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

Legal Issues

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