Statement by ATTAC (Ireland) supporting European Parliament vote scheduled for Nov. 23rd to request legal clarity from European Court of Justice on controversial investor protection mechanism in the CETA
Law professors, legal experts and the European and German associations of judges believe that the controversial investment court system (ICS) in the CETA free investment and trade deal, is not legal under EU law. On Wednesday 23rd November 2016, MEPs will be asked to vote at the European Parliament, Yes or No to a resolution seeking an opinion from the European Court of Justice as to whether ICS is compatible with EU law.
The Fine Gael parliamentary party here in Ireland, and the four Fine Gael MEPs, must make public statements on this matter, and at the very least commit to not obstructing this request for a legal opinion. The resolution has been drafted by 89 MEPs from five political groupings from across the political spectrum and is supported by both pro-CETA and anti-CETA MEPs who are concerned that here in Europe we must be seen to proactively stay within the boundaries of constitutional democracy and the rule of law.
Given the weight of evidence putting ICS in legally dodgy territory, we cannot risk signing a potentially illegal, trade deal. Following the election of Trump in the USA by merely holding on to roughly the same level of Republican Party support over the past three elections, now is the time for European exceptionalism: for the centre, centre-left, and centre-right establishment parties of Europe to demonstrate their commitment to best governmental practice, transparency and the rule of law.
While the recent concessions won by the regional parliaments of Belgium as to how the CETA would impact on farming there, many Europeans got the impression that the Belgium government will ask the ECJ for a ruling on ICS. While they are legally committed to doing so, there is no legal commitment to enforce them to take that case now. The European Parliament will most likely be asked to vote to approve the CETA deal around December 14th , and after that date, neither the Parliament, nor the Belgian government will be able to invoke Article 218.11 of EU law which empowers them to ask the ECJ to clarify whether ICS is legal or not. It will be too late!
Article 218.11 of TFEU explicitly refers to “the agreement envisaged”; in other words, one that has not been approved. December’s Parliament vote will be on provisionally applying CETA, which means it is fully in law and no longer “envisaged”. As Article 30.7.4(d) of CETA clearly states: “the Parties shall understand the term ‘entry into force of this Agreement’ as meaning the date of provisional application” .
Further clarity is provided below with references, showing how hundreds of law professors, as well as associations of judges, and even European Commission staff themselves believe that ICS is legally suspect.
Barry Finnegan, researcher with ATTAC (Ireland) is available for interview. Barry works as Programme Director and Senior Lecturer, at the Faculty of Journalism & Media Communications, Griffith College Dublin: firstname.lastname@example.org; he presented his paper, ‘European Court of Justice Must Rule on Coherence of ISDS (ICS) with EU Law Prior to the Provisional Application of CETA’ at the ‘International and Comparative Law in the 21st Century: Lessons learned?’ conference at Griffith College on 10th June, 2016.
Further background and research:
What is ICS?
The Investor Court System (ICS) is an arbitration mechanism inserted into a ‘new generation’ of international free trade and investment agreements which allows foreign businesses to bypass the domestic courts and to sue governments for compensation, in private, in front of a panel of part-time, for-profit arbitrators, when they feel state legislation, regulations, licencing decisions and EU directives impact negatively on their existing assets and/or their perceived future, unearned profits.
Text of the Parliamentary resolution:
The European Parliament resolution for Wednesday 23rd November 2016, “seeking an opinion from the [European] Court of Justice on the compatibility with the Treaties of the proposed agreement between Canada and the European Union on a Comprehensive Economic and Trade Agreement(CETA) (2016/2981(RSP))” states:
“1. Takes the view that there is legal uncertainty as to whether the proposed agreement is compatible with the Treaties, in particular Article 19 of the Treaty on European Union as well as Articles 49, 54, 56, 267 and 340 of the Treaty on the Functioning of the European Union;
2. Decides to seek an opinion from the Court of Justice on the compatibility of the proposed agreement with the Treaties;
3. Instructs its President to take the necessary measures to obtain such an opinion from the Court of Justice and to forward this resolution, for information, to the Council and the Commission.”
