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The great CETA swindle

With a fast approaching European Parliament vote on the EU-Canada trade deal CETA and potential subsequent rows over its ratification in EU member states, CETA continues to draw heavy criticism. A close look at the text of the agreement – and recent declarations designed to reassure critics and gain support for its ratification – shows that concerns over CETA are well-founded. Behind the PR attempts by the Canadian Government and the European Commission to sell it as a progressive agreement, CETA remains what it always has been: an attack on democracy, workers, and the environment. It would be a major mistake to ratify it.

On both sides of the Atlantic, the Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada is hugely controversial. A record 3.5 million people across Europe signed a petition against CETA and its twin agreement TTIP (Transatlantic Trade and Investment Partnership). European and Canadian trade unions, as well as consumer, environmental and public health groups and small and medium enterprises (SMEs) reject the agreement. Constitutional challenges against CETA have been filed in Germany and Canada and the compatibility of CETA’s controversial privileges for foreign investors with EU law is likely to be judged by the European Court of Justice.

The controversy has also reached governments and parliaments. Across Europe, more than 2,100 local and regional governments have declared themselves TTIP/CETA free zones, often in cross-party resolutions. National and regional parliaments, too, worry about CETA, for example in Belgium, France, Slovenia, Luxembourg, Ireland, and the Netherlands. In October 2016, concerns in four sub-federal Belgian governments (led by Wallonia) over the agreement’s negative impacts, and in particular its dangerous privileges for foreign investors, nearly stopped the federal government from approving the signing of CETA.

Over the past months, to salvage CETA’s ratification process, European and Canadian trade officials have gone into a massive propaganda mode. They have framed CETA as “a very progressive trade agreement” (European Trade Commissioner Cecilia Malmström) which will “shape globalisation” along the principles of “fair trade” and in the interest of workers (Germany’s Foreign Minister Frank-Walter Steinmeier).

The latest PR move of the CETA supporters is a multitude of 39 declarations and statements accompanying the text of the agreement. These texts are designed to alleviate concerns amongst Social Democrats, trade unions, and the wider public who fear that CETA threatens public services, labour and environmental standards and undermines governments’ right to regulate in the public interest. But in fact, the declarations do nothing to fix CETA’s flaws.

Read the full report (also available in German, French and Bulgarian) to see through the many swindles, which CETA supporters are currently engaged in, in order to win support for what is actually a major assault on democracy, workers, and the environment:

Swindle #1: CETA protects workers’ rights

Swindle #2: CETA is a good deal for the environment

Swindle #3: CETA’s investor rights safeguard the right to regulate to protect the environment, health and other public interests

Swindle #4: CETA protects public services like healthcare and water

Swindle #5: CETA establishes an independent court to settle investor-state disputes

Swindle #6: CETA will uphold standards to protect people and the environment

Full report: The great CETA swindle

Also available in German: Der große CETA Schwindel

Also available in French: Le monumentale arnaque de CETA

Also available in Bulgarian

Comments

Submitted by john Bates (not verified) on

Hi, good article. I was just a bit confused though, since you say that "While Canada, the EU and its Member States have inserted a number of public service reservations and exemptions... they don't apply to the most dangerous investor protection standards, like expropriation (article 8.12)".

However if you open article 8.12 in CETA, is says "A Party shall not nationalise or expropriate covered investment either directly, or indirectly through measures having an effect equivalent to nationalisation or expropriation ("expropriation"), except: (a) for a public purpose...."

Does this count as a public service exemption in the investor protection against expropriation?

Submitted by Pia Eberhardt on

Hi John,

the public services exceptions referred to in the text are in Annex I and Annex II of the CETA. Basically, everything which is not excluded from the agreement or specific provisions in these annexes is covered by the CETA text (because CETA liberalises services according to a negative list approach puts everything under its scope unless it is specifically excluded).

The headnotes to annex I and annex II list the articles, to which the reservations in the annexes can apply. And neither the investor-state dispute settlement process, nor expropriation nor fair and equitable treatment are listed there. That means that investors can always challenge measures with regards to public services if they consider them a violation of the fair and equitable treatment standard or a direct and indirect expropriation.

If you continue reading the article you have started quoting you will find that, even if a measure that has the effect equivalent to an expropriation is for a public purpose, compensation will have to be paid. So, the reference to "a public purpose" does not prevent that governments will have to pay compensation.

Please see the annex of our report Trading away Democracy for more information on all these provisions.

Submitted by Janus Kannuberg (not verified) on

When is the vote? and is there any chance that it will not go through?

Submitted by Pia Eberhardt on

The vote in the lead committee (INTA) is scheduled for 24 January. The vote in plenary is currently scheduled for 14 February, but could be postponed further.

