Thanks to the rather low profile of the negotiations, the EU and Canada have been able to successfully conclude The Comprehensive Economic and Trade Agreement (CETA), which is now slated to be formally signed on October 18. The process would then move from EU institutions onto EU national parliaments, which have to ratify it unanimously. However, don’t let this apparent calm fool you: CETA is by no means a tame free trade agreement to be pored over by lawyers and their ilk. On the contrary, the deal has received considerable flack from environmental groups and consumer organizations who likened it to a “wolf in sheep’s clothing” and accused the EU of forcing the most controversial aspects of the now-dead TTIP through the backdoor.
Indeed, while the 1598-page agreement is a hefty read even for the most seasoned lawyer, the main problem of the deal is the controversial Investor-State Dispute Settlement (ISDS) mechanism that led to the original shelving of the TTIP. The special court where private companies can challenge unwanted national legislation survived, and received a cosmetic makeover for CETA – it is now called the Investment Court System (ICS).
While ICS makes a pretense at greater transparency with the addition of an appeals courts, the same pro-corporate bias that incensed the European public about TTIP is still there: the secrecy of the tribunals, the supremacy of their decisions over national law, and the continued ability for foreign investors to sue European governments for damages resulting from a change in the regulatory environment.
Besides the ethically dubious right to sue governments for passing laws in the public interest, there is also the fact that no such privilege is extended to citizens who are affected by the operations of a private company. Given that Europe and Canada have some of the best legal systems in the world, this begs the question: why do corporations need their own special tribunals to hear their cases? Some have pointed out that arbiters, who are nominated by the parties and are handsomely remunerated for each case, have an interest to find in favor of the litigant as a way of locking in more contracts in the future. What’s more, the fact that arbiters are usually corporate lawyers, taking turns between hearing cases and defending litigators is an even more glaring conflict of interest.
And it’s not just activists who are riled up by the wider implications of the ICS. Germany’s biggest association of public judges and prosecutors, representing some 15,000 judges condemned the ICS mechanism on the grounds that it doesn’t “meet the minimum standards for judicial office”. Similarly, the European Association of Judges expressed “serious reservations” about the EU’s competence to even establish such a court system in the first place.
Never mind the standard defense put forward by private companies – that it safeguards their assets in third countries and leads to greater investment and jobs – the fact is that ISDS leads to “regulatory chill” by forcing policymakers to think twice before passing stricter regulations, whether environmental or fiscal. Even if the ICS is billed as a new and improved system, the evidence is shaky.
ICS will do nothing, for instance, to stop the likes of Vattenfall, the Swedish nuclear energy company from suing the German government as it is doing now for promising to phase out nuclear energy by 2022, even though this decision was taken by a democratic government in the interests of its citizen’s health and safety. Were Germany to lose the suit, Berlin would have to shell out nearly $5 billion of taxpayer money to compensate the company. And although the German government is also fighting lawsuits from domestic energy companies for the same reason, it is only Vattenfall who has the right to make its case using this arbitration method. This unjustly preferential treatment of foreign companies will still be a factor under the new ICS.
What’s more, the replacement of ISDS with the ICS is not going to stop the kind of unscrupulous litigation seen in the case of Veolia versus Lithuania, where the former is claiming $100 million in damages after Vilnius decided against renewing a contract with the French company. Investigators found that Veolia deceitfully overcharged customers for years, generating an unlawful profit of €24 million between 2012 and 2015 by including consultancy services and other unrelated operation in the prices charged consumers for heating. And instead of paying fines, Veolia could stand to make even more money thanks to the legal remedies offered by ISDS.
And if anyone thought that CETA is harmless because it excludes American companies from the deal and stops them from suing European countries, they would be sorely mistaken. American companies would still be able to initiate litigation through their Canadian subsidiaries. There is precedent for this too after Lone Pine Resources, a Canadian company, sued its own government through an American subsidiary for calling for a moratorium on fracking in Quebec.
Let it be stated clearly: opposition to TTIP and CETA does not equal opposition to trade. Europeans don’t need to be convinced that free trade is a win-win for all involved. This understanding forms the very basis of the common market. However, freer trade is not an objective in and of itself for Europeans. Unlike the US, Europe is asking for quality trade, that is, trade that respects Europe’s environmental standards, labor rights, public health care, and social safety net. This is the purpose of regulation, to serve the public interest. Trade treaties like CETA are devised to serve private interests, and mechanisms like ICS are only going to further institutionalize corporate rapaciousness. It is not too late for it to be stopped.
*Carrie Winters is a British environmental research officer currently residing in Singapore with extensive knowledge of the Southeast Asia region.