EU-Canada trade agreement leaked text makes mockery of TTIP ISDS public consultation

The text of the recently completed EU-Canada bilateral free trade agreement (known as CETA) has been leaked by a German media organisation. The text contains a chapter on Investor State Dispute Settlement (ISDS) which makes a mockery of the recent EU public consultation on ISDS in the Transatlantic Trade and Investment Partnership (TTIP), the proposed trade deal currently being negotiated by the EU and U.S.

Much of the language used is virtually identical to the unacceptable terms that the European Commission (EC) referenced in the consultation and which were strongly criticized by the Transatlantic Consumer Dialogue (TACD) in its response.

TACD believes that ISDS cannot be ‘fixed’ and must be ditched.  A major concern associated with ISDS is that it empowers foreign firms to circumvent domestic courts and challenge public interest policies before extrajudicial tribunals. The leaked text makes it clear that CETA would not address any of these problems.

TACD has a number of specific criticisms of the leaked CETA provisions, including:

An expansive definition of “fair and equitable treatment.”  This is the widely used and abused investor “right” under which foreign corporations have repeatedly extracted taxpayer compensation for environmental, health and other public interest policies.  The CETA definition of “fair and equitable treatment” would explicitly empower tribunals to use an expansive interpretation of the term, by stating that tribunalists may consider whether a challenged domestic policy frustrated the investor’s “legitimate expectation” when deciding whether to order taxpayer compensation.

Rules on expropriation that exceed domestic law in many countries. Under the CETA provisions, States could be obliged to compensate foreign investors for regulatory actions that would not be subject to compensation for expropriation claims under domestic law. While an annex clarifying the meaning of expropriation may help deter the most far-fetched claims against domestic policies or actions, it still would allow for a broad definition of indirect expropriation that would invite tribunal decisions against regulatory policies on the mere basis that they adversely affected the value of an investment.

A broad definition of investment that would extend the deal’s property rights protections to activities and instruments that would not be provided the same protections in domestic law. The CETA definition of an investment includes vague concepts such as “assumption of risk” and “expectation of gain or profit,” which would grant tribunals wide discretion in determining whether an actionable investment exists, and thus, whether an investor-state challenge to domestic policies could proceed.

Even if ISDS was left out of the TTIP, the current CETA provisions  would allow  U.S. corporations with Canadian subsidiaries to launch investor-state challenges against European governments. This has already happened in other agreements. For example, Philip Morris International, headquartered in New York, has used its subsidiaries in Switzerland and Hong Kong to take advantage of two non-U.S. agreements to launch investor-state attacks on plain-packaging cigarette laws in Uruguay and Australia.

An EU-U.S. trade agreement including ISDS would present additional threats as a far greater number of corporations would be able to bring cases against governments using ISDS. TACD will continue to oppose ISDS provisions in the TTIP.