Text of legal instrument being used:
Article 218 (11) of the Treaty on the Functioning of the European Union (TFEU) states: “A Member State, the European Parliament, the Council or the Commission may obtain the opinion of the Court of Justice as to whether an agreement envisaged is compatible with the Treaties. Where the opinion of the Court is adverse, the agreement envisaged may not enter into force unless it is amended or the Treaties are revised.”
Commission employees claim ICS is illegal:
With relation to ICS, even employees within European Commission have stated in their ‘Working Document on the free movement of capital in the EU’ from 2013 that:
“This form of international arbitration is incompatible with the exclusive competence of EU courts to rule on the rights and obligations of Member States under EU law.”
EU’s European Economic and Social Committee rejects ICS:
With the support of 73% of the members of the EU’s European Economic and Social Committee (EESC), their 2015 ‘Own-Initiative Opinion On ISDS’ stated:
“Private arbitration courts have the capacity to make rulings which do not comply with EU law or infringe the CFR [Charter of Fundamental Rights]”.
European Commission’s legal services division rejects ICS:
Further to this, in numerous incidences, the European Commission’s own legal services division has made amicus curiae submissions to private investor protection arbitration cases taken against EU governments by private companies from other EU member states. Part of their argument has been that, “All EU investors also benefit from the same protection thanks to EU rules (e.g. non-discrimination on grounds of nationality)”. Despite the fact that the Commission reiterate that “discrimination based on nationality is incompatible with EU law”, they appear to be content to discriminate against EU businesses, in that CETA’s ICS allows only non-EU companies to sue EU governments, and so thereby disadvantages our own European companies and discriminates against them specifically because they are European.
Commission hiding own legal advice:
This may be the reason why the Commission is only publishing a heavily redacted version of the legal advice it sought and received, as to whether the ICS is legal under EU law. Thankfully a group of lawyers called ClientEarth are currently suing the Commission in the ECJ demanding that they obey EU transparency law and release to the public the legal advice they have received. ClientEarth says, “Under EU transparency laws, the public has a right to see the documents. But the Commission refused access, saying disclosure of the legal reflections would undermine the Commission’s negotiating position.” ClientEarth lawyer Laurens Ankersmit said: “Documents setting out the law are not strategic as they are not about negotiation tactics. The Commission is bound by the rule of law during trade negotiations, as at any other time. Disclosure of documents setting out these legal limits cannot weaken its negotiating position.”
ICS sets aside Article 340 of the TFEU
Additionally, ICS sets aside Article 340 of the TFEU which identifies that the exclusive forum for legal personalities seeking redress, financial compensation or otherwise, against the EU itself, is in the ECJ.
ClientEarth makes its case:
ClientEarth has published its legal opinion on ISDS/ICS stating that: “This short briefing explains why the Investor-State Dispute Settlement (ISDS) and the newly proposed Investment Court System (ICS) might not be legal under EU law. It outlines the threats of investment dispute settlement to the autonomy of the EU legal order, undermining the power of EU courts, and to the functioning of the EU’s internal market.”
German Magistrates’ Association rejects ICS:
In their statement against the Investor Court System (ICS) from February this year, the German Magistrates’ Association says that it “sees neither a legal basis nor a need for such a court.”
101 professors of law say ICS incompatible:
Additionally, a significant part of the legal community finds the investor protection mechanisms within the free trade deals TTIP and CETA to be highly problematic and not compatible with the rule of law. 101 professors of law from 24 European countries have signed a statement outlining the many legal problems of adopting ICS for the European Union legal order, stating:
“The envisaged investment chapters of TTIP and CETA are also in strong tension with the rule of law and democratic principles enshrined in national constitutions and European law. Additionally, they are likely to affect the autonomy of the European Union’s legal order, as the investment tribunals’ binding and enforceable decisions on state liability threaten the effective and uniform application of EU law. In particular, they can counteract any national and EU provisions imposing financial burdens on individuals and corporations (including provisions on fees, taxes, penalties, fines and environmental liability.”
