Don Quijones writes
This past week saw the ceremonious signing of the Trans-Pacific Partnership (TPP) in Auckland, an event whose prime purpose was to convince the world that a trade agreement that most people have not even heard of and which has so far been approved by only one (Malaysia) out of 12 elected parliaments is already done and dusted.
Even the Sidney Morning Herald concedes that it was a giant PR exercise:
It masks the fact that for Australia and most TPP countries, the public debate and parliamentary process to pass implementing legislation, leading to final ratification of the deal, is just the beginning, and it will be a rocky road.
The road will be particularly rocky in the U.S. where the treaty’s safe passage through Congress and the Senate is far from guaranteed. Indeed, the trade agreement has become so toxic with the voting public that not a single presidential contender dares to endorse it. Even the former US Trade Representative, and now Senator, Rob Portman, has come out against TPP, albeit for the wrong reasons, most tellingly the fact that he, too, is up for reelection this autumn.
However, the biggest blow to the global corporatocracy’s bloated designs did not come from the U.S. It came from Germany, where the German Association of Judges (DRB, an association that also includes prosecutors) just issued a damning indictment on the EU’s proposal to establish an “investment court system (ICS)” for the TPP’s sister treaty, the Transatlantic Trade and Investment Partnership (TTIP).
The ICS proposal was designed to placate the growing ranks of opponents of the current global investor-state dispute settlement (ISDS) system. ISDS is a vital part of any free trade agreement since it allows businesses to bypass national court systems and sue governments for past and/or future profits lost, and do so in private arbitration panels held in global capitals like Washington, Paris, London, Hong Kong or The Hague. Put simply, it is what gives trade treaties their teeth.
In Europe, public opposition to ISDS is intensifying. In 2014 the European Commission, in a rare fit of public spiritedness and accountability, ran a public consultation on ISDS. Nearly 150,000 people responded to the survey – the highest number of responses ever for an EU consultation – with the overwhelming majority (more than 97%) rejecting the inclusion of ISDS in TTIP. Since then public opposition to ISDS has snowballed, with a growing number of local and city councils – including my home city of Barcelona – refusing to honor any future TTIP agreement.
Other opponents include small and medium size businesses, in particular in Germany and France; academic experts in trade and investment law, EU law, international law and human rights; trade unions, public interest groups and half of the Commission’s own advisors. Then, in July last year, the European Parliament refused to support TTIP unless the investor-state dispute settlement (ISDS) mechanism was replaced by a more public, accountable system.
The system that EU Trade Commissioner Cecilia Malmstrom came up with was a permanent international Investment Court System – ICS – to adjudicate conflicts between international investors and host states, with real judges and slightly more transparency. As WOLF STREET noted at the time:
Instead of the prospect of having three private arbitrators (i.e. corporate attorneys) decide how many billions in taxpayer funds elected governments should pay out in compensation for daring to put the rights and interests of national citizens before the rights and interest of overseas corporations and investors, we can have a whole new, ridiculously expensive international court system, paid for by global taxpayers, dedicated to doing exactly the same thing.
This new system is currently being negotiated with trade representatives in the U.S., Japan and Canada, while Vietnam, which signed a new trade agreement with the EU in December, had little choice but to ratify the so-called investment court. In January one of Canada’s most prestigious newspapers The Globe and Mail published a ringing endorsement of the ICS proposal. Against all odds, it seemed that the Commission might actually be winging it.
But then on Thursday, the German Association of Judges mercilessly crushed the idea, with three basic arguments:
- There is no legal basis or necessity for such a court. The EU Commission is probably legally not empowered to simply set up a court and if it were to do so, it would undermine the sovereignty not only of EU member states but of the EU itself. The judges are crystal clear on this point: the court would be “outside the institutional and judicial framework of the Union” and would “deprive courts of member states of their powers in relation to the interpretation and application of European Union law and the court of its powers to reply.”
- The ICS would have no legal jurisdiction over European countries. Issues affecting the German economy should be decided on German turf. In other words, investment cases should be fought in local courts. This is a remarkable claim in a country that has been a major advocate of ISDS for decades. Indeed, the first ever bilateral investment treaty (BIT) was agreed between Germany and Pakistan, in 1959. However, attitudes toward ISDS have shifted considerably in Germany, especially since the government was sued twice for billions of euros each time – by the same company!
- The so-called judges of the ICS would not be independent, as the Commission claims. “The pool of judges will be limited to the circle of persons already professionally predominantly engaged in international arbitration.” In other words, the investment court would merely become a permanent version of the ISDS system that is already so deeply unpopular. Which, as Nick Dearden, the director of Global Justice Now, notes, is precisely what campaigners are worried about.
The DRB’s ruling could be a game-changer for two reasons.
First, anybody who knows anything about the new generation of trade treaties like TTIP, TPP and TiSA knows that they pose a direct threat to national sovereignty, but this is the first time that public fears have been confirmed by the legal authorities of a signatory nation. And not just any signatory nation: as home to the largest economy in Europe which is effectively backstopping the cratering economies on the periphery, Germany wields more influence over EU decision making than any other Member State. What’s more, small and medium-size businesses — the backbone of its economy — are also bitterly opposed to ISDS.
Second, it leaves the Commission’s trade representatives stuck in no man’s land. Having as good as abandoned ISDS and bet all its horses on ICS, it now has to find a third way that not only placates European policy makers who oppose ISDS but also appeases the demands of its negotiating partners, the U.S. and Canadian governments, and the corporate behemoths that have been pushing for this deal. And that is not going to be easy.