Submitted by DIDIER Pierre (not verified) on

This article is a superb example of caricature and populist disinformation : aitec/CEO, Trump, Le Pen, Farage etc. same fight ? Everything in that paper is based on intent shaming of the 28 EU member States that have ratified the CETA, of Canada and its provinces, the EU Commission, the European Parliament etc. plotting for weakening European and Canadian standards for the benefit of a few multinationals.
The CETA, however, in itself, does not imply any single change (positive or negative) to existing standards or prevents adoption of future standards. Any change to existing standards, however tiny, requires a change in existing laws, thus passage through the normal legislative process, i.e., in Europe, a proposal by the Commission, the examination and adoption by the 28 Member States (often unanimous) and by the European Parliament. Good luck to those willing to weaken existing standards or prevent adoption of more stringent rules at the end of that process! Of course, if all euro-skeptics or alter-mondialists abstain in the coming European Parliament elections, the risk is serious that populists and arch-liberals the Trump style dismantle new environmental, social, human rights etc. developments. But this will not be the fault of the CETA.
As to the arbitration bodies between investors and host parties to the CETA, the so-called “CETA Swindle” paper is pure intox. The arbitration body has no other competence than guaranteeing that the commitments taken by the parties in the trade agreement, particularly the non-discrimination principle, are respected in word and spirit. Both the text of the CETA, of the bilaterally agreed interpretative note (that merely confirms in other words what was clear in the CETA) and the guarantees given by the Commission and the Canadian government, guarantee that the CETA (including its ISDS provisions) cannot restrict the parties freedom to legislate as regards public services (including education and health), labor, environment, consumers protection, regulation of economic activities, human rights etc.
By definition, an arbitration body created by a trade agreement cannot not impose on parties obligations that go further than what they have stated/limited in that agreement. Once parties have stated unambiguously limits to their commitments, no arbitration body could compel them to go beyond what they committed. If, by impossible a wild or mad panel imposed on a party to violate the limits of its commitments, for example by penalizing it for legislative (in)actions beyond reserved limits, the “condemned” party could of course refuse implementing that panel’s conclusion. Need to remember that panels have no bailiffs nor armed forced allowing them to have their conclusions enforced. Only the regular judicial could decide executive force (in legal slang this is called “exequatur”). However seeing the judiciary of a “condemned” Party compelling the to violate the terms and limits of its commitments is, the least one can say, non common in a democratic constituency!
As to the “billions of Euros” referred to in the paper as sanction for breach of a commitment, let us recall that only proven damage caused by an expropriation (direct or indirect) can be indemnified. Mere lower profit due to the (non) action by a Party in the fields of competence of the arbitration body (essentially discrimination between foreign and local investors) does not allow recourse to arbitration. The German constitutional court (www.bloomberg.com/news/articles/2016-12-06/utilities-entitled-to-damages... )(seized in parallel with an arbitration procedure) admitted that the Swedish Vattenfall, producer of nuclear energy in Germany, be compensated for the German decision to close nuclear power plants, this being held an indirect expropriation. Vattenfall never asked for the repealing of the German law but only to be compensated for the colossal investment made in good faith in Germany, that had become idle. Is this chocking or undemocratic? As to Philip Morris, its action before an arbitration body was turned down (www.nortonrosefulbright.com/knowledge/publications/139441/philip-morris-...). That firms caring for pub launch actions they know will fail, just for blackmail, this is not new.
Let us remind that these cases and all the others referred to by alter-mondialists took place in the frame of bilateral trade agreements that, unlike the CETA, do not in any way limit the remit of arbitration bodies’ competences. EU Member States have hundreds of these kinds of agreements containing unlimited competence of fully private arbitration bodies (investmentpolicyhub.unctad.org/IIA/mappedContent#iiaInnerMenu). Belgium only has 80 such agreements with most countries of the world, 18 of which are in the process of ratification. Instead of accusing CETA of “swindle”, why not underline the real democratic progress it brings by the so far unknown strict limitations of the competences of the arbitration system?
Is this meaning that the limits on competences entrusted to the CETA ISDS makes it useless? No. Suppose a Canadian press group settles in Hungary and diffuses there ideas opposed to those of Mr Orban. Directly or indirectly it will soon be expropriated. Could one imagine that Orban’s judiciary would indemnify that group? If a Canadian investor sets up a rubbish incinerator in Naples, this causing concern to the local rubbish mafia. Its activity will soon be interrupted, local authorities keeping blind. Would all Naples judges quickly and fully indemnify the group? If a Canadian investor builds an airport in Bulgaria, in competition with a local entrepreneur well introduced with local authorities. What about indemnification by local justice? Those are real-life situations.
In another framework, what about indemnification for discriminatory practices common in China, India, Russia, Vietnam? The 2016 Commission report on Trade and Investment Barriers and Protectionist Trends (trade.ec.europa.eu/doclib/docs/2016/june/tradoc_154665.pdf) identifies 1059 trade restrictive measures and discriminations affecting EU investors in 31 selected third countries.
In complex matters, after-truth, complotism, accusation of “all rotten”, facts deformation, omissions easily develop on the fertile ground of current populism. The text herewith commented is a masterpiece of disinformation.

