On Friday, July 25th, the German Government raised concerns over the current chapter on the controversial Investor-State Dispute Settlement (“ISDS”) included in the trade agreement between the EU and Canada – known as CETA – currently being discussed on both sides of the Atlantic.
Germany has announced that, in principle, its Government would be willing to ratify CETA next September, however, the chapter on the investor to state dispute settlement (ISDS) is seen to be “problematic” and currently not acceptable. This announcement is indicative of the growing resistance to ISDS in trade agreements taking place in the European Union at the moment.
ISDS, a mechanism which would allow companies to challenge government’s policies in special tribunals, is also one of the most controversial issues in the negotiations of the Transatlantic and Trade Investment Partnership (TTIP), a major trade agreement currently under discussion between the E.U. and the U.S..
While public pressure focusing on TTIP has been growing over the past twelve months in Europe, CETA’s negotiations will greatly impact the E.U.-U.S. trade deal. On the one hand, if ISDS is included in a trade deal with Canada, it will be very difficult for the E.U. to justify its exclusion from an agreement with the U.S.. On the other hand, even if excluded of TTIP, ISDS in CETA could provide a “backdoor” for U.S. companies, enabling them to use their Canadian affiliates to file ISDS claims.
A wide range of stakeholders throughout the E.U., including farmers, academics, trade unions and civil society groups, have increasingly voiced concerns about the severe impacts of ISDS on governments’ ability to regulate and the lack of transparency and independence of this mechanism. In response to these concerns, the European Commission decided to launch a public consultation on ISDS in TTIP in March 2014 on the matter, to which Access responded.
The consultation, which ended on July 13th, received almost 150,000 submissions — 99% of which came from citizens — breaking a new record for number of responses for an E.U. consultation. While the consultation only sought to gather comments on the implementation and scope of ISDS, a large majority of respondents used this opportunity to raise concerns about ISDS and call for the exclusion of this mechanism in the TTIP.
So far, the Commission has been clear on its intention to include ISDS in E.U. trade agreements, only allowing discussion on the “type” of ISDS to be included. Following the outcome of the public consultation and last Friday’s announcement by the German Government, the European Commission might have to reconsider this approach.
As a matter of fact, just a few days before his election as the head of the European Commission, Jean-Claude Juncker said that he “personally does not see the benefits of “private courts” when asked about ISDS in a hearing in the European Parliament. Juncker then added that he does “not understand why great democracies do not have confidence in their own judicial systems.”
We are encouraged by the declarations of Commissioner Juncker and call on the new Commission to guarantee the rule of law and ensure that governments’ right to regulate will not be altered by these trade negotiations.
It is yet to be seen how ISDS in CETA will affect the ongoing negotiations of the TTIP, though it is encouraging to see that the resistance to the inclusion of this mechanism in trade agreements is gaining momentum. However, as the debate on ISDS comes to the fore in Europe, it is worth noting that this mechanism is only one of many controversial aspects of these opaque trade negotiations. More than a trade agreement on lowering tariff barriers in order to facilitate trade, TTIP seeks harmonisation of standards between the EU and the US, putting at risk Europe’s high standards for protection of citizens’ rights and the public interest.
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