Who is afraid of CETA?

In: Uncategorized

26 Oct 2016

How could Europe not sign an agreement ‘even with a country with European values such as Canada, even with a country as nice and as patient as Canada’? The words of Canada’s trade minister Chrystia Freeland have been widely reported by media, after the Walloon government, with its veto, brought the Comprehensive Economic and Trade Agreement with Canada (CETA) to an impasse. The image of a miniscule province in Europe, taking hostage the European Union and its progressive ally Canada, risks conveying the cliché image of the anti-globalist blocking progress because of irrational fears.

Are the critiques to CETA irrational and populist?

Scholars have argued that the ‘anti-CETA arguments’ are incorrect and the European Commission has vigorously denied that CETA will put at risk health, safety and environmental regulation. In this post I will focus on the one of the most controversial institutions, which will be established by CETA: the Investment Tribunal, a sophisticated form of Investor State Dispute Settlement (ISDS) mechanism by which investors can directly sue governments, sidestepping domestic courts. The fears that this system may threaten the adoption of legitimate public policies have been fuelled by all too real cases, such as the (in-)famous Philipp Morris cases against Australia and Uruguay (the case, targeting measures aimed at preventing tobacco smoking, has not gone unnoticed by John Oliver). The ISDS system is problematic because it grants foreign investors the privilege (vis-à-vis normal citizens) to resort to an international arbitral tribunal. And to be sure, the revised CETA text includes open-ended provisions, such as the Fair and Equitable Treatment in Article 8.10, which can be easily used by investors to initiate all kinds of disputes.

But, why should we have such a system in the first place? The website of the European Commission contents that the ISDS is needed to protect foreign investors from discrimination and unfair treatment. Yet there is no empirical evidence, which shows that foreign investors as such are treated unfairly or are being discriminated. Given that the ISDS system has repercussions for public policy, the case needs to be made first of why we need it!

Looking at the history of international investment law, we cannot ignore the work by Kate Miles who has brilliantly shown how investment treaty law has co-evolved with our colonial history (read here and here). History aside, it is highly problematic to treat Canadian and European judicial systems as incapable to deliver justice. This is what CETA does by establishing the ISDS system. The trite line that there are some countries in Europe (e.g. Southern European countries), where the judicial system is far from perfect is all but a rebuttal of the argument that ISDS grants a privileged position to foreign investors. Citizens equally suffer from not well functioning legal systems. If, as a citizen, you get hurt by the leakage of a chemical factory, you do not have super-rights to go to an international arbitration tribunal to get compensation. Why should foreign investors be treated differently?

Is CETA better than nothing?

One powerful argument against the critiques is that CETA may not be perfect when it comes to ISDS, but it is a great improvement vis-à-vis already existing Bilateral Investment Treaties (BITs). Granted, the Investment Chapter in the current CETA text has greatly improved (now there are rules on transparency and about the independence of the arbitration tribunal). CETA would clearly be an improvement for the few European countries (mainly eastern European) that have a BIT with Canada. But most European countries do not have BITs with Canada, which means that CETA would establish this new system. The CETA Investment Tribunal is still criticized by legal scholar Gus Van Harten for various reasons, including for not sufficiently guaranteeing judicial independence, for not providing a right to intervene to affected parties, and for its imbalance in the allocation of rights and obligations (with investors being mainly granted the rights and governments the obligations). Many legal scholars have recently signed a letter to voice similar concerns about the ‘fundamental flaws’ of CETA.

While writing my last line, proposals are being weighted on how to go ahead with CETA without Wallonia. Instead of framing the Wallonia incident as a diplomatic disaster, the transatlantic negotiators could take it as an opportunity to further revise CETA in ways more responsive to critiques.

Dr. Alessandra Arcuri


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