Submitted by Pia Eberhardt on

Thank you for this comment, which we appreciate, despite the harsh criticism.

Allow us to respond to your key points:

  1. You claim that CETA does not change existing standards or prevent the adoption of future standards because any such changes would need to go through the EU’s ordinary legislative process and that won’t change. The key point made in the “Great CETA Swindle”, however, is a different one: the chapters on regulatory cooperation and domestic regulation put heavy additional burden on regulators, strengthen the role of business lobbyists in the development of regulations, and enshrine criteria such as that licensing and qualification procedures have to be “as simple as possible” for corporations. The likely result is that existing standards will come under pressure – and it will be much more difficult to adopt stricter regulations if they are disliked by the business sector or the trading partner. Another likely result is that some regulatory proposals might never enter the ordinary legislative process as they might be “weeded out” in the initial stages of the Commission developing them.
  2. You argue that future CETA arbitration tribunals have no other competence than guaranteeing that the commitments taken by the parties in CETA are respected (mentioning particularly the non-discrimination principle and protection against expropriation) and that no other obligations can be imposed on the parties. That is correct. But the problem is exactly those obligations and how they are being interpreted by ISDS panels. In particular the guarantee that investors will be treated in a fair and equitable way has been interpreted in very far-reaching ways that have compromised environmental and public health legislation. The Bilcon case against Canada is just one example: Canada lost it because of the way it conducted an environmental impact assessment! The dissenting arbitrator on the panel criticised the ruling as a “significant intrusion into domestic jurisdiction” that “will create a chill on the operation of environmental review panels”. You can find more about this and other cases (and how they would be possible under CETA) here.
  3. You claim that ISDS cases can only be launched if the treaty provisions have been breached and not just if profits have been lost. You also seem to suggest that compensation can only be paid for money that has actually been spent on an investment project, and not for expected future profits. Again, you are right: claims can only be filed if there is an alleged breach of the treaty provisions. However, corporations and their lawyers are using these provisions to challenge basically everything they dislike – from environmental legislation, to anti-discrimination and anti-smoking laws. And they have regularly received compensation for money that they could have earned – not just money, which they have already spent on a project. The example mentioned in the “Great CETA swindle” is the case of Libya which was ordered to pay US$900 million for “lost profits” from a tourism project, even though the investor had only invested US$5 million and construction had never started.
  4. You state that the parties could refuse to implement the ruling of an ISDS panel, which “have no bailiffs nor armed forced allowing them to have their conclusions enforced”. Because of several international treaties (like the New York convention), ISDS awards can be enforced in courts around the world. So, we are talking about a really powerful enforcement mechanism (compared to nothing of the kind for enforcing labour rights or environmental obligations). This is why countries do generally comply with ISDS rulings and pay.
  5. You also claim that CETA does not limit regulations of public services – and that this is clearly stated in the treaty itself and the accompanying declarations. As the related section in the “Great CETA swindle” explains, several commitments by the CETA parties put narrow limits on this freedom to regulate public services. Also, any regulation in the public services sector can potentially be challenged in an ISDS case as none of the CETA exceptions for public services apply to ISDS and the most dangerous investment protection standards.
  6. You ask about cases of abusive treatment by states and local courts and whether these do not merit extra protection for foreign investors. Of course, there are problems with governments and judicial systems in many parts of the world. Yet, it is not just foreign firms that suffer in countries with weak legal systems and dodgy governments: domestic firms and citizens suffer, too. Shouldn’t we try to improve the legal systems and governments for everyone – rather than granting legal privileges to some of the most powerful actors in society, taking away their incentives to improve legal and political systems? As the German association of judges has convincingly argued, problems with existing courts have to be fixed for everyone – and “the creation of special courts for certain groups of litigants is the wrong way forward”. In this context, you might also be interested in this recent study from the University of Oxford, which found that “even when foreign firms are exposed to significant political risks in the developing world, domestic firms remain even worse off on average”.
  7. You call the “Great CETA Swindle” a “masterpiece of disinformation” and accuse us of “after-truth” arguments feeding rightwing populists such as Trump, Le Pen and Farage. We firmly reject this accusation. The “Great CETA swindle” is a well-referenced and solid piece of analysis. It is building on the work of many other people, organisations and institutions, which have published in-depth studies and criticisms of CETA or parts of it. Amongst those quoted in the paper are Germany’s former judicial minister of Germany, the German and European association of judges, 101 law professors from across Europe who have spoken out against CETA’s investment protection chapter, the European consumer organisation BEUC, the German association of public water operators, a group of independent UN experts and many trade unions from both sides of the Atlantic. The claim that all of them are engaged in a disinformation campaign based on post-factual arguments that will feed the far-right seems to us a thinly disguised attempt to discredit and delegitimise the CETA-critics – rather than taking their concerns and analyses seriously. Those who want to fight the extreme right should not push through trade deals like CETA, which have been negotiated in secret, will further increase inequality and limit democratic policy space – all sources feeding the groundswell of discontent, on which the extreme right is thriving.

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