EU-Canada in FTA, ISDS in Focus

Just weeks after threatening to block the ratification of the EU’s planned free trade deal with Canada (CETA) over its investor-state dispute settlement (ISDS) provisions, German Economy Minister Sigmar Gabriel has now said he is ready to back the agreement.

Some EU political parties, including the SPD, oppose ISDS in both CETA and the Transatlantic Trade and Investment Partnership (TTIP) which is currently being negotiated with the US. The EU and Canada signed CETA in late September, after five years of talks.

ISDS

The European Commission has noted in the past, as have others, that the EU’s 28 member states combined have over 1400 bilateral investment treaties and nearly all feature ISDS.

But while proponents of ISDS argue that arbitration ensures unbiased adjudication and increases investor confidence in the business environment, among other benefits, critics argue that it is opaque, inadequate to defend the public interest, and unnecessary in countries with strong rule of law.

In the context of CETA, some ISDS detractors are particularly concerned that US companies with “substantial business interests” in Canada could be allowed to bring suits against EU member states.

“CETA will be a Trojan horse for US-based multinationals,” predicted Cecile Toubeau, a sustainable trade policy officer at NGO watchdog Transport & Environment.

Responding to these criticisms, Canada’s Ambassador to the EU, David Plunkett, emphasised that ISDS provisions are common in EU treaties and that “letter-box” companies would not qualify as investors under CETA.

While the US is insistent on the inclusion of an ISDS provision, French officials have been among those indicating their opposition to ISDS in TTIP. “France did not want the ISDS to be included in the negotiation mandate,” France’s Secretary of State for Foreign Trade Matthias Fekl told the French Senate last month.