More legal scholars reject ICS:
97% of the 149,399 responses to the 2014 European Commission consultation on special courts for foreign businesses, rejected this type of private arbitration in trade deals, and among these was one submission signed by 122 legal scholars based in universities in 17 countries who have expertise in trade and investment law, public international law and human rights, European Union law, global political economy, comparative law, public law and private law. It stated:
“Investment arbitration law, after all, is far too important to leave to just investment lawyers” [and these special corporate courts] “profoundly challenges” European “judicial, legal and regulatory systems. At root the system involves a shift in sovereign priorities toward the interests of foreign owners of major assets and away from those of other actors whose direct representation and participation is limited to democratic processes and judicial institutions.”
ECJ sets precedent that ICS is incompatible with EU law:
In its Opinion 1/09 of March 8th 2011 on the then draft text on for a new special Patents Court, the European Court of Justice (ECJ) rejected the competence of the European Union to establish a new Court system outside the existing European one. They said that the proposed new patents court:
“would deprive courts of Member States of their powers in relation to the interpretation and application of European Union law and the [European] Court [of Justice] of its powers to reply, by preliminary ruling, to questions referred by those courts and, consequently, would alter the essential character of the powers which the Treaties confer on the institutions of the European Union and on the Member States and which are indispensable to the preservation of the very nature of European Union law”.
European Association of Judges rejects ICS:
Referring to the Investor Court System (ICS) included in the CETA, the European Association of Judges (EAJ) went on to say:
“The EAJ does not see the necessity for such a court system [i.e. the ISDS/ICS of CETA]. The judicial system of the European Union and its member states is well established and able to cope with claims of an investor in an effective, independent and fair way. The European Commission should promote the national systems for investor’s claims instead of trying to impose on the Union and the member states a jurisdiction not bound outside the decisions both of the ECJ and the supreme courts of the member states.”
With relation to the envisaged selection process for arbitrators to be appointed to the private special arbitration mechanism (ICS) just for non-EU companies to sue EU governments, the EAJ says:
“These provisions for the election, time of office and remuneration for the judges of the ICS do not meet the minimum standards for judicial office as laid down in the European Magna Carta of Judges or other relevant international texts on the independence of judges.”
Reading the European judges final word on the matter, it is clear that only a wilful, reckless abandonment of respect for the law, could make an MEP get in the way of the European Parliament resolution of 23rd November 2016. Let’s find out if the EAJ is correct, and simply ask the European Court of Justice to rule as to the legality of this proposed special foreign-investor-only private arbitration mechanism. The EJA says:
“The necessity to guarantee the interpretation and application of European Union law and not harmonized national law to the ECJ or a supreme court cannot be given away by an international treaty. This would alter, as the ECJ puts it on its opinion 1/09, the very nature of the European Union Law and might infringe national constitutional law.”
European Public Services Union (EPSU) supports resolution:
The European Public Services Union (EPSU) is also calling on MEPs to support the resolution on 23rd November.
Even if the Commission’s staff are wrong and ICS is legal, even if the Commission actually has nothing substantive to hide in its concealment of its own legal advice, even if the German and European judges associations are wrong, the fact the MEPs are being barred from having time to debate this resolution and that some MEPs intend of rejecting it, sends a terribly anti-democratic message to European citizens.
See French economist Thomas Piketty on this where he says, “ From this point of view, CETA, the EU-Canada free trade deal, should be rejected. It is a treaty which belongs to another age.”: https://www.theguardian.com/commentisfree/2016/nov/16/globalization-trump-inequality-thomas-piketty
 See for example: U.S. Steel Global Holdings I B.V. v Slovak Republic, UNCITRAL, (PCA Case No. 2013-16); and, European American Investment Bank AG (EURAM) v. Slovak Republic, UNCITRAL, (PCA Case No. 2010-17); and, Ioan Micula, Viorel Micula, S.C. European Food S.A, S.C. Starmill S.R.L. and S.C. Multipack S.R.L. v. Romania, ICSID (Case No. ARB/05/20).