and Mail:

Billionaire investor Wilbur Ross, chosen by U.S. president-elect Donald Trump to reshape U.S. trade policy, has informed Canada that rules of origin and independent dispute tribunals will be central to talks aimed at resetting the North American free-trade agreement.

Canadian officials say the nominee for commerce secretary has indicated a formal-notification letter to open negotiations on NAFTA will be sent to Canada and Mexico within days of Friday's presidential inauguration.

Techdirt readers will have noticed the reference to "independent dispute tribunals," or corporate sovereignty as we term it around here. Its presence confirms the almost universal view that such investor-state dispute settlement (ISDS) chapters in trade deals have big problems. What's not clear is how Trump's administration will tackle them. Another article in The Globe and Mail, this time a commentary, is convinced that the US will seek to keep corporate sovereignty in trade deals:

A number of indicators, however, suggest that the coming administration will stick closely to traditional U.S. policy of promoting ISDS.

The author is David Schneidermann, a professor of law at the University of Toronto, who offers three main reasons why he believes that is the case:

First, there is good reason to believe Mr. Trump will want to have these protections available as a backstop for the Trump organization overseas.

Here's the reasoning:

Consider how vulnerable Trump foreign properties will be once the Trump administration takes a position that is unpopular in some other part of the world. Or consider how a foreign government may choose to target Trump properties in order to seek U.S. government concessions. Why wouldn't Mr. Trump insist upon, among other protections available in investment treaties, "full protection and security" for Trump properties? One can safely predict that, the more the president-elect thinks about this, he is likely to act in the best interests of his family’s business concerns.

It's extraordinary that Schneidermann believes one of Trump's main concerns when formulating US policy will be its impact on himself and his businesses, but highly plausible. The second reason has to do with Trump's nominee for secretary of state, Rex Tillerson:

As former head of Houston-based Exxon Mobil, Mr. Tillerson will be aware of the advantages of having ISDS as a means of challenging government regulation. Under his watch, the company has successfully launched investment disputes against a number of countries with which the United States has investment treaties, including Venezuela and Argentina.

Finally, corporate sovereignty is likely to remain in NAFTA and other trade deals because it's part of the Republicans' DNA:

House and Senate Republicans have long been supportive of placing constraints on state action abroad via investment treaties.

There's plenty of sound logic to be found in this analysis. However, if we have learned anything over the last few months, it is that old-fashioned logic is relatively unimportant in the new political landscape. Since it looks like moves to renegotiate NAFTA are going to be made quickly, we should find out soon enough what the Trump administration's new line on ISDS will be.

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Filed Under: corporate sovereignty, donald trump, isds, nafta, rex tillerson, trade agreements

Great: Now Wall Street Is Funding Speculative Corporate Sovereignty Claims For A Share Of The Spoils

from the this-is-fine dept

Techdirt first wrote about corporate sovereignty four years ago -- although we only came up with that name about a year later. Since then, a hitherto obscure aspect of trade deals has become one of the most contentious issues in international relations. Indeed, the investor-state dispute settlement (ISDS) measures in both TPP and TTIP played an important part in galvanizing resistance to these so-called "trade" deals, and thus in their defeat, at least for the moment (never say "never".)

Corporate sovereignty may be a tough sell in new trade deals, but it is still lurking in plenty of existing agreements. For example, a post on the Sierra Club blog points out that two countries, Colombia and Romania, are being sued using ISDS clauses because of their refusal to issue mining permits:

Both mines would require huge quantities of cyanide and threaten watersheds used by millions of people for drinking water. One would damage a unique, legally protected ecosystem and the other would destroy an ancient, UNESCO-nominated settlement. Both have been opposed by scientific bodies, protested by tens of thousands of people, and restricted by domestic courts.

