In a very disappointing judgement, the Court of Justice of the EU (CJEU) has ruled that the investment court system in the Canadian EU trade agreement (CETA) is compatible with EU law.
The opinion is a surprising turn of events as only last year’s Achmea ruling wiped out investment arbitration between EU countries because it undermines the EU judicial system.
Investor-state dispute settlement (ISDS) mechanisms – like the investment court system in CETA – enable big corporations to sideline domestic and EU courts and directly sue governments whose environmental or social policies may affect their investment.
The European Court has missed the opportunity to protect the rule of law and the powers of domestic courts. Although the Court found investment court system (ICS) was “safe” under EU law, it does not make the system fair or democratic. It allows multinational corporations to put pressure on public decision-making.
Even though the CJEU considered the CETA to have sufficient safeguards, arbitration mechanisms have a demonstrable regulatory chill effect on environmental and other laws. For example: because of an ISDS case, the city of Hamburg backed off from applying European and German regulations aimed at tackling climate change and water pollution caused by coal plants.
ISDS mechanisms also afford unbalanced privileges to foreign investors, without imposing any responsibilities for their activities. This structural asymmetry was not addressed by the Court.
In October 2016, the region of Wallonia temporarily blocked the signing of CETA over concerns about investor-state dispute settlement, among other issues. In a compromise deal, the Belgian federal government committed to request an opinion from the CJEU on the legality of the controversial investment court set up in these agreements, under EU law.
The European Commission had attempted to overcome ISDS legitimacy crisis by replacing it with an institutionalized form of ISDS mechanism – the investment court system (ICS) – without addressing the deep flaws.
Unfortunately for campaigners fighting hard against the corporate stitch-up that is CETA, the court decided that the ISDS part of the deal was in fact compatible with EU law.
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 halting or banning 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.
No matter what you call it – and the EU Commission is busy trying to expand ISDS into a global Multinational Investment Court (MIC) which could make matters even worse – the road to ending ISDS is political.
All the opinion means is that now the ball is firmly in the court of our politicians. Allowing multinationals to bully our democratically elected governments and ride roughshod over our rights is a political choice. And it is one we can change.