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  • ‘Reformed’ or not, corporate handouts in trade agreements are as dangerous as ever

    Two proposed trade deals – the Canada-European Union Comprehensive Trade and Economic Agreement (CETA), and the United States-European Union Transatlantic Trade and Investment Partnership (TTIP) – have attracted widespread international criticism by threatening to give unrivaled, unfettered "investment" rights to multinational corporations, including the world's worst polluters. While the text of CETA has been finalized and made public and TTIP is in an earlier phase of secretive negotiations, both still require formal ratification. It's not too late – the EU, U.S. and Canada should eliminate corporate-empowering rules from trade agreements rather than falsely claim that the rules have been "reformed" for the better.

    Can the Devil be reformed?

    The European Union and Canada recently released the text of their proposed free trade deal, and it is a gift to multinational corporations. Like TTIP, CETA has attracted widespread public criticism for including so-called investment rules that, in past deals, have allowed corporations to demand billions of dollars in compensation for public interest policies that corporations allege reduce their profits. These rules have empowered corporations to sue governments (and therefore taxpayers) in private trade tribunals over hazardous waste safeguards, fracking bans, nuclear energy phase-outs, and minimum wage policies, prompting international outrage and resistance.

    The European Commission and the Canadian government have promised that CETA’s investment rules would be an improvement over those in past deals. However, a November 2014 report, “Trading Away Democracy,” reveals that these corporate handouts are as strong as ever in CETA. Its investor-state dispute settlement (ISDS) rules would continue to allow “investors” (typically multinational corporations) to bypass national courts and force the public to pay for risky corporate behavior.

    The report finds that the so-called ISDS “reforms” in CETA will not prevent abuse by investors and arbitrators, and that these proposed tweaks fall short of providing protection to governments and the public. CETA, in fact, makes Canada, the EU, and its member states even more vulnerable to being sued by corporations over public interest policies. The weak reforms in CETA also provide a glimpse into the sorts of investment rules that we can expect in the TTIP.

    CETA’s “reforms,” detailed below, will not prevent corporations from suing governments over policies that protect communities and the environment, and there remains no justification for including ISDS in new trade agreements.

    Reforms = More corporate empowerment

    1) A key CETA reform the EU extols is that arbitrators can decide if a case is frivolous or unfounded. This is a conflict of interest, since the same arbitrators’ income depends on cases moving forward, and they have a vested economic interest in ensuring that corporations’ claims do indeed seem legitimate. Arbitrators can make hundreds of millions of dollars overseeing a single case. Allowing them to choose whether a case is frivolous is like allowing a car salesman to determine whether you need a car. To date, not one case has ever been dismissed as frivolous, even though some existing treaties allow for it.

    2) Because governments acknowledge that the independence of arbitrators is problematic, CETA is proposing to solve this with a code of conduct, and proposes that the International Bar Association (IBA) code of conduct will ensure impartiality and prevent conflict of interest. However, this provision in practice does nothing to address the fact that these private commercial arbitrators have no fixed salaries (to put a cap on their eagerness to approve new cases). It also does not address the inherent conflict of interest whereby “arbitrators” can also work as attorneys or lobbyists for multinational corporations on the side.

    3) Most national courts have a system of reviewing court decisions; investment tribunals do not allow this. The reformed ISDS in CETA ostensibly includes an appeal clause; however the language is vague and non-binding. This type of nebulous language around appeal systems has been discussed and included in other investment treaties for the last 10 years with no results.

    It’s time to throw out ISDS

    The European Commission is very pleased with the reforms put in place in CETA, and plans to adopt a similar approach with the US-EU trade deal (TTIP). Through CETA and TTIP, mega-corporations in all three regions – Canada, the U.S., and Europe – would have new ability to demand billions of dollars in compensation for public interest policies.

    The controversies around ISDS have pushed the European Commission to undertake a public consultation – an online questionnaire – on how to deal with ISDS, essentially looking for a sign-off to continue using the CETA ISDS reform model. While the results are still pending, an interim report demonstrates that nearly all respondents (99 percent) stated that they did not approve of the mechanism and did not agree with its inclusion in CETA or TTIP. Public consultations in Canada and the U.S. would likely reveal similar levels of distrust in ISDS, if the Canadian and U.S. governments engaged the public in a similar consultation – which they have given no indication of doing.

    Multinational corporations are hardly without means, and already possess tools to evaluate risk, seek awards in national courts, take out private insurance, and participate in public investment guarantees. Governments should be protecting their ability to protect people and the environment – not giving away this power to please multinational corporations.

    “Reformed” or not, ISDS in TTIP and CETA remains as threatening as ever, and it’s high time our governments acknowledge that ISDS has no place in these trade deals.