The use of corporate sovereignty to trump health and environmental concerns is nothing new. What is noteworthy here is the following:

Both ISDS claims are being funded by the same Wall Street hedge fund -- Tenor Capital Management. Tenor helps cover the companies' legal costs in exchange for a cut of any award. These speculative ISDS bets have already paid off for Tenor. The hedge fund won big in April 2016 when it secured 35 percent of a $1.4 billion ISDS ruling against Venezuela, a return of over 1,000 percent on the $36 million that Tenor had provided for the legal costs of the company that brought the case.

That is, the rewards of winning a corporate sovereignty case are so great that hedge funds are starting to fund them speculatively with no direct connection to the ISDS dispute other than providing money to initiate and pursue the claim. As the Sierra Club points out:

The risks of such arrangements, known as "third-party funding," are clear: When Wall Street speculates on the outcome of ISDS cases, it inflates the number of corporate suits against governments, leading to higher costs for taxpayers and higher risks for policymakers that challenge harmful investments.

Doubtless, defenders of the corporate sovereignty system will claim that the hedge fund's willingness to invest money is actually a good thing, since it means that even impecunious companies can enjoy their "right" to sue a government. But the new interest of Wall Street in ISDS underlines the unfair asymmetry of the system:

Because only corporations, not governments, can launch ISDS cases, governments have no equivalent funding sources, as they have no potential winnings to leverage. In Costa Rica -- which is also on the receiving end of a third-party-funded ISDS case relating to an environmentally destructive gold mine -- the Attorney General's office has an annual budget of only $17 million. In Bolivia -- one of the poorest countries in the Western Hemisphere, which faces a third-party-funded ISDS case relating to a silver mine -- the Attorney General's office has a budget of $12 million.

This is a crucially-important point about corporate sovereignty: governments never win ISDS cases; at best, they just don't lose them. All the upside is with the corporates that bring the claim, and all the downside with nations that are defending their actions and regulations. The new wave of third-party funding will accentuate that skewed nature, and make corporate sovereignty even more of a scourge than it is today, regardless of whether it is ever included again in any new deal.

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Filed Under: corporate sovereignty, isds, litigation finance, nafta, wall street

Study Shows Risks Of Including Corporate Sovereignty In The 'Other' Huge Asian Trade Deal, RCEP

from the watch-out-US dept

As we've noted, TPP is unlikely to come back from the dead, despite what some seem to think or hope. For example, the Japanese government has decided to go ahead and ratify TPP anyway. That seems foolish, since it has just thrown away most of its bargaining counters for other trade negotiations, in what amounts to an act of political seppuku. As Sean Flynn points out, Japan has form here, since it also ratified the infamous Anti-Counterfeiting Trade Agreement (ACTA), just as pointlessly.

One of the most important trade deals still under active discussion is the Regional Comprehensive Economic Partnership (RCEP). Techdirt first wrote about this 18 months ago, while recently we noted that many of its provisions are even worse than those in TPP. One aspect of RCEP that has received little attention so far is the corporate sovereignty chapter. The Transnational Institute (TNI) has put together a useful document looking at what it calls the "hidden costs" of including investor-state dispute settlement (ISDS) in RCEP. It provides an excellent summary of corporate sovereignty activity in Asia that complements a 2014 study from Friends of the Earth Europe, which looked at the same "hidden costs" of ISDS in Europe. Here are a few of the main findings for RCEP nations (pdf):

50 investment arbitration cases already filed against 11 RCEP (Regional Comprehensive Economic Partnership) countries since 1994, over 50% of which have been filed after 2010.

India alone has been the target of 40% of the cases filed against RCEP countries.

Foreign investors have claimed at least 31 billion USD from RCEP countries. Given the secrecy surrounding investor-state dispute settlement (ISDS) proceedings, this could be much more. This amount is 7 billion USD less than India's entire health budget for 2015.

Of the 31 billion USD claimed by investors, 81% has been claimed from just four countries, India, South Korea, Australia and Vietnam.

The largest known amount paid to a foreign Investor by an RCEP country is 337 million USD as part of the settlement in the Cemex versus Indonesia case.

