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European Commission gets political thumbs up to negotiate broad investment protections in CETA

Last week, the European Union’s General Affairs Council approved negotiating mandates for investment protection chapters in free trade deals being negotiated with Canada, Singapore and India. This step clears a hurdle in the Canada-EU Comprehensive Economic and Trade Agreement negotiations, since now the two sides can finalize a controversial investor-to-state dispute settlement process that will largely mirror the one in NAFTA.

NAFTA’s investment chapter rights have been invoked time and again by non-Canadian firms to challenge environmental or public health measures at the provincial or federal level. The most recent challenge comes from Brazil-based St Mary’s Cement, which has used its registration in the United States to demand hundreds of millions in compensation for an Ontario government decision to stop its proposed quarry outside Hamilton. The new EU mandate will allow Canada to extend, and possibly even expand those corporate rights to European firms.

In response to the decision last week, the Seattle To Brussels Network issued a statement strongly condemning the move as ignoring necessary reforms “to create more balance between the rights and obligations of the investors, the host and home countries and to come to agreements that make investments instruments for sustainable development.”

The S2B statement stresses that bilateral investment treaties (including NAFTA and the thousands of deals signed by EU member states already), “are posing a threat to public policy, democratic governance and the public interest; and that they need to be radically overhauled.” It says that the EU Parliament has repeatedly recognized flaws in existing international investment pacts and asserted its rights under the new Lisbon Treaty to be consulted on negotiating mandates for future trade agreements.

Essentially, the European Commission has won the right to bypass the EU Parliament by negotiating an EU-wide investment protection pact with Canada without first having the mandate approved by elected representatives.

While Canadian negotiators have repeatedly tried to assuage Canadian concerns with including investor-to-state in CETA by claiming it will be a milder version, the new EU mandate contradicts those claims. The mandate calls for “the highest possible level of legal protection and certainty for European investors in Canada/India/Singapore.” Under standards of treatment, the mandate would exceed investor protections in NAFTA by guaranteeing:

a) fair and equitable treatment, including a prohibition of unreasonable, arbitrary or discriminatory measures,
b) unqualified national treatment
c) unqualified most-favoured nation treatment
d) protection against direct and indirect expropriation, including the right to prompt, adequate and effective compensation
e) full protection and security of investors and investments
f) other effective protection provisions, such as “umbrella clause”
g) free transfer of funds of capital and payments by investors
h) rules concerning subrogation

Seattle to Brussels has been campaigning and taking action for:

• the incorporation of investor obligations into investment agreements, in particular in areas of human rights and corporate accountability
• more precise and restrictive language regarding investors’ rights
• the abolition of one-sided and secretive investor-to-state dispute settlement mechanisms
• an explicit and effective recognition of the right of governments to regulate and to formulate policies of general interest
• a substantive social and environmental dimension

The Council of Canadians has been working closely with European, US and Latin American allies to fight trade-related investment protections which surpass most other international environmental, human rights or labour commitments and which undermine democratic governance.

To read more on the European debate on investment, see:

Investment Rights Stifle Democracy: How industry misled the EU Parliament to protect the rights of foreign investors, by Corporate Europe Observatory.