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Le Monde | 16.08.2014
Freely translated by Anoosha Boralessa in April 2015. Not reviewed or revised by bilaterals.org or any other organization or person
CETA: What the leaked version reveals
Author: Maxime Vaudano
On Wednesday 13 August 2014, the German television news programme Teggeschau revealed the final version of CETA, which for now is confidential. CETA is a trade agreement between the European Union and Canada subject to radar scrutiny by negotiators because it was considered a model for the TTIP. The most controversial provisions include the investor state dispute resolution mechanism (ISDS), an arbitral tribunal meant to settle disputes between governments and corporations.
According to the negotiators, when compared to the previous generation of trade agreements’ provision for ISDS (such as NAFTA, signed by the United States, Mexico and Canada in 1994), CETA is a considerable improvement. The previous generation of ISDS has been heavily criticized for giving too much power to multinationals. In fact, very little has changed. While the European Commission has suspended negotiations on the ISDS in the transatlantic treaty so that it can take account of proposals emanating from the public, the Commission has not done the same for CETA which remains in line with its position to date.
If multinationals are very keen on arbitration, this is partly because it is discretionary. In some cases, it is even impossible to access an arbitral tribunal’s ruling. This challenges democracy.
While CETA establishes the opening of debates to the public and the publishing of all documents relating to an arbitration, it carves out an exemption to these obligations where confidential trade information is at stake.
Conflict of interest:
The text conforms to common international standards, which are however criticized on the issue of preventing conflict of interests when choosing arbitrators. If certain practices are prohibited or not recommended, one radical measure recommended by NGOs and some self-critical Arbitrators’ has been shoved aside: that the same person should not be allowed to keep swapping the hat of arbitrator and lawyer.
One article aims to prevent a practice that has become increasingly widespread. This practice consists of a multinational setting up a mailbox in a country simply so it can attack another state with which that country had signed a trade agreement providing for ISDS. A company must prove that it is active in Canada or Europe to be able to launch proceedings.
Refusing to exclude issues of intellectual property from the ISDS, the Europeans have conceded to Canadians a meeting three years after the treaty enters into force to ensure that states’ capacity to regulate has not been harmed by arbitral tribunals.
Definition of expropriation:
The obscurity surrounding the notion of « indirect expropriation » of a business by a government has been one of the weaknesses of investment treaties signed up to now. An annex to CETA clearly defines it.
An expropriation is defined as a measure that “substantially deprives the investor of the fundamental attributes of property in its investment”. The text recognizes that it will be necessary to proceed on a case-by-case basis and recommends taking into consideration the“economic effects” and trying to ascertain if the measure “interferes with distinct, reasonable investment-backed expectations”.
The annex also specifies that measures that serve the “legitimate public welfare objectives, such as health, safety and the environment”are not considered to be expropriation “except in the rare circumstance where the impact of the measure [...] appears manifestly excessive.”
Where the interpretation of the text is unclear, provision is made for a Canadian-European Committee to publish opinions to clarify it and arbitrators shall be bound by these interpretations.
Journalist with Monde.fr