36% of cases against RCEP countries concern environmentally relevant sectors.

RCEP countries have been sued for measures taken to protect public health, adjust corporate taxes, promote industrialisation, and review contracts acquired through allegations of corruption, among others.

The study brings together much-needed data on corporate sovereignty cases in Asia. It also points outs why RCEP countries would be very unwise to sign up to an ISDS chapter in the deal:

Including the harmful ISDS clause in the RCEP trade agreement under negotiation contributes to cementing investors' rights and expanding the scope of private arbitrators' power. RCEP will lock in place this system of privatised justice. Governments will find it much more difficult to withdraw their commitments to the rights accorded to foreign investors in RCEP than in Bilateral Investment Treaties, because they would need to put an end to the whole agreement and not just the sections on investors' rights.

It's a general problem with ISDS provisions in trade deals: they are almost impossible to cancel, however much harm they end up causing. The bigger the deal, the greater the lock-in. This aspect underlines once more how corporate sovereignty comes at the expense of national sovereignty.

Finally, there's one other interesting nugget that Techdirt readers may find of note. According to the RCEP report, over two-thirds of all ISDS cases against RCEP nations have come from Europe. At the moment, there are only a few minor trade deals that allow European companies to sue the US in ISDS tribunals, in theory at least. But if some kind of post-Trump TTIP 2.0 were agreed -- always a possibility despite the anti-trade deal rhetoric -- and it included a corporate sovereignty chapter, the US might find itself on the receiving end of a similar barrage of costly lawsuits that will reduce its sovereignty at both a national and local level.

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Filed Under: asia, china, corporate sovereignty, isds, rcep, trade deals

TPP Dead, TTIP Dying, But The EU And Canada Seem Determined To Ram Through CETA Deal Without Proper Scrutiny

from the cost-benefit-analysis,-what's-that? dept

The death of TPP has now been confirmed by Donald Trump himself in a short video posted to YouTube. As Mike wrote recently, the other huge trade deal, TTIP, is now in limbo, probably dying, and there are rumors that even the low-profile Trade in Services Agreement (TISA) has been put on ice pending instructions from the new President. Doubtless attempts will be made to revivify them, and if those fail, there will certainly be further so-called "trade" deals -- which actually go way beyond trade -- that seek to bring in all the bad things that Techdirt has been warning about for years.

But alongside TPP, TTIP and TISA, there is one deal that is teetering on the brink of success. CETA is a smaller-scale agreement between the EU and Canada, but it's more important than it looks. It allows US companies with subsidiaries in Canada to use the agreement's corporate sovereignty provisions to sue the EU -- and there are 42,000 such companies according to one analysis (pdf). As a result, CETA has been called "TTIP by the backdoor," since it would provide a handy way for US companies to put pressure on EU nations even if TTIP suffers the same fate as TPP.

Perhaps because CETA looks increasingly like the last hope for the establishment to push through an old-style trade deal, there is now an unseemly haste on both sides of the Atlantic to ram it through the ratification process as quickly as possible, with as little scrutiny as possible. That's most clearly seen in the EU, where the normal procedures for approval have been thrown out of the window, as this post explains:

CETA will only officially arrive at the European Parliament on November 21. From then MEPs have six months to analyse, write opinions, debate and vote. But a coup of sorts has ensured none of the usual procedures count this time. The centre-left and centre right groups, that together make up the huge majority known to many of us as the "grand coalition" in the European Parliament have plotted to ensure CETA will speed so quickly through this institution that if you blink, you may miss it. They want a vote as early as December, making it impossible for the Parliament to assess CETA in any concrete terms.

Moreover:

To make matters worse, several committees who have oversight on certain aspects covered in CETA have requested their own opinions, and as it stands all have been denied. The environment and employment committees, who complained that the speedy timetable made it impossible to adequately assess CETA, were refused opinions for seemingly no reason but to silence any critique.

