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