Techdirt | 22 Jan 2015
European Commission’s clever ruse to introduce corporate sovereignty regardless of ratification votes in EU
by Glyn Moody
Because of the complicated nature of power-sharing in the European Union, some international agreements require the approval of both the European Parliament and of every Member State — so-called "mixed agreements." It is generally accepted that both the Canada-EU trade agreement (CETA) and TAFTA/TTIP are mixed agreements, and will therefore require a double ratification: by the full European Parliament, and all the EU governments. Indeed, the European Commission has frequently cited this fact to bolster its assertion that both CETA and TAFTA/TTIP are being negotiated democratically, since the European public — through their representatives — will have their say in these final votes.
But a disturbing analysis published by Greenpeace on its Austrian pages (original in German), suggests that built into the CETA agreement, which is currently going through a "legal scrub" before being presented for ratification (pdf), are a couple of sections that will allow the European Commission to introduce the corporate sovereignty provisions anyway. According to Article X.06 3(a):
This Agreement shall be provisionally applied from the first day of the month following the date on which the parties have notified each other that their respective relevant procedures have been completed.
This means that CETA would enter into force provisionally as soon as the European Commission and the Canadian government have notified each other that "relevant procedures have been completed." There’s no explicit requirement there for those "relevant procedures" to include ratification by the European Parliament or the EU Member States: the European Commission might claim that the "relevant procedures" simply meant things like the legal scrub. One of the provisions of CETA is a corporate sovereignty chapter, so this too would enter into force at this point, regardless of what national governments might want.
Now suppose that the European Parliament, or one of those Member States, does not ratify CETA, perhaps because of the investor-state dispute settlement (ISDS) mechanism, in which case the entire agreement would fail. But here’s what Article X.07 4 says happens in this case:
If the provisional application of this Agreement is terminated and it does not enter into force, a claim may be submitted pursuant to the provisions of this Agreement, regarding any matter arising during the period of the provisional application of this Agreement, pursuant to the rules and procedures established in this Agreement, and provided no more than three (3) years have elapsed since the date of termination of the provisional application.
In other words, even if CETA is rejected in Europe, thus causing the provisional application to be terminated, claims under the ISDS chapter would still be possible up to three years afterwards for investments made during the provisional period. This is no mere theoretical possibility: it is exactly what happened to Russia with the Energy Charter Treaty, which it never ratified, but where an ISDS tribunal made an award of $50 billion against the country because of the treaty’s provisional application. What’s even more troubling is that the European Commission proposes to add similar clauses to TAFTA/TTIP, as the Greenpeace article notes:
A representative of the European Commission at a press briefing session in Vienna on Tuesday confirmed to Greenpeace that the Commission intends to propose a "provisional application" for TTIP too.
This would be even worse than putting such sections in CETA, because ISDS in TAFTA/TTIP will apply retrospectively to all existing investments, as the negotiating mandate specifies (pdf):
The investment protection chapter of the Agreement should cover a broad range of investors and their investments, intellectual property rights included, whether the investment is made before or after the entry into force of the Agreement.
This would allow corporate sovereignty provisions applying to huge numbers of existing investments to enter into force and remain there for some years even if TTIP were rejected by the European Parliament or one of the national governments. So much for the European Commission’s much-vaunted "democracy" — and another compelling reason to take the ISDS chapter out of both CETA and TAFTA/TTIP.