Things aren't much better in Canada, as Michael Geist explains:

Last week, Steve Verheul, the lead Canadian CETA negotiator, appeared before another House of Commons committee and was asked if the department has done any analysis on the financial impact of the extended patent protection [for pharmaceutical drugs]. Remarkably, Verheul said that it has not, arguing that it is difficult to come up with a projection.

Essentially, the Canadian government has absolutely no idea how much this concession to the EU is likely to cost the people of Canada. Nor does it really have much intention of trying to calculate it, because it plans to implement CETA regardless. As in the EU, then, the Canadian public is expected to sit back and meekly allow their government to sign up to a deal with open-ended risks, thanks to corporate sovereignty, but without any proper scrutiny of the costs and alleged benefits.

And yet the politicians involved in this arrogant and anti-democratic behavior are surprised when demagogues like Donald Trump win elections.

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Filed Under: canada, ceta, corporate sovereignty, eu, isds, tisa, tpp, ttip, us

US Admits TPP Is Dead, TTIP On Life Support... But Beware Of What Comes Next

from the this-isn't-over dept

Back when most people still expected Hillary Clinton to be our next President, there was a lot of talk about how President Obama would try to shove through the ratification of the TPP agreement in the lame duck session between the election and the inauguration -- so that Clinton wouldn't have to flip flop on the agreement yet again. Of course, with Trump elected, that was going to be even more difficult, and now basically everyone in the administration and Congress has agreed that the TPP is dead. There will be no effort to ratify it in the lame duck session, and it certainly seems unlikely that President Trump will push to revive it. While other countries in the agreement may move forward, it doesn't matter unless the US ratifies. It's expected that the other major trade deal, the TTIP, is also unlikely to move forward at this point.

Of course, this doesn't mean we're out of the water. These agreements may be dying, but not for the right reasons -- and that's what should worry folks. The reason why many of us have been worried about TPP and TTIP is not because of the actual free trade parts of the agreement that involve lowering or getting rid of tariffs -- but rather much of the other stuff in there, including dangerous and damaging copyright and patent policies, along with the whole ISDS setup, which is really a provision for corporate sovereignty, giving companies the effective ability to veto certain regulations.

But, that doesn't seem to be the reason why Trump is against these deals. Rather, almost all of his commentary on these agreements is about how other countries are "winning" and the US is "losing" from these trade deals -- and how he's ready and willing to jack up tariffs and basically set off trade wars with some of our largest trading partners. That's bad, and will likely cause a lot more harm than good. Furthermore, the fact that Trump is either unaware or doesn't understand the actual problems with these agreements suggests that there will be ample opportunity for lobbyists to work them in to future agreements. So while the problems of the TPP (and TTIP) are now off the table, there is plenty to watch out for going forward.

Filed Under: corporate sovereignty, donald trump, free trade, isds, tpp, trade deals, ttip

EU-Canada Trade Deal Dodges Belgian Veto For Now, But Faces Multiple Legal Challenges

from the just-buying-some-time dept

A few days ago we described how the Belgian region of Wallonia was holding up the official signing of the EU-Canada trade deal, CETA, in part because of the corporate sovereignty chapter it contains. Not surprisingly, given the high-profile embarrassment this caused -- Canada's prime minister, Justin Trudeau, was forced to cancel his planned trip to Europe at the last minute -- the Walloon politicians have been under intense pressure to change their minds in return for some concessions. This they have now done, and a document has been published spelling out the nature of the deal they have obtained (currently only available in French and Dutch). The Council of Canadians suggests that the EU has not solved the problem, just bought some time:

The proposed compromise would give any region of Belgium the right to walk out during any part of the ratification process [which is still required, even after CETA has been signed]. Four Belgian Parliaments (the Walloon region, the French community, the German community, and the Francophone community commission of the Brussels Capital region) have made it clear that they will never ratify the Investment Court System (ICS) -- the provision that allows foreign investors to sue governments -- in its current form.

