Top Court Rules CETA's Lipstick-On-A-Pig Version Of Corporate Sovereignty Is Compatible With EU Law

from the it-may-be-legal,-but-is-it-moral? dept

Techdirt readers with good memories may recall the long saga of the EU-Canada Comprehensive Economic and Trade Agreement (CETA). One important moment was when Canada agreed to use the EU's proposed replacement for corporate sovereignty, the Investor Court System (ICS). Both are versions of so-called "investor-state dispute settlement" (ISDS), which allows companies to sue countries for alleged losses caused by government decisions. Although ICS was devised in order to blunt the growing criticism of traditional ISDS, it amounts to little more than lipstick on a pig. It still gives foreign investors unique legal privileges not possessed by local companies. However, as part of the deal to persuade the Belgian region of Wallonia not to veto CETA, the EU agreed to allow Belgium to ask the region's top court to rule on whether the new ICS was compatible with EU law.

As is usual in such referrals, one of the top legal advisers of the Court of the Justice of the European Union (CJEU) offered a preliminary opinion. In this case, Advocate General Yves Bot found that the ICS was compatible with EU law. The main CJEU has now issued its own judgment (pdf), essentially agreeing with Bot on every point. The key ruling is that, according to the CJEU, the ICS won't be able to overturn EU decisions:

the CETA contains provisions that deprive those [ICS] tribunals of any power to call into question the choices that have been democratically made within a Party to that agreement in relation to, inter alia, the level of protection of public order or public safety, the protection of public morals, the protection of health and life of humans and animals or the preservation of food safety, protection of plants and the environment, welfare at work, product safety, consumer protection or, equally, fundamental rights. Consequently, that agreement does not adversely affect the autonomy of the EU legal order.

That seems a little naive. It may be true, from a strictly legal point of view, but it ignores the reality of the situation. Even if the ICS cannot force an EU Member State to amend its laws, or change its decisions, it can impose fines for the "losses" an investor may suffer because of those moves. In such cases, a government may decide that it would rather repeal the law or cancel its decision than pay hundreds of millions of euros in fines. Even the threat of losing may be enough to convince governments to back down -- exactly as has happened many times with traditional ISDS. However, the Stop ISDS campaign points out:

The case against ISDS (or its rebranded version ICS) has never been primarily a legal one. It is a moral one.

ISDS allows multinational companies access to an obscure, parallel justice system closed to the rest of us. Calling it a court system for the 1% would be generous. It is really a court system for the 0.01%.

ISDS has allowed corporate interests to trump those of the public time and time again. Countries have been threatened for passing pollution regulations, approving health and safety measures and for hitting the pause button on fracking. It has been used to defend land grabs, environmental destruction and lock in privatisation of key public services.

None of these arguments depend on the opinion of the ECJ. The moral case is as strong as ever -- ISDS must go.

That's not a hopeless aspiration. As Techdirt reported earlier this year, the EU has already announced that corporate sovereignty claims can no longer be brought over internal EU matters. Meanwhile, the US seems to be cooling on the idea. So while the ICS has been blessed by the CJEU, it may be that corporate sovereignty is on the way out anyway.

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Filed Under: canada, ceta, cjeu, corporate sovereignty, ics, investor court system, isds

Canada Agrees To Use EU's 'Lipstick On A Pig' Version Of Corporate Sovereignty For CETA

from the clever-cosmetic-changes dept

Last September, Techdirt reported on the EU's plan to replace the highly-controversial corporate sovereignty provisions in TAFTA/TTIP -- the "investor-state dispute settlement" (ISDS) chapter -- with something it called the "Investor Court System" (ICS). As we reported then, even if ICS addressed all the problems of ISDS -- spoiler alert: it certainly doesn't -- there was a huge backdoor in the form of CETA, the trade deal between the EU and Canada. If CETA includes old-style corporate sovereignty provisions, US companies with subsidiaries in Canada will be able to use CETA to by-pass TAFTA/TTIP's new ICS system completely, and sue EU nations using ISDS with all its widely-recognized faults. In fact, Bernd Lange, the MEP with responsibility for making recommendations on how the European Parliament (EP) should vote on international trade matters, said at the time that he would not support CETA if it included ISDS.

The arrival of a new government in Canada while CETA is still undergoing "legal scrubbing" -- checking and tweaking the exact wording -- has given the European Commission the opportunity to re-negotiate the corporate sovereignty chapter in CETA, even though it rather sneakily claimed it couldn't do that. But it turns out it could, and did, in a move that is likely to have important repercussions:

The European Commission and the Canadian Government have agreed to include a new approach on investment protection and investment dispute settlement in the EU-Canada Comprehensive Economic and Trade Agreement (CETA).

The negotiations on a free trade deal between the European Union and Canada were concluded in 2014 with a reformed investment dispute settlement system, notably with full transparency of proceedings and clear and unambiguous investment protection standards.

Following the legal revision of the text, the agreement now reached goes even further. All the main elements of the EU's new approach on investment, as outlined in the EU's TTIP proposal of November 2015 and contained in the recently concluded EU-Vietnam free trade agreement, have been included in the finalised CETA text.

This represents a clear break from the old Investor to State Dispute Settlement (ISDS) approach and demonstrates the shared determination of the EU and Canada to replace the current ISDS system with a new dispute settlement mechanism and move towards establishing a permanent multilateral investment court. This revised CETA text is also a clear signal of the EU’s intent to include this new proposal on investment in its negotiations with all partners.

By persuading Canada to accept the ICS instead of a marginally-updated ISDS, the European Commission can claim to have addressed Lange's concerns. Indeed, his party, the Socialists and Democrats (S&D), rushed out a press release that tries to claim credit for the move:

The Socialists and Democrats in the European Parliament welcome the announcement made today by the European Commission and the Canadian government on the changes in the trade agreement between the EU and Canada (CETA) so as to include the S&D demands.

What matters here is not who did what, but that the S&D are now unlikely to block CETA because of the corporate sovereignty provision. With broad S&D support, CETA stands a better chance of being ratified by the European Parliament sometime later this year.

However, even with ICS in CETA, the European Commission still faces an uphill battle convincing the US that it too should agree to replace the old-style corporate sovereignty in TAFTA/TTIP. Last week, during the 12th round of the TTIP negotiations, the EU formally proposed its ICS alternative (pdf), but we don't yet know what the official US response will be. Unofficial comments suggest that it is lukewarm about the idea. Since some powerful US business lobbies seem unhappy with the ICS approach, Canada's decision to accept it in CETA may paradoxically stiffen US resistance to the idea in TAFTA/TTIP. And without ICS, Lange's S&D could decide they have to vote against the deal if and when it comes up for ratification in the European Parliament.

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Filed Under: canada, ceta, corporate soveriegnty, eu, ics, investor court system, isds, trade