21st Mar 2018

EU and Canada agree on dispute settlement court

  • Malmstroem: the investor court system "is in CETA, we'll see what happens in TTIP." (Photo: European Commission)

EU and Canada have agreed on a permanent investor court system to be included in their free trade agreement, in a decision the EU hopes will be replicated in its trade talks with the US.

In a last round of talks, the European Commission and the Canadian government completed scrubbing over the legal elements of the Comprehensive Economic and Trade Agreement (CETA) they had finished negotiating in 2014.

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"This is good news," EU trade commissioner Cecilia Malmstroem said at a press conference on Monday.

"It is good sign that we can cooperate and that we have listened to the concerns."

The investment chapter had remained open in the face on criticism on both sides of the Atlantic about investor-state dispute settlement (ISDS), an ad hoc arbitration system that was included in the first version.

A permanent and institutionalised dispute settlement tribunal will be set up instead, with judges appointed in advance by the EU and Canada, and an appeal mechanism will be put in place.

The agreement also has "stronger language" on the rights of states to regulate, and judges will be "bound by a very strict ethical code of conduct," Malmstroem said.

For the EU, the new settlement system, called investor court system (ICS) should also be part of the ongoing negotiations for a Transatlantic Trade and Investment Partnership (TTIP) wih the US.

As in CETA, the ISDS has been widely criticised by TTIP opponents, and last autumn Malmstroem proposed an investor court system (ICS) to replace it. An ICS has already been put in place with Vietnam and is now agreed with Canada.

"The mandate I have from the member states is to try to introduce all this new system in TTIP but also in all future negotiations until we have a permanent multilateral court," Malmstroem said.

"It's in CETA, we'll see what happens in TTIP," she said.

During the latest round of talks in Brussels last week, US negotiators did not commit to endorse the investor court system (ICS) put forward by the EU.

"We are pursuing those discussions with full understanding of what the objectives are behind these provisions and with a focus on how best we can achieve what are essentially commonly shared goals and outcomes in this area,” the chief US negotiator Dan Mullaney said Friday (26 February).

Malmstroem said the ICS responded to the demands of the European Parliament and member states. But it has been rejected by German judges as illegal. In early February, the German Association of Magistrates, a Berlin-based judicial umbrella organisation, said it saw "neither a legal basis nor a need for such a court".

The trade commissioner assured that CETA was "a very good agreement" which would remove 99 percent of customs and duties between Canada and the EU and save 407 million per year in tariffs.

CETA will now have to be translated into the other EU languages before the commission can formally publish its legislative proposal to ratify the agreement, in May or June.

"If everything goes well," the Council of member states and the European Parliament could approve CETA before the end of the year, Malmstroem said.

A question remains over whether EU member states will be called on to ratify the deal as well.

Officials said that the commission had not decided yet whether it would consider CETA a mixed agreement, requiring national approval, or an EU agreement, where the EU Parliament and Council's approval is enough.

In any case, the final decision on ratification will be up to the council.

TTIP: US yet to approve EU investor court plan

The United States “understands” why the European Union wants to include an investor court system in the TTIP agreement, but has not yet given an opinion on the EU's proposal itself.


The seven sins of the EU investment court

The investor dispute settlement mechanism the EU and Canada have agreed to include in their free trade agreement gives the same privileges to large companies as its contested earlier versions.

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