Wallonia's minister-president, Paul Magnette, came away with something else, too:

Magnette had also raised objections to the proposed court system for settling disputes between foreign investors and governments.

One concession he won means Belgium would be able to go to the European court of justice to determine whether the new investor-state special tribunals are compatible with EU law.

That's potentially big. Back in 2015, lawyers from the environmental group ClientEarth carried out an analysis of the corporate sovereignty approach -- both the older investor-state dispute settlement (ISDS) and the re-branded ICS -- and found that:

ISDS mechanisms would set up an arbitration system outside of, but binding on, the EU judicial system. Such mechanisms would introduce an additional judicial relief within the EU legal order that is independent of the EU courts. It would, in effect, be a system that would enable foreign investors to sideline the EU courts and resort to claims that are not available to domestic investors.

EU law, and settled case-law of the European Court of Justice (ECJ), suggest that such a system of external judicial control may be incompatible with the EU legal order because it would (1) undermine the autonomy of the EU legal order and the powers of the EU courts in particular and (2) negatively affect the completion of the internal market, and more specifically the EU competition rules.

Of course, some will dismiss that as simply the biased opinion of an activist organization. It's harder to ignore the views of 100 law professors from across Europe, who agree with ClientEarth, or the warning of the UN rights expert, Alfred de Zayas, not to sign the "flawed" CETA treaty, as he calls it. And "biased" certainly won't be something anyone could ever say about an ISDS ruling from the Court of Justice of the European Union (CJEU), the EU's highest court, which will be definitive once it is handed down. It will also apply to any trade deal that includes corporate sovereignty, such as TAFTA/TTIP, which is why Magnette's last-minute haggling turns out to be so important. One hint of how the CJEU might view matters is provided by the following:

ClientEarth recently launched a lawsuit against the Commission, because it refused to disclose official analysis of whether ISDS and ICS are legal. The Commission said sharing the legal reflections would undermine its negotiating position in trade agreements.

It's hard to see how an analysis that found ISDS and ICS were legal would weaken the EU's negotiating position. And it would surely be in the European Commission's interest to convince everyone that corporate sovereignty is, indeed, legal by releasing analyses supporting that view. So the fact the EU refuses to release them would naturally suggest that there is a problem somewhere, which presumably the CJEU will reveal when it comes to examine the issue.

Although the most important, the referral to the CJEU is not the only legal challenge that CETA is facing. There's one in Canada, too:

Canada's longest-serving member of the Queen’s privy Council, the Honourable Paul Hellyer, P.C., along with two co-plaintiffs, Ann Emmett and George Crowell, both prominent members of the Committee on Monetary and Economic Reform ("COMER"), launched a constitutional challenge against the much-maligned Canada-Europe Trade Agreement ("CETA"), at the Federal Court of Canada today.

Here's what they hope to obtain:

In addition to seeking several declarations, to clarify the Constitutional authority of the Executive branch of government to do this, the Plaintiff's also seek interim injunctions to prevent the federal government from signing, ratifying and implementing the CETA.

Finally, it's worth noting that there is also a constitutional challenge to CETA in Germany. On that front, the following happened a couple of weeks ago:

In its judgment pronounced today, the Second Senate of the Federal Constitutional Court rejected several applications for a preliminary injunction directed against the approval by the German representative in the Council of the European Union of the signing, the concluding and the provisional application of the Comprehensive Economic and Trade Agreement (CETA), which the Council of the European Union is expected to decide upon on 18 October 2016.

However, that's not as bad as it might seem at first sight. First, Germany's constitutional court imposed some quite stringent constraints on the German government. The most important of these is that the official signing of CETA will not cause the entire text to be applied provisionally, as the European Commission had originally hoped. Instead, some parts must wait until all 28 member states ratify the deal through votes in their national parliaments. That's going to take quite a while -- perhaps years -- and there's no guarantee that every country will ultimately ratify CETA. The corporate sovereignty provisions are one of the elements that will not come into force until after full ratification, something also agreed with Magnette. This means it's quite likely that the CJEU will hand down its verdict on the legality or otherwise of ICS before that, possibly killing it forever.

The other important point about the German constitutional court's decision is that it only rejected a request for a preliminary injunction, which it deemed unnecessary. The German court's full consideration of whether CETA is constitutional or not continues. The European Commission may have postponed the Wallonian problem but there are plenty of others on both sides of the Atlantic that could still stop CETA, and definitively.

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Filed Under: belgium, canada, ceta, cjeu, corporate sovereignty, eu, eu law, human rights, ics, isds

Corporate Sovereignty Helps To Bring EU-Canada Trade Deal To Brink Of Collapse

from the politically-toxic dept

The trade deal between the EU and Canada, known as CETA -- the Comprehensive Economic and Trade Agreement -- is remarkable for the fact that it has still not been signed and ratified, even though its completion was "celebrated" over two years ago. That's partly because of growing resistance to the inclusion of a corporate sovereignty chapter -- also known as investor-state dispute settlement (ISDS). In an attempt to head that off, the European Commission persuaded Canada to swap out vanilla ISDS for a new, "improved" version called the Investor Court System (ICS). As Techdirt noted before, this is really just putting lipstick on the pig, and doesn't change the fact that companies are being given unique privileges to sue a country for alleged harm to their investments using special tribunals, as well as in national courts.

CETA has faced other problems, notably from Bulgaria, Romania and Belgium. The first two said they wouldn't sign because of Canada's refusal to lift visa requirements for their citizens. That blackmail seems to have paid off. The Sofia Globe reports that Canada has agreed to remove the visa requirements from December 2017, and Bulgaria and Romania now say that they will sign CETA.

That leaves Belgium, or more precisely, the French-speaking Belgian region of Wallonia, which, as we noted back in April, was not happy with CETA. A couple of weeks ago, the Walloon parliament confirmed that it would refuse to give its permission for the central government to sign CETA in its name (original in French). Because of the way the Belgian political system works, that meant that Belgium would not be able to sign CETA on October 27, as the European Commission had originally hoped.

That, in its turn, meant that the European Union as a whole would not be able to sign CETA on that day. That's because back in July, European Commission president Jean-Claude Juncker agreed to treat CETA as a so-called "mixed agreement," a deal that must be ratified by all of the EU member states' national assemblies, as well as by the bloc. If Belgium can't do that because of Wallonia, CETA is blocked.

As you might imagine, the Walloons have come under intense pressure to change their mind, from just about the entire EU and Canadian political establishment. Last Friday, Wallonia's Minister-President Paul Magnette told the regional parliament that he still refused to allow Belgium to sign, despite that pressure. As well as being worried about the impact of Canada's agricultural products on Walloon farmers, Magnette singled out corporate sovereignty as a particular worry for him and his colleagues.

The fact that CETA's ISDS/ICS remains the most problematic area can be seen from a fascinating CETA document (pdf) that was recently leaked. It's called the "Joint Interpretative Declaration on the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union and its Member States," and is an attempt to offer additional guarantees that are enough to convince Magnette and other CETA skeptics to allow its signing and ratification:

This interpretative declaration aims to provide a clear and unambiguous statement of what Canada and the European Union and its Member States agreed in a number of CETA provisions that have been the object of public debate and concerns. This includes, in particular, the impact of CETA on the ability of governments to regulate in the public interest, as well as the provisions on investment protection and dispute resolution, and on sustainable development, labour rights and environmental protection.

The section on Investment Protection is by far the longest, reflecting the seriousness of the problems there. Here's a key paragraph:

CETA clarifies that governments may change their laws, regardless of whether this may negatively affect an investment or investor's expectations of profits. Furthermore, CETA clarifies that any compensation due to an investor will be based on an objective determination by the Tribunal and will not be greater than the loss suffered by the investor.

As that demonstrates, there is nothing new in the declaration. Nobody is claiming that CETA will stop governments changing their laws, just that the massive fines that can be imposed by supra-national tribunals are likely to discourage them from doing so. Similarly, claiming that those fines will be "based on an objective determination by the Tribunal and will not be greater than the loss suffered by the investor" simply confirms the untrammelled power of the tribunal to impose whatever fine it thinks is appropriate.

As of this weekend, Magnette was still holding out for more guarantees. He has said that he is not against CETA in principle, but does want improvements to it, which offers the European Commission a way out of this crisis that they will surely try to seize. If the interpretative declaration is changed sufficiently, Magnette may be willing to give permission to Belgium to sign.

However, there's another factor. In the face of the continuing problems on the EU side, the Canadians seem to be close to calling the whole thing off. As the Guardian reported:

A landmark trade deal between the European Union and Canada is in meltdown, after Canada's trade minister walked out of talks with the Belgian regional parliament that has been blocking the deal.

The Canadian trade minister, Chrystia Freeland, was on the verge of tears on Friday as she announced the "end and the failure" of talks with the Walloon government.

However the head of the European parliament said late on Friday he would hold emergency talks in a bid to save the deal.

As that indicates, EU politicians are still trying to patch things up, but it's unlikely that Canada will be willing to make yet more concessions to satisfy Magnette. For his part, he said on Sunday night that he was "disappointed" with the Commission's latest attempt to convince him to accept CETA's ISDS (original in French). In any case, it looks increasingly likely that CETA will not be signed on October 27, and that Canada's prime minister, Justin Trudeau, will not be traveling to Europe to do so, which would be a huge diplomatic embarrassment for the European Commission. Corporate sovereignty may not be the only reason CETA is falling apart, but it is certainly one of the main ones. The twists and turns of the Walloon saga confirm just how politically toxic it has become.

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Filed Under: belgium, canada, ceta, corporate sovereignty, eu, ics, isds

Tobacco Carve-Out From ISDS Starts To Spread: Another Nail In The Coffin Of Corporate Sovereignty

from the crack-in-the-dam dept

One of the last pieces of horse-trading that went on in order to conclude the TPP deal involved corporate sovereignty, aka investor-state dispute settlement (ISDS), and tobacco. As we reported a year ago, a "carve-out" for tobacco was agreed, which was designed to assuage fears that tobacco companies would use TPP's ISDS mechanism to challenge health measures like plain packs -- something that Philip Morris attempted against both Australia and Uruguay. Now, it looks like the idea is spreading, as Simon Lester points out on the International Economic Law and Policy Blog:

Whether or not the TPP ever gets ratified, the idea for a tobacco carveout seems to have taken hold. Via Tania Voon on twitter, I see that Australia and Singapore have agreed to amend their FTA to include a tobacco carveout.

The wording itself, inserted into the section on corporate sovereignty, is pretty simple (pdf):

Section B: Investor-State Dispute Settlement

ARTICLE 22

Tobacco Control Measures

No claim may be brought under this Section in respect of a tobacco control measure of a Party

It's worth noting that this is not just another carve-out, but a retrospective one, which creates an interesting precedent that might be followed elsewhere. After all, once the principle that tobacco companies should not be allowed to use ISDS to interfere with health programs is established, there's no reason not to apply it more widely, to both future and existing trade and investment deals.

More generally, the appearance of this carve-out for tobacco raises a question Mike asked a year ago: if corporate sovereignty is such a bad idea for this industry, why not for others that can cause harm -- like the extractive industries, for example? And once people start asking these kinds of questions, it's not long before they realize that putting companies above national laws, and letting them sue governments in supranational tribunals, makes no sense at all for any sector. Calls to drop the entire ISDS system have been growing for a while; the latest move by Australia and Singapore is likely to make them louder.

Follow me @glynmoody on Twitter or identi.ca, and +glynmoody on Google+

Filed Under: carve-outs, corporate sovereignty, isds, tobacco, trade deals