In a disappointing decision, the European Court of Justice (ECJ) ruled that the investor court system in the Canada-European Union Comprehensive and Economic Trade Agreement (CETA) was compatible with EU law. Even though the ECJ considered the legal merits of investor-state dispute settlement (ISDS) provisions, the debate on the political legitimacy of ISDS is far from over.
Like the Chapter 11 provisions in NAFTA, the investor-state dispute system gives investors the right to sue governments over policy decisions if they feel they interfere with their future profits. In 2016, at the urging of Wallonia and its former Minister President Paul Magnette, Belgium asked the court to rule on the compatibility of these rights with the European constitution.
Given that these ISDS mechanisms supersede government and state sovereignty, many hoped that the ECJ would also see the incompatibility of these mechanisms with basic democratic rights. Prominent lawyers and organizations argued against ISDS. The Deutscher Richerbund, the largest association of judges in Germany, said that the system was unnecessary and that it would interfere with the competency of the European Union and its members states.
In in another ECJ decision, the Archmea decision, the court ruled that in a bilateral treaty between the Netherlands and Slovakia, the investor-state provisions were incompatible with European law thus eliminating it.
But as in most things, being legal and being acceptable are two different things. Maude Barlow, Honorary Chairperson of the Council of Canadians, said it was time for Canada to jettison ISDS in the treaty.
“Just because something is legal, does not make it acceptable,” said Barlow, “In the new NAFTA, Canada accepted the elimination of ISDS. This showed that it had the foresight to bail on a failed system which gives corporations powers to attack sound public policy that protects people and the environment. Canada should pull the plug on ISDS in CETA as well.”
ClientEarth trade lawyer Amandine Van Den Berghe said: “The European Court has missed the opportunity to protect the rule of law and the powers of domestic courts. Although the Court found the investment court system 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.”
Alexandra Strickner of Attac Austria explained: "Not everything that is legal is legitimate. It is clear to us that special claims for corporations are not compatible with democracy, climate protection, social and labor rights, and that they undermine the rule of law."
For Michel Cermak, from the Belgian organization CCND 11.11.11, it is now time for political decision makers to reject ISDS.
The CETA investment chapter has to go through ratification in all EU states. So far, it has only been ratified in 12 of the 28 EU countries.
And there are many critics. Paul Magnette said that he and the Belgian Socialist Party will continue to oppose any arbitration mechanism that is exclusive to companies and that affects public authorities and individuals.
The Belgian Socialist Party controls the Brussels-Wallonia Federation and the government of Brussels. In the Belgian constitution, these regions have to also give their approval before Belgium can ratify the agreement.
The German constitutional court will also rule on the compatibility of ISDS with its constitution.
ISDS will be an issue in the upcoming European elections on May 26. Already, 550,000 Europeans have signed a petition saying that ISDS is not compatible with democracy. In the past, 1 million Europeans signed a registrar saying they were opposed to including ISDS in the TTIP, the proposed EU-US agreement, and CETA.
The fight